CSX CORP

Liquidity is a company’s ability to generate adequate amounts of cash to meet both current and future needs for obligations as they mature and to provide for planned capital expenditures, including those to address regulatory and legislative requirements. To have a complete picture of a company’s liquidity, its sources and uses of cash, balance sheet and external factors should be reviewed.

Significant Cash Flows

The following charts highlight the operating, investing and financing components of the change in cash and cash equivalents for operating, investing and financing activities for full years 2025 and 2024.

CSX 2025 Form 10-K p.38

In 2025, the Company generated $634 million less cash from operating activities compared to prior year, primarily driven by lower cash-generating net earnings, the payment of $429 million of previously postponed taxes with no postponements available in 2025, and a $96 million prepayment for locomotive maintenance services. These decreases were partially offset by the impact of bonus depreciation and other changes in working capital. In 2024, the payment of $387 million of previously-postponed taxes related to the 2023 tax year was more than offset by postponement of $429 million of taxes related to the 2024 tax year. CSX used $246 million more cash for investing activities in 2025 compared to 2024, primarily due to higher property additions consistent with planned capital expenditures, including approximately $470 million related to rebuilding the Blue Ridge subdivision as a result of impacts from Hurricane Helene. The $1.0 billion decrease in net spending on financing activities compared to the prior year was driven by fewer share repurchases and higher proceeds from the issuance of long-term debt.

Sources of Cash and Liquidity

The Company has multiple sources of liquidity, including cash generated from operations and financing sources. The Company filed a shelf registration statement with the SEC on February 27, 2025, which may be used to issue debt or equity securities at CSX’s discretion, subject to market conditions and CSX Board authorization. While CSX seeks to give itself flexibility with respect to cash requirements, there can be no assurance that market conditions would permit CSX to sell such securities on acceptable terms at any given time, or at all. In 2025, CSX issued $900 million of long-term debt. See Note 10, Debt and Credit Agreements for more information.

CSX has access to a $1.2 billion five-year unsecured revolving credit facility backed by a diverse syndicate of banks that expires in February 2028. As of December 31, 2025, the Company had no outstanding balances under this facility. The Company also has a commercial paper program, backed by the revolving credit facility, under which the Company may issue unsecured commercial paper notes up to a maximum aggregate principal amount of $1.0 billion outstanding at any one time. As of December 31, 2025, the Company had no outstanding debt under the commercial paper program.

Uses of Cash

CSX uses current cash balances for general corporate purposes, which may include capital expenditures, working capital requirements, reduction or refinancing of outstanding indebtedness, redemptions and repurchases of CSX common stock, dividends to shareholders, acquisitions and other business opportunities, and contributions to the Company's qualified pension plan.

In 2025, CSX continued to invest in its business to create long-term value for shareholders. The Company is committed to maintaining and improving its existing infrastructure and to positioning itself for long-term, profitable growth through optimizing network and terminal capacity. Funds used for property additions are further described below.

CSX 2025 Form 10-K p.39

Capital expenditures above include approximately $470 million and $50 million in 2025 and 2024, respectively, related to rebuilding the Blue Ridge subdivision as a result of impacts from Hurricane Helene. Planned capital investments for 2026 are expected to be less than $2.4 billion. Spending to sustain core infrastructure with a focus on safety and reliability will be a top priority. In addition, management is committed to investments that promote profitable growth, including projects supporting service enhancements and productivity initiatives, including investments in locomotives and freight cars. CSX intends to fund capital investments primarily through cash generated from operations.

CSX is continually evaluating market and regulatory conditions that could affect the Company’s ability to generate sufficient returns on capital investments. CSX may revise its future estimates for capital spending as a result of changes in business conditions, tax legislation or the enactment of new laws or regulations, which could have a material adverse effect on the Company’s operations and financial performance in the future (see Risk Factors under Item 1A of this Form 10-K).

CSX is committed to returning cash to shareholders. Capital structure, capital investments and cash distributions, including dividends and share repurchases, are reviewed at least annually by the Board of Directors. On February 12, 2025, the Company's Board of Directors authorized an 8% increase in the quarterly cash dividend to $0.13 per common share effective March 2025. The 2025 dividend increase was the 21 st consecutive increase in CSX's annual dividend. 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.

Material Changes in the Consolidated Balance Sheets and Working Capital

CSX's balance sheet reflects its strong capital base and the impact of CSX's balanced approach in deploying capital for the benefit of its shareholders, which includes investments in infrastructure, dividend payments and share repurchases. Further, CSX is well positioned from a liquidity standpoint. The Company ended the year with $675 million of cash, cash equivalents and short-term investments.

Total assets as well as total liabilities and shareholders' equity increased $918 million from prior year end. The increase in total assets was primarily due to a $1.2 billion increase in net properties consistent with planned capital expenditures, including additions related to rebuilding the Blue Ridge subdivision. Additionally, investments in affiliates and other companies increased $114 million driven by affiliate earnings and other current assets increased due to a $96 million prepayment of locomotive maintenance expenses. These increases were partially offset by a $263 million decrease in cash and cash equivalents as noted above and a $164 million impairment of Quality Carriers' goodwill.

Total liabilities increased $265 million from prior year end primarily due to the issuance of $900 million in long-term debt and a $189 million increase in deferred income taxes primarily driven by bonus tax depreciation enacted into law on July 4, 2025. These increases were partially offset by debt repayments of $613 million and a decrease in income and other taxes payable primarily resulting from payments of $429 million for previously postponed federal and state income taxes. Total shareholders' equity increased $653 million from prior year end primarily driven by net earnings of $2.9 billion, partially offset by share repurchases of $1.4 billion and dividends paid of $972 million.

CSX 2025 Form 10-K p.40

Working capital is considered a measure of a company’s ability to meet its short-term needs. CSX had a working capital deficit of $583 million at December 2025 and $456 million at December 2024. This deficit increase of $127 million since prior year end is primarily due to cash paid for property additions of $2.9 billion, share repurchases of $1.4 billion, dividend payments of $972 million, and debt repayments of $613 million. These decreases were partially offset by cash-generating net earnings of $4.9 billion and debt issued of $900 million.

The Company’s working capital balance varies due to factors such as the timing of scheduled debt and tax payments and other changes in cash and cash equivalent balances. A working capital deficit is not unusual for CSX or other companies in the industry and does not indicate a lack of liquidity. The Company continues to maintain adequate current assets to satisfy current liabilities and maturing obligations when they come due. Furthermore, CSX has sufficient financial capacity, including its revolving credit facility, commercial paper program and its ability to file and use shelf registration statements to manage its day-to-day cash requirements and any anticipated obligations. The Company accesses the credit markets from time to time for additional liquidity.

Credit Ratings

Credit ratings reflect an independent agency’s judgment on the likelihood that a borrower will repay a debt obligation at maturity. The ratings reflect many considerations, such as the nature of the borrower’s industry and its competitive position, the size of the company, its liquidity and access to capital and the sensitivity of a company’s cash flows to changes in the economy. The three largest rating agencies, Standard & Poor’s Ratings Services (“S&P”), Moody’s Investors Service (“Moody’s”), and Fitch Ratings ("Fitch"), use alphanumeric codes to designate their ratings. The highest quality rating for long-term credit obligations is AAA for S&P and Fitch and is Aaa for Moody’s. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency.

CSX's credit ratings remained stable during 2025 with no changes in the Company's S&P, Moody's, or Fitch ratings from prior year. The Company's credit ratings as of December 31, 2025 are summarized below:

The cost and availability of unsecured financing are materially affected by CSX's long-term credit ratings. Ratings of BBB- by S&P and Fitch and Baa3 by Moody’s, or better, reflect ratings on debt obligations that fall within a band of credit quality considered to be investment-grade. If CSX's credit ratings were to decline to below investment-grade levels, the Company could experience significant increases in its interest cost for new debt. In addition, a decline in CSX’s credit ratings to below investment-grade levels could adversely affect the market’s demand, and thus the Company’s ability to readily issue new debt. The Company is committed to maintaining an investment-grade credit profile.

CSX 2025 Form 10-K p.41