CSX (CSX) 10-K risk factor changes: FY2016 vs FY2015

Legislation passed by [removed: Congress or] [added: Congress,] new regulations issued by federal agencies [removed: can] [added: or executive orders issued by the President of the United States could] significantly affect the revenues, costs and profitability of the Company's business.

Climate change and other emissions-related [removed: legislation] [added: laws] and [removed: regulation] [added: regulations] could adversely affect the Company's operations and financial results.

Climate change and other emissions-related [removed: legislation] [added: laws] and [removed: regulation] [added: regulations] have been proposed and, in some cases adopted, on the federal, state, provincial and local levels.

In particular, the EPA has issued various regulations and [removed: is expected to] [added: may] issue additional regulations targeting emissions, including rules and standards governing emissions from certain stationary sources and from vehicles.

Additionally, depressed crude oil prices due to increased supply or lower demand could result in a [added: further] decrease in domestic crude oil production, which could have an adverse effect on crude oil volumes for CSX.

Although the Company [removed: establishes reserves and] maintains insurance to cover [added: some of] these types of [removed: claims,] [added: claims and establishes reserves when appropriate,] final amounts determined to be due on any outstanding matters may [added: exceed the Company's insurance coverage or] differ materially from the recorded [removed: reserves and exceed the Company's insurance coverage.][added: reserves.]

CSX 2016 Form 10-K p.

CSX 2016 Form 10-K p.

CSX 2016 Form 10-K p.

The Company could be adversely impacted by actions of activist stockholders, and such activism could impact the value of the Company’s securities.

While the Company continually engages with shareholders and considers their views on business and strategy, responding to activist shareholders can be costly and time-consuming, disrupt operations and divert the attention of management and employees.

The uncertainties associated with such activities could interfere with the Company’s ability to effectively execute its strategic plan, impact customer retention and long-term growth, and limit the Company's ability to hire and retain personnel.

In addition, a proxy contest for the election of directors could require the Company to incur significant legal fees and proxy solicitation expenses and require significant time and attention by management and the board of directors.

Uncertainties related to, or the results of, such activism could affect the market price and volatility of the Company's securities.

CSX 2016 Form 10-K p.

10

CSX provides rail-based freight transportation services including traditional rail service, the transport of intermodal containers and [removed: trailers] [added: trailers,] as well as other transportation services such as rail-to-truck transfers and bulk commodity [removed: operations with its approximately 29,000 dedicated employees.][added: operations.]

[removed: U.S. demand to move more goods by rail is expected to rise and] [added: In addition,] freight railroads provide the most [added: economical and] environmentally efficient [removed: and economical] means to [removed: meet this growing demand.][added: transport goods over land.]

Through [removed: this] [added: its] network, the Company transports a diverse portfolio of commodities and products to meet the country's needs.

These products range from agricultural goods, such as grains, to chemicals, automobiles, metals, building materials, paper, consumer products, and energy sources like coal, ethanol and [removed: crude oil.][added: liquefied petroleum gas.]

CSX's transportation solutions connect industries and population centers across the United States with each other and with global markets through access to over 70 port facilities [removed: whereby meeting] [added: allowing] the [added: Company to meet the dynamic] transportation needs of [removed: energy producers,] manufacturers, industrial producers, construction companies, farmers and feed mills, wholesalers and [removed: retailers] [added: retailers, energy producers] and the [removed: United States] [added: U.S.] Armed Forces.

[removed: Through the] Service Excellence [removed: initiative, CSX is building] [added: has long been] a [added: core component of CSX’s] culture that engages all employees [removed: and focuses] [added: to focus] on [removed: the] [added: delivering] value [removed: delivered] to customers through improved [removed: service.][added: service levels, communications tools and advanced technologies.]

[removed: This] [added: For example, CSX’s intermodal network connects all major population centers east of the Mississippi River and] positions the Company to capture a significant share of the [removed: incremental] [added: growing] domestic intermodal market opportunity, [added: currently] estimated at nine million truckloads in the eastern United States that move over 550 miles.

The [removed: Company’s] [added: company’s] highway-to-rail [removed: initiatives assist] [added: initiative assists] in [removed: capturing] [added: growing] this traffic [removed: and also help] [added: by helping] customers identify [added: new] conversion opportunities for both domestic [added: intermodal] moves and the U.S. portion of international [added: intermodal] moves.

[removed: Energy] [added: The Company’s coal] markets have shifted [added: dramatically] over the past [removed: few] [added: several] years and continue to [added: rapidly] evolve.

[removed: CSX] [added: Domestic utility coal demand decreased again in 2016 relative to previous years while] export coal [removed: volume and pricing is] [added: remains] subject to a high degree of volatility as a result of changes in the global economy, competition from foreign [removed: coal] producers and regulatory [removed: shifts.][added: impacts on coal mining in the United States.]

[added: |] Public-Private Partnerships [added: - net (a) | 41 | | | | 14 | | | | 8 | | |]

Therefore, CSX and its government partners are jointly working to invest in multi-year rail infrastructure [removed: projects such as the National Gateway.][added: projects.]

[removed: This initiative] [added: An example of one of these initiatives] is [added: the National Gateway, which is] a public-private partnership [removed: which] [added: that] will increase intermodal capacity and create substantial environmental and efficiency advantages by clearing key corridors between mid-Atlantic ports and the Midwest for double-stack intermodal trains.

[removed: As part of the National Gateway project, CSX broke ground on the modernization of the Virginia Avenue Tunnel in Washington, D.C. in 2015.This] [added: This] project [removed: will improve] [added: improves] the flow of freight traffic through the District of Columbia and [removed: will eliminate] [added: eliminates] a [removed: rail-traffic] [added: rail traffic] bottleneck that also impacts commuter and passenger trains in the region.

In [removed: 2015,] [added: 2016,] the Company invested [removed: $2.6] [added: $2.7] billion to further enhance the [removed: capacity, quality, safety and] [added: safety, reliability, efficiency,] flexibility [added: and capability] of its [removed: network.][added: network and its overall business.]

[removed: In addition, CSX] [added: The Company] continues to return value to its shareholders in the form of dividends and share repurchases.

Also in [removed: 2015,] [added: 2016,] CSX [removed: announced a new $2 billion] [added: continued] share [removed: repurchase program,] [added: repurchases under its $2.0 billion program] which [added: began in 2015 and] is expected to be completed by April [removed: 2017 based on market and business decisions.][added: 2017.]

CSX repurchased [removed: $804 million,] [added: $1.1 billion,] or [removed: 26] [added: 38] million shares, during [removed: 2015] [added: 2016] under this program.

[removed: These operating initiatives,] [added: The] strategic [removed: areas, long-term investments] [added: initiatives] and [removed: shareholder returns] [added: opportunities, as well as the strategic investments] discussed [removed: above] [added: above,] provide a foundation for volume growth, [added: continued value pricing,] productivity improvement, enhanced customer service and continued advancements in the safety and reliability of operations.

To continue these types of investments, the Company must be able to operate in [removed: an] [added: a balanced regulatory] environment in which it can generate adequate returns and drive shareholder value.

- Revenue of [removed: $11.8] [added: $11.1] billion decreased [removed: $858] [added: $742] million or [removed: 7%] [added: six percent] versus the prior year.

- Expenses of [removed: $8.2] [added: $7.7] billion decreased [removed: $829] [added: $547] million or [removed: 9%] [added: seven percent] year over year.

- Operating income of [removed: $3.6] [added: $3.4] billion decreased [removed: $29] [added: $195] million or [removed: 1%] [added: five percent] year over year.

| • | Earnings per diluted share of [removed: $2.00 increased $0.08] [added: $1.81 decreased $0.19] or [removed: 4%] [added: 10 percent] year over year. |

| [removed: (in Thousands)] | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Operating Income | [removed: $] [added: 3,389] | [added: | | |] 3,584 | | | [removed: $] | [removed: 3,613] [added: (195] | | [added: )] | [removed: $] | [removed: 3,473] [added: (5] | [added: )] | [added: |]

| Operating Ratio | 69.7 | | % | | 71.5 | | % | | [removed: 71.1] | | [removed: %] | [added: | 180 | | bps |]

Free cash flow is considered a non-GAAP financial measure under SEC Regulation [removed: G, Disclosure of Non-GAAP Measures.][added: G and Reg S-K Item 10(e).]

[removed: As described below, free] [added: Free] cash flow before dividends [removed: increased $73] [added: decreased $145] million [removed: year over year] [added: year-over-year] to [removed: $992] [added: $847] million.

| Net cash provided by operating activities | $ | [removed: 3,370] [added: 3,041] | | | $ | [removed: 3,343] [added: 3,370] | | | $ | [removed: 3,267] [added: 3,343] | |

| Property additions (a) | [removed: (2,562] [added: (2,398] | | ) | | [removed: (2,449] [added: (2,562] | | ) | | [removed: (2,313] [added: (2,449] | | ) |

| Proceeds from property dispositions | [removed: 147] [added: 195] | | | | [removed: 62] [added: 147] | | | | [removed: 53] [added: 62] | | |

| Other investing activities | [removed: 37] [added: 9] | | | | [removed: (37] [added: 37] | | [removed: )] | | [removed: (112] [added: (37] | | ) |

| Free Cash Flow (before payment of dividends) | $ | [removed: 992] [added: 847] | | | $ | [removed: 919] [added: 992] | | | $ | [removed: 895] [added: 919] | |

| (a) | Property additions include investments related to reimbursable public-private partnerships. These partnership investments of [removed: $14] [added: $41] million, [removed: $8] [added: $14] million and [removed: $40] [added: $8] million in [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013,] [added: 2014,] respectively, are projects that are partially or wholly reimbursed to CSX through either government grants or other funding sources such as cash received from a property sale. These reimbursements may not be fully received in a given year; [removed: therefore] [added: therefore,] the timing of receipts may differ from the timing of the investment. [added: Also, property additions for 2016 above do not include $307 million for locomotives purchased in 2015 using seller financing with payment made in 2016.] |

| Other Income - Net | [removed: 98] [added: 46] | | | | [removed: (24] [added: 98] | | [removed: )] | | [removed: 122] [added: (52] | | [added: )] | | [removed: (508] [added: (53] | ) | |

| Operating Ratio | [removed: 69.7] [added: 69.4] | | % | | [removed: 71.5] [added: 69.7] | | % | | | | | | [removed: (180] [added: 30] | [removed: )] | bps |

| Volume and Revenue (Unaudited) [added: (b)] | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| [removed: Phosphates and] Fertilizers [added: (a)] | 301 | | | 330 | | | (9 | ) | | 489 | | | | 534 | | | | (8 | ) | | 1,625 | | | | 1,618 | | | | — | |

In 2015, [removed: Revenue] [added: revenue] decreased $858 million, or [removed: 7%,] [added: seven percent,] mostly due to the decline in fuel surcharge of $646 million.

TERMS USED BY CSX

When used in this report, unless otherwise indicated by the context, these terms are used to mean the following:

Car hire - A charge paid by one railroad for its use of cars belonging to another railroad or car owner.

Class I freight railroad - One of the largest line haul freight railroads as determined based on operating revenue; the exact revenue required to be in each class is periodically adjusted for inflation by the Surface Transportation Board.

Smaller railroads are classified as Class II or Class III.

Common carrier mandate - A federal mandate that requires U.S. railroads to accommodate reasonable requests from shippers to carry any freight, including hazardous materials.

Demurrage - A charge assessed by railroads for the use of rail cars by shippers or receivers of freight beyond a specified free time.

Department of Transportation ("DOT") - A U.S Government agency with jurisdiction over matters of all modes of transportation.

Depreciation study (also referred to as a "life study") - A periodic statistical analysis of fixed asset service lives, salvage values, accumulated depreciation, and other factors for group assets along with a comparison of similar asset groups at other companies conducted by a third-party specialist.

Double-stack - Stacking containers two-high on specially equipped cars.

Drayage \- The pickup or delivery of intermodal shipments by truck.

Federal Railroad Administration ("FRA") - The branch of the DOT that is responsible for developing and enforcing railroad safety regulations, including safety standards for rail infrastructure and equipment.

Free cash flow - The calculation of a non-GAAP measure by using net cash provided by operating activities and adjusting for property additions and certain other investing activities.

Free cash flow is a measure of cash available for paying dividends, share repurchases and principal reduction on outstanding debt.

Group-life method \- A type of depreciation in which assets with similar useful lives and characteristics are aggregated into groups.

Instead of calculating depreciation for individual assets, depreciation is calculated for each group.

Highway-to-rail \- An initiative to assist new and existing customers in identifying freight moves that would benefit from converting from a highway-only move to one that utilizes intermodal containers on rail and local drayage by truck.

Incidental revenue - Revenue for switching, demurrage, storage, etc.

Intermodal - A flexible way of transporting freight over water, highway and rail without being removed from the original transportation equipment, namely a container or trailer.

Mainline - The main track thoroughfare, exclusive of terminals, yards, sidings and turnouts.

CSX 2016 Form 10-K p.

24

National Gateway - A multi-phase construction initiative aimed at increasing intermodal capacity on the CSX network by clearing key corridors between mid-Atlantic ports and the Midwest for double-stack trains.

Construction on National Gateway projects is funded by CSX, the federal government, and individual states.

Revenue adequacy - The achievement of a rate of return on investment at least equal to the cost of investment capital, as measured by the STB.

Shipper - A customer shipping freight via rail.

Siding - Track adjacent to the mainline used for passing trains.

Staggers Act of 1980 - Congressional law which significantly deregulated the rail industry, replacing the regulatory structure in existence since the 1887 Interstate Commerce Act.

Where previously rates were controlled by the Interstate Commerce Commission, the Staggers Act allowed railroads to establish their own rates for shipments, enhancing their ability to compete with other modes of transportation.

Surface Transportation Board ("STB") - An independent governmental adjudicatory body administratively housed within the DOT, responsible for the economic regulation of interstate surface transportation within the United States.

Switching - Putting cars in a specific order, placing cars for loading, retrieving empty cars or adding or removing cars from a train at an intermediate point.

Terminal - A facility, typically owned by a railroad, for the handling of freight and for the breaking up, making up, forwarding and servicing of trains.

TTX Company ("TTX") - A Company that provides its owner-railroads with standardized fleets of intermodal, automotive and general use railcars at time and mileage rates.

CSX owns about 20 percent of TTX's common stock, and the remainder is owned by the other leading North American railroads and their affiliates.

Turnout - A track that diverts trains from one track to another.

Yard - A system of tracks, other than main tracks and sidings, used for making up trains, storing cars and other purposes.

CSX 2016 Form 10-K p.

25

To support long-term growth and value creation consistent with the evolving trends in freight transportation, CSX has launched a new strategic initiative known as the CSX of Tomorrow: a safe, highly automated, resource-efficient railroad enabling Service Excellence, profitable growth and improved cash flow.

The CSX of Tomorrow is comprised of four distinct strategic pillars and builds on the Company’s vision, purpose and core values.

Low natural gas prices, increased foreign labor costs and supply chain factors have helped to improve competitiveness of CSX's customers over the long term.

The rail industry benefits from this long-term improved global competitiveness, continued economic growth and the shift towards more rail-based solutions.

CSX can move a ton of freight about 475 miles on one gallon of diesel fuel, as trains are four times more fuel efficient than trucks on average.

Shipping freight by rail also alleviates highway congestion, eases air pollution and saves energy.

CSX's network reaches nearly two-thirds of the U.S. population, which accounts for the majority of the nation's consumption of goods.

Operating Initiatives

To support long-term growth, CSX is focused on meeting or exceeding customers’ expectations while improving profitability.

Several key operating initiatives have been implemented over the past several years that lay a foundation for meeting these objectives.

The overall goal is sustained high customer service levels, which is in part achieved through a relentless focus on using advanced network modeling analytics and tools to create a disciplined, scheduled approach to designing and running CSX's network.

The Company continues to identify the most efficient, cost-effective routes for CSXT customers' traffic while providing timely service with the fewest handlings and car miles possible.

This initiative increases employee communication and dialogue to help identify and resolve customer issues at the lowest level, improving the customer experience and allowing CSX to grow the business.

This process involves engagement from all operating employees, as well as collaboration with sales and marketing employees and, ultimately, with the Company’s customers.

Higher levels of customer service and satisfaction support CSX’s ability to profitably grow the business by increasing customer retention, price sustainability and asset utilization.

In addition, Total Service Integration (“TSI”) is intended to align operating capabilities with customers' needs resulting in an efficient and effective service product.

TSI was first implemented in the unit train network, where it successfully increased the average number of cars per train and improved asset utilization.

CSX has been implementing TSI in the carload network over the past few years and has focused on improving the “first and last mile” service experience for carload customers, providing a more consistent and reliable service product.

The carload network is connected to more than 5,000 customer facilities and has a high degree of variability each day.

New tools and technology have allowed the Company to more effectively communicate with customers, not only providing the service the Company has promised to deliver but proactively notifying the customer of service status.

Applying TSI to the carload network has improved local customer service satisfaction and local service performance.

Finally, Enterprise Asset Management (“EAM”) focuses on improving the utilization of the company’s most critical assets, namely, crews, locomotives, cars and track infrastructure.

Projects are currently in place to deploy technology, improve processes and reduce unproductive time.

Because the railroad is an asset intensive industry, EAM helps reduce the overall expense associated with asset ownership by monitoring the overall condition of equipment, helping proactively schedule maintenance, increasing utilization and also effectively managing the investment required for new or replacement assets.

By improving asset utilization, CSX expects to sustain long-term operating efficiencies and reduce future capital expenditures associated with asset replacement.

In summary, these initiatives are designed to improve service levels in a cost effective manner and enhance the reliability of rail transportation.

These improvements to operational processes, customer communication and service are better aligning CSX's operating capabilities with customers' needs and are enabling the Company to capitalize on the strategic opportunities described below.

Strategic Opportunities

Intermodal Growth

CSX’s intermodal business is a growth opportunity that provides an economical and environmentally friendly alternative to transporting freight on highways via truck.

CSX’s intermodal network connects all major population centers east of the Mississippi River, and over 90% of intermodal traffic moves in double-stack (two containers high) service.

To further enhance the Company's intermodal offering and support future growth, CSX recently completed new or expanded terminal construction to increase network capacity and broaden its market presence in key growth areas.

In 2015, CSX began construction on a new terminal near Pittsburgh, PA, enhancing the Company’s reach and supporting continued growth.

Over the past several years, the Company also opened or expanded seven other terminals in Winter Haven, FL; Quebec, Canada; Columbus, OH; Louisville, KY; Atlanta, GA; and Worcester, MA; as well as the Company's Northwest Ohio terminal which is part of the National Gateway Initiative discussed below.

Illinois Basin Coal Shift

For instance, domestic utility coal demand decreased in 2015 relative to previous years.

In the long term, downward pressure on domestic coal volumes will likely continue as the result of increasingly stringent existing and proposed environmental regulations and continued low natural gas prices.

In addition, mining economics are causing a shift from Central Appalachian coal to thermal coal in the Illinois Basin and the Powder River Basin.

CSX will capitalize on these shifts and address structural costs in the regions of declining volume.

Export Coal

Over the past few years, CSX has capitalized on the global coal demand in both steel manufacturing and power generation.

Currently, both global thermal and metallurgical coal prices are low due to oversupply, but CSX sees long-term growth in global demand as developing countries become more urbanized.

As of December [removed: 2015,] [added: 2016,] CSX does not have a material amount of floating rate debt obligations outstanding, and therefore fluctuations in the interest rate would not have a material impact on the Company's financial condition, results of operations or liquidity.

| Report of Independent Registered Public Accounting Firm | | [removed: [50](#sB3C2A94F8CA49A3CA18C4D48F024FE9A)] [added: [58](#s8AB7455252325F0FBCDF3969C7E1BE80)] |

| Consolidated Income Statements for the Fiscal Years Ended: | | [removed: [51](#s7C63628A992D235F213D4D48DC087B32)] [added: [59](#sF09AE7C0C27453299BC787F9A4606F9E)] |

| [removed: |] December 27, 2013 | [added: $] | [added: 280 | | | $ | 100 | | | $ | 71 | | | $ | 451 | |]

| Consolidated Comprehensive Income Statements for the Fiscal Years Ended: | | [removed: [52](#sC905E80A3D30F6B847C04D48DBF83C81)] [added: [60](#s3437F4C073235AAE9F61DD1C79236E59)] |

| Consolidated Balance Sheets as of: | | [removed: [53](#s6A6D3A6026C643C555CA4D48DB8B280D)] [added: [61](#sAFEEDBA96CBB54599D8AE664665A6B13)] |

| Consolidated Cash Flow Statements for Fiscal Years Ended: | | [removed: [54](#s5E863309326F238E282D4D48DA9278DE)] [added: [62](#sEDA9084C9C54583AB2E402FA5BCE2A1C)] |

| Consolidated Statements of Changes in Shareholders' Equity: | | [removed: [55](#s9DCFB034DD1FAAE302CB4D48DAD06336)] [added: [63](#sF9F4E137C0FD533B853CF2603C49660C)] |

| Notes to Consolidated Financial Statements | | [removed: [56](#s4B2F63D6EF1A31FEBE734D48F17B0C0D)] [added: [64](#s5C652409EA3354A1BF59B2EC9D780646)] |

We have audited the accompanying consolidated balance sheets of CSX Corporation as of December [removed: 25, 2015] [added: 30, 2016] and December [removed: 26, 2014,] [added: 25, 2015,] and the related consolidated statements of income, comprehensive income, cash flows, and changes in shareholders’ equity for each of the three fiscal years [added: in the period] ended December [removed: 25, 2015.][added: 30, 2016.]

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of CSX Corporation at December [removed: 25, 2015] [added: 30, 2016] and December [removed: 26, 2014,] [added: 25, 2015,] and the consolidated results of its operations and its cash flows for each of the three fiscal years in the period ended December [removed: 25, 2015,] [added: 30, 2016,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), CSX Corporation's internal control over financial reporting as of December [removed: 25, 2015,] [added: 30, 2016,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February [removed: 10, 2016] [added: 14, 2017] expressed an unqualified opinion thereon.

| | Fiscal Years | | | | | | | [removed: | | | |]

| | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Revenue | $ | [removed: 11,811] [added: 11,069] | | | $ | [removed: 12,669] [added: 11,811] | | | $ | [removed: 12,026] [added: 12,669] | |

| Labor and Fringe | [removed: 3,290] [added: 3,159] | | | | [removed: 3,377] [added: 3,290] | | | | [removed: 3,138] [added: 3,377] | | |

| Materials, Supplies and Other | [removed: 2,336] [added: 2,069] | | | | [removed: 2,484] [added: 2,336] | | | | [removed: 2,275] [added: 2,484] | | |

| Fuel | [removed: 957] [added: 713] | | | | [removed: 1,616] [added: 957] | | | | [removed: 1,656] [added: 1,616] | | |

| Depreciation | [removed: 1,208] [added: 1,301] | | | | [removed: 1,151] [added: 1,208] | | | | [removed: 1,104] [added: 1,151] | | |

| Equipment and Other Rents | [removed: 436] [added: 438] | | | | [removed: 428] [added: 436] | | | | [removed: 380] [added: 428] | | |

| Total Expense | [removed: 8,227] [added: 7,680] | | | | [removed: 9,056] [added: 8,227] | | | | [removed: 8,553] [added: 9,056] | | |

| Operating Income | [removed: 3,584] [added: 3,389] | | | | [removed: 3,613] [added: 3,584] | | | | [removed: 3,473] [added: 3,613] | | |

| Interest Expense | [removed: (544] [added: (579] | | ) | | [removed: (545] [added: (544] | | ) | | [removed: (562] [added: (545] | | ) |

| Other Income (Expense) - Net (Note 10) | [removed: 98] [added: 46] | | | | [removed: (24] [added: 98] | | [removed: )] | | [removed: 11] [added: (8] | | [added: )] |

| Earnings Before Income Taxes | [removed: 3,138] [added: 2,741] | | | | [removed: 3,044] [added: 3,138] | | | | [removed: 2,922] [added: 3,044] | | |

| Income Tax Expense (Note 11) | [removed: (1,170] [added: (1,027] | | ) | | [removed: (1,117] [added: (1,170] | | ) | | [removed: (1,058] [added: (1,117] | | ) |

| Net Earnings | $ | [removed: 1,968] [added: 1,714] | | | $ | [removed: 1,927] [added: 1,968] | | | $ | [removed: 1,864] [added: 1,927] | |

| Basic | $ | [removed: 2.00] [added: 1.81] | | | $ | [removed: 1.93] [added: 2.00] | | | $ | [removed: 1.83] [added: 1.93] | |

| Assuming Dilution | $ | [removed: 2.00] [added: 1.81] | | | $ | [removed: 1.92] [added: 2.00] | | | $ | [removed: 1.83] [added: 1.92] | |

| Basic | [removed: 983] [added: 947] | | | | [removed: 1,001] [added: 983] | | | | [removed: 1,019] [added: 1,001] | | |

| Assuming Dilution | [removed: 984] [added: 948] | | | | [removed: 1,002] [added: 984] | | | | [removed: 1,019] [added: 1,002] | | |

| Cash Dividends Paid Per Common Share | $ | [removed: 0.70] [added: 0.72] | | | $ | [removed: 0.63] [added: 0.70] | | | $ | [removed: 0.59] [added: 0.63] | |

See accompanying Notes to Consolidated Financial [removed: Statements][added: Statements.]

| | [removed: 2015] [added: 2016] | | | [removed: 2014] [added: 2015] | | | [removed: 2013] [added: 2014] | | |

| Net Earnings | $ | [removed: 1,968] [added: 1,714] | | $ | [removed: 1,927] [added: 1,968] | | $ | [removed: 1,864] [added: 1,927] | |

| Pension and Other Post-Employment Benefits | [removed: 10] [added: 21] | | | [removed: (149] [added: 10] | | [removed: )] | [removed: 389] [added: (149] | | [added: )] |

| Other | [removed: (9] [added: 4] | | [removed: )] | [removed: 6] [added: (9] | | [added: )] | [removed: 24] [added: 6] | | |

| Total Other Comprehensive Income (Loss) | [removed: 1] [added: 25] | | | [removed: (143] [added: 1] | | [removed: )] | [removed: 413] [added: (143] | | [added: )] |

| Comprehensive Earnings (Note 14) | $ | [removed: 1,969] [added: 1,739] | | $ | [removed: 1,784] [added: 1,969] | | $ | [removed: 2,277] [added: 1,784] | |

| | December [removed: | | | | December |] [added: 30, 2016] | |

CSX 2016 Form 10-K p.

56

CSX 2016 Form 10-K p.

57

CSX 2016 Form 10-K p.

58

| Debt Repurchase Expense | (115 | | ) | | — | | | | (16 | | ) |

Certain prior year data has been reclassified to conform to the current presentation.

CSX 2016 Form 10-K p.

59

See accompanying Notes to Consolidated Financial Statements.

CSX 2016 Form 10-K p.

60

| Total Assets | $ | 35,414 | | | $ | 34,745 | |

| Total Liabilities | 23,720 | | | | 23,077 | | |

Certain prior year data has been reclassified to conform to the current presentation.

See accompanying Notes to Consolidated Financial Statements.

CSX 2016 Form 10-K p.

61

| Depreciation | 1,301 | | | | 1,208 | | | | 1,151 | | |

| Contributions to Qualified Pension Plans (Note 8) | (250 | | ) | | — | | | | — | | |

See accompanying Notes to Consolidated Financial Statements.

CSX 2016 Form 10-K p.

62

| Net Earnings | — | | | — | | 1,714 | | | — | | | — | | | 1,714 | | |

| Share Repurchases | (38,379 | ) | | (38 | ) | (1,018 | | ) | — | | | — | | | (1,056 | | ) |

| Other | 951 | | | 24 | | (1 | | ) | — | | | (1 | | ) | 22 | | |

| December 30, 2016 | 928,180 | | $ | 1,066 | | $ | 11,253 | | $ | (640 | ) | $ | 15 | | $ | 11,694 | |

See accompanying Notes to Consolidated Financial Statements.

CSX 2016 Form 10-K p.

63

CSX 2016 Form 10-K p.

64

Fiscal fourth quarter 2016 included an extra week, so the quarter consisted of 14 weeks and fiscal year 2016 consisted of 53 weeks ending on December 30, 2016.

CSX 2016 Form 10-K p.

65

CSX 2016 Form 10-K p.

66

In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU"), Improvements to Employee Share-based Payment Accounting, which requires excess tax benefits and deficiencies to be recorded as income tax expense or benefit in the income statement rather than being recorded in additional paid-in capital.

The Company adopted the provisions of this ASU during the second quarter of 2016 which did not have a material effect on the Company's financial condition, results of operations or liquidity.

CSX CORPORATION

PART II

Item 8.

Financial Statements and Supplementary Data

| | December 26, 2014 | |

February 10, 2016

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | Fiscal Years | | | | | | | | |

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| Deferred Income Taxes | 126 | | | | 141 | | |

| Total Assets | $ | 35,039 | | | $ | 33,053 | |

| Total Liabilities | 23,371 | | | | 21,877 | | |

| December 28, 2012 | 1,020,485 | | $ | 1,048 | | $ | 9,010 | | $ | (936 | ) | $ | 14 | | $ | 9,136 | |

| Share Repurchases | (13,791 | ) | (14 | | ) | (339 | | ) | — | | | — | | | (353 | | ) |

| Stock Option Exercises and Other | 2,165 | | 36 | | | 1 | | | — | | | 7 | | | 44 | | |

| | |

| --- | --- |

The next 53 week fiscal year will be 2016, which will end on December 30, 2016.

Investments

In July 2015, the FASB issued ASU, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962) and Health and Welfare Benefit Plans (Topic 965): I.

Fully Benefit-Responsive Investment Contracts; II.

Plan Investment Disclosures; III.

Measurement Date Practical Expedient.

This three-part update simplifies current benefit plan accounting and requires benefit plans to disaggregate their investments measured using fair value by general type, among other changes.

This update is effective for fiscal years beginning after December 15, 2015 and early adoption is permitted.

Parts I and III of this update are not applicable to CSX.

This update only affects disclosures related to fair value measurement.

Adoption does not have an effect on the Company's pension plan net assets available for benefits or its changes in net assets available for benefits.

In May 2015, the FASB issued ASU, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).

This update eliminates the requirement to categorize investments within the fair value hierarchy if their fair value is measured using the net asset value per share practical expedient.

This update requires that investments measured using the net asset value per share be disclosed as a reconciling item between the statement of net assets available for benefits and the fair value hierarchy disclosure.

In April 2015, the FASB issued ASU, Interest - Imputation of Interest, which changes the financial statement presentation of debt issuance costs to be a direct reduction to long-term debt, rather than presented as a long-term asset.

The amortization of debt issuance costs will continue to be included in interest expense.

This standard is effective for annual reporting periods beginning after December 15, 2015 and will not have a material effect on the Company's financial condition, results of operations or liquidity.

In July 2015, the FASB approved a one-year deferral of the effective date.

The Company recorded a charge for each of the initiatives above as shown in the table below.

The Company’s number of employees was approximately [removed: 29,000] [added: 27,000] as of December [removed: 2015,] [added: 2016,] which includes approximately [removed: 24,000] [added: 22,000] union employees.

During [removed: 2015,] [added: 2016,] the [removed: Company] [added: Company's] services generated [removed: $11.8] [added: $11.1] billion of revenue and served three primary lines of business:

| • | The merchandise business shipped [removed: nearly 2.9] [added: 2.8] million carloads and generated [removed: 62%] [added: 64%] of revenue and [removed: 42%] [added: 43%] of volume in [removed: 2015.] [added: 2016.] The Company’s merchandise business is comprised of shipments in the following diverse markets: agricultural [removed: products, phosphates] and [removed: fertilizers,] food [removed: and consumer,] [added: products, fertilizers,] chemicals, automotive, [removed: metals, forest products, minerals] [added: metals] and [removed: waste] [added: equipment, minerals] and [removed: equipment.] [added: forest products.] |

| • | The coal business shipped [removed: about 1.1 million] [added: 838 thousand] carloads and accounted for [removed: 19%] [added: 17%] of revenue and [removed: 16%] [added: 13%] of volume in [removed: 2015.] [added: 2016.] The Company transports domestic coal, coke and iron ore to electricity-generating power plants, steel manufacturers and industrial plants as well as export coal to deep-water port facilities. Roughly one-third of export coal and the majority of the domestic coal that the Company transports is used for generating electricity. |

| • | The intermodal business accounted for [removed: 15%] [added: 16%] of revenue and [removed: 42%] [added: 44%] of volume in [removed: 2015.] [added: 2016.] The intermodal business combines the superior economics of rail transportation with the short-haul flexibility of trucks and offers a cost advantage over long-haul trucking. Through a network of more than 50 terminals, the intermodal business serves all major markets east of the Mississippi River and transports mainly manufactured consumer goods in containers, providing customers with truck-like service for longer shipments. |

Other revenue accounted for [removed: 4%] [added: 3%] of the Company’s total revenue in [removed: 2015.][added: 2016.]

This category includes revenue from regional subsidiary railroads, demurrage, revenue for customer volume commitments not met, [removed: switching and] [added: switching,] other incidental [removed: charges.][added: charges and adjustments to revenue reserves.]

In the U.S., the railroad operations conducted by the Company's subsidiaries, including CSXT, are subject to the regulatory jurisdiction of the Surface Transportation Board (“STB”), the Federal Railroad Administration (“FRA”), and its sister agency within the U.S. Department of [removed: Transportation,] [added: Transportation ("DOT"),] the Pipeline and Hazardous Materials Safety Administration (“PHMSA”).

CSX currently estimates that the total multi-year cost of PTC implementation will be approximately [removed: $2.2] [added: $2.4] billion for the Company.

Total PTC investment through [removed: 2015] [added: 2016] was [removed: $1.5] [added: $1.8] billion.

New rules [removed: regarding] [added: regarding, among other things,] competitive access or revenue adequacy could have a material adverse effect on the Company's financial condition, results of operations and liquidity as well as its ability to invest in enhancing and maintaining vital infrastructure.

For additional information concerning business conducted by the Company during [removed: 2015,] [added: 2016,] see Item 7.

CSX 2016 Form 10-K p.

CSX 2016 Form 10-K p.

CSX 2016 Form 10-K p.

CSX 2016 Form 10-K p.

CSX CORPORATION

PART I

Environmental Proceedings That Could Result in Fines Above $100,000

In connection with a CSXT train derailment in Mount Carbon, West Virginia in February 2015, the Company has entered into discussions with the U.S. Department of Justice and the U.S. Environmental Protection Agency concerning a regulatory penalty related to a release of product into the environment.

Although final resolution of this matter is subject to further discussions and potential litigation, the Company does not believe that the outcome will have a material adverse effect on its financial position, results of operations or liquidity.

For the fiscal year ended December [removed: 25, 2015][added: 30, 2016]

On June [removed: 26, 2015] [added: 24, 2016] (which is the last day of the second quarter and the required date to use), the aggregate market value of the Registrant’s voting stock held by non-affiliates was approximately [removed: $33] [added: $24] billion (based on the New York Stock Exchange closing price on such date).

There were [removed: 963,150,011] [added: 926,446,993] shares of Common Stock outstanding on January [removed: 22, 2016] [added: 27, 2017] (the latest practicable date that is closest to the filing date).

Portions of the Registrant’s Definitive Proxy Statement (the “Proxy Statement”) to be filed no later than 120 days after the end of the fiscal year with respect to its [added: 2017] annual meeting of [removed: shareholders scheduled to be held on May 11, 2016.][added: shareholders.]

| | [1A. Risk [removed: Factors](#s79734231558BE44758834D48ECDA4DEE)] [added: Factors](#sDDDA57A18A3E585A80C5B4272CE60837)] | | | [removed: [6](#s79734231558BE44758834D48ECDA4DEE)] [added: [7](#sDDDA57A18A3E585A80C5B4272CE60837)] |

| | [1B. Unresolved Staff [removed: Comments](#s5C6C5AEB35026899206D4D48ECF90C27)] [added: Comments](#sDB0DEA6729D35D13A6F3BCC680488D7D)] | | | [removed: [10](#s5C6C5AEB35026899206D4D48ECF90C27)] [added: [11](#sDB0DEA6729D35D13A6F3BCC680488D7D)] |

| 3. | [Legal [removed: Proceedings](#s89258EE8DCDA9BC4F3134D48ED56B0DE)] [added: Proceedings](#s5F5B5BA7B10D5995A59C212C817CB86F)] | | | [removed: [15](#s89258EE8DCDA9BC4F3134D48ED56B0DE)] [added: [17](#s5F5B5BA7B10D5995A59C212C817CB86F)] |

| 4. | [Mine Safety [removed: Disclosures](#s5DA3F39D596D0AE3AAC34D48ED853179)] [added: Disclosures](#s845FF478335A5E4C9F74060463EBF1C4)] | | | [removed: [15](#s5DA3F39D596D0AE3AAC34D48ED853179)] [added: [17](#s845FF478335A5E4C9F74060463EBF1C4)] |

| | [Executive Officers of the [removed: Registrant](#s81D1EF9A03EA12A146024D48EDA4A177)] [added: Registrant](#sA4047DC551EF5BDC9D472040C0F064F5)] | | | [removed: [15](#s81D1EF9A03EA12A146024D48EDA4A177)] [added: [18](#sA4047DC551EF5BDC9D472040C0F064F5)] |

| 5. | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#sD569ACA8578A5143FA5C4D48EDD3DDE7)] [added: Securities](#s979175DB06D4584CA4281F3C9A5DCABE)] | | | [removed: [17](#sD569ACA8578A5143FA5C4D48EDD3DDE7)] [added: [20](#s979175DB06D4584CA4281F3C9A5DCABE)] |

| 6. | [Selected Financial [removed: Data](#s03DE1E3F92014A97E6DA4D48EDF29667)] [added: Data](#s9BB985C701DC51F28D8AA3471EDF76A2)] | | | [removed: [19](#s03DE1E3F92014A97E6DA4D48EDF29667)] [added: [23](#s9BB985C701DC51F28D8AA3471EDF76A2)] |

| 7. | [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s8E49F386978C605BA0944D48EE31B6BE)] [added: Operations](#sE23C47F0F9525DF58313CB5D0E73630E)] | | | [removed: [20](#s8E49F386978C605BA0944D48EE31B6BE)] [added: [24](#sE23C47F0F9525DF58313CB5D0E73630E)] |

| | | | · [Strategic [removed: Overview](#s369FC438BBCB01ACE7EE4D48EE5001B7)] [added: Overview](#s98629EB8888053AEAFFB01A38BFF6D32)] | [removed: [20](#s369FC438BBCB01ACE7EE4D48EE5001B7)] [added: [26](#s98629EB8888053AEAFFB01A38BFF6D32)] |

| | | | · [Results of [removed: Operations](#s6DB2C36CBEBAB15BABDF4D48E52CF9A9)] [added: Operations](#s20D8A5FF22FF5E4988B9714B7C468320)] | [removed: [26](#s6DB2C36CBEBAB15BABDF4D48E52CF9A9)] [added: [29](#s20D8A5FF22FF5E4988B9714B7C468320)] |

| | | | · [Liquidity and Capital [removed: Resources](#sE6BB6B55210C90DAEA854D48EEEC555F)] [added: Resources](#s0A7A2E6B506A54E285FD0612CC905F99)] | [removed: [35](#sE6BB6B55210C90DAEA854D48EEEC555F)] [added: [41](#s0A7A2E6B506A54E285FD0612CC905F99)] |

| | | | · [Schedule of Contractual Obligations and Commercial [removed: Commitments](#sF171D44CE7B6862633C14D48EF2A03FF)] [added: Commitments](#sAA520B06DD065DD3A2A86413D7A96E9A)] | [removed: [38](#sF171D44CE7B6862633C14D48EF2A03FF)] [added: [46](#sAA520B06DD065DD3A2A86413D7A96E9A)] |

| | | | · [Off-Balance Sheet [removed: Arrangements](#s4B3AC66A96D06B50D0654D48EF4A5DCE)] [added: Arrangements](#s9FD508303EDA590BA639603A28D3C955)] | [removed: [38](#s4B3AC66A96D06B50D0654D48EF4A5DCE)] [added: [46](#s9FD508303EDA590BA639603A28D3C955)] |

| | | | · Critical Accounting Estimates | [removed: [39](#sD617D09AB9D08B01EAC44D48EF886F64)] [added: [47](#sA02FB59EA683586BBFD4F5CD29AB2541)] |

| | | | · Forward-Looking Statements | [removed: [46](#s9C77B99A5EF7A37C78BE4D48EF98F83C)] [added: [54](#s53AF446EA36657608F32A003EFF33963)] |

| 7A. | [Quantitative and Qualitative Disclosures about Market [removed: Risk](#s81EA9BF3E0A209A6AA914D48EFC69B62)] [added: Risk](#s1733A4EAF3FD5185AF82044C5F007333)] | | | [removed: [48](#s81EA9BF3E0A209A6AA914D48EFC69B62)] [added: [56](#s1733A4EAF3FD5185AF82044C5F007333)] |

| 8. | [Financial Statements and Supplementary [removed: Data](#s9AAF2BABA8D36B8D7C344D48EFF57C6F)] [added: Data](#s7A00BBE499CF5B57BEF5FD85FBFFCE2E)] | | | [removed: [49](#s9AAF2BABA8D36B8D7C344D48EFF57C6F)] [added: [57](#s7A00BBE499CF5B57BEF5FD85FBFFCE2E)] |

| 9. | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s359018C61D436F4D89B44D48F6C88FF9)] [added: Disclosure](#s4342ECB56AF95C999A8D62666F933E44)] | | | [removed: [103](#s359018C61D436F4D89B44D48F6C88FF9)] [added: [114](#s4342ECB56AF95C999A8D62666F933E44)] |

| 9A. | [Controls and [removed: Procedures](#sCF23827BD831FB204B824D48F6F727B3)] [added: Procedures](#sFF11161FFD635E8882051B249C0E2660)] | | | [removed: [103](#sCF23827BD831FB204B824D48F6F727B3)] [added: [114](#sFF11161FFD635E8882051B249C0E2660)] |

| 9B. | [Other [removed: Information](#sA715634782F85F1B616B4D48F7168E0A)] [added: Information](#s43432F8834E458A2B7C064C1F5296705)] | | | [removed: [105](#sA715634782F85F1B616B4D48F7168E0A)] [added: [116](#s43432F8834E458A2B7C064C1F5296705)] |

| 10. | [Directors, Executive [removed: Officers](#s1CE038E073B2FF50F5DB4D48F7556A3A)] [added: Officers](#s1FF93335833453E69F9BD733BD1AC4F6)] of the Registrant and Corporate Governance | | | [removed: [105](#s1CE038E073B2FF50F5DB4D48F7556A3A)] [added: [116](#s1FF93335833453E69F9BD733BD1AC4F6)] |

| 11. | [Executive [removed: Compensation](#s28BC9664796EEDE336944D48F7640D4F)] [added: Compensation](#s0EBD2763BE7551B8B9423EEE22E2515F)] | | | [removed: [105](#s28BC9664796EEDE336944D48F7640D4F)] [added: [116](#s0EBD2763BE7551B8B9423EEE22E2515F)] |

| 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s2C50009B3A74C9DDE40A4D48F7A3EF83)] [added: Matters](#sD4565177E2C85A78A38BA339B0E522F4)] | | | [removed: [105](#s2C50009B3A74C9DDE40A4D48F7A3EF83)] [added: [116](#sD4565177E2C85A78A38BA339B0E522F4)] |

| 13. | [Certain Relationships and Related Transactions, and Director [removed: Independence](#sD47E8224A21CE66718C04D48F7C2E562)] [added: Independence](#s282CCE070817555584E2D5116B80A044)] | | | [removed: [105](#sD47E8224A21CE66718C04D48F7C2E562)] [added: [116](#s282CCE070817555584E2D5116B80A044)] |

| 14. | [Principal Accounting Fees and [removed: Services](#s2C632E0095100419FCDD4D48F7F186D3)] [added: Services](#sB121772F3DBA5EA5BAC31E812D663DCE)] | | | [removed: [105](#s2C632E0095100419FCDD4D48F7F186D3)] [added: [116](#sB121772F3DBA5EA5BAC31E812D663DCE)] |

| 15. | [Exhibits, Financial Statement [removed: Schedules](#s957E63CF084DA739A3834D48F820DB1C)] [added: Schedules](#s1A06E612F39451C3B2854C05455B9775)] | | | [removed: [105](#s957E63CF084DA739A3834D48F820DB1C)] [added: [116](#s1A06E612F39451C3B2854C05455B9775)] |

10-K 1 csx-12302016x10k.htm 10-K

CSX 2016 Form 10-K p.

| 1. | [Business](#s8AF9708E23585357A16935A9FBDEDFC1) | | | [3](#s8AF9708E23585357A16935A9FBDEDFC1) |

| 2. | [Properties](#s64680A0A656C5C53A718B5FDFD2F86E7) | | | [12](#s64680A0A656C5C53A718B5FDFD2F86E7) |

| | | | · Terms Used by CSX | [24](#see5ad6e9828142d1a8c4ebc3d53e3a98) |

| | | | · 2016 Highlights | [29](#sDCEB4A31C3105608B1FEE10309EC0E37) |

| [Signatures](#s9E81442D1AEB57D9ABF082CF9AB495D4) | | | | [121](#s9E81442D1AEB57D9ABF082CF9AB495D4) |

CSX 2016 Form 10-K p.

10-K 1 csx-12252015x10k.htm 10-K

| 1. | [Business](#s79A501C72A77D87E69CF4D48ECABAB3E) | | | [3](#s79A501C72A77D87E69CF4D48ECABAB3E) |

| 2. | [Properties](#sCAA1039220659BDE142C4D48DC56E186) | | | [11](#sCAA1039220659BDE142C4D48DC56E186) |

| | | | · 2015 Highlights | [24](#s1A8FF538A2A4FC7C55A14D48E819BC9A) |

| [Signatures](#s572B4D5466FDB71CF5B04D48F83FA66F) | | | | [109](#s572B4D5466FDB71CF5B04D48F83FA66F) |

CSX 2016 Form 10-K p.

11

At December [removed: 2015,] [added: 2016,] the breakdown of track miles was as follows:

| Mainline track | [removed: 26,565] [added: 26,530] | |

| Terminals and switching yards | [removed: 9,390] [added: 9,396] | |

| Passing sidings and turnouts | [removed: 936] [added: 937] | |

In addition to its physical track structure, [removed: CSXT] [added: the Company] operates numerous yards and [removed: terminals.][added: terminals for rail and intermodal service.]

These serve as hubs between [removed: CSXT] [added: the Company] and its local customers and as sorting facilities where railcars [added: and intermodal containers] often are received, re-sorted and placed onto new outbound trains.

This route carries [removed: consumer] goods from all three of the Company’s major markets – merchandise, coal and intermodal.

It is the [removed: only] [added: leading] rail corridor along the eastern seaboard south of the District of Columbia, and provides access to major eastern ports.

CSXT’s coal network [removed: is] [added: remains] well positioned to supply utility markets in both the Northeast and Southeast and to transport coal shipments for export outside of the U.S. Roughly one-third of the tons of export coal and the majority of the domestic coal that the Company transports is used for generating electricity.

See the following [removed: page] [added: pages] for [removed: a map] [added: maps] of the CSX Rail [added: Network and CSX Intermodal Rail] Network.

[removed: ][added: ]

At December [removed: 2015,] [added: 2016,] CSXT’s fleet of owned [removed: and long-term leased] locomotives consisted of the following [removed: types of locomotives:][added: types:]

| Auxiliary Units | 209 | | | 5 | % | | [removed: 23] [added: 24] | |

| Total | [removed: 4,463] [added: 4,400] | | | 100 | % | | 20 | |

In [removed: 2015,] [added: 2016,] the average daily fleet of cars on line consisted of approximately [removed: 206,000] [added: 208,000] cars.

Examples of these [removed: non-CSXT railcars are as follows:] [added: include] railcars owned by other railroads (which are utilized by CSXT), shipper-furnished or private cars (which are generally used only in that shipper’s [removed: service) and] [added: service),] multi-level railcars used to transport automobiles (which are shared [removed: among railroads).][added: between railroads) and doublestack railcars, or well cars (which are industry pooled), that allow for two intermodal containers to be loaded one above the other.]

The Company’s [removed: revenue generating equipment (either] [added: revenue-generating equipment, either] owned or long-term [removed: leased)] [added: leased,] consists of freight cars and containers as described below.

Heavier commodities like cement, ground limestone and [added: industrial] sand are shipped in small cube covered hoppers.

At December [removed: 2015,] [added: 2016,] the Company’s owned and long-term leased equipment consisted of the following:

| Open-top hoppers | [removed: 11,161] [added: 11,089] | | | 17 | % |

| Multi-level flat cars | [removed: 11,634] [added: 12,069] | | | [removed: 18] [added: 19] | % |

| Covered hoppers | [removed: 10,308] [added: 10,030] | | | [removed: 16] [added: 15] | % |

| Box cars | [removed: 7,386] [added: 7,151] | | | 11 | % |

| Flat cars | [removed: 674] [added: 648] | | | 1 | % |

| Other cars | [removed: 379] [added: 370] | | | — | % |

| Subtotal freight cars | [removed: 66,386] [added: 65,159] | | | 100 | % |

| Total equipment | [removed: 84,617] [added: 83,306] | | | | |

| Total | 36,863 | |

| Chicago, IL (Bedford Park) - Intermodal | 1,136,124 | |

| North Baltimore, OH (Northwest Ohio) - Intermodal | 809,254 | |

| Waycross, GA | 677,003 | |

| Selkirk, NY | 545,310 | |

| Nashville, TN | 539,407 | |

| Willard, OH | 515,335 | |

| Cincinnati, OH | 496,299 | |

| Indianapolis, IN | 496,235 | |

| Hamlet, NC | 458,760 | |

| Louisville, KY | 417,679 | |

CSX 2016 Form 10-K p.

12

The domestic coal market has declined significantly over the past several years and export coal remains subject to a high degree of volatility.

CSX 2016 Form 10-K p.

13

CSX 2016 Form 10-K p.

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CSX Intermodal Rail Network


CSX 2016 Form 10-K p.

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At December 2016, CSXT owned 4,400 locomotives.

| Freight | 3,880 | | | 88 | % | | 20 | |

| Switching | 311 | | | 7 | % | | 37 | |

| Gondolas | 23,802 | | | 37 | % |

| Containers | 18,147 | | | | |

CSX 2016 Form 10-K p.

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CSX CORPORATION

PART I

Other cars – Primarily leased refrigerator cars and slab steel cars.

| Total | 36,891 | |

| Chicago, IL | 1,072,809 | |

| Waycross, GA | 672,801 | |

| Selkirk, NY | 544,452 | |

| Indianapolis, IN | 527,170 | |

| Willard, OH | 517,891 | |

| Nashville, TN | 497,371 | |

| Cincinnati, OH | 485,105 | |

| Hamlet, NC | 461,780 | |

| Louisville, KY | 396,681 | |

| Toledo, OH | 372,666 | |

CSXT owns and long-term leases nearly 4,500 locomotives, almost all of which are owned by CSXT.

| Freight | 3,932 | | | 88 | % | | 20 | |

| Switching | 322 | | | 7 | % | | 35 | |

Other cars on the network consist primarily of refrigerated boxcars for transporting perishable items.

| Gondolas | 24,844 | | | 37 | % |

| Containers | 18,231 | | | | |

| Michael J. Ward, [removed: 65] [added: 66] Chairman and Chief Executive Officer | A [removed: 38-year] [added: 39-year] veteran of the Company, Ward has served as Chairman and Chief Executive Officer of CSX since January 2003. Ward’s distinguished railroad career has included key executive positions in nearly all aspects of the Company’s business, including sales and marketing, operations and finance. |

| Clarence W. Gooden, [removed: 64] [added: 65] President | Clarence Gooden [removed: was appointed] [added: has served as] President of CSX [removed: in] [added: since] September 2015 with responsibility for operations and sales and marketing. In this role, he is responsible for safe and reliable operations as well as a highly diversified market portfolio serving all facets of the North American economy. As an employee of the Company for [removed: 45] [added: 46] years, Gooden previously served as Executive Vice President and Chief Commercial Officer since 2004 where he was responsible for generating customer revenue, forecasting business trends and developing CSX's model for future revenue growth. Gooden has also held key executive positions in both operations and sales and marketing. |

| Frank A. Lonegro, [removed: 47] [added: 48] Executive Vice President and Chief Financial Officer | Lonegro has served as Executive Vice President and Chief Financial Officer of CSX since September 2015. In this capacity, he directs all financial and strategic planning activities, including accounting, financial planning, [added: purchasing,] tax, treasury and investor [removed: relations, and is also responsible for the management and oversight of the Company's technology assets and activities.] [added: relations.] During his [removed: 15-year] [added: 16-year] tenure with the Company, Lonegro also served as Vice President Internal Audit, President of CSX Technology, Vice [removed: President-Mechanical] [added: President Mechanical] and Vice [removed: President-Service] [added: President Service] Design. Additionally, he led development and implementation of Positive Train Control, an advanced train control system, to further enhance the Company’s safety performance. |

| Cindy M. Sanborn, [removed: 51] [added: 52] Executive Vice President and Chief Operating Officer | Sanborn has served as Executive Vice President and Chief Operating Officer of CSXT since September 2015. In this capacity, she is responsible for all aspects of safe, reliable and cost-effective service delivery. She directs daily train operations, maintains the Company's locomotive and rail car fleet as well as maintains and upgrades the Company’s more than 21,000-route-mile network in the eastern United States and two Canadian provinces. Since joining the Company in 1987, she also served as Executive Vice President - Operations, Vice President and Chief Transportation Officer, Vice President of Operations for the Northern Region and various other key roles in network operations, locomotive management and division operations. |

| Fredrik J. Eliasson, [removed: 45] [added: 46] Executive Vice President and Chief Sales and Marketing Officer | Eliasson has served as Executive Vice President and Chief Sales and Marketing Officer of CSX since September 2015. In this capacity, he directs all customer-facing aspects of the Company’s business, including market growth, forecasting business trends and development of strategic plans for revenue growth. During his [removed: 20-year] [added: 21-year] tenure with the Company, he also served as Executive Vice President and Chief Financial Officer. Prior to becoming CFO, he led development of two of the Company’s major markets as Vice President of Chemicals and Fertilizer and Vice President of Emerging Markets. He also supported Sales and Marketing in a previous position as Vice President of Commercial Finance. |

| Ellen M. Fitzsimmons, [removed: 55] [added: 56] Executive Vice President of Law and Public Affairs, General Counsel and Corporate Secretary | Fitzsimmons has been the Executive Vice President of Law and Public Affairs, General Counsel, and Corporate Secretary of CSX since December 2003. She serves as the Company’s Chief Legal Officer and oversees all government relations and public affairs activities as well as internal audit and other risk management functions. During her [removed: 24-year] [added: 25-year] tenure with the Company, her broad responsibilities have included key roles in major risk and corporate governance-related areas. |

| Carolyn T. Sizemore, [removed: 53] [added: 54] Vice President and Controller | Sizemore has served as Vice President and Controller of CSX since April 2002. She is responsible for financial and regulatory reporting, freight billing and collections, payroll, accounts payable and various other accounting processes. Sizemore’s responsibilities during her [removed: 26-year] [added: 27-year] tenure with the Company have included roles in finance and audit-related areas including a variety of positions in accounting, finance strategies, budgets and performance analysis. |

CSX 2016 Form 10-K p.

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CSX 2016 Form 10-K p.

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PART I

| Cressie D. Brown, 55 Senior Vice President and Chief Administrative Officer | Brown has served as Senior Vice President and Chief Administrative Officer since July 2016. She is responsible for human resources, employee compensation and benefits, labor relations, real estate, facilities and aviation. During her 28-year tenure with the Company, Brown previously served as Vice President of Labor Relations and Vice President of Service Design and Advanced Technology. She also has significant experience in technology, finance and customer service. |

| Kathleen Brandt, 53 Senior Vice President and Chief Information Officer | Brandt has been Senior Vice President and Chief Information Officer since July 2016. In this role, she directs the information technology to support the company's strategic objectives and leads the development and application of the tools and information to maximize safety, service excellence, and efficiency. During her 31-year tenure with the Company, she previously served as President CSX Technology and has also made significant contributions to organizational strategy and capital planning. |

CSX 2016 Form 10-K p.

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CSX CORPORATION

| Lisa A. Mancini, 56 Senior Vice President and Chief Administrative Officer | Mancini has been Senior Vice President and Chief Administrative Officer of CSX since January 2009. She is responsible for employee compensation and benefits, labor relations, employee staffing and development activities, purchasing, real estate, and facilities management. She previously served as Vice President - Strategic Infrastructure Initiatives from 2007 to 2009 and, prior to that, Vice President - Labor Relations. Prior to joining CSX in 2003, Mancini served as Chief Operating Officer of the San Francisco Municipal Railway. |

A total of 1.8 billion shares of common stock are authorized, of which [removed: 965,513,559] [added: 928,179,723] shares were outstanding as of December [removed: 2015.][added: 30, 2016.]

At January [removed: 22, 2016,] [added: 27, 2017,] the latest practicable date that is closest to the filing date, there were [removed: 30,242] [added: 28,956] common stock shareholders of record.

The weighted average of common shares outstanding, which was used in the calculation of diluted earnings per share, was [removed: 984] [added: 948] million as of December [removed: 25, 2015.][added: 30, 2016.]

The cumulative shareholder returns, assuming reinvestment of dividends, on $100 invested at December 31, [removed: 2010] [added: 2011] are illustrated on the graph below.

[removed: ][added: ]

In April 2015, the Company announced a [removed: new] $2 billion share repurchase program, which is expected to be completed by April 2017.

During [added: 2016,] 2015, [removed: 2014,] and [removed: 2013,] [added: 2014,] CSX repurchased [removed: $804 million,] [added: $1.1 billion] or [removed: 26] [added: 38] million shares, [removed: $517 million,] [added: $804 million] or [removed: 17] [added: 26] million shares, and [removed: $353 million,] [added: $517 million] or [removed: 14] [added: 17] million shares, respectively, of common stock.

Generally, retained earnings [removed: is] [added: are] only impacted by net earnings and dividends.

Share repurchase activity of [removed: $258] [added: $278] million for the fourth quarter [removed: 2015] [added: 2016] was as follows:

| CSX Purchases of Equity Securities for the Quarter | | | | | | | | | | | | [added: |]

| Fourth Quarter (a) | Total Number of Shares Purchased (b) | | [added: |] Average Price Paid per Share | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(b) | | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | |

(a) Fourth quarter [removed: 2015] [added: 2016] consisted of the following fiscal periods: October (September [removed: 26, 2015] [added: 24, 2016] - October [removed: 23, 2013),] [added: 21, 2016),] November (October [removed: 24, 2015] [added: 22, 2016] - November [removed: 20, 2015),] [added: 25, 2016),] and December (November [removed: 21,] [added: 26,] 2015 - December [removed: 25, 2015).][added: 30, 2016).]

(b) The difference of [removed: 25,690] [added: 21,550] shares between the "Total Number of Shares [removed: Repurchase"] [added: 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.

| 2016 | | | | | | | | | | | | | | | | | | | |

| Dividends | $ | 0.18 | | | $ | 0.18 | | | $ | 0.18 | | | $ | 0.18 | | | $ | 0.72 | |

| High | $ | 27.27 | | | $ | 27.97 | | | $ | 30.11 | | | $ | 37.42 | | | $ | 37.42 | |

| Low | $ | 21.33 | | | $ | 24.36 | | | $ | 24.43 | | | $ | 29.39 | | | $ | 21.33 | |

CSX 2016 Form 10-K p.

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CSX 2016 Form 10-K p.

21

Shares are retired immediately upon repurchase.

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | |

| Beginning Balance | | | | | | | | | | $ | 548,855,151 | |

| October | 2,757,869 | | | $ | 30.39 | | 2,736,609 | | | | 465,695,348 | |

| November | 3,117,190 | | | | 32.02 | | 3,116,900 | | | | 365,903,976 | |

| December | 2,634,900 | | | | 36.30 | | 2,634,900 | | | | 270,270,134 | |

| Ending Balance | 8,509,959 | | | $ | 32.82 | | 8,488,409 | | | $ | 270,270,134 | |

CSX 2016 Form 10-K p.

22

CSX CORPORATION

PART II

| 2014 | | | | | | | | | | | | | | | | | | | |

| Dividends | $ | 0.15 | | | $ | 0.16 | | | $ | 0.16 | | | $ | 0.16 | | | $ | 0.63 | |

| High | $ | 29.45 | | | $ | 31.09 | | | $ | 32.66 | | | $ | 37.99 | | | $ | 37.99 | |

| Low | $ | 25.84 | | | $ | 27.14 | | | $ | 29.07 | | | $ | 29.75 | | | $ | 25.84 | |

CSX is required to disclose any purchases of its own common stock for the most recent quarter.

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Beginning Balance | | | | | | | | | $ | 1,584,194,942 | |

| October | 3,062,615 | | $ | 27.38 | | 3,037,000 | | | 1,501,038,454 | | |

| November | 3,029,875 | | 27.45 | | | 3,029,800 | | | 1,417,877,753 | | |

| December | 3,401,200 | | 26.89 | | | 3,401,200 | | | 1,326,402,817 | | |

| Ending Balance | 9,493,690 | | $ | 27.23 | | 9,468,000 | | | $ | 1,326,402,817 | |

| | | [added: Fiscal Years] | | | | [removed: Fiscal Years] | | | | | | | | | | | | | | |

| (Dollars and Shares in Millions, Except Per Share Amounts) | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | |

| | Revenue | $ | [removed: 11,811] [added: 11,069] | | | $ | [removed: 12,669] [added: 11,811] | | | $ | [removed: 12,026] [added: 12,669] | | | $ | [removed: 11,763] [added: 12,026] | | | $ | [removed: 11,795] [added: 11,763] | |

| | Expense | [removed: 8,227] [added: 7,680] | | | | [removed: 9,056] [added: 8,227] | | | | [removed: 8,553] [added: 9,056] | | | | [removed: 8,299] [added: 8,553] | | | | [removed: 8,325] [added: 8,299] | | |

| | Operating Income | $ | [removed: 3,584] [added: 3,389] | | | $ | [removed: 3,613] [added: 3,584] | | | $ | [removed: 3,473] [added: 3,613] | | | $ | [removed: 3,464] [added: 3,473] | | | $ | [removed: 3,470] [added: 3,464] | |

| Net Earnings from Continuing Operations | | [removed: 1,968] [added: 1,714] | | | | [removed: 1,927] [added: 1,968] | | | | [removed: 1,864] [added: 1,927] | | | | [removed: 1,863] [added: 1,864] | | | | [removed: 1,854] [added: 1,863] | | |

| | Operating Ratio | [removed: 69.7] [added: 69.4] | | % | | [removed: 71.5] [added: 69.7] | | % | | [removed: 71.1] [added: 71.5] | | % | | [removed: 70.6] [added: 71.1] | | % | | 70.6 | | % |

| | From Continuing Operations, Basic | $ | [removed: 2.00] [added: 1.81] | | | $ | [removed: 1.93] [added: 2.00] | | | $ | [removed: 1.83] [added: 1.93] | | | $ | [removed: 1.80] [added: 1.83] | | | $ | [removed: 1.71] [added: 1.80] | |

| | From Continuing Operations, Assuming Dilution | [removed: 2.00] [added: 1.81] | | | | [removed: 1.92] [added: 2.00] | | | | [removed: 1.83] [added: 1.92] | | | | [removed: 1.79] [added: 1.83] | | | | [removed: 1.70] [added: 1.79] | | |

| | Basic | [removed: 983] [added: 947] | | | | [removed: 1,001] [added: 983] | | | | [removed: 1,019] [added: 1,001] | | | | [removed: 1,038] [added: 1,019] | | | | [removed: 1,083] [added: 1,038] | | |

| | Assuming Dilution | [removed: 984] [added: 948] | | | | [removed: 1,002] [added: 984] | | | | [removed: 1,019] [added: 1,002] | | | | [removed: 1,040] [added: 1,019] | | | | [removed: 1,089] [added: 1,040] | | |

| | Cash, Cash Equivalents and Short-term Investments | $ | [removed: 1,438] [added: 1,020] | | | $ | [removed: 961] [added: 1,438] | | | $ | [removed: 1,079] [added: 961] | | | $ | [removed: 1,371] [added: 1,079] | | | $ | [removed: 1,306] [added: 1,371] | |

| | Shareholders' Equity | [removed: 11,668] [added: 11,694] | | | | [removed: 11,176] [added: 11,668] | | | | [removed: 10,504] [added: 11,176] | | | | [removed: 9,136] [added: 10,504] | | | | [removed: 8,598] [added: 9,136] | | |

| | Dividend Per Share | $ | [removed: 0.70] [added: 0.72] | | | $ | [removed: 0.63] [added: 0.70] | | | $ | [removed: 0.59] [added: 0.63] | | | $ | [removed: 0.54] [added: 0.59] | | | $ | [removed: 0.45] [added: 0.54] | |

| | Capital Expenditures (a) | $ | [removed: 2,562] [added: 2,705] | | | $ | [removed: 2,449] [added: 2,562] | | | $ | [removed: 2,313] [added: 2,449] | | | $ | [removed: 2,341] [added: 2,313] | | | $ | [removed: 2,297] [added: 2,341] | |

| | Employees -- Annual Averages (estimated) | [removed: 31,285] [added: 27,350] | | | | [removed: 31,511] [added: 31,285] | | | | [removed: 31,254] [added: 31,511] | | | | [removed: 32,120] [added: 31,254] | | | | [removed: 31,344] [added: 32,120] | | |

| | Employees -- Year-end Count (estimated) | [removed: 29,410] [added: 26,628] | | | | [removed: 32,287] [added: 29,410] | | | | [removed: 31,413] [added: 32,287] | | | | [removed: 30,787] [added: 31,413] | | | | [removed: 32,235] [added: 30,787] | | |

| (a) | Capital expenditures include investments related to reimbursable public-private partnerships. These partnership investments of [added: $41 million,] $14 million, $8 million, $40 [removed: million, $166] million and [removed: $102] [added: $166] million in [added: 2016,] 2015, 2014, [removed: 2013, 2012] [added: 2013] and [removed: 2011,] [added: 2012,] respectively, are projects that are partially or wholly reimbursed to CSX through either government grants or other funding sources such as cash received from a property sale. These reimbursements may not be fully received in a given year; therefore, the timing of receipts may differ from the timing of the investment. See the capital expenditures table on page [removed: 36] [added: 46] for additional information. |

| | Total Assets | 35,414 | | | | 34,745 | | | | 32,747 | | | | 31,462 | | | | 30,436 | | |

| | Long-term Debt | 10,962 | | | | 10,515 | | | | 9,349 | | | | 8,857 | | | | 8,884 | | |

Certain prior year data has been reclassified to conform to the current presentation.

CSX 2016 Form 10-K p.

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| | Total Assets | 35,039 | | | | 33,053 | | | | 31,782 | | | | 30,723 | | | | 29,491 | | |

| | Long-term Debt | 10,683 | | | | 9,514 | | | | 9,022 | | | | 9,052 | | | | 8,734 | | |

| [removed: | 2015 | | | | | | |] [added: (Dollars in Millions)] | [added: 2016] | | | | [added: 2015] | | | | 2014 | | | | [added: 2016] | | | | [added: 2015] | | | | [added: 2014] | | |

| Common Stock | $ | [removed: 738] [added: 940] | | | $ | — | | | $ | — | | | $ | [removed: 738] [added: 940] | | | $ | [removed: 787] [added: 738] | | | $ | — | | | $ | — | | | $ | [removed: 787] [added: 738] | |

| Mutual funds | [removed: 15] [added: 12] | | | | — | | | | — | | | | [removed: 15] [added: 12] | | | | [removed: 20] [added: 15] | | | | — | | | | — | | | | [removed: 20] [added: 15] | | |

| Cash equivalents | [removed: 8] [added: 1] | | | | — | | | | — | | | | [removed: 8] [added: 1] | | | | [removed: 1] [added: 8] | | | | — | | | | — | | | | [removed: 1] [added: 8] | | |

| Corporate bonds | — | | | | [removed: 480] [added: 497] | | | | — | | | | [removed: 480] [added: 497] | | | | — | | | | [removed: 539] [added: 480] | | | | — | | | | [removed: 539] [added: 480] | | |

| Government securities | — | | | | [removed: 132] [added: 141] | | | | — | | | | [removed: 132] [added: 141] | | | | — | | | | [removed: 164] [added: 132] | | | | — | | | | [removed: 164] [added: 132] | | |

| Asset-backed securities | — | | | | 14 | | | | — | | | | 14 | | | | — | | | | [removed: 15] [added: 14] | | | | — | | | | [removed: 15] [added: 14] | | |

| Derivatives and other | — | | | | [removed: 6] [added: 11] | | | | — | | | | [removed: 6] [added: 11] | | | | — | | | | [removed: 2] [added: 6] | | | | — | | | | [removed: 2] [added: 6] | | |

| Total investments in the fair value hierarchy | $ | [removed: 761] [added: 953] | | | $ | [removed: 632] [added: 663] | | | $ | — | | | $ | [removed: 1,393] [added: 1,616] | | | $ | [removed: 808] [added: 761] | | | $ | [removed: 720] [added: 632] | | | $ | — | | | $ | [removed: 1,528] [added: 1,393] | |

| Investments measured at net asset value (a) | n/a | | | | n/a | | | | n/a | | | | $ | [removed: 916] [added: 923] | | | n/a | | | | n/a | | | | n/a | | | | $ | [removed: 976] [added: 916] | |

| Investments at fair value | $ | [removed: 761] [added: 953] | | | $ | [removed: 632] [added: 663] | | | $ | — | | | $ | [removed: 2,309] [added: 2,539] | | | $ | [removed: 808] [added: 761] | | | $ | [removed: 720] [added: 632] | | | $ | — | | | $ | [removed: 2,504] [added: 2,309] | |

NOTE [removed: 14.][added: 8.]

Total comprehensive earnings represent the activity for a period net of tax and were [removed: $2.0] [added: $1.7] billion, [removed: $1.8] [added: $2.0] billion and [removed: $2.3] [added: $1.8] billion for [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013,] [added: 2014,] respectively.

[added: | Total] Other Comprehensive Income [removed: / (Loss), continued][added: | 21 | | | 4 | | | 25 | | |]

| Balance December [removed: 28, 2012] [added: 27, 2013] - Net of Tax | $ | [removed: (851] [added: (462] | ) | $ | [removed: (85] [added: (61] | ) | $ | [removed: (936] [added: (523] | ) |

| [added: (Loss)] Income Before Reclassifications | [removed: 510] [added: (16] | | [added: )] | [removed: 24] [added: 3] | | | [removed: 534] [added: (13] | | [added: )] |

| Amounts Reclassified to Net Earnings | [removed: 111] [added: 50] | | | [removed: (2] [added: 1] | | [removed: )] | [removed: 109] [added: 51] | | |

| Tax [removed: (Expense) Benefit] [added: Expense] | [removed: (232] [added: (13] | | ) | [removed: 2] [added: —] | | | [removed: (230] [added: (13] | | ) |

| Balance December [removed: 27, 2013] [added: 25, 2015] - Net of Tax | [removed: (462] [added: (601] | | ) | [removed: (61] [added: (64] | | ) | [removed: (523] [added: (665] | | ) |

| Balance December [removed: 25, 2015] [added: 30, 2016] - Net of Tax | $ | [removed: (601] [added: (580] | ) | $ | [removed: (64] [added: (60] | ) | $ | [removed: (665] [added: (640] | ) |

| Fiscal Year Ended December 2015 | [removed: Quarters] | | | | | | | | | | | | | | | [removed: | | | |]

| Fiscal Year Ended December [removed: 2014] [added: 2015 (52 weeks)] | | | | | | | | | | | | | | | | | | | |

| Earnings Per Share, Assuming Dilution | [removed: 0.40] [added: 0.37] | | | | [removed: 0.53] [added: 0.47] | | | | [removed: 0.51] [added: 0.48] | | | | 0.49 | | | | [removed: 1.92] [added: 1.81] | | |

| Fiscal Year Ended December [removed: 2015] [added: 2016] | CSX Corporation | | | | CSX Transportation | | | | Eliminations and Other | | | | CSX Consolidated | | |

| Fiscal Year Ended December [removed: 2013] [added: 2016 (53 weeks)] | [added: Quarters] | | | | | | | | | | | | | | | [added: | | | |]

| Equity in Earnings of Subsidiaries | [removed: 1,964] [added: 1,997] | | | | [removed: (1] [added: 2] | | [removed: )] | | [removed: (1,963] [added: (1,999] | | ) | | — | | |

[removed: |] Other Income - Net [removed: | (7 | | ) | | (2 | | ) | | 20 | | | | 11 | | |]

| Income Tax Benefit (Expense) | [removed: 52] [added: 147] | | | | [removed: (1,028] [added: (1,081] | | ) | | [removed: (82] [added: (93] | | ) | | [removed: (1,058] [added: (1,027] | | ) |

| Total Comprehensive Earnings | $ | [removed: 2,277] [added: 1,739] | | | $ | [removed: 1,825] [added: 1,833] | | | $ | [removed: (1,825] [added: (1,833] | ) | | $ | [removed: 2,277] [added: 1,739] | |

[removed: | Deferred] Income Taxes [removed: | 10 | | | | 117 | | | | (1 | | ) | | 126 | | |]

| Other Long-term Assets | [removed: 176] [added: 8] | | | | 399 | | | | (70 | | ) | | [removed: 505] [added: 337] | | |

[removed: |] Long-term Debt [removed: | 9,900 | | | | 783 | | | | — | | | | 10,683 | | |]

| As of December [removed: 26, 2014] [added: 30, 2016] | CSX Corporation | | | | CSX Transportation | | | | Eliminations and Other | | | | CSX Consolidated | | |

| Short-term Investments | [removed: 250] [added: 415] | | | | — | | | | [removed: 42] [added: 2] | | | | [removed: 292] [added: 417] | | |

| Materials and Supplies | — | | | | [removed: 272] [added: 407] | | | | [removed: 1] [added: —] | | | | [removed: 273] [added: 407] | | |

| Deferred Income Taxes [added: - Net] | [removed: 3] [added: (188] | | [added: )] | | [removed: 139] [added: 9,141] | | | | [removed: (1] [added: 226] | | [removed: )] | | [removed: 141] [added: 9,179] | | |

| Other Current Assets | — | | | | [removed: 61] [added: 106] | | | | [removed: 7] [added: 16] | | | | [removed: 68] [added: 122] | | |

| Investments in Conrail | — | | | | — | | | | [removed: 779] [added: 840] | | | | [removed: 779] [added: 840] | | |

| Affiliates and Other Companies | (39 | | ) | | [removed: 644] [added: 643] | | | | [removed: (28] [added: 15] | | [removed: )] | | [removed: 577] [added: 619] | | |

| Investment in Consolidated Subsidiaries | [removed: 21,570] [added: 24,179] | | | | — | | | | [removed: (21,570] [added: (24,179] | | ) | | — | | |

Employee Benefit Plans, continued

Under the supervision of the Investment Committee, individual investments or fund managers are selected in accordance with standards of prudence applicable to asset diversification and investment suitability.

The Company also selects fund managers with differing investment styles and benchmarks their investment returns against appropriate indices.

Fund investment performance is continuously monitored.

Acceptable performance is determined in the context of the long-term return objectives of the fund and appropriate asset class benchmarks.

Within the Company's equity funds, the U.S. stock segment includes diversification among large and small capitalization stocks.

The international stock segment is diversified in a similar manner as well as in developed versus emerging markets stocks.

Guidelines established with individual managers limit investment by industry sectors, individual stock issuer concentration and the use of derivatives and CSX securities.

Fixed income securities guidelines established with individual managers specify the types of allowable investments, such as government, corporate and asset-backed bonds, target certain allocation ranges for domestic and foreign investments and limit the use of certain derivatives.

Additionally, guidelines stipulate minimum credit quality constraints and any prohibited securities.

For detailed information regarding the fair value of pension assets, see Note 13, Fair Value Measurements.

Benefit Obligation, Plan Assets and Funded Status

Changes in benefit obligation and the fair value of plan assets for the 2016 and 2015 calendar plan years are as follows:

| | Pension Benefits | | | | | | | | Post-retirement Benefits | | | | | | |

| | Plan Year | | | | Plan Year | | | | Plan Year | | | | Plan Year | | |

| (Dollars in Millions) | 2016 | | | | 2015 | | | | 2016 | | | | 2015 | | |

| Actuarial Present Value of Benefit Obligation | | | | | | | | | | | | | | | |

| Accumulated Benefit Obligation | $ | 2,717 | | | $ | 2,672 | | | N/A | | | | N/A | | |

| Projected Benefit Obligation | 2,871 | | | | 2,860 | | | | $ | 274 | | | $ | 314 | |

| Change in Projected Benefit Obligation: | | | | | | | | | | | | | | | |

| Projected Benefit Obligation at Beginning of Plan Year | $ | 2,860 | | | $ | 3,002 | | | $ | 314 | | | $ | 340 | |

| Service Cost | 48 | | | | 45 | | | | 2 | | | | 2 | | |

| Interest Cost | 119 | | | | 116 | | | | 12 | | | | 12 | | |

| Plan Participants' Contributions | — | | | | — | | | | 6 | | | | 7 | | |

| Workforce Reduction Program/Curtailment | — | | | | 7 | | | | — | | | | — | | |

| Actuarial Loss (Gain) | 20 | | | | (110 | | ) | | (22 | | ) | | (7 | | ) |

| Benefits Paid | (176 | | ) | | (200 | | ) | | (38 | | ) | | (40 | | ) |

| Benefit Obligation at End of Plan Year | $ | 2,871 | | | $ | 2,860 | | | $ | 274 | | | $ | 314 | |

| Change in Plan Assets: | | | | | | | | | | | | | | | |

| Fair Value of Plan Assets at Beginning of Plan Year | $ | 2,309 | | | $ | 2,504 | | | $ | — | | | $ | — | |

| Actual Return on Plan Assets | 139 | | | | (9 | | ) | | — | | | | — | | |

| Qualified Employer Contributions | 250 | | | | — | | | | — | | | | — | | |

| Non-qualified Employer Contributions | 17 | | | | 14 | | | | 32 | | | | 33 | | |

| Plan Participants' Contributions | — | | | | — | | | | 6 | | | | 7 | | |

| Benefits Paid | (176 | | ) | | (200 | | ) | | (38 | | ) | | (40 | | ) |

| Fair Value of Plan Assets at End of Plan Year | 2,539 | | | | 2,309 | | | | — | | | | — | | |

| Funded Status at End of Plan Year | $ | (332 | ) | | $ | (551 | ) | | $ | (274 | ) | | $ | (314 | ) |

CSX 2016 Form 10-K p.

90

NOTE 8.

| Total Other Comprehensive Income | 389 | | | 24 | | | 413 | | |

| Revenue | $ | 3,012 | | | $ | 3,244 | | | $ | 3,221 | | | $ | 3,192 | | | $ | 12,669 | |

| Operating Income | 739 | | | | 997 | | | | 976 | | | | 901 | | | | 3,613 | | |

| Net Earnings | 398 | | | | 529 | | | | 509 | | | | 491 | | | | 1,927 | | |

| Earnings Per Share, Basic | $ | 0.40 | | | $ | 0.53 | | | $ | 0.51 | | | $ | 0.49 | | | $ | 1.93 | |

| Revenue | $ | — | | | $ | 11,950 | | | $ | 76 | | | $ | 12,026 | |

| Expense | (371 | | ) | | 9,091 | | | | (167 | | ) | | 8,553 | | |

| Operating Income | 371 | | | | 2,859 | | | | 243 | | | | 3,473 | | |

| Interest Expense | (516 | | ) | | (62 | | ) | | 16 | | | | (562 | | ) |

| Earnings Before Income Taxes | 1,812 | | | | 2,794 | | | | (1,684 | | ) | | 2,922 | | |

| Net Earnings | $ | 1,864 | | | $ | 1,766 | | | $ | (1,766 | ) | | $ | 1,864 | |

| Total Current Assets | 2,298 | | | | 2,998 | | | | (2,330 | | ) | | 2,966 | | |

| Total Assets | $ | 25,190 | | | $ | 33,003 | | | $ | (23,154 | ) | | $ | 35,039 | |

| Deferred Income Taxes | (178 | | ) | | 9,258 | | | | 225 | | | | 9,305 | | |

| Total Liabilities | 13,538 | | | | 12,968 | | | | (3,135 | | ) | | 23,371 | | |

| Total Liabilities and Shareholders' Equity | $ | 25,190 | | | $ | 33,003 | | | $ | (23,154 | ) | | $ | 35,039 | |

| Cash and Cash Equivalents | $ | 510 | | | $ | 100 | | | $ | 59 | | | $ | 669 | |

| Accounts Receivable - Net | 2 | | | | 206 | | | | 921 | | | | 1,129 | | |

| Receivable from Affiliates | 1,211 | | | | 2,418 | | | | (3,629 | | ) | | — | | |

| Total Current Assets | 1,976 | | | | 3,196 | | | | (2,600 | | ) | | 2,572 | | |

| Properties | 1 | | | | 36,888 | | | | 2,454 | | | | 39,343 | | |

| Accumulated Depreciation | (1 | | ) | | (9,516 | | ) | | (1,242 | | ) | | (10,759 | | ) |

| Properties - Net | — | | | | 27,372 | | | | 1,212 | | | | 28,584 | | |

| Total Assets | $ | 23,685 | | | $ | 31,599 | | | $ | (22,231 | ) | | $ | 33,053 | |

| Accounts Payable | $ | 106 | | | $ | 707 | | | $ | 32 | | | $ | 845 | |

| Payable to Affiliates | 3,053 | | | | 514 | | | | (3,567 | | ) | | — | | |

| Total Current Liabilities | 3,247 | | | | 2,291 | | | | (3,431 | | ) | | 2,107 | | |

| Long-term Debt | 8,705 | | | | 809 | | | | — | | | | 9,514 | | |

| Deferred Income Taxes | (172 | | ) | | 8,827 | | | | 203 | | | | 8,858 | | |

| Other Long-term Liabilities | 753 | | | | 487 | | | | (118 | | ) | | 1,122 | | |

| Total Liabilities | 12,533 | | | | 12,627 | | | | (3,283 | | ) | | 21,877 | | |

| Retained Earnings | 10,734 | | | | 13,717 | | | | (13,717 | | ) | | 10,734 | | |

| Total Shareholders' Equity | 11,152 | | | | 18,972 | | | | (18,948 | | ) | | 11,176 | | |

| Total Liabilities and Shareholders' Equity | $ | 23,685 | | | $ | 31,599 | | | $ | (22,231 | ) | | $ | 33,053 | |

| Stock Options Exercised | — | | | | — | | | | — | | | | — | | |

| Property Additions | — | | | | (2,053 | | ) | | (260 | | ) | | (2,313 | | ) |

| Stock Options Exercised | 9 | | | | — | | | | — | | | | 9 | | |

As of December [removed: 25, 2015,] [added: 30, 2016,] 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 December [removed: 25, 2015,] [added: 30, 2016,] 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.

Under the supervision and with the participation of the management of CSX, including CSX’s CEO and CFO, CSX conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December [removed: 25, 2015] [added: 30, 2016] based on the 2013 framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission which is also referred to as COSO.

Based on that evaluation, management of CSX concluded that the Company’s internal control over financial reporting was effective as of December [removed: 25, 2015.][added: 30, 2016.]

The Company’s internal control over financial reporting as of December [removed: 25, 2015] [added: 30, 2016] has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included elsewhere herein.

We have audited CSX Corporation’s (CSX) internal control over financial reporting as of December [removed: 25, 2015,] [added: 30, 2016,] based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, CSX maintained, in all material respects, effective internal control over financial reporting as of December [removed: 25, 2015,] [added: 30, 2016,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the [removed: 2015] [added: 2016] consolidated financial statements of CSX and our report dated February [removed: 10, 2016] [added: 14, 2017] expressed an unqualified opinion thereon.

CSX 2016 Form 10-K p.

114

February 14, 2017

CSX 2016 Form 10-K p.

115

February 10, 2016

The Proxy Statement will be filed not later than April [removed: 23, 2016] [added: 29, 2017] with respect to its [removed: 2016] [added: 2017] annual meeting of shareholders, except for the information regarding the executive officers of the Company.

| See Index to Consolidated Financial Statements on page | [removed: [49](#s9AAF2BABA8D36B8D7C344D48EFF57C6F).] [added: [57](#s7A00BBE499CF5B57BEF5FD85FBFFCE2E).] |

| 3.1 | Amended and Restated Articles of Incorporation of the Registrant, effective as of October 7, 2015 | October 9, [removed: 2015] [added: 2015,] Exhibit 3.1, Form 8-K |