United States securities and exchange commission logo
March 13, 2024
Sean Pelkey
Chief Financial Officer
CSX Corporation
500 Water Street
15th Floor
Jacksonville, FL 32202
Re: CSX Corporation
Form 10-K for the
Fiscal Year ended December 31, 2023
Filed February 14,
2024
File No. 001-08022
Dear Sean Pelkey:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comment.
Please respond to this letter within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe a
comment applies to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to this letter, we may have additional comments.
Form 10-K for the Fiscal Year ended December 31, 2023
Management's Discussion and Analysis
Non-GAAP Measures, page 33
1. We note your disclosure
of the non-GAAP Economic Profit measure, which you also refer
to as CSX Cash Earnings
or CCE, and define as "gross cash earnings minus the capital
charge on gross
operating assets." You indicate gross cash earnings represents Adjusted
EBITDA less an assumed
15% cash tax, and that the capital charge is derived by applying
a long-term average
cost of capital of 8% to average gross operating assets.
If the most directly
comparable GAAP-based measure were operating income, your
measure would exclude
(not deduct) DD&A and operating lease expense, both of which
are included (deducted)
in computing operating income, and include (deduct) generalized
measures of tax and a
capital charge, both of which are excluded (not deducted) in
computing operating
income. However, you have not identified this measure or any other
Sean Pelkey
CSX Corporation
March 13, 2024
Page 2
measure as the most directly comparable GAAP measure, nor provided the
reconciliation
prescribed by Item 10(e)(1)(i)(A) and (B) of Regulation S-K. As your
first three
adjustments correlate with the activity that is presented between
operating income and net
earnings on page 52, it appears that operating income would be the
most directly
comparable GAAP measure to utilize in the reconciliation.
As your computational table begins with Net Income (identified as Net
Earnings in your
financial statements) and arrives at the intermediary non-GAAP measure
of Adjusted
EBITDA, before deducting the generalized tax and capital charge to
yield your non-
GAAP measure, it appears that Adjusted EBITDA should be removed from
the
reconciliation and if you wish to present this as an incremental
non-GAAP measure, it
should be separately reconciled to a corresponding GAAP measure.
However, we would
like to understand your rationale for the generalized charges and your
view on the overall
utility of the resulting measure compared to your GAAP performance
measures.
Please describe to us the nature and extent of support for the
percentages utilized in
calculating the generalized measures for each period, explain why
there should be no
deviation between periods in your view, and address the concerns in
the Answer to C&DI
Question 100.04, including the third example and more generally, the
practice of
substituting a proportionally static measurement approach for any
actual corresponding
activity based on GAAP. Tell us how you would propose to characterize
the capital
charge, relative to activity that is generally reflected in a GAAP
performance
measure, and explain how your non-GAAP Economic Profit measure
enhances an
investors understanding of your performance in your view.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
Please contact John Cannarella at 202-551-3337 or Karl Hiller at
202-551-3686 with any
questions.
FirstName LastNameSean Pelkey Sincerely,
Comapany NameCSX Corporation
Division of
Corporation Finance
March 13, 2024 Page 2 Office of Energy
& Transportation
FirstName LastName