XML 24 R11.htm IDEA: XBRL DOCUMENT
v3.21.2

Stock Plans and Share-Based Compensation | 9 Months Ended
--- | ---
Sep. 30, 2021
Share-based Payment Arrangement [Abstract] |
Stock Plans and Share-Based Compensation | Stock Plans and Share-Based Compensation Under CSX's share-based compensation plans, awards consist of performance units, stock options, restricted stock units and restricted stock awards for management and stock grants for directors. Awards granted under the various programs are determined and approved by the Compensation and Talent Management Committee of the Board of Directors. Awards to the Chief Executive Officer are approved by the full Board and awards to senior executives are approved by the Compensation and Talent Management Committee. In certain circumstances, the Chief Executive Officer or delegate approves awards to management employees other than senior executives. The Board of Directors approves awards granted to CSX's non-management directors upon recommendation of the Governance and Sustainability Committee. Share-based compensation expense for awards under share-based compensation plans and purchases made as part of the employee stock purchase plan is measured using the fair value of the award on the grant date and is recognized on a straight-line basis over the service period of the respective award or upon grant date to certain retirement-eligible employees whose agreements allow for continued vesting upon retirement. Forfeitures are recognized as they occur. Total pre-tax expense and income tax benefits associated with share-based compensation are shown in the table below. Income tax benefits include impacts from option exercises and the vesting of other equity awards.
| Third Quarters |  | Nine Months
(Dollars in millions) | 2021 | 2020 |  | 2021 | 2020
Share-Based Compensation Expense: |  |  |  |  |
Performance Units | $ | 6 |  | $ | 14 |  |  | 44 |  | $ | 6 |
Stock Options | 3 |  | 3 |  |  | 13 |  | 16 |
Restricted Stock Units and Awards | 3 |  | 2 |  |  | 10 |  | 5 |
Employee Stock Purchase Plan | 1 |  | 1 |  |  | 3 |  | 3 |
Stock Awards for Directors | — |  | — |  |  | 2 |  | 2 |
Total Share-Based Compensation Expense | $ | 13 |  | $ | 20 |  |  | $ | 72 |  | $ | 32 |
Income Tax Benefit | $ | 4 |  | $ | 6 |  |  | $ | 19 |  | $ | 17 |
NOTE 3. Stock Plans and Share-Based Compensation, continued Long-term Incentive Plan In February 2021, the Company granted 566 thousand (split-adjusted) performance units to certain employees under a new long-term incentive plan ("LTIP") for the years 2021 through 2023, which was adopted under the CSX 2019 Stock and Incentive Award Plan. Payouts of performance units for the cycle ending with fiscal year 2023 will be based on the achievement of goals related to both operating income and free cash flow, in each case excluding non-recurring items as disclosed in the Company's financial statements. The average annual operating income growth percentage and cumulative free cash flow measures over the plan period will each comprise 50% of the payout and will be measured independently of the other. Grants were made in performance units, with each unit representing the right to receive one share of CSX common stock, and payouts will be made in CSX common stock. The payout range for participants will be between 0% and 200% of the target awards depending on Company performance against predetermined goals. Payouts for certain executive officers are subject to formulaic upward or downward adjustment by up to 25%, capped at an overall payout of 250%, based upon the Company's total shareholder return relative to specified comparable groups over the performance period. Participants will receive stock dividend equivalents declared over the performance period based on the number of performance units paid upon vesting. Other immaterial grants of performance units were made during third quarter 2021. No grants were made during third quarter 2020. The fair values of the performance units awarded during the nine months ended 2021 and 2020 were primarily calculated using a Monte-Carlo simulation model with the following weighted-average assumptions:
|  |  | Nine Months
|  |  |  | 2021 | 2020
Weighted-Average Assumptions Used: |  |  |  |  |
Annual Dividend Yield |  |  |  | N/A | N/A
Risk-free Interest Rate |  |  |  | 0.2 | % | 1.4 | %
Annualized Volatility |  |  |  | 33.6 | % | 24.5 | %
Expected Life (in years) |  |  |  | 2.9 | 2.9
Stock Options In February 2021, the Company granted approximately 1,831 thousand (split-adjusted) stock options along with the corresponding LTIP. The fair value of stock options was calculated using the Black-Scholes valuation model. These stock options were granted with ten-year terms and vest over three years in equal installments each year on the anniversary of the grant date. The exercise price for stock options granted equals the closing market price of the underlying stock on the date of grant. These awards are time-based and are not based upon attainment of performance goals. During third quarter 2021, there were additional immaterial grants of stock options. No options were granted during third quarter 2020. NOTE 3. Stock Plans and Share-Based Compensation, continued The fair values of all stock option awards during the quarters and nine months ended September 30, 2021 and September 30, 2020 were estimated at the grant date with the following weighted average assumptions:
| Third Quarters |  | Nine Months
| 2021 | 2020 |  | 2021 | 2020
Weighted-Average Grant Date Fair Value | $ | 8.86 | N/A |  | $ | 7.94 | $ | 6.29
Weighted-Average Assumptions Used: |  |  |  |  |
Annual Dividend Yield | 1.2 | % | N/A |  | 1.2 | % | 1.2 | %
Risk-Free Interest Rate | 1.0 | % | N/A |  | 0.7 | % | 1.4 | %
Annualized Volatility | 30.7 | % | N/A |  | 31.2 | % | 26.0 | %
Expected Life (in years) | 6.3 | N/A |  | 6.0 | 6.0
Other Pricing Model Inputs: |  |  |  |  |
Weighted-Average Grant Date Market Price of CSX Stock (strike price) | $ | 32.18 | N/A |  | $ | 29.65 | $ | 26.49
Restricted Stock Units In February 2021, the Company granted 490 thousand (split-adjusted) restricted stock units along with the corresponding LTIP. The restricted stock units vest three years after the date of grant. Participants will receive stock dividend equivalents on the vested shares upon vesting. These awards are time-based and are not based upon CSX's attainment of operational targets. Restricted stock units are paid out in CSX common stock on a one-for-one basis. During third quarter 2021, there were additional immaterial grants of restricted stock units. For information related to the Company's other outstanding long-term incentive compensation, see CSX's most recent annual report on Form 10-K. Employee Stock Purchase Plan In May 2018, shareholders approved the 2018 CSX Employee Stock Purchase Plan (“ESPP”) for the benefit of Company employees. The Company registered 12 million (split-adjusted) shares of common stock that may be issued pursuant to this plan. Under the ESPP, employees may contribute between 1% and 10% of base compensation, after-tax, to purchase up to $25,000 of market value CSX common stock per year at 85% of the closing market price on either the grant date or the last day of the six-month offering period, whichever is lower. During the third quarter and nine months ended September 30, 2021 and September 30, 2020, the Company issued the following shares under this program:
| Third Quarters |  | Nine Months
| 2021 | 2020 |  | 2021 | 2020
Shares issued (in thousands) | 334 |  | 360 |  |  | 730 |  | 726 |
Weighted average purchase price per share | $ | 24.93 |  | $ | 19.76 |  |  | $ | 21.90 |  | $ | 20.13 |

X
- Definition The entire disclosure for share-based payment arrangement. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsSharebasedPaymentsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration