What are the key performance metrics for the new incentive program?

The key performance metrics are operating ratio (operating expense divided by operating revenue) and return on assets (ROA), calculated using tax-adjusted operating income divided by net property. Each metric accounts for 50% of the total payout opportunity for Performance Units.

When will the Performance Units and RSUs be paid out or settled?

Performance Units are expected to be paid out in the form of CSX common stock in early 2018, based on performance from 2015 through 2017. The RSUs are granted on February 11, 2015, and will vest in February 2018, at which point they will be settled in CSX common stock.

Are there any conditions that could reduce the payout of Performance Units?

Yes, for certain executive officers, payouts for Performance Units are subject to a potential downward adjustment of up to 30% based on CSX's total shareholder return relative to specified comparator groups.

Who are the named executive officers receiving grants under this program?

The named executive officers receiving grants include Michael J. Ward (Chairman and CEO), Oscar Munoz (President and COO), Clarence W. Gooden (EVP and Chief Commercial Officer), Fredrik J. Eliasson (EVP and CFO), and Ellen M. Fitzsimmons (EVP – Law and Public Affairs, General Counsel and Corporate Secretary).

CSX 8-K: Leadership Changes

Summary

CSX Corporation's February 13, 2015, 8-K filing details the adoption of a new Long-Term Incentive Program (LTIP) by its Compensation Committee. This program, effective for the 2015-2017 performance period, is designed to align executive compensation with key company performance metrics, specifically operating ratio and return on assets (ROA). The program consists of two components: Performance Units and Restricted Stock Units (RSUs), both intended to motivate and reward certain employees, particularly named executive officers. The Performance Units are tied to achieving cumulative operating ratio and average ROA targets over the three-year period, with each metric accounting for 50% of the total payout. Payouts are contingent on performance against predetermined goals and will be settled in CSX common stock in early 2018. Potential payouts can range from zero to 200% of target awards, with possible downward adjustments based on relative total shareholder return. The RSUs vest over a three-year period and will be settled in CSX common stock upon vesting in February 2018. This initiative underscores management's focus on operational efficiency and shareholder value creation.

Key Highlights

1CSX adopted a new Long-Term Incentive Program (LTIP) for the 2015-2017 performance period.
2The LTIP comprises two components: Performance Units and Restricted Stock Units (RSUs).
3Performance Units are based on achieving specific goals for operating ratio and return on assets (ROA), each weighted at 50%.
4Operating ratio is defined as operating expense divided by operating revenue.
5ROA is calculated using tax-adjusted operating income divided by net property.
6Performance Units have a potential payout range of 0% to 200% of target awards and will be settled in CSX common stock in early 2018.
7RSUs vest over three years and will be settled in CSX common stock upon vesting in February 2018.

CSX CORP 8-K Report, Executive Changes (Feb 13, 2015)

Summary

Key Highlights

Frequently Asked Questions