CSX Corp. (NASDAQ:CSX)

The financial data over the five-year period reveals distinct trends in goodwill and intangible assets.

Goodwill

Goodwill was not recorded in 2018 but appeared at US$63 million in 2019 and remained stable through 2020. Starting in 2021, goodwill saw a significant increase to US$276 million, continuing to rise to US$319 million in 2022.

Intangible assets, cost

No value was recorded for intangible assets in the early years, but from 2021 there is a notable introduction with a cost base of US$180 million, increasing moderately to US$198 million in 2022.

Accumulated amortization

Accumulated amortization of intangible assets first appears in 2021 with a negative value of US$5 million, intensifying to US$15 million by 2022. This indicates ongoing amortization expense recognition against intangible assets.

Intangible assets, net carrying amount

The net carrying amount, presumably reflecting intangible assets after amortization, emerges at US$175 million in 2021, slightly increasing to US$183 million in 2022. This suggests that while amortization is recognized, the asset base remains relatively stable or grows modestly.

Goodwill and other intangible assets, net

Combined goodwill and other intangible assets show a marked increase starting in 2021, rising from US$63 million in 2020 to US$451 million in 2021 and US$502 million in 2022. This reflects a substantial increase in intangible asset recognition, likely related to acquisitions or revaluations.

Overall, the data indicates that the company significantly expanded its intangible asset base beginning in 2021, with marked increases in goodwill and the recognition of intangible assets at cost. The accumulation of amortization expenses is modest relative to the asset growth. The escalation in these asset categories suggests strategic investments or acquisitions that materially impacted the company's intangible assets during the latest two reporting periods.

Total Assets

The reported total assets showed a consistent upward trend from US$ 36,729 million in 2018 to US$ 41,912 million in 2022, indicating steady asset growth over the five-year period. The adjusted total assets, which account for goodwill adjustments, followed a similar pattern, rising from US$ 36,729 million in 2018 to US$ 41,593 million in 2022. The small gap between reported and adjusted total assets grew slightly over time, suggesting incremental goodwill accounting impacts.

Shareholders' Equity

The reported shareholders’ equity attributable to CSX experienced fluctuations, starting at US$ 12,563 million in 2018, decreasing to US$ 11,848 million in 2019, then increasing to a peak of US$ 13,490 million in 2021 before declining again to US$ 12,615 million in 2022. The adjusted equity followed a similar trend but reflected slightly lower values in the later years due to goodwill adjustments. The equity adjustments appear to reduce reported equity by modest amounts each year after 2018, with the adjusted figure at US$ 12,296 million in 2022 compared to the reported US$ 12,615 million.

Insights

The data reveals a stable growth in the asset base of the company, with total assets increasing steadily. However, shareholders’ equity did not follow the same consistent growth pattern and exhibited variability, particularly a notable dip in 2019 and a decrease in 2022 compared to the previous peak year. The adjustments related to goodwill have a limited but visible effect on equity, slightly lowering it each year after 2018, which may indicate write-downs or amortization of goodwill assets. Overall, the financial position reflects expanding assets with some variability in equity, suggesting changes in retained earnings, dividends, or other equity-affecting transactions during the period.

The data shows financial performance trends over a five-year period with both reported and goodwill-adjusted figures for key metrics including total asset turnover, financial leverage, return on equity (ROE), and return on assets (ROA).

Total Asset Turnover

The reported total asset turnover ratio exhibits a declining trend from 0.33 in 2018 to a low of 0.27 in 2020, indicating reduced efficiency in generating sales from assets during that period. This ratio then recovers gradually to 0.35 by 2022, surpassing its 2018 level. The adjusted total asset turnover follows a nearly identical trajectory, with a slight improvement in 2022 compared to the reported figure, suggesting minor impacts from goodwill adjustments on asset utilization measures.

Financial Leverage

Financial leverage, both reported and adjusted, demonstrates overall growth from 2.92 in 2018 to 3.32 and 3.38 respectively in 2022. The leverage peaked in 2019, slightly declined in the following years, before rising again in 2022. The adjustment for goodwill slightly increases the leverage ratios consistently in each year, reflecting an increased proportion of debt or other liabilities relative to equity when intangible assets are excluded.

Return on Equity (ROE)

The ROE exhibits variability, with a rise from around 26% in 2018 to over 28% in 2019, then a significant drop to approximately 21% in 2020. After this dip, ROE recovers strongly, reaching its highest point in 2022 at over 33%. The adjusted ROE closely mirrors the reported trend but shows slightly higher values in most years, implying that excluding goodwill positively affects equity returns.

Return on Assets (ROA)

ROA follows a decreasing pattern from 9.01% in 2018 to about 7% in 2020, indicating reduced profitability of asset usage. However, it recovers in the two subsequent years, reaching nearly 10% in 2022. The adjusted ROA is marginally higher than the reported ROA throughout the period, reinforcing the notion that goodwill adjustments reveal a more favorable asset efficiency.

Overall, the data suggests that after a downturn around 2020, the company has improved both its asset utilization and profitability through 2022. The impact of goodwill adjustments generally enhances financial metrics slightly, indicating that intangible assets may obscure underlying operational performance. The increase in financial leverage in 2022 could be a factor driving the improved ROE, while the rising asset turnover and ROA point to better operational efficiency post-2020.

Total Assets

The reported total assets demonstrate a consistent upward trend from 36,729 million US dollars in 2018 to 41,912 million US dollars in 2022. This represents a moderate growth over the five-year period. Adjusted total assets, which likely exclude goodwill or other intangible assets, follow a similar pattern, increasing from 36,729 million US dollars in 2018 to 41,593 million US dollars in 2022. The difference between reported and adjusted total assets remains relatively small throughout the years, suggesting limited goodwill or intangible asset adjustments.

Total Asset Turnover

The reported total asset turnover ratio exhibits some fluctuation over the analyzed period. It starts at 0.33 in 2018, declines to 0.31 in 2019, and further decreases to 0.27 in 2020. Subsequently, it recovers to 0.31 in 2021 and improves further to 0.35 in 2022, the highest point in the observed timeframe. Similarly, the adjusted total asset turnover ratio follows the same pattern, though with a slightly higher value of 0.36 in 2022. The dip in 2020 might indicate reduced operational efficiency or lower revenue relative to assets during that year, potentially influenced by external factors affecting the business environment. The recovery in 2021 and 2022 suggests an improvement in the company’s ability to generate sales from its asset base.

Overall Insight

Over the five-year period, the company’s asset base has grown steadily, while the efficiency of asset utilization declined notably in 2020 before showing recovery in the subsequent years. The close alignment between reported and adjusted figures indicates limited impact from goodwill adjustments on overall asset metrics. The upward trend in asset turnover towards 2022 reflects improved operational performance, possibly driven by increased revenues or better asset management. The data collectively suggest a resilient business adapting to challenges and improving efficiency after a temporary setback.

Total Assets

The reported total assets demonstrated a consistent increasing trend from 36,729 million US dollars in 2018 to 41,912 million US dollars in 2022. The adjusted total assets, which account for goodwill adjustments, followed a similar pattern, increasing steadily from 36,729 million US dollars in 2018 to 41,593 million US dollars in 2022. The difference between reported and adjusted values widened slightly over the period, indicating growing goodwill adjustments.

Shareholders’ Equity

The reported shareholders’ equity attributable to CSX showed some fluctuations over the five years. It decreased from 12,563 million US dollars in 2018 to 11,848 million US dollars in 2019, then increased to 13,101 million US dollars in 2020 and further to 13,490 million US dollars in 2021 before declining again to 12,615 million US dollars in 2022. Adjusted shareholders’ equity followed a similar trajectory but was consistently lower than the reported figures, declining slightly more in 2019 and ending at 12,296 million US dollars in 2022. This suggests the impact of goodwill adjustments tended to reduce the reported equity figures.

Financial Leverage

The reported financial leverage ratio expanded from 2.92 in 2018 to a peak of 3.23 in 2019, then decreased to 3.00 in 2021 before rising again to 3.32 in 2022. The adjusted financial leverage ratio showed a parallel pattern, slightly higher than the reported ratio in most years, starting at 2.92 in 2018, peaking around 3.24 in 2019, and reaching 3.38 in 2022. The increase in financial leverage in 2019 and 2022 indicates a higher reliance on debt relative to equity during those periods, with goodwill adjustments slightly increasing the leverage ratios.

Overall Trends and Insights

Over the five-year span, the company exhibited steady asset growth while experiencing fluctuations in shareholders’ equity, partially influenced by goodwill adjustments. The financial leverage ratios suggest a moderate increase in debt relative to equity at specific points, notably in 2019 and 2022, which may warrant further assessment of risk and capital structure. The consistent gap between reported and adjusted figures underlines the importance of considering goodwill effects for a more accurate representation of the company’s financial position.

Shareholders’ Equity Trends

The reported shareholders’ equity attributable to the company exhibited fluctuations over the five-year period. It initially decreased from 12,563 million USD at the end of 2018 to 11,848 million USD in 2019. Subsequently, it recovered, rising to 13,101 million USD in 2020 and further to 13,490 million USD in 2021, before declining again to 12,615 million USD in 2022.

The adjusted shareholders’ equity, which removes goodwill effects, followed a broadly similar pattern but with slightly lower values in most years except 2018, suggesting that goodwill adjustments reduced net equity. After a decline from 12,563 million USD in 2018 to 11,785 million USD in 2019, adjusted equity increased to 13,038 million USD in 2020 and 13,214 million USD in 2021, then decreased to 12,296 million USD in 2022. This indicates a consistent impact of goodwill adjustments on the equity base throughout the period.

Return on Equity (ROE) Trends

The reported ROE showed variability but maintained a generally high level. Starting at 26.34% in 2018, it rose to 28.11% in 2019, declined noticeably to 21.11% in 2020, then recovered to 28.03% in 2021 and increased significantly to 33.02% in 2022. This trend suggests that profitability relative to equity was slightly volatile but ultimately improved considerably by the end of the period.

Adjusted ROE, which accounts for the removal of goodwill effects, consistently exceeded the reported ROE across most years, though the differences were small. It followed a similar trajectory, increasing from 26.34% in 2018 to 28.26% in 2019, dropping to 21.21% in 2020, then rising to 28.61% in 2021 and peaking at 33.88% in 2022. This indicates that when goodwill is excluded, the company demonstrated slightly improved efficiency in generating returns on tangible equity.

Insights and Observations

The periods 2019 and 2020 marked significant shifts with a decrease in shareholders’ equity and a drop in ROE, suggesting that the company faced challenges that affected both its balance sheet strength and profitability during those years. The recovery in 2021 and 2022 shows a positive turnaround with improved equity levels and enhanced returns.

The consistent difference between reported and adjusted equity and ROE highlights the material impact of goodwill on the company’s financial metrics. The upward trend in adjusted ROE in the final years signifies strengthening core profitability and effective utilization of tangible equity.

The data reveals consistent growth in total assets over the five-year period from 2018 to 2022, both in reported and adjusted terms. Reported total assets increased steadily from $36,729 million in 2018 to $41,912 million in 2022. Similarly, adjusted total assets showed a gradual increase, albeit slightly lower than the reported figures, moving from $36,729 million to $41,593 million in the same timeframe.

Return on Assets (ROA) demonstrated variability throughout the period. Both reported and adjusted ROA experienced a decline from 2018 to 2020, dropping from approximately 9.0% to around 7.0%. However, from 2020 onwards, there was a marked recovery, with ROA rising to approximately 9.3% in 2021 and further improving to nearly 10.0% by 2022. Adjusted ROA consistently mirrored the reported ROA trends closely, with marginally higher values in the later years.

Total Assets Trends

Both reported and adjusted total assets increased progressively each year, indicating growth in the company's asset base. The difference between reported and adjusted total assets remained minimal, suggesting limited impact from goodwill adjustments on asset valuation.

Return on Assets Trends

ROA initially declined during the years 2019 and 2020, which may indicate a period of reduced profitability or increased asset base without commensurate income growth. The recovery from 2021 onward points to improved efficiency in asset utilization or higher earnings relative to the asset base. The adjusted ROA values, being slightly higher in recent years, imply positive effects once goodwill adjustments are considered.