FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.D. C. 20549
(X)
FORM 10-Q
| x | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
| | SECURITIES EXCHANGE ACT OF 1934 |
| | For the quarter ended June 28, 2002 |
OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 29, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
¨ | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
| | SECURITIES EXCHANGE ACT OF 1934 |
| | For the transition period fromto |
Commission File Number 1-8022
CSX CORPORATION
(Exact
(Exact name of registrant as specified in its charter)
Virginia 62-1051971
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 East Cary Street, Richmond, Virginia 23219-4031
(Address of principal executive offices) (Zip Code)
Virginia | | 62-1051971 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
901 East Cary Street, Richmond, Virginia | | 23219-4031 |
(Address of principal executive offices) | | (Zip Code) |
(804) 782-1400
(Registrant's
(Registrant’s telephone number, including area code)
No Change
(Former
(Former name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X)x No ( )
¨
Indicate the number of shares outstanding of each of the
issuer'sissuer’s classes of common stock, as of
March 29,June 28, 2002:
212,362,201212,886,212 shares.
-1-
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 29,JUNE 28, 2002
INDEX
| | | | Page Number
|
|
| PART I. FINANCIAL INFORMATION | | |
|
| Item 1: | | Financial Statements | | |
|
| | | | 3 |
|
| | | | 4 |
|
| | | | 5 |
|
| | | | 6 |
|
Item 2: Management's | | | | 25 |
|
| Item 3: | | | | 38 |
|
| PART II. OTHER INFORMATION | | |
|
Item 6: 4. | | | | 39 |
|
| Item 6. | | | | 40 |
|
| | 40 |
-2-
CSX CORPORATION AND SUBSIDIARIES
Consolidated Statement of Earnings
(Millions
CONSOLIDATED STATEMENT OF EARNINGS (Millions of Dollars, Except Per Share Amounts)
(Unaudited)
Quarters Ended
----------------------
March 29, March 30,
2002 2001
--------- ---------
Operating Revenue $ 1,964 $ 2,025
Operating Expense 1,752 1,836
--------- ---------
Operating Income 212 189
Other Income (Expense) 9 (29)
Interest Expense 114 133
--------- ---------
Earnings before Income Taxes and Cumulative Effect of Accounting Change 107 27
Income Tax Expense 39 7
--------- ---------
Earnings before Cumulative Effect of Accounting Change 68 20
Cumulative Effect of Accounting Change - Net of tax (43) --
--------- ---------
Net Earnings $ 25 $ 20
========= =========
Earnings Per Share:
Before Cumulative Effect of Accounting Change $ 0.32 $ 0.10
Cumulative Effect of Accounting Change (0.20) --
--------- ---------
Including Cumulative Effect of Accounting Change $ 0.12 $ 0.10
========= =========
Earnings Per Share, Assuming Dilution:
Before Cumulative Effect of Accounting Change $ 0.32 $ 0.10
Cumulative Effect of Accounting Change (0.20) --
--------- ---------
Including Cumulative Effect of Accounting Change $ 0.12 $ 0.10
========= =========
Average Common Shares Outstanding (Thousands) 212,053 211,299
========= =========
Average Common Shares Outstanding, Assuming Dilution (Thousands) 213,190 211,897
========= =========
Cash Dividends Paid Per Common Share $ 0.10 $ 0.30
========= =========
| | | (Unaudited) |
| | | Quarter Ended
| | Six Months Ended
|
| | | June 28, 2002
| | June 29, 2001
| | June 28, 2002
| | | June 29, 2001
|
| Operating Revenue | | $ | 2,073 | | $ | 2,057 | | $ | 4,037 | | | $ | 4,082 |
| Operating Expense | | | 1,752 | | | 1,792 | | | 3,504 | | | | 3,628 |
| | |
|
| |
|
| |
|
|
| |
|
|
| Operating Income | | | 321 | | | 265 | | | 533 | | | | 454 |
| Other Income | | | 4 | | | 37 | | | 13 | | | | 8 |
| Interest Expense | | | 116 | | | 135 | | | 230 | | | | 268 |
| | |
|
| |
|
| |
|
|
| |
|
|
| Earnings before Income Taxes and Cumulative Effect of Accounting Change | | | 209 | | | 167 | | | 316 | | | | 194 |
| Income Tax Expense | | | 74 | | | 59 | | | 113 | | | | 66 |
| | |
|
| |
|
| |
|
|
| |
|
|
| Earnings before Cumulative Effect of Accounting Change | | | 135 | | | 108 | | | 203 | | | | 128 |
| Cumulative Effect of Accounting Change—Net of Tax | | | — | | | — | | | (43 | ) | | | — |
| | |
|
| |
|
| |
|
|
| |
|
|
| Net Earnings | | $ | 135 | | $ | 108 | | $ | 160 | | | $ | 128 |
| | |
|
| |
|
| |
|
|
| |
|
|
| Earnings Per Share: | | | | | | | | | | | | | |
| Before Cumulative Effect of Accounting Change | | $ | 0.63 | | $ | 0.51 | | $ | 0.95 | | | $ | 0.60 |
| Cumulative Effect of Accounting Change | | | — | | | — | | | (0.20 | ) | | | — |
| | |
|
| |
|
| |
|
|
| |
|
|
| Net Earnings | | $ | 0.63 | | $ | 0.51 | | $ | 0.75 | | | $ | 0.60 |
| | |
|
| |
|
| |
|
|
| |
|
|
| Earnings Per Share, Assuming Dilution: | | | | | | | | | | | | | |
| Before Cumulative Effect of Accounting Change | | $ | 0.63 | | $ | 0.51 | | $ | 0.95 | | | $ | 0.60 |
| Cumulative Effect of Accounting Change | | | — | | | — | | | (0.20 | ) | | | — |
| | |
|
| |
|
| |
|
|
| |
|
|
| Net Earnings | | $ | 0.63 | | $ | 0.51 | | $ | 0.75 | | | $ | 0.60 |
| | |
|
| |
|
| |
|
|
| |
|
|
| Average Common Shares Outstanding (Thousands) | | | 212,555 | | | 211,687 | | | 212,303 | | | | 211,491 |
| | |
|
| |
|
| |
|
|
| |
|
|
| Average Common Shares Outstanding Assuming Dilution (Thousands) | | | 213,541 | | | 212,464 | | | 213,364 | | | | 212,180 |
| | |
|
| |
|
| |
|
|
| |
|
|
| Cash Dividends Paid Per Common Share | | $ | 0.10 | | $ | 0.30 | | $ | 0.20 | | | $ | 0.60 |
| | |
|
| |
|
| |
|
|
| |
|
|
See accompanying Notes to Consolidated Financial Statements.
-3-
CSX CORPORATION AND SUBSIDIARIES
Consolidated Statement
CONSOLIDATED STATEMENT OF CASH FLOWS (Millions of Cash Flows
(Millions of Dollars)
(Unaudited)
Quarters Ended
----------------------
March 29, March 30,
2002 2001
--------- ---------
OPERATING ACTIVITIES
Net Earnings $ 25 $ 20
Adjustments to Reconcile Net Earnings to Net Cash Provided:
Cumulative Effect of Accounting Change 43 --
Depreciation 155 157
Deferred Income Taxes 20 4
Equity in Conrail Earnings - Net (1) (5)
Other Operating Activities 6 1
Changes in Operating Assets and Liabilities:
Accounts Receivable 34 10
Other Current Assets (43) (18)
Accounts Payable (26) (22)
Other Current Liabilities (53) (147)
--------- ---------
Net Cash Provided by Operating Activities 160 --
--------- ---------
INVESTING ACTIVITIES
Property Additions (162) (183)
Short-term Investments - Net (158) (77)
Other Investing Activities (11) (5)
--------- ---------
Net Cash Used by Investing Activities (331) (265)
--------- ---------
FINANCING ACTIVITIES
Short-term Debt - Net -- (271)
Long-term Debt Issued 450 500
Long-term Debt Repaid (267) (48)
Cash Dividends Paid (21) (64)
Other Financing Activities 12 8
--------- ---------
Net Cash Provided by Financing Activities 174 125
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents 3 (140)
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash and Cash Equivalents at Beginning of Period 137 261
--------- ---------
Cash and Cash Equivalents at End of Period 140 121
Short-term Investments at End of Period 641 500
--------- ---------
Cash, Cash Equivalents and Short-term
Investments at End of Period $ 781 $ 621
========= =========
| | | (Unaudited) | |
| | | Six Months Ended
| |
| | | June 28, 2002
| | | June 29, 2001
| |
| OPERATING ACTIVITIES | | | | | | | | |
| Net Earnings | | $ | 160 | | | $ | 128 | |
| Adjustments to Reconcile Net Earnings to Net Cash Provided: | | | | | | | | |
| Cumulative Effect of Accounting Change | | | 43 | | | | — | |
| Depreciation | | | 312 | | | | 312 | |
| Deferred Income Taxes | | | 50 | | | | 32 | |
| Equity in Conrail Earnings—Net | | | (8 | ) | | | (9 | ) |
| Other Operating Activities | | | (5 | ) | | | (1 | ) |
| Changes in Operating Assets and Liabilities: | | | | | | | | |
| Accounts Receivable | | | 17 | | | | (33 | ) |
| Other Current Assets | | | (34 | ) | | | (15 | ) |
| Accounts Payable | | | (54 | ) | | | (71 | ) |
| Other Current Liabilities | | | 30 | | | | (78 | ) |
| | |
|
|
| |
|
|
|
| Net Cash Provided by Operating Activities | | | 511 | | | | 265 | |
| | |
|
|
| |
|
|
|
| INVESTING ACTIVITIES | | | | | | | | |
| Property Additions | | | (431 | ) | | | (420 | ) |
| Short-term Investments—Net | | | (2 | ) | | | 11 | |
| Other Investing Activities | | | 4 | | | | (8 | ) |
| | |
|
|
| |
|
|
|
| Net Cash Used by Investing Activities | | | (429 | ) | | | (417 | ) |
| | |
|
|
| |
|
|
|
| FINANCING ACTIVITIES | | | | | | | | |
| Short-term Debt—Net | | | 576 | | | | (228 | ) |
| Long-term Debt Issued | | | 474 | | | | 500 | |
| Long-term Debt Repaid | | | (991 | ) | | | (118 | ) |
| Dividends Paid | | | (43 | ) | | | (128 | ) |
| Other Financing Activities | | | 16 | | | | 8 | |
| | |
|
|
| |
|
|
|
| Net Cash Provided by Financing Activities | | | 32 | | | | 34 | |
| | |
|
|
| |
|
|
|
| Net Increase (Decrease) in Cash and Cash Equivalents | | | 114 | | | | (118 | ) |
| CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS | | | | | | | | |
| Cash and Cash Equivalents at Beginning of Period | | | 137 | | | | 260 | |
| | |
|
|
| |
|
|
|
| Cash and Cash Equivalents at End of Period | | | 251 | | | | 142 | |
| Short-term Investments at End of Period | | | 480 | | | | 414 | |
| | |
|
|
| |
|
|
|
| Cash, Cash Equivalents and Short-term Investments at End of Period | | $ | 731 | | | $ | 556 | |
| | |
|
|
| |
|
|
|
See accompanying Notes to Consolidated Financial Statements.
-4-
CSX CORPORATION AND SUBSIDIARIES
Consolidated Statement
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Millions of Financial Position
(Millions of Dollars)
(Unaudited)
March 29, December 28,
2002 2001
------------ ------------
ASSETS
Current Assets
Cash, Cash Equivalents and Short-Term Investments $ 781 $ 618
Accounts Receivable, Net 809 878
Materials and Supplies 223 206
Deferred Income Taxes 131 162
Other Current Assets 232 210
------------ -----------
Total Current Assets 2,176 2,074
Properties 18,261 18,151
Accumulated Depreciation (5,282) (5,179)
------------ -----------
Properties-Net 12,979 12,972
Investment in Conrail 4,656 4,655
Affiliates and Other Companies 388 382
Other Long-term Assets 643 718
------------ -----------
Total Assets $ 20,842 $ 20,801
============ ===========
LIABILITIES
Current Liabilities
Accounts Payable $ 912 $ 966
Labor and Fringe Benefits Payable 396 418
Casualty, Environmental and Other Reserves 247 250
Current Maturities of Long-term Debt 952 1,044
Short-term Debt - 225
Income and Other Taxes Payable 116 101
Other Current Liabilities 238 299
------------ -----------
Total Current Liabilities 2,861 3,303
Casualty, Environmental and Other Reserves 678 690
Long-term Debt 6,361 5,839
Deferred Income Taxes 3,575 3,621
Other Long-term Liabilities 1,223 1,228
------------ -----------
Total Liabilities 14,698 14,681
------------ -----------
SHAREHOLDERS' EQUITY
Common Stock, $1 Par Value 214 214
Other Capital 1,511 1,492
Retained Earnings 4,463 4,459
Accumulated Other Comprehensive Loss (44) (45)
------------ -----------
Total Shareholders' Equity 6,144 6,120
------------ -----------
Total Liabilities and Shareholders' Equity $ 20,842 $ 20,801
============ ===========
| | | (Unaudited) | | | | |
| | | June 28, 2002
| | | December 28, 2001
| |
ASSETS | | | | | | | | |
| Current Assets | | | | | | | | |
| Cash, Cash Equivalents and Short-term Investments | | $ | 731 | | | $ | 618 | |
| Accounts Receivable, Net | | | 828 | | | | 878 | |
| Materials and Supplies | | | 220 | | | | 206 | |
| Deferred Income Taxes | | | 122 | | | | 162 | |
| Other Current Assets | | | 190 | | | | 210 | |
| | |
|
|
| |
|
|
|
| Total Current Assets | | | 2,091 | | | | 2,074 | |
| Properties | | | 18,416 | | | | 18,151 | |
| Accumulated Depreciation | | | (5,348 | ) | | | (5,179 | ) |
| | |
|
|
| |
|
|
|
| Properties-Net | | | 13,068 | | | | 12,972 | |
| Investment in Conrail | | | 4,663 | | | | 4,655 | |
| Affiliates and Other Companies | | | 410 | | | | 382 | |
| Other Long-term Assets | | | 688 | | | | 718 | |
| | |
|
|
| |
|
|
|
| Total Assets | | $ | 20,920 | | | $ | 20,801 | |
| | |
|
|
| |
|
|
|
LIABILITIES | | | | | | | | |
| Current Liabilities | | | | | | | | |
| Accounts Payable | | $ | 918 | | | $ | 966 | |
| Labor and Fringe Benefits Payable | | | 413 | | | | 418 | |
| Casualty, Environmental and Other Reserves | | | 245 | | | | 250 | |
| Current Maturities of Long-term Debt | | | 326 | | | | 1,044 | |
| Short-term Debt | | | 578 | | | | 225 | |
| Income and Other Taxes Payable | | | 171 | | | | 101 | |
| Other Current Liabilities | | | 243 | | | | 299 | |
| | |
|
|
| |
|
|
|
| Total Current Liabilities | | | 2,894 | | | | 3,303 | |
| Casualty, Environmental and Other Reserves | | | 657 | | | | 690 | |
| Long-term Debt | | | 6,338 | | | | 5,839 | |
| Deferred Income Taxes | | | 3,598 | | | | 3,621 | |
| Other Long-term Liabilities | | | 1,165 | | | | 1,228 | |
| | |
|
|
| |
|
|
|
| Total Liabilities | | | 14,652 | | | | 14,681 | |
| | |
|
|
| |
|
|
|
| SHAREHOLDERS’ EQUITY | | | | | | | | |
| Common Stock, $1 Par Value | | | 215 | | | | 214 | |
| Other Capital | | | 1,521 | | | | 1,492 | |
| Retained Earnings | | | 4,576 | | | | 4,459 | |
| Accumulated Other Comprehensive Loss | | | (44 | ) | | | (45 | ) |
| | |
|
|
| |
|
|
|
| Total Shareholders’ Equity | | | 6,268 | | | | 6,120 | |
| | |
|
|
| |
|
|
|
| Total Liabilities and Shareholders’ Equity | | $ | 20,920 | | | $ | 20,801 | |
| | |
|
|
| |
|
|
|
See accompanying Notes to Consolidated Financial Statements.
-5-
CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(All
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (All Tables inIn Millions ofOf Dollars, Except Per Share Amounts)
NOTE 1. BASIS OF PRESENTATION
In the opinion of management, the accompanying consolidated financial statements contain all adjustments necessary to present fairly the financial position of CSX Corporation and subsidiaries ("CSX"(“CSX” or the "Company"“Company”) at March
29,June 28, 2002 and December 28, 2001, and the results of its operations for the quarters and six months ended June 28, 2002 and June 29, 2001, and its cash flows for the threesix months ended March 29,June 28, 2002 and March 30,June 29, 2001, such adjustments being of a normal recurring nature. Certain prior-year data have been reclassified to conform to the 2002 presentation.
While the Company believes that the disclosures presented are adequate to make the information not misleading, it is suggested that these financial statements be read in conjunction with the financial statements and the notes included in the Company'sCompany’s latest Annual Report and Form 10-K.
CSX follows a 52/53 week fiscal reporting calendar. Fiscal years 2002 and 2001 consist of 52 weeks ending on December 27, 2002 and December 28, 2001, respectively. The financial statements presented are for the 13-week quarters ended March 29,June 28, 2002 and March 30,June 29, 2001, the 26-week periods ended June 28, 2002 and June 29, 2001, and as of December 28, 2001.
Comprehensive income approximates net earnings for all periods presented in the accompanying consolidated statement of earnings.
NOTE 2. EARNINGS PER SHARE
Earnings per share are based on the weighted average number of common shares outstanding for the fiscal quarters and six months ended March 29,June 28, 2002 and March 30,June 29, 2001. Earnings per share, assuming dilution, are based on the weighted average number of common shares outstanding adjusted for the effect of potential common shares outstanding during the period, principally arising from employee stock plans. For the fiscal quarters ended March 29,June 28, 2002 and March 30,June 29, 2001, potential common shares that were dilutive totaled 1.0 million and 0.8 million, respectively. For the six months ended June 28, 2002 and June 29, 2001, potential common shares that were dilutive totaled 1.1 million and 0.60.7 million, respectively. During the quarter and six months ended June 28, 2002, 0.3 million and 1.0 million shares, respectively, were issued as a result of options exercised. During the quarter and six months ended June 29, 2001, 0.1 million and 0.5 million shares, respectively, were issued as a result of options exercised.
Certain potential common shares outstanding at March 29,June 28, 2002 and March
30,June 29, 2001 were not included in the computation of earnings per share, assuming dilution, since their exercise or conversion prices were greater than the average market price of the common shares during the period and, accordingly, their effect is antidilutive. These shares totaled 30.033.2 million at a weighted-average exercise price of $47.32$46.35 per share at March 29,June 28, 2002 and 17.019.3 million with a weighted-average exercise price of $43.76$43.46 per share at March 30,June 29, 2001. A substantial increase in the fair market value of the Company’s stock price could negatively impact earnings per share due to the dilutive effect of stock options and convertible debt.
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 3. NEW ACCOUNTING PRONOUNCEMENTS
In 2001, Statement of Financial Accounting Standard
(SFAS) No. 142,
(SFAS 142),
Goodwill“Goodwill and Other Intangible Assets,
” was issued. Under the provisions of SFAS 142, goodwill and other indefinite lived intangible assets are no longer amortized but are reviewed for impairment on a periodic basis. The Company adopted this standard in the first quarter of 2002 and incurred a
pre-tax charge of $83 million,
after-tax charge$43 million after tax and consideration of
$43 million,minority interest, 20 cents per share as a cumulative effect of an accounting change, which represents the difference between book value and the fair value of indefinite lived intangible assets. These indefinite lived intangible assets are permits and licenses that the company holds relating to a proposed pipeline to transfer natural gas from
Alaska'sAlaska’s north slope to the port in Valdez, Alaska. The fair value was determined using a discount method of projected future cash flows relating to these assets. The carrying value of these assets is now approximately $3 million. The adoption of SFAS 142 did not have a material effect on prior reporting periods, and
the Company doeswill not
believe it will have a material effect on future earnings. The Company does not have any other indefinite lived intangible assets.
-6-
CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 4. INVESTMENT IN AND INTEGRATED RAIL OPERATIONS WITH CONRAIL
Background
- ----------
CSX and Norfolk Southern Corporation ("(“Norfolk Southern"Southern”) completed the acquisition of Conrail Inc. ("Conrail"(“Conrail”) in May 1997. Conrail owns the primary freight railroad system serving the northeastern United States, and its rail network extends into several midwestern states and into Canada. CSX and Norfolk Southern, through a jointly owned acquisition entity, hold economic interests in Conrail of 42% and 58%, respectively, and voting interests of 50% each. CSX and Norfolk Southern operate over allocated portions of the Conrail lines.
The rail subsidiaries of CSX and Norfolk Southern operate their respective portions of the Conrail system pursuant to various operating agreements. Under these agreements, the railroads pay operating fees to Conrail for the use of right-of-way and rent for the use of equipment. Conrail continues to provide rail service in certain shared geographic areas ("(“Shared Asset Areas"Areas”) for the joint benefit of CSX and Norfolk Southern for which it is compensated on the basis of usage by the respective railroads.
Conrail Financial Information
- -----------------------------
Summary financial information for Conrail for its fiscal periods ended
March 31,June 30, 2002 and 2001, and at December 31, 2001, is as follows:
Quarters Ended
-----------------------------------
March 31, March 31,
2002 2001
-------------- -------------
Income Statement Information:
Revenues $ 225 $ 233
Income from Operations 61 64
Net Income 36 45
As Of
-----------------------------------
March 31, December 31,
2002 2001
-------------- -------------
Balance Sheet Information:
Current Assets $ 325 $ 846
Property and Equipment and Other Assets 7,788 7,236
Total Assets 8,113 8,082
Current Liabilities 449 408
Long-Term Debt 1,144 1,156
Total Liabilities 3,972 3,977
Stockholders' Equity 4,141 4,105
-7-
| | | Quarters Ended June 30,
| | Six Months Ended June 30,
|
| | |
| | | 2002
| | 2001
| | 2002
| | 2001
|
| Income Statement Information: | | | | | | | | | | | | |
| Revenues | | $ | 222 | | $ | 229 | | $ | 447 | | $ | 462 |
| Income From Operations | | | 64 | | | 76 | | | 125 | | | 140 |
| Net Income | | | 42 | | | 47 | | | 78 | | | 92 |
CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 4. INVESTMENT IN AND INTEGRATED RAIL OPERATIONS WITH CONRAIL, Continued
CSX'sCONRAIL—(Continued)
Conrail Financial Information—(Continued)
| | | As Of
|
| | | June 30, 2002
| | December 31, 2001
|
| Balance Sheet Information: | | | | | | |
| Current Assets | | $ | 315 | | $ | 846 |
| Property and Equipment and Other Assets | | | 7,785 | | | 7,236 |
| Total Assets | | | 8,100 | | | 8,082 |
| Current Liabilities | | | 394 | | | 408 |
| Long-Term Debt | | | 1,140 | | | 1,156 |
| Total Liabilities | | | 3,916 | | | 3,977 |
| Stockholders’ Equity | | | 4,184 | | | 4,105 |
CSX’s Accounting for Its Investment in and Integrated Rail Operations with - --------------------------------------------------------------------------
Conrail
- -------
Upon integration, substantially all of Conrail'sConrail’s customer freight contracts were assumed by CSX and Norfolk Southern. As a result, CSX'sCSX’s rail and intermodal operating revenue includes revenue from traffic previously moving on Conrail. Operating expenses reflect corresponding increases for costs incurred to handle the new traffic and operate the former Conrail lines. Rail operating expenses includes an expense category, "Conrail“Conrail Operating Fee, Rent and Services,"” which reflects payments to Conrail for the use of right-of-way and equipment, as well as charges for transportation, switching, and terminal services in the Shared Asset Areas that Conrail operates for the joint benefit of CSX and Norfolk Southern. This expense category also includes amortization of the fair value write-up arising from the acquisition of Conrail, as well as CSX'sCSX’s proportionate share of Conrail'sConrail’s net income or loss recognized under the equity method of accounting.
Transactions with Conrail
- -------------------------
The agreement under which CSX operates its allocated portion of the Conrail route system has an initial term of 25 years and may be renewed at CSX'sCSX’s option for two five-year terms. Operating fees paid to Conrail under the agreement are subject to adjustment every six years based on the fair value of the underlying system. Lease agreements for the Conrail equipment operated by CSX cover varying terms. CSX is responsible for all costs of operating, maintaining, and improving the routes and equipment under these agreements.
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 4. INVESTMENT IN AND INTEGRATED RAIL OPERATIONS WITH CONRAIL—(Continued)
Transactions with Conrail—(Continued)
At
March 29,June 28, 2002, CSX had no amounts receivable from Conrail, while at December 28, 2001, amounts receivable from Conrail totaled $3 million, principally for reimbursement of certain capital improvement costs. Conrail advances its available cash balances to CSX and Norfolk Southern under
a
variable-rate
notes, with CSX’s note maturing on March 28, 2007. At
March 29,June 28, 2002 and December 28, 2001, Conrail had advanced
$275$299 million and $225 million, respectively, to CSX under this arrangement at interest rates of
2.75%2.87% and
2.5%2.50%, respectively. CSX also had amounts payable to Conrail of
$78$64 million and $88 million at
March
29,June 28, 2002 and December 28, 2001, respectively, representing expenses incurred under the operating, equipment, and shared area agreements with Conrail.
-8-
CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 5. ACCOUNTS RECEIVABLE
The Company sells revolving interests in its rail accounts receivable to public investors through a securitization program and to financial institutions through commercial paper conduit programs. The accounts receivable are sold, without recourse, to a wholly-owned, special-purpose subsidiary, which then transfers the receivables, with recourse, to a master trust. The securitization and conduit programs are accounted for as sales in accordance with SFAS 140 "Accounting“Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."” Receivables sold under these arrangements are excluded from accounts receivable in the consolidated statement of financial position. At March 29,June 28, 2002, the agreements provide for the sale of up to $350 million in receivables through the securitization program and $200 million through the conduit programs.
program.
At March 29,June 28, 2002 and December 28, 2001, the Company had sold $500 million of accounts receivable; $300 million through the securitization program and $200 million through the conduit programs.program. The certificates issued under the securitization program bear interest at 6% annually and mature in June 2003. Receivables sold under the conduit programsprogram which expires in December 2002 require yield payments based on prevailing commercial paper rates (2.06%(2.00% at March 29,June 28, 2002) plus incremental fees. The Company'sCompany’s retained interest in the receivables in the master trust were approximately $430$485 million and $466 million at March 29,June 28, 2002 and December 28, 2001, respectively, and are included in accounts receivable. Losses recognized on the sale of accounts receivable totaled $8 million and $12$16 million for the quartersquarter and six months ended MarchJune 28, 2002, respectively, and $10 million and $22 million for the quarter and six months ended June 29, 2002 and March 30, 2001, respectively.
The Company has retained the responsibility for servicing accounts receivable transferred to the master trust. The average servicing period is approximately one month. No servicing asset or liability has been recorded since fees the Company receives for servicing the receivables approximate the related costs.
The Company maintains an allowance for doubtful accounts based upon the expected collectibility of accounts receivable including receivables transferred to the master trust. Allowances for doubtful accounts of $99 million and $100 million have been applied as a reduction of accounts receivable at
March 29,June 28, 2002 and December 28, 2001, respectively.
-9-
CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 6. OPERATING EXPENSE
Quarters Ended
------------------------
March 29, March 30,
2002 2001
---------- ----------
Labor and Fringe Benefits $ 733 $ 756
Materials, Supplies and Other 430 424
Conrail Operating Fee, Rent & Services 87 83
Building and Equipment Rent 148 163
Inland Transportation 86 85
Depreciation 152 155
Fuel 116 170
---------- ----------
Total $ 1,752 $ 1,836
========== ==========
| | | Quarters Ended
| | Six Months Ended
|
| | | June 28, 2002
| | June 29, 2001
| | June 28, 2002
| | June 29, 2001
|
| Labor and Fringe | | $ | 718 | | $ | 743 | | $ | 1,451 | | $ | 1,499 |
| Materials, Supplies and Other | | | 441 | | | 422 | | | 871 | | | 846 |
| Conrail Operating Fee, Rent and Services | | | 79 | | | 85 | | | 166 | | | 168 |
| Building and Equipment Rent | | | 154 | | | 159 | | | 302 | | | 322 |
| Inland Transportation | | | 77 | | | 84 | | | 163 | | | 169 |
| Depreciation | | | 155 | | | 153 | | | 307 | | | 308 |
| Fuel | | | 128 | | | 146 | | | 244 | | | 316 |
| | |
|
| |
|
| |
|
| |
|
|
| Total | | $ | 1,752 | | $ | 1,792 | | $ | 3,504 | | $ | 3,628 |
| | |
|
| |
|
| |
|
| |
|
|
NOTE 7. OTHER INCOME (EXPENSE)
| | | Quarters Ended
| | | Six Months Ended
| |
| | | June 28, 2002
| | | June 29, 2001
| | | June 28, 2002
| | | June 29, 2001
| |
| Interest Income | | $ | 8 | | | $ | 13 | | | $ | 15 | | | $ | 26 | |
| Income from Real Estate and Resort Operations(1) | | | 11 | | | | 53 | | | | 43 | | | | 50 | |
| Net Losses from Accounts Receivable Sold | | | (8 | ) | | | (10 | ) | | | (16 | ) | | | (22 | ) |
| Minority Interest | | | (10 | ) | | | (10 | ) | | | (18 | ) | | | (18 | ) |
| Equity Income (Losses) of Other Affiliates(2) | | | 1 | | | | (3 | ) | | | (5 | ) | | | (19 | ) |
| Miscellaneous Income (Expense) | | | 2 | | | | (6 | ) | | | (6 | ) | | | (9 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Total | | $ | 4 | | | $ | 37 | | | $ | 13 | | | $ | 8 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Quarters Ended
-------------------------
March| (1) | | Gross revenue from real estate and resort operations was $51 million and $114 million for the quarter and six months ended June 28, 2002, respectively, and $96 million and $121 million for the quarter and six months ended June 29, March 30,
2002 2001, ---------- ----------
Interest Income $ 7 $ 13
Income (Loss) from Real Estate and Resort
Operations/(1)/ 32 (3)
Net Losses from Accounts Receivable Sold (8) (12)
Minority Interest (8) (8)
Equity Lossesrespectively. |
| (2) | | Included in Other Affiliates/(2)/ (6) (16)
Miscellaneous (8) (3)
---------- ----------
Total $ 9 $ (29)
========== ==========
equity losses in other affiliates was the $14 million write-off of an investment in a non-rail affiliate, during the six months ended June 29, 2001. |
/(1)/ Gross revenue from real estate and resort operations was $63 million and
$25 million for the quarters ended March 29, 2002 and March 30, 2001,
respectively. A $36 million pre-tax gain from a property sale had a
favorable impact on other incomeCSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
(All Tables in 2002.
/(2)/ Included in equity losses in other affiliates was the $14 million
write-offMillions of an investment in a non-rail affiliate, during the quarter
ended March 30, 2001.
Dollars, Except Per Share Amounts)
NOTE 8. DEBT AND CREDIT AGREEMENTS
During the quarter ended
On March 29,6, 2002 the Company issued $400 million aggregate principal amount of 6.30% notes due 2012. Proceeds of the notes will be used to refinance other debt coming duewere applied in the second quarterrefinancing of $450 million of debentures that matured in May 2002. During the quartersix months ended March 29,June 28, 2002 the Company issued commercial paper in the amount of $578 million at a weighted average rate of 2.00%. These borrowings were primarily used to make scheduled payments of long-term debt.
During the six months ended June 28, 2002, the Company exchanged
a $225 million
of notesnote payable to Conrail for a new long-term note. Additionally, the note payable was increased by
$50$74 million, for a total of
$275$299 million. The note matures on March 28, 2007, and has been appropriately classified as long-term debt. (See Note 4)
-10-
CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS
On March 20, 2002,
CSX has entered into an interest rate swap agreement on
its $150 million, 8.30% notes due May 1, 2032, in addition to its already
outstanding interest rate swap agreements on its $300 million, 7.25% notes due
May 1, 2004, $150 million, 5.85% notes due December 1, 2003, $50 million, 6.46%
notes due June 22, 2005, $300 million, 9% notes due August 15, 2006 and $450
million, 7.45% notes due May 1, 2007. the following fixed rate notes:
Notional Amount (millions)
| | Interest Rate
| | Maturity
|
| $150 | | 8.30% | | May 1, 2032 |
| 300 | | 7.25% | | May 1, 2004 |
| 150 | | 5.85% | | December 1, 2003 |
| 50 | | 6.46% | | June 22, 2005 |
| 300 | | 9.00% | | August 15, 2006 |
| 450 | | 7.45% | | May 1, 2007 |
These agreements were entered for interest rate risk exposure management purposes and mature at the time the related notes are due. Under these agreements, the Company will pay variable interest based on LIBOR in exchange for fixed rate payments (on March 29,June 28, 2002 the variable and fixed rate weighted averages were 5.07%5.10% and 7.62%, respectively), effectively transforming the notes to floating rate obligations. Accordingly, the instruments qualify, and are designated, as fair value hedges.
For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in current earnings during the period of change in fair values. The accounting for hedge effectiveness is measured at least quarterly based on the relative change in fair value between the derivative contract and the hedged item over time. Any change in fair value resulting from ineffectiveness, as defined by Statement of Financial Accounting StandardsSFAS No. 133, "Accounting“Accounting For Derivative Instruments and Hedging Activities" ("SFAS 133"),Activities,” is recognized immediately in earnings. The Company'sCompany’s interest rate swaps qualify as perfectly effective fair value hedges, as defined by SFAS 133. As such, there was no ineffective portion to the hedge recognized in earnings during the period. Long-term debt has been decreased $27increased $11 million and decreased $26 million for the fair market value of the interest rate swap agreements at March 29,June 28, 2002 and December 28, 2001, respectively.
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS—(Continued)
The differential to be paid or received under these agreements is accrued consistently withbased on the terms of the agreements and is recognized in interest expense over the term of the related debt. The related amounts payable to or receivable from counterparties are included in other liabilities or assets. Cash flows related to interest rate swap agreements are classified as "Operating activities"“Operating Activities” in the Consolidated Statements of Cash Flows. For the threequarter and six months ended March 29, 2001,June 28, 2002, the Company reduced interest expense by approximately $7.3$8.3 million and $15.6 million, respectively, as a result of the interest rate swap agreements that were in place during that period. There were no interest rate swaps in place during the quarter and six months ended March 31,June 29, 2001.
The Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate swap agreements. However, the Company does not anticipate nonperformance by the counterparties.
-11-
CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 10. COMMITMENTS AND CONTINGENCIES
Purchase Commitments
- --------------------
The Company has entered into fuel purchase agreements for approximately 50% of its fuel requirements over the next ninesix months. These agreements amount to approximately 220144 million gallons in commitments at a weighted average of 7778 cents per gallon. These contracts require the Company to take monthly delivery of specified quantities of fuel at a fixed price. These contracts cannot be net settled.
The Company also has a commitment under a long-term maintenance program for approximately 40% of CSXT'sCSX Transportation, Inc.’s (CSXT), a subsidiary of CSX, fleet of locomotives. The agreement expires in 2024 and totals $2.7 billion.
Contingencies
- -------------
Self-Insurance
Although the Company obtains substantial amounts of commercial insurance for potential losses for third-party liability and property damage, reasonable levels of risk are retained on a self-insurance basis. A portion
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
(All Tables in Millions of the
insurance coverage, $25 million limit above $100 million per occurrence from
rail and certain other operations, is provided by a company partially owned by
CSX.
Dollars, Except Per Share Amounts)
NOTE 10. COMMITMENTS AND CONTINGENCIES—(Continued)
Environmental
CSXT is a party to various proceedings involving private parties and regulatory agencies related to environmental issues. CSXT has been identified as a potentially responsible party (PRP) at 9282 environmentally impaired sites that are or may be subject to remedial action under the Federal Superfund statute ("Superfund"(“Superfund”) or similar state statutes. A number of these proceedings are based on allegations that CSXT, or its railroad predecessors, sent hazardous substances to the facilities in question for disposal. Such proceedings arising under Superfund or similar state statutes can involve numerous other waste generators and disposal companies and seek to allocate or recover costs associated with site investigation and cleanup, which could be substantial.
CSXT is involved in a number of administrative and judicial proceedings and other clean-up efforts at
220206 sites, including the sites addressed under Superfund or similar state statutes, where it is participating in the study and/or clean-up of alleged environmental contamination. The assessment of the required response and remedial costs associated with most sites is extremely complex. Cost estimates are based on information available for each site, financial viability of other PRPs, where available, and existing technology, laws and regulations.
CSXT'sCSXT’s best estimates of the allocation method and percentage of liability when other PRPs are involved are based on assessments by consultants, agreements among PRPs, or determinations by the U.S. Environmental Protection Agency or other regulatory agencies.
-12-
CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 10. COMMITMENTS AND CONTINGENCIES, Continued
Environmental, Continued
At least once each quarter, CSXT reviews its role, if any, with respect to each such location, giving consideration to the nature of CSXT'sCSXT’s alleged connection to the location (e.g., generator, owner or operator), the extent of CSXT'sCSXT’s alleged connection (e.g., volume of waste sent to the location and other relevant factors), the accuracy and strength of evidence connecting CSXT to the location, and the number, connection and financial position of other named and unnamed PRPs at the location. The ultimate liability for remediation can be difficult to determine with certainty because of the number and creditworthiness of PRPs involved. Through the assessment process, CSXT monitors the creditworthiness of such PRPs in determining ultimate liability.
Based upon such reviews and updates of the sites with which it is involved, CSXT has recorded, and reviews at least quarterly for adequacy, reserves to cover estimated contingent future environmental costs with respect to such sites. The recorded liabilities for estimated future environmental costs at March 29,June 28, 2002, and December 28, 2001 were $34 million and $32 million,
respectively.million. These recorded liabilities, which are undiscounted, include amounts representing CSXT'sCSXT’s estimate of unasserted claims, which CSXT believes to be immaterial. The liability has been accrued for future costs for all sites where the Company'sCompany’s obligation is probable and where such costs can be reasonably estimated. The liability includes future costs for remediation and restoration of sites as well as any significant ongoing monitoring costs, but excludes any anticipated insurance recoveries. The majority of the March 29,June 28, 2002 environmental liability is expected to be paid out over the next five to seven years, funded by cash generated from operations.
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 10. COMMITMENTS AND CONTINGENCIES—(Continued)
Environmental—(Continued)
The Company does not currently possess sufficient information to reasonably estimate the amounts of additional liabilities, if any, on some sites until completion of future environmental studies. In addition, latent conditions at any given location could result in exposure, the amount and materiality of which cannot presently be reliably estimated. Based upon information currently available, however, the Company believes its environmental reserves are adequate to accomplish remedial actions to comply with present laws and regulations, and that the ultimate liability for these matters will not materially affect its overall results of operations and financial condition.
STB Proceeding
In December 2001 Duke Energy Corporation ("Duke") filed a complaint
before the U.S. Surface Transportation Board alleging that certain CSXT common
carrier coal rates are unreasonably high. A similar complaint was filed by Duke
against Norfolk Southern. The outcome of the ongoing proceeding against CSXT is
uncertain and would only apply to billings subsequent to December 2001. CSXT is
pursuing an aggressive legal strategy in its defense against this complaint. An
unfavorable outcome to this complaint would not have a material effect on the
Company.
Sale ofOf International Container-Shipping Assets
In December 1999, CSX sold certain assets comprising
Sea-Land'sSea-Land’s international liner business to A. P. Moller-Maersk Line (Maersk). Maersk acquired vessels, containers, certain terminal facilities and various other assets and related liabilities of the international liner business. The agreement with Maersk provides for a post-closing working capital adjustment to the sales price based on the change in working capital, as defined in the agreement, between June 25, 1999, and December 10, 1999. The Company has recorded a receivable of approximately $70 million in connection with the post-closing working capital adjustment and this amount is currently in dispute. This matter, together with other issues relating to the contractual obligations of the Company, has been submitted to arbitration.
-13-
CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 10. COMMITMENTS AND CONTINGENCIES, Continued
In addition to the disputes relating to the sale of the international container shipping assets, CSX has received a claim amounting to approximately $180 million plus interest from Europe Container Terminals bv (ECT), owner of the Rotterdam Container Terminal previously operated by Sea-Land prior to its sale to Maersk. ECT has claimed that the sale of the international liner business to Maersk resulted in a breach of the Sea-Land terminal agreements. ECT has refused to accept containers at the former Sea-Land facility tendered by Maersk Sea-Land and is seeking compensation from CSX related to the alleged breach. CSX has also advised Maersk that CSX will hold themit responsible for any damages that may result from this dispute. A finalAn initial arbitration hearing has been held to establish whether CSX is liable on ECT’s claim, and a ruling on ECT's claim, which
has advanced to formal binding arbitrationthat issue is expected in Rotterdam, is not expected before
late summerDecember 2002, after the filing of 2002.post-hearing briefs. Management believes that valid defenses to this claim exist. If the arbitration panel determines that there is liability, then a separate hearing will be set to fix the amount of any damages.
Although management believes it will prevail in some or all of the Maersk and ECT disputes and arbitrations, it can give no assurance in this regard. An adverse outcome could have a material effect on the determination of the final loss on sale of Sea-Land'sSea-Land’s International Liner business and the financial results in future reporting periods.
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 10. COMMITMENTS AND CONTINGENCIES—(Continued)
New Orleans Tank Car Fire
In 2001 CSXT reached a settlement of the New Orleans Tank Car Fire In September 1997 a state court jury in New Orleans, Louisiana returned a
$2.5 billion punitive damages award against CSXT. The awardlitigation, which was made in a
class-action lawsuit against a group of nine companies based on personal
injuries alleged to have arisen from a 1987 tank car fire. In October 1997 the
Louisiana Supreme Court set aside the punitive damages judgment, ruling the
judgment should not have been entered until all liability issues were resolved.
Six of the nine defendants settled with the plaintiffs' representatives in 1999.
On November 5, 1999, the trial court granted CSXT's motion for judgment
notwithstanding the verdict, and effectively reduced the amount of the punitive
damages verdict from $2.5 billion to $850 million.
A judgment reflecting the $850 million punitive award has been entered
against CSXT. In June 2001 the Louisiana Court of Appeal for the Fourth Circuit
affirmed the judgment of the trial court, which reduced the punitive damages
verdict from $2.5 billion to $850 million. CSXT then filed with the Louisiana
Supreme Court an application that the court take jurisdiction over and reverse
the 1997 punitive damages award.
In November 2001 CSXT announced that it had reached a proposed settlement
of the litigation, subject to a fairness hearing and court approval. The amount to be paid by CSXT under the settlement is $220 million, to resolve all claims
arising out of the 1987 fire and evacuation (whether or not included in the
present class-action lawsuit). CSXT incurred a charge of $60$85 million before tax,
$37 million after tax, 17 cents per share in the fourth quarter of 2001 to
account for the expense of the settlement, net of insurance recoveries. InThe fairness hearing occurred in April 2002, and the trial court held a fairness hearing respectingCourt approved the
proposed CSXT settlement. The same day,time has run for appeals. The Company is fully accrued for this settlement, which is subject to plaintiffs’ attorney’s reaching agreement with the trial court issued an ordergroup of plaintiffs. The Company expects that among other things, (1) gave final approvalagreement to be obtained and the settlement; (2) provided that
anysettlement is expected to be paid in 2002.
Contract Settlement
In July the Company received $44 million as the first of two payments to settle a contract dispute. The second payment of $23 million is due in January 2003. The accounting for the settlement is under review, and
all liabilitythe Company believes some portion will be recognized in the third quarter of
CSXT pursuant to any2002, but will be primarily recognized ratably over the remaining 18 year life of the
judgments previously
entered in the litigation was satisfied; and (3) determined that upon the "final
settlement date" as defined in the preliminary settlement agreement between CSXT
and the plaintiffs' representatives, the case will be finally dismissed against
CSXT. The "final settlement date" is defined as the date by which the April 2002
order becomes final and non-appealable (calculated as June 10, 2002, if no
appeals from the order are taken) or all appeals from the order are finally
resolved, and the date by which certain other events must occur as provided in
the preliminary settlement agreement.
-14-
contract. CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 10. COMMITMENTS AND CONTINGENCIES, Continued
CONTINGENCIES—(Continued)
Other Legal Proceedings
A number of other legal actions are pending against CSX and certain subsidiaries in which claims are made in substantial amounts. While the ultimate results of these legal actions cannot be predicted with certainty, management does not currently expect that the resolution of these matters will have a material adverse effect on CSX'sCSX’s consolidated financial position, results of operations or cash flows. The Company is also party to a number of actions, the resolution of which could result in gain realization in amounts that could be material to results of operations in the quarter received.
NOTE 11. BUSINESS SEGMENTS
The Company operates in four business segments: Rail, Intermodal, Domestic Container Shipping, and International Terminals. The Rail segment provides rail freight transportation over a network of more than 23,000 route miles in 23 states, the District of Columbia and two Canadian provinces. The Intermodal segment provides transcontinental intermodal transportation services and operates a network of dedicated intermodal facilities across North America. The Domestic Container Shipping segment consists of a fleet of 1617 ocean vessels and 22,000 containers serving the trade between ports on the United States mainland and Alaska, Guam, Hawaii and Puerto Rico. The International Terminals segment operates container freight terminal facilities in Hong Kong, China, Australia, Europe, Russia and Latin America. The Company'sCompany’s segments are strategic business units that offer different services and are managed separately based on the differences in these services. Because of their close interrelationship, the Rail and Intermodal segments are viewed on a combined basis as Surface Transportation operations and the Domestic Container Shipping and International Terminals segments are viewed on a combined basis as Marine Services operations.
The Company evaluates performance and allocates resources based on several factors, of which the primary financial measure is business segment operating
income, defined as income from operations, excluding the effects of
non-recurring charges and gains.income. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (Note 1)
, in the CSX Annual Report on Form 10-K, except that for segment reporting purposes, CSX includes minority interest expense on the International Terminals
segment'ssegment’s joint venture businesses in operating expense. These amounts are reclassified in
CSX'sCSX’s consolidated financial statements to other expense. Intersegment sales and transfers are generally accounted for as if the sales or transfers were to third parties, that is, at current market prices.
Business segment information for the quarters ended March 29, 2002 and
March 30, 2001 is as follows: Quarter ended March 29, 2002:
-----------------------------
Marine Services
-----------------------------------
Surface Transportation Domestic
--------------------------------- Container International
Rail Intermodal Total Shipping Terminals Total Total
------------------------------------------------------------------------------------
Revenues from external customers $ 1,486 $257 $ 1,743 $161 $ 60 $ 221 $ 1,964
Intersegment revenues - 5 5 - 1 1 6
Segment operating income 177 17 194 1 11 12 206
Assets 12,734 437 13,171 482 895 1,377 14,548
-15-
CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 11. BUSINESS SEGMENTS, Continued
SEGMENTS—(Continued)
Business segment information for the quarters ended June 28, 2002 and June 29, 2001 is as follows:
Quarter ended March 30,June 28, 2002:
| | | Surface Transportation
| | Marine Services
| | |
| | | Rail
| | Intermodal*
| | Total
| | Domestic Container Shipping
| | International Terminals
| | Total
| | Totals
|
| Revenues from external customers | | $ | 1,538 | | $ | 288 | | $ | 1,826 | | $ | 189 | | $ | 58 | | $ | 247 | | $ | 2,073 |
| Intersegment revenues | | | — | | | 8 | | | 8 | | | — | | | — | | | — | | | 8 |
| Segment operating income | | | 244 | | | 49 | | | 293 | | | 9 | | | 16 | | | 25 | | | 318 |
| Assets | | | 12,711 | | | 496 | | | 13,207 | | | 477 | | | 929 | | | 1,406 | | | 14,613 |
Quarter ended June 29, 2001:
- ----------------------------
| | | Surface Transportation
| | Marine Services
| | |
| | | Rail
| | Intermodal
| | Total
| | Domestic Container Shipping
| | International Terminals
| | Total
| | Totals
|
| Revenues from external customers | | $ | 1,556 | | $ | 266 | | $ | 1,822 | | $ | 168 | | $ | 60 | | $ | 228 | | $ | 2,050 |
| Intersegment revenues | | | — | | | 5 | | | 5 | | | — | | | 1 | | | 1 | | | 6 |
| Segment operating income | | | 219 | | | 23 | | | 242 | | | 7 | | | 18 | | | 25 | | | 267 |
| Assets | | | 12,904 | | | 413 | | | 13,317 | | | 393 | | | 834 | | | 1,227 | | | 14,544 |
Six Months ended June 28, 2002:
| | | Surface Transportation
| | Marine Services
| | |
| | | Rail
| | Intermodal*
| | Total
| | Domestic Container Shipping
| | International Terminals
| | Total
| | Totals
|
| Revenues from external customers | | $ | 3,024 | | $ | 545 | | $ | 3,569 | | $ | 350 | | $ | 115 | | $ | 465 | | $ | 4,034 |
| Intersegment revenues | | | — | | | 13 | | | 13 | | | — | | | 1 | | | 1 | | | 14 |
| Segment operating income | | | 421 | | | 66 | | | 487 | | | 10 | | | 27 | | | 37 | | | 524 |
| Assets | | | 12,711 | | | 496 | | | 13,207 | | | 477 | | | 929 | | | 1,406 | | | 14,613 |
Six Months ended June 29, 2001:
| | | Surface Transportation
| | Marine Services
| | |
| | | Rail
| | Intermodal
| | Total
| | Domestic Container Shipping
| | International Terminals
| | Total
| | Totals
|
| Revenues from external customers | | $ | 3,088 | | $ | 531 | | $ | 3,619 | | $ | 329 | | $ | 118 | | $ | 447 | | $ | 4,066 |
| Intersegment revenues | | | — | | | 10 | | | 10 | | | — | | | 2 | | | 2 | | | 12 |
| Segment operating income | | | 385 | | | 39 | | | 424 | | | 4 | | | 30 | | | 34 | | | 458 |
| Assets | | | 12,904 | | | 413 | | | 13,317 | | | 393 | | | 834 | | | 1,227 | | | 14,544 |
Marine Services
--------------------------------
Surface Transportation Domestic
---------------------------------
Container International
Rail | * | | Intermodal Total Shipping Terminals Total Total
---------------------------------------------------------------------------------
Revenues from external customers $ 1,532 $265 $ 1,797 $161 $ 67 $ 228 $ 2,025
Intersegment revenues - 5 5 - 1 1 6
Segment operating income 166 16 182 (3) 12 9 191
Assets 12,911 418 13,329 299 795 1,094 14,423
for the quarter and six months ended June 28, 2002 includes a $15 million non-recurring gain on a contract settlement. |
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 11. BUSINESS SEGMENTS—(Continued)
A reconciliation of the totals reported for the business segments to the applicable line items in the consolidated financial statements is as follows:
March 29, March 30,
2002 2001
----------- -----------
Revenues:
- --------
Total external revenues for business segments $ 1,964 $ 2,025
Intersegment revenues for business segments 6 6
Elimination of intersegment revenues (6) (6)
----------- -----------
Total consolidated revenues $ 1,964 $ 2,025
=========== ===========
Operating Income:
- ----------------
Total operating income for business segments $ 206 $ 191
Reclassification of minority interest expense for
International Terminals segment 8 8
Unallocated corporate expenses (2) (10)
----------- -----------
Total consolidated operating income $ 212 $ 189
=========== ===========
Assets:
- ------
Assets for Business Segments $ 14,548 $ 14,423
Investment in Conrail 4,656 4,673
Elimination of intercompany receivables (231) 180
Non-segment assets 1,869 1,162
----------- -----------
Total consolidated assets $ 20,842 $ 20,438
=========== ===========
-16-
| | | Quarters Ended
| | | Six Months Ended
| |
| | | June 28, 2002
| | | June 29, 2001
| | | June 28, 2002
| | | June 29, 2001
| |
| Revenues: | | | | | | | | | | | | | | | | |
| Total external revenues for business segments | | $ | 2,073 | | | $ | 2,050 | | | $ | 4,034 | | | $ | 4,066 | |
| Intersegment revenues for business segments | | | 8 | | | | 6 | | | | 14 | | | | 12 | |
| Elimination of intersegment revenues | | | (8 | ) | | | (6 | ) | | | (14 | ) | | | (12 | ) |
| Other | | | — | | | | 7 | | | | 3 | | | | 16 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Total consolidated revenues | | $ | 2,073 | | | $ | 2,057 | | | $ | 4,037 | | | $ | 4,082 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Operating Income: | | | | | | | | | | | | | | | | |
| Total operating income for business segments | | $ | 318 | | | $ | 267 | | | $ | 524 | | | $ | 458 | |
| Reclassification of minority interest expense for International Terminals segment | | | 10 | | | | 10 | | | | 18 | | | | 18 | |
| Other unallocated expenses | | | (7 | ) | | | (12 | ) | | | (9 | ) | | | (22 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Total consolidated operating income | | $ | 321 | | | $ | 265 | | | $ | 533 | | | $ | 454 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| | | June 28, 2002
| | | June 29, 2001
| |
| Assets: | | | | | | | | |
| Assets for business segments | | $ | 14,613 | | | $ | 14,544 | |
| Investment in Conrail | | | 4,663 | | | | 4,677 | |
| Elimination of intercompany receivables | | | (225 | ) | | | (193 | ) |
| Non-segment assets | | | 1,869 | | | | 1,481 | |
| | |
|
|
| |
|
|
|
| Total consolidated assets | | $ | 20,920 | | | $ | 20,509 | |
| | |
|
|
| |
|
|
|
CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
(All Tables in Millions of Dollars, exceptExcept Per Share Amounts)
NOTE 12. SUMMARIZED CONSOLIDATING FINANCIAL DATA- DATA—CSX LINES
During 1987, CSX Lines entered into agreements to sell and lease back by charter three new
U.S. -built, U.S. -flag,U.S.-built, U.S.-flag, D-7 class container ships. CSX has guaranteed the obligations of CSX Lines pursuant to the related charters which, along with the container ships, serve as collateral for debt securities registered with the Securities and Exchange Commission
("SEC"(“SEC”). The
MarchJune 28, 2002, June 29,
2002, March 30, 2001, and December 28, 2001 consolidating schedules reflect CSX Lines as the obligor. In accordance with SEC disclosure requirements, consolidating financial information for the parent and guarantors are as follows (amounts in millions):
Consolidating Statements of Financial Position
March 29, 2002
CSX Corporate CSX Lines Other Eliminations Consolidated
--------------- --------- --------- ------------ ------------
ASSETS
Current Assets
Cash, Cash Equivalents and Short-term Investments $ 578 $ 39 $ 164 $ -- $ 781
Accounts Receivable - Net 53 40 970 (254) 809
Materials and Supplies -- 15 208 -- 223
Deferred Income Taxes -- -- 131 -- 131
Other Current Assets 4 33 330 (135) 232
--------- ------- --------- -------- --------
Total Current Assets 635 127 1,803 (389) 2,176
Properties 29 405 17,827 -- 18,261
Accumulated Depreciation (27) (269) (4,986) -- (5,282)
--------- ------- --------- -------- --------
Properties, net 2 136 12,841 -- 12,979
Investment in Conrail 350 -- 4,306 -- 4,656
Affiliates and Other Companies 2 84 334 (32) 388
Investment in Consolidated Subsidiaries 12,625 -- 396 (13,021) --
Other Long-term assets 834 135 239 (565) 643
--------- ------- --------- -------- --------
Total Assets $ 14,448 $ 482 $ 19,919 $(14,007) $ 20,842
========= ======= ========= ======== ========
LIABILITIES
Current Liabilities
Accounts Payable $ 117 $ 64 $ 918 $ (187) $ 912
Labor and Fringe Benefits Payable 21 13 362 -- 396
Payable to Affiliates -- -- 135 (135) --
Casualty, Environmental and Other Reserves 1 3 243 -- 247
Current Maturities of Long-term Debt 750 21 181 -- 952
Short-term Debt -- -- -- -- --
Income and Other Taxes Payable 1,337 27 (1,248) -- 116
Other Current Liabilities 36 18 251 (67) 238
--------- ------- --------- -------- --------
Total Current Liabilities 2,262 146 842 (389) 2,861
Casualty, Environmental and Other reserves 3 4 671 -- 678
Long-term Debt 5,254 132 975 -- 6,361
Deferred Income Taxes -- 70 3,505 -- 3,575
Long-term Payable to Affiliates 396 -- 170 (566) --
Other Long-term Liabilities 358 48 847 (30) 1,223
--------- ------- --------- -------- --------
Total Liabilities 8,273 400 7,010 (985) 14,698
--------- ------- --------- -------- --------
SHAREHOLDER'S EQUITY
Preferred Stock -- -- 396 (396) --
Common Stock 214 -- 209 (209) 214
Other Capital 1,511 69 8,231 (8,300) 1,511
Retained Earnings 4,463 13 4,104 (4,117) 4,463
Accumulated Other Comprehensive Loss (13) -- (31) -- (44)
--------- ------- --------- -------- --------
Total Shareholders' Equity 6,175 82 12,909 (13,022) 6,144
--------- ------- --------- -------- --------
Total Liabilities and Shareholders' Equity $ 14,448 $ 482 $ 19,919 $(14,007) $ 20,842
========= ======= ========= ======== ========
-17-
| | | Consolidating Statement of Earnings Quarter ended June 28, 2002
|
| | | CSX Corporate
| | | CSX Lines
| | Other
| | Eliminations
| | | Consolidated
|
| Operating Revenue | | $ | — | | | $ | 189 | | $ | 1,995 | | $ | (111 | ) | | $ | 2,073 |
| Operating Expense | | | (69 | ) | | | 180 | | | 1,749 | | | (108 | ) | | | 1,752 |
| | |
|
|
| |
|
| |
|
| |
|
|
| |
|
|
| Operating Income (Loss) | | | 69 | | | | 9 | | | 246 | | | (3 | ) | | | 321 |
| Other Income (Expense) | | | 169 | | | | 2 | | | 16 | | | (183 | ) | | | 4 |
| Interest Expense | | | 103 | | | | 3 | | | 23 | | | (13 | ) | | | 116 |
| | |
|
|
| |
|
| |
|
| |
|
|
| |
|
|
| Earnings (Loss) before Income Taxes | | | 135 | | | | 8 | | | 239 | | | (173 | ) | | | 209 |
| Income Tax Expense (Benefit) | | | (11 | ) | | | 3 | | | 82 | | | — | | | | 74 |
| | |
|
|
| |
|
| |
|
| |
|
|
| |
|
|
| Net Earnings (Loss) | | $ | 146 | | | $ | 5 | | $ | 157 | | $ | (173 | ) | | $ | 135 |
| | |
|
|
| |
|
| |
|
| |
|
|
| |
|
|
| | | Consolidating Statement of Earnings Quarter ended June 29, 2001
|
| | | CSX Corporate
| | | CSX Lines
| | Other
| | Eliminations
| | | Consolidated
|
| Operating Revenue | | $ | — | | | $ | 168 | | $ | 1,997 | | $ | (108 | ) | | $ | 2,057 |
| Operating Expense | | | (45 | ) | | | 161 | | | 1,782 | | | (106 | ) | | | 1,792 |
| | |
|
|
| |
|
| |
|
| |
|
|
| |
|
|
| Operating Income (Loss) | | | 45 | | | | 7 | | | 215 | | | (2 | ) | | | 265 |
| Other Income (Expense) | | | 160 | | | | 2 | | | 39 | | | (164 | ) | | | 37 |
| Interest Expense | | | 110 | | | | 2 | | | 27 | | | (4 | ) | | | 135 |
| | |
|
|
| |
|
| |
|
| |
|
|
| |
|
|
| Earnings (Loss) before Income Taxes | | | 95 | | | | 7 | | | 227 | | | (162 | ) | | | 167 |
| Income Tax Expense (Benefit) | | | (22 | ) | | | 3 | | | 78 | | | — | | | | 59 |
| | |
|
|
| |
|
| |
|
| |
|
|
| |
|
|
| Net Earnings (Loss) | | $ | 117 | | | $ | 4 | | $ | 149 | | $ | (162 | ) | | $ | 108 |
| | |
|
|
| |
|
| |
|
| |
|
|
| |
|
|
CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
(All Tables in Millions of Dollars, Except Per Share Amounts
Amounts)
NOTE 12. SUMMARIZED CONSOLIDATING FINANCIAL DATA - DATA—CSX LINES, Continued
Consolidating Statement of Financial Position
December 28, 2001
CSX Corporate CSX Lines Other Eliminations Consolidated
--------------- ----------- ------- -------------- ---------------
ASSETS
Current Assets
Cash, Cash Equivalents and Short-term Investments $ 225 $ 55 $ 339 $ (1) $ 618
Accounts Receivable - Net 58 8 1,036 (224) 878
Materials and Supplies - 14 192 - 206
Deferred Income Taxes - - 162 - 162
Other Current Assets 4 36 295 (125) 210
-------- -------- -------- -------- --------
Total Current Assets 287 113 2,024 (350) 2,074
Properties 29 453 17,669 - 18,151
Accumulated Depreciation (27) (286) (4,866) - (5,179)
-------- -------- -------- -------- --------
Properties, net 2 167 12,803 - 12,972
Investment in Conrail 353 - 4,302 - 4,655
Affiliates and Other Companies 2 85 326 (31) 382
Investment in Consolidated Subsidiaries 12,641 - 396 (13,037) -
Other Long-term assets 825 137 344 (588) 718
-------- -------- -------- -------- --------
Total Assets $ 14,110 $ 502 $ 20,195 $(14,006) $ 20,801
======== ======== ======== ======== ========
LIABILITIES
Current Liabilities
Accounts Payable $ 86 $ 81 $ 965 $ (166) $ 966
Labor and Fringe Benefits Payable 17 13 388 - 418
Payable to Affilitates - 2 123 (125) -
Casuality, Environmental and Other Reserves 1 3 246 - 250
Current Maturities of Long-term Debt 850 21 173 - 1,044
Short-term Debt 225 - - - 225
Income and Other Taxes Payable 1,296 25 (1,220) - 101
Other Current Liabilities 38 20 300 (59) 299
-------- -------- -------- -------- --------
Total Current Liabilities 2,513 165 975 (350) 3,303
Casuality, Environmental and Other Reserves 4 4 682 - 690
Long-term Debt 4,680 132 1,027 - 5,839
Deferred Income Taxes - 83 3,538 - 3,621
Long-term Payable to Affiliates 396 - 192 (588) -
Other Long-term Liabilities 365 48 845 (30) 1,228
-------- -------- -------- -------- --------
Total Liabilities 7,958 432 7,259 (968) 14,681
-------- -------- -------- -------- --------
SHAREHOLDER'S EQUITY
Preferred Stock - - 396 (396) -
Common Stock 214 - 209 (209) 214
Other Capital 1,492 57 8,243 (8,300) 1,492
Retained Earnings 4,459 13 4,120 (4,133) 4,459
Accumulated Other Comprehensive Loss (13) - (32) - (45)
-------- -------- -------- -------- --------
Total Shareholder's Equity 6,152 70 12,936 (13,038) 6,120
-------- -------- -------- -------- --------
Total Liabilities and Shareholder's Equity $ 14,110 $ 502 $ 20,195 $(14,006) $ 20,801
======== ======== ======== ======== ========
-18-
LINES—(Continued) | | | Consolidating Statement of Earnings Six Months Ended June 28, 2002
| |
| | | CSX Corporate
| | | CSX Lines
| | Other
| | | Eliminations
| | | Consolidated
| |
| Operating Revenue | | $ | — | | | $ | 350 | | $ | 3,911 | | | $ | (224 | ) | | $ | 4,037 | |
| Operating Expense | | | (136 | ) | | | 340 | | | 3,519 | | | | (219 | ) | | | 3,504 | |
| | |
|
|
| |
|
| |
|
|
| |
|
|
| |
|
|
|
| Operating Income (Loss) | | | 136 | | | | 10 | | | 392 | | | | (5 | ) | | | 533 | |
| Other Income (Expense) | | | 217 | | | | 4 | | | 40 | | | | (248 | ) | | | 13 | |
| Interest Expense | | | 203 | | | | 5 | | | 50 | | | | (28 | ) | | | 230 | |
| | |
|
|
| |
|
| |
|
|
| |
|
|
| |
|
|
|
| Earnings (Loss) before Income Taxes and Cumulative Effect of Accounting Change | | | 150 | | | | 9 | | | 382 | | | | (225 | ) | | | 316 | |
| Income Tax Expense (Benefit) | | | (21 | ) | | | 3 | | | 131 | | | | — | | | | 113 | |
| | |
|
|
| |
|
| |
|
|
| |
|
|
| |
|
|
|
| Earnings (Loss) before Cumulative Effect of Accounting Change | | | 171 | | | | 6 | | | 251 | | | | (225 | ) | | | 203 | |
| Cumulative Effect of Accounting Change | | | — | | | | — | | | (43 | ) | | | — | | | | (43 | ) |
| | |
|
|
| |
|
| |
|
|
| |
|
|
| |
|
|
|
| Net Earnings (Loss) | | $ | 171 | | | $ | 6 | | $ | 208 | | | $ | (225 | ) | | $ | 160 | |
| | |
|
|
| |
|
| |
|
|
| |
|
|
| |
|
|
|
| | | Consolidating Statement of Earnings Six Months Ended June 29, 2001
|
| | | CSX Corporate
| | | CSX Lines
| | Other
| | Eliminations
| | | Consolidated
|
| Operating Revenue | | $ | — | | | $ | 329 | | $ | 3,971 | | $ | (218 | ) | | $ | 4,082 |
| Operating Expense | | | (91 | ) | | | 325 | | | 3,609 | | | (215 | ) | | | 3,628 |
| | |
|
|
| |
|
| |
|
| |
|
|
| |
|
|
| Operating Income (Loss) | | | 91 | | | | 4 | | | 362 | | | (3 | ) | | | 454 |
| Other Income (Expense) | | | 238 | | | | 4 | | | 51 | | | (285 | ) | | | 8 |
| Interest Expense | | | 244 | | | | 6 | | | 65 | | | (47 | ) | | | 268 |
| | |
|
|
| |
|
| |
|
| |
|
|
| |
|
|
| Earnings (Loss) before Income Taxes | | | 85 | | | | 2 | | | 348 | | | (241 | ) | | | 194 |
| Income Tax Expense (Benefit) | | | (50 | ) | | | 1 | | | 115 | | | — | | | | 66 |
| | |
|
|
| |
|
| |
|
| |
|
|
| |
|
|
| Net Earnings (Loss) | | $ | 135 | | | $ | 1 | | $ | 233 | | $ | (241 | ) | | $ | 128 |
| | |
|
|
| |
|
| |
|
| |
|
|
| |
|
|
CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 12. SUMMARIZED CONSOLIDATING FINANCIAL DATA - DATA—CSX LINES, Continued
Consolidating Statement of Earnings
Quarter ended March 29, 2002
CSX
Corporate CSX Lines Other Eliminations Consolidated
--------- --------- ----- ------------ ------------
Operating Revenue $ - $ 161 $ 1,916 $ (113) $ 1,964
Operating Expense (67) 160 1,769 (110) 1,752
--------- --------- ------- ------------ ------------
Operating Income (Loss) 67 1 147 (3) 212
Other Income (Expense) 48 2 24 (65) 9
Interest Expense 100 2 27 (15) 114
--------- --------- ------- ------------ ------------
Earnings before Income Taxes and Cumulative Effect of Accounting Change 15 1 144 (53) 107
Income Tax Expense (Benefit) (1) 1 39 - 39
--------- --------- ------- ------------ ------------
Earnings Before Cumulative Effect of Accounting Change 16 - 105 (53) 68
Cumulative Effect of Accounting Change - - (43) - (43)
--------- --------- ------- ------------ ------------
--------- --------- ------- ------------ ------------
Net Earnings $ 16 $ - $ 62 $ (53) $ 25
========= ========= ======= ============ ============
Consolidating Statement of Earnings
Quarter ended March 31, 2001
CSX
Corporate CSX Lines Other Eliminations Consolidated
--------- --------- ----- ------------ ------------
Operating Revenue $ - $ 161 $ 1,974 $ (110) $ 2,025
Operating Expense (46) 164 1,827 (109) 1,836
--------- --------- ------- ------------ ------------
Operating Income (Loss) 46 (3) 147 (1) 189
Other Income (Expense) 78 2 12 (121) (29)
Interest Expense 134 4 38 (43) 133
--------- --------- ------- ------------ ------------
Earnings before Income Taxes (10) (5) 121 (79) 27
Income Tax Expense (Benefit) (1) (2) 10 - 7
--------- --------- ------- ------------ ------------
Net Earnings (Loss) $ (9) $ (3) $ 111 $ (79) $ 20
========= ========= ======= ============ ============
-19-
LINES—(Continued) | | | Consolidating Statement of Cash Flows Six Months Ended June 28, 2002
| |
| | | CSX Corporate
| | | CSX Lines
| | | Other
| | | Eliminations
| | | Consolidated
| |
| Operating Activities: | | | | | | | | | | | | | | | | | | | | |
| Net Cash Provided (Used) by Operating Activities | | $ | 117 | | | $ | (45 | ) | | $ | 559 | | | $ | (120 | ) | | $ | 511 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Investing Activities: | | | | | | | | | | | | | | | | | | | | |
| Property Additions | | | (4 | ) | | | (13 | ) | | | (414 | ) | | | — | | | | (431 | ) |
| Short-term Investments-net | | | (138 | ) | | | (1 | ) | | | 137 | | | | — | | | | (2 | ) |
| Other Investing Activities | | | — | | | | 25 | | | | (9 | ) | | | (12 | ) | | | 4 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Net Cash Used by Investing Activities | | | (142 | ) | | | 11 | | | | (286 | ) | | | (12 | ) | | | (429 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
|
| Financing Activities: | | | | | | | | | | | | | | | | | | | | |
| Short-term Debt-Net | | | 575 | | | | — | | | | 1 | | | | — | | | | 576 | |
| Long-term Debt Issued | | | 473 | | | | — | | | | 1 | | | | — | | | | 474 | |
| Long-term Debt Repaid | | | (850 | ) | | | — | | | | (141 | ) | | | — | | | | (991 | ) |
| Dividends Paid | | | (43 | ) | | | — | | | | (105 | ) | | | 105 | | | | (43 | ) |
| Other Financing Activities | | | 29 | | | | — | | | | (41 | ) | | | 28 | | | | 16 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Net Cash Provided (Used) by Financing Activities | | | 184 | | | | — | | | | (285 | ) | | | 133 | | | | 32 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Net Increase (Decrease) in Cash and Cash Equivalents | | | 159 | | | | (34 | ) | | | (12 | ) | | | 1 | | | | 114 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Cash and Cash Equivalents at Beginning of Period | | | 156 | | | | 52 | | | | (71 | ) | | | — | | | | 137 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Cash and Cash Equivalents at End of Period | | $ | 315 | | | $ | 18 | | | $ | (83 | ) | | $ | 1 | | | $ | 251 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 12. SUMMARIZED CONSOLIDATING FINANCIAL DATA - DATA—CSX LINES, Continued
Consolidating Statement of Cash Flows
Three Months Ended March 29, 2002
CSX CSX
Corporate Lines Other Eliminations Consolidated
--------- ----- ----- ------------ ------------
Operating Activities
Net Cash Provided (Used) by Operating Activities $ 103 $ (9) $ 127 $ (61) $ 160
--------- ----- ------- ------------ ------------
Investing Activities
Property Additions - (6) (156) - (162)
Short-term Investments-net (288) (3) 133 - (158)
Other Investing Activities 3 (1) (1) (12) (11)
--------- ----- ------- ------------ ------------
Net Cash Used by Investing Activities (285) (10) (24) (12) (331)
--------- ----- ------- ------------ ------------
Financing Activities
Short-term Debt-Net - - - - -
Long-term Debt Issued 450 - - - 450
Long-term Debt Repaid (200) - (67) - (267)
Cash Dividends Paid (22) - (52) 53 (21)
Other Financing Activities 20 - (28) 20 12
--------- ----- ------- ------------ ------------
Net Cash Provided (Used) by Financing Activities 248 - (147) 73 174
Net Increase (Decrease) in Cash and Cash Equivalents 66 (19) (44) - 3
Cash and Cash Equivalents at Beginning of Period 156 52 (71) - 137
--------- ----- ------- ------------ ------------
Cash and Cash Equivalents at End of Period $ 222 $ 33 $ (115) $ - $ 140
========= ===== ======= ============ ============
-20-
LINES—(Continued) | | | Consolidating Statement of Cash Flows Six Months Ended June 29, 2001
| |
| | | CSX Corporate
| | | CSX Lines
| | | Other
| | | Eliminations
| | | Consolidated
| |
| Operating Activities: | | | | | | | | | | | | | | | | | | | | |
| Net Cash Provided (Used) by Operating Activities | | $ | (57 | ) | | $ | 18 | | | $ | 433 | | | $ | (129 | ) | | $ | 265 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Investing Activities: | | | | | | | | | | | | | | | | | | | | |
| Property Additions | | | — | | | | (2 | ) | | | (418 | ) | | | — | | | | (420 | ) |
| Short-term Investments-net | | | 11 | | | | — | | | | — | | | | — | | | | 11 | |
| Other Investing Activities | | | (884 | ) | | | 1 | | | | 1,327 | | | | (452 | ) | | | (8 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Net Cash Provided (Used) by Investing Activities | | | (873 | ) | | | (1 | ) | | | 909 | | | | (452 | ) | | | (417 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Financing Activities: | | | | | | | | | | | | | | | | | | | | |
| Short-term Debt-Net | | | (228 | ) | | | — | | | | — | | | | — | | | | (228 | ) |
| Long-term Debt Issued | | | 500 | | | | — | | | | — | | | | — | | | | 500 | |
| Long-term Debt Repaid | | | — | | | | — | | | | (118 | ) | | | — | | | | (118 | ) |
| Dividends Paid | | | (130 | ) | | | — | | | | (111 | ) | | | 113 | | | | (128 | ) |
| Other Financing Activities | | | 679 | | | | 76 | | | | (1,214 | ) | | | 467 | | | | 8 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Net Cash Provided (Used) by Financing Activities | | | 821 | | | | 76 | | | | (1,443 | ) | | | 580 | | | | 34 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Net Increase (Decrease) in Cash and Cash Equivalents | | | (109 | ) | | | 93 | | | | (101 | ) | | | (1 | ) | | | (118 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Cash and Cash Equivalents at Beginning of Period | | | (134 | ) | | | (94 | ) | | | 488 | | | | — | | | | 260 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Cash and Cash Equivalents at End of Period | | $ | (243 | ) | | $ | (1 | ) | | $ | 387 | | | $ | (1 | ) | | $ | 142 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
(All Tables in Millions of Dollars, Except Per Share Amounts
Amounts)
NOTE 12. SUMMARIZED CONSOLIDATING FINANCIAL DATA - DATA—CSX LINES, Continued
LINES—(Continued)
| | | Consolidating Statement of Financial Position June 28, 2002
| |
| | | CSX Corporate
| | | CSX Lines
| | | Other
| | | Eliminations
| | | Consolidated
| |
ASSETS | | | | | | | | | | | | | | | | | | | | |
| Current Assets | | | | | | | | | | | | | | | | | | | | |
| Cash, Cash Equivalents and Short-term Investments | | $ | 522 | | | $ | 21 | | | $ | 188 | | | $ | — | | | $ | 731 | |
| Accounts Receivable, Net | | | 52 | | | | 48 | | | | 971 | | | | (243 | ) | | | 828 | |
| Materials and Supplies | | | — | | | | 18 | | | | 202 | | | | — | | | | 220 | |
| Deferred Income Taxes | | | — | | | | — | | | | 122 | | | | — | | | | 122 | |
| Other Current Assets | | | 5 | | | | 34 | | | | 286 | | | | (135 | ) | | | 190 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Total Current Assets | | | 579 | | | | 121 | | | | 1,769 | | | | (378 | ) | | | 2,091 | |
| Properties | | | 33 | | | | 387 | | | | 17,996 | | | | — | | | | 18,416 | |
| Accumulated Depreciation | | | (28 | ) | | | (260 | ) | | | (5,060 | ) | | | — | | | | (5,348 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Properties, Net | | | 5 | | | | 127 | | | | 12,936 | | | | — | | | | 13,068 | |
| Investment in Conrail | | | 348 | | | | — | | | | 4,315 | | | | — | | | | 4,663 | |
| Affiliates and Other Companies | | | 2 | | | | 84 | | | | 357 | | | | (33 | ) | | | 410 | |
| Investment in Consolidated Subsidiaries | | | 12,729 | | | | — | | | | 396 | | | | (13,125 | ) | | | — | |
| Other Long-term Assets | | | 911 | | | | 145 | | | | 199 | | | | (567 | ) | | | 688 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Total Assets | | $ | 14,574 | | | $ | 477 | | | $ | 19,972 | | | $ | (14,103 | ) | | $ | 20,920 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
LIABILITIES | | | | | | | | | | | | | | | | | | | | |
| Current Liabilities | | | | | | | | | | | | | | | | | | | | |
| Accounts Payable | | $ | 79 | | | $ | 83 | | | $ | 925 | | | $ | (169 | ) | | $ | 918 | |
| Labor and Fringe Benefits Payable | | | 27 | | | | 16 | | | | 370 | | | | — | | | | 413 | |
| Payable to Affilitates | | | — | | | | — | | | | 135 | | | | (135 | ) | | | — | |
| Casuality, Environmental and Other Reserves | | | 1 | | | | 3 | | | | 241 | | | | — | | | | 245 | |
| Current Maturities of Long-term Debt | | | 100 | | | | 21 | | | | 205 | | | | — | | | | 326 | |
| Short-term Debt | | | 575 | | | | — | | | | 3 | | | | — | | | | 578 | |
| Income and Other Taxes Payable | | | 1,360 | | | | (7 | ) | | | (1,182 | ) | | | — | | | | 171 | |
| Other Current Liabilities | | | 37 | | | | 25 | | | | 256 | | | | (75 | ) | | | 243 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Total Current Liabilities | | | 2,179 | | | | 141 | | | | 953 | | | | (379 | ) | | | 2,894 | |
| Casuality, Environmental and Other Reserves | | | 3 | | | | 3 | | | | 651 | | | | — | | | | 657 | |
| Long-term Debt | | | 5,318 | | | | 132 | | | | 888 | | | | — | | | | 6,338 | |
| Deferred Income Taxes | | | — | | | | 66 | | | | 3,532 | | | | — | | | | 3,598 | |
| Long-term Payable to Affiliates | | | 396 | | | | — | | | | 170 | | | | (566 | ) | | | — | |
| Other Long-term Liabilities | | | 379 | | | | 46 | | | | 771 | | | | (31 | ) | | | 1,165 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Total Liabilities | | | 8,275 | | | | 388 | | | | 6,965 | | | | (976 | ) | | | 14,652 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| SHAREHOLDER’S EQUITY | | | | | | | | | | | | | | | | | | | | |
| Preferred Stock | | | — | | | | — | | | | 396 | | | | (396 | ) | | | — | |
| Common Stock | | | 215 | | | | — | | | | 209 | | | | (209 | ) | | | 215 | |
| Other Capital | | | 1,521 | | | | 70 | | | | 8,230 | | | | (8,300 | ) | | | 1,521 | |
| Retained Earnings | | | 4,576 | | | | 19 | | | | 4,203 | | | | (4,222 | ) | | | 4,576 | |
| Accumulated Other Comprehensive Loss | | | (13 | ) | | | — | | | | (31 | ) | | | | | | | (44 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Total Shareholder’s Equity | | | 6,299 | | | | 89 | | | | 13,007 | | | | (13,127 | ) | | | 6,268 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Total Liabilities and Shareholder’s Equity | | $ | 14,574 | | | $ | 477 | | | $ | 19,972 | | | $ | (14,103 | ) | | $ | 20,920 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(CONTINUED)
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 12. SUMMARIZED CONSOLIDATING FINANCIAL DATA—CSX LINES—(Continued)
| | | Consolidating Statement of Financial Position December 28, 2001
| |
| | | CSX Corporate
| | | CSX Lines
| | | Other
| | | Eliminations
| | | Consolidated
| |
ASSETS | | | | | | | | | | | | | | | | | | | | |
| Current Assets | | | | | | | | | | | | | | | | | | | | |
| Cash, Cash Equivalents and Short-term Investments | | $ | 225 | | | $ | 55 | | | $ | 339 | | | $ | (1 | ) | | $ | 618 | |
| Accounts Receivable, Net | | | 58 | | | | 8 | | | | 1,036 | | | | (224 | ) | | | 878 | |
| Materials and Supplies | | | — | | | | 14 | | | | 192 | | | | — | | | | 206 | |
| Deferred Income Taxes | | | — | | | | — | | | | 162 | | | | — | | | | 162 | |
| Other Current Assets | | | 4 | | | | 36 | | | | 295 | | | | (125 | ) | | | 210 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Total Current Assets | | | 287 | | | | 113 | | | | 2,024 | | | | (350 | ) | | | 2,074 | |
|
| Properties | | | 29 | | | | 453 | | | | 17,669 | | | | — | | | | 18,151 | |
| Accumulated Depreciation | | | (27 | ) | | | (286 | ) | | | (4,866 | ) | | | — | | | | (5,179 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Properties, Net | | | 2 | | | | 167 | | | | 12,803 | | | | — | | | | 12,972 | |
| Investment in Conrail | | | 353 | | | | — | | | | 4,302 | | | | — | | | | 4,655 | |
| Affiliates and Other Companies | �� | | 2 | | | | 85 | | | | 326 | | | | (31 | ) | | | 382 | |
| Investment in Consolidated Subsidiaries | | | 12,641 | | | | — | | | | 396 | | | | (13,037 | ) | | | — | |
| Other Long-term Assets | | | 905 | | | | 137 | | | | 264 | | | | (588 | ) | | | 718 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Total Assets | | $ | 14,190 | | | $ | 502 | | | $ | 20,115 | | | $ | (14,006 | ) | | $ | 20,801 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
LIABILITIES | | | | | | | | | | | | | | | | | | | | |
| Current Liabilities | | | | | | | | | | | | | | | | | | | | |
| Accounts Payable | | $ | 86 | | | $ | 81 | | | $ | 965 | | | $ | (166 | ) | | $ | 966 | |
| Labor and Fringe Benefits Payable | | | 17 | | | | 13 | | | | 388 | | | | — | | | | 418 | |
| Payable to Affilitates | | | — | | | | 2 | | | | 123 | | | | (125 | ) | | | — | |
| Casuality, Environmental and Other Reserves | | | 1 | | | | 3 | | | | 246 | | | | — | | | | 250 | |
| Current Maturities of Long-term Debt | | | 850 | | | | 21 | | | | 173 | | | | — | | | | 1,044 | |
| Short-term Debt | | | 225 | | | | — | | | | — | | | | — | | | | 225 | |
| Income and Other Taxes Payable | | | 1,296 | | | | 25 | | | | (1,220 | ) | | | — | | | | 101 | |
| Other Current Liabilities | | | 38 | | | | 20 | | | | 300 | | | | (59 | ) | | | 299 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Total Current Liabilities | | | 2,513 | | | | 165 | | | | 975 | | | | (350 | ) | | | 3,303 | |
| Casuality, Environmental and Other Reserves | | | 4 | | | | 4 | | | | 682 | | | | — | | | | 690 | |
| Long-term Debt | | | 4,680 | | | | 132 | | | | 1,027 | | | | — | | | | 5,839 | |
| Deferred Income Taxes | | | — | | | | 83 | | | | 3,538 | | | | — | | | | 3,621 | |
| Long-term Payable to Affiliates | | | 396 | | | | — | | | | 192 | | | | (588 | ) | | | — | |
| Other Long-term Liabilities | | | 445 | | | | 48 | | | | 765 | | | | (30 | ) | | | 1,228 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Total Liabilities | | | 8,038 | | | | 432 | | | | 7,179 | | | | (968 | ) | | | 14,681 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| SHAREHOLDER’S EQUITY | | | | | | | | | | | | | | | | | | | | |
| Preferred Stock | | | — | | | | — | | | | 396 | | | | (396 | ) | | | — | |
| Common Stock | | | 214 | | | | — | | | | 209 | | | | (209 | ) | | | 214 | |
| Other Capital | | | 1,492 | | | | 57 | | | | 8,243 | | | | (8,300 | ) | | | 1,492 | |
| Retained Earnings | | | 4,459 | | | | 13 | | | | 4,120 | | | | (4,133 | ) | | | 4,459 | |
| Accumulated Other Comprehensive Loss | | | (13 | ) | | | — | | | | (32 | ) | | | — | | | | (45 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Total Shareholder’s Equity | | | 6,152 | | | | 70 | | | | 12,936 | | | | (13,038 | ) | | | 6,120 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Total Liabilities and Shareholder’s Equity | | $ | 14,190 | | | $ | 502 | | | $ | 20,115 | | | $ | (14,006 | ) | | $ | 20,801 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Consolidating Statement of Cash Flows
Three Months Ended March 31, 2001
CSX CSX
Corporate Lines Other Eliminations Consolidated
----------- ------- ------- -------------- --------------
Operating Activities
Net Cash Provided (Used) by Operating Activities $ (78) $ - $ 142 $ (64) $ -
----------- ------- ------- -------------- --------------
Investing Activities
Property Additions - 1 (184) - (183)
Short-term Investments-net (76) - (1) - (77)
Other Investing Activities 8 - (71) 58 (5)
----------- ------- ------- -------------- --------------
Net Cash Provided (Used) by Investing Activities (68) 1 (256) 58 (265)
----------- ------- ------- -------------- --------------
Financing Activities
Short-term Debt-Net (271) - - - (271)
Long-term Debt Issued 500 - - - 500
Long-term Debt Repaid - - (48) - (48)
Cash Dividends Paid (66) - (54) 56 (64)
Other Financing Activities (12) - 70 (50) 8
----------- ------- ------- -------------- --------------
Net Cash Provided (Used) by Financing Activities 151 - (32) 6 125
Net Increase (Decrease) in Cash and Cash Equivalents 5 1 (146) - (140)
Cash and Cash Equivalents at Beginning of Period 47 (94) 308 - 261
----------- ------- ------- -------------- --------------
Cash and Cash Equivalents at End of Period $ 52 $ (93) $ 162 $ - $ 121
=========== ======= ======= ============== ==============
|
-21-
ITEM 2. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Results of Operations
CSX follows a 52/53-week fiscal calendar. Fiscal years 2002 and 2001 consist of 52 weeks. The quarters ended March 29,June 28, 2002 and March 30,June 29, 2001 each consisted of 13 weeks. The six-month periods ended June 28, 2002 and June 29, 2001 each consisted of 26 weeks.
Consolidated Results
- --------------------
First
Second Quarter 2002 Compared with 2001
- -------------------------------------
CSX reported net earnings of $135 million, or 63 cents per share for the quarter ended March 29,June 28, 2002, of $25as compared to $108 million, 12 cents per share, compared with $20 million, 10or 51 cents per share in the quarter ended March 30,June 29, 2001. CurrentThe increase in earnings over the prior year period is a result of increases in operating income due to lower operating expenses and, as discussed below, a decrease in interest expense. This was offset by a decrease in other income.
Operating income was $321 million for the quarter ended June 28, 2002, an increase of 21% compared to operating income of $265 million for the same quarter in 2001. This increase is a result of the continued improvement in the Surface Transportation operating ratio. Operating revenue increased 1% to $2.07 billion in the second quarter of 2002 from $2.06 billion in the prior year period. However, operating expenses decreased 2% to $1.75 billion in the current quarter, from $1.79 billion in the prior year quarter, primarily as a result of decreased costs of operations in the Surface Transportation unit.
Interest expense benefited from favorable interest rates with a decline to $116 million, from $135 million in the prior year quarter. Other income was $4 million in the quarter ended June 28, 2002, as compared with $37 million reported in the same quarter of 2001. The decrease primarily related to a significant real estate transaction of $32 million in the prior year quarter.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION—(CONTINUED)
RESULTS OF OPERATIONS—(Continued)
Surface Transportation Results
The following tables provide Surface Transportation operating results includefor the quarters and six months ended June 28, 2002 and June 29, 2001:
Quarters Ended June 28, 2002 and June 29, 2001
(Millions) (Unaudited)
| | | Rail
| | | Intermodal
| | | Surface Transportation
| |
| | | 2002(1)
| | | 2001
| | | 2002(2)
| | | 2001
| | | 2002
| | | 2001
| |
Operating Revenue | | $ | 1,538 | | | $ | 1,556 | | | $ | 296 | | | $ | 271 | | | $ | 1,834 | | | $ | 1,827 | |
Operating Expense | | | | | | | | | | | | | | | | | | | | | | | | |
| Labor and Fringe | | | 628 | | | | 654 | | | | 16 | | | | 16 | | | | 644 | | | | 670 | |
| Materials, Supplies and Other | | | 322 | | | | 307 | | | | 44 | | | | 43 | | | | 366 | | | | 350 | |
| Conrail Operating Fees, Rents and Services | | | 79 | | | | 85 | | | | — | | | | — | | | | 79 | | | | 85 | |
| Building and Equipment Rent | | | 107 | | | | 114 | | | | 33 | | | | 30 | | | | 140 | | | | 144 | |
| Inland Transportation | | | (92 | ) | | | (92 | ) | | | 146 | | | | 151 | | | | 54 | | | | 59 | |
| Depreciation | | | 138 | | | | 138 | | | | 8 | | | | 8 | | | | 146 | | | | 146 | |
| Fuel | | | 112 | | | | 131 | | | | — | | | | — | | | | 112 | | | | 131 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Total Operating Expense | | | 1,294 | | | | 1,337 | | | | 247 | | | | 248 | | | | 1,541 | | | | 1,585 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Operating Income | | $ | 244 | | | $ | 219 | | | $ | 49 | | | $ | 23 | | | $ | 293 | | | $ | 242 | |
Operating Ratio | | | 84.1 | % | | | 85.9 | % | | | 83.4 | % | | | 91.5 | % | | | 84.0 | % | | | 86.8 | % |
Six Months Ended June 28, 2002 and June 29, 2001
(Millions) (Unaudited)
| | | Rail
| | | Intermodal
| | | Surface Transportation
| |
| | | 2002(1)
| | | 2001
| | | 2002(2)
| | | 2001
| | | 2002
| | | 2001
| |
Operating Revenue | | $ | 3,024 | | | $ | 3,088 | | | $ | 558 | | | $ | 541 | | | $ | 3,582 | | | $ | 3,629 | |
Operating Expense | | | | | | | | | | | | | | | | | | | | | | | | |
| Labor & Fringe | | | 1,271 | | | | 1,317 | | | | 33 | | | | 33 | | | | 1,304 | | | | 1,350 | |
| Materials, Supplies & Other | | | 643 | | | | 609 | | | | 85 | | | | 87 | | | | 728 | | | | 696 | |
| Conrail Operating Fees, Rents & Services | | | 166 | | | | 168 | | | | — | | | | — | | | | 166 | | | | 168 | |
| Building & Equipment Rent | | | 209 | | | | 233 | | | | 64 | | | | 58 | | | | 273 | | | | 291 | |
| Inland Transportation | | | (178 | ) | | | (186 | ) | | | 295 | | | | 308 | | | | 117 | | | | 122 | |
| Depreciation | | | 276 | | | | 277 | | | | 15 | | | | 16 | | | | 291 | | | | 293 | |
| Fuel | | | 216 | | | | 285 | | | | — | | | | — | | | | 216 | | | | 285 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Total Operating Expense | | | 2,603 | | | | 2,703 | | | | 492 | | | | 502 | | | | 3,095 | | | | 3,205 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Operating Income | | $ | 421 | | | $ | 385 | | | $ | 66 | | | $ | 39 | | | $ | 487 | | | $ | 424 | |
Operating Ratio | | | 86.1 | % | | | 87.5 | % | | | 88.2 | % | | | 92.8 | % | | | 86.4 | % | | | 88.3 | % |
| (1) | | Rail operating expense includes and increase of $4 million in materials, supplies, and other for an unfavorable contract dispute settlement. |
| (2) | | Intermodal operating expense includes a reduction of $15 million in inland transportation for a favorable contract dispute settlement. |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION—(Continued)
RESULTS OF OPERATIONS—(Continued)
Surface Transportation Results—(Continued)
Rail
The rail segment earned $244 million in operating income for the quarter ended June 28, 2002, up $25 million, or 11 percent, from the $219 million reported in the second quarter of 2001. Operating revenue decreased to $1.54 billion in the current period from $1.56 billion in the same quarter of the prior year. Although volumes in the second quarter declined because of continued weakness in the national economy by 2% year-over-year, revenue declined by only 1% compared to the corresponding quarter of the prior year because of the continued success of CSXT’s yield improvement program. Increased volumes for the phosphates and fertilizers, paper and forest, chemicals, emerging markets and automotive groups were offset by decreases in all other commodity groups. The metals, agricultural products, minerals, coal and coke markets realized price increases despite revenue declines.
Merchandise revenue was up $12 million or 1% over the prior year period. Merchandise volumes increased for the first time in two years, growing by 1% for the second quarter of 2002 compared to the same period in 2001. This increase was due to phosphates and fertilizers strong performance as well as year-over-year improved volumes in paper and forest, chemicals, and emerging markets. Strong demand and low inventory levels caused some metals shipments that normally move by rail to be diverted to trucks, which had a negative impact on metals volume. Agriculture and minerals volumes also were down in the quarter because of weakness in feed grains and foreign competition, respectively. Food and consumer products experienced revenue yield deterioration because of increased shipments in private rail equipment. All other merchandise commodity groups showed either flat or improved revenue yield compared to the prior year quarter.
Automotive volumes were up 6% versus second quarter of 2001 as manufacturers continue aggressive dealer incentive programs. Automotive revenue was up $18 million or 8% due to both rate and mix improvement.
Coal, coke and iron ore volumes were down 10% for the quarter versus last year. Coal, coke and iron ore revenue was down $38 million or 9% versus the prior year. Coal revenue yields were flat as rate increases were masked by volume pickup in shorthaul coal traffic that was converted to rail from truck.
The operating ratio decreased to 84.1% for the quarter ended June 28, 2002 from 85.9% for the quarter ended June 29, 2001. Operating expenses decreased to $1.29 billion for the quarter ended June 28, 2002, from $1.34 billion in the same period in the prior year. This $43 million decrease resulted primarily from decreases in labor and fringe benefits, fuel, Conrail operations, and building and equipment rent, offset by increases in materials, supplies and other.
Labor and fringe benefits decreased $26 million primarily resulting from increased crew productivity and net headcount reductions of approximately 1,700 from prior year quarter as part of a continued effort by management to eliminate inefficiencies, which was somewhat offset by inflation. The positive effect of lower fuel prices, which reduced costs by $20 million, was offset by $1 million in increased volumes. The net impact of reduced fuel price was $11 million since $9 million of fuel surcharge revenue was eliminated. The favorable variance in Conrail’s operating results was primarily a result of continued efficiencies relating to its operations.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION—(Continued)
RESULTS OF OPERATIONS—(Continued)
Surface Transportation Results—(Continued)
Rail—(Continued)
These operating expense decreases were partially offset by increases in materials, supplies, and other of $15 million. These offsetting increases were due primarily to the receipt of $14 million in insurance settlements in 2001 that were not received in 2002, $4 million in a negative contract settlement, and a $4 million increase in the cost of occupational claims received for 2002, offset by some positive variances in other expenses.
The following table provides rail carload and revenue data by service group and commodity for the quarters and six months ended June 28, 2002 and June 29, 2001:
| | | Carloads
(Thousands)
Quarter Ended
| | Revenue (Millions of Dollars) Quarter Ended
|
| | | June 28, | | June 29, | | June 28, | | June 29, |
| | | 2002
| | 2001
| | 2002
| | 2001
|
| Rail: | | | | | | | | | | |
| Merchandise | | | | | | | | | | |
| Phosphates and Fertilizer | | 119 | | 105 | | $ | 83 | | $ | 75 |
| Metals | | 80 | | 83 | | | 101 | | | 103 |
| Food and Consumer Products | | 42 | | 42 | | | 55 | | | 57 |
| Paper and Forest Products | | 122 | | 121 | | | 162 | | | 161 |
| Agricultural Products | | 87 | | 92 | | | 119 | | | 125 |
| Chemicals | | 129 | | 127 | | | 233 | | | 225 |
| Minerals | | 23 | | 24 | | | 34 | | | 35 |
| Emerging Markets | | 115 | | 113 | | | 106 | | | 100 |
| | |
| |
| |
|
| |
|
|
| Total Merchandise | | 717 | | 707 | | | 893 | | | 881 |
| Automotive | | 148 | | 139 | | | 231 | | | 213 |
| Coal, Coke and Iron Ore | | | | | | | | | | |
| Coal | | 390 | | 430 | | | 379 | | | 415 |
| Coke | | 9 | | 11 | | | 14 | | | 13 |
| Iron Ore | | 9 | | 13 | | | 5 | | | 8 |
| | |
| |
| |
|
| |
|
|
| Total Coal, Coke and Iron Ore | | 408 | | 454 | | | 398 | | | 436 |
| Other | | — | | — | | | 16 | | | 26 |
| | |
| |
| |
|
| |
|
|
| Total Rail | | 1,273 | | 1,300 | | | 1,538 | | | 1,556 |
| | |
| |
| |
|
| |
|
|
| Intermodal: | | | | | | | | | | |
| Domestic | | 242 | | 227 | | | 168 | | | 155 |
| International | | 295 | | 270 | | | 124 | | | 114 |
| Other | | — | | — | | | 4 | | | 2 |
| | |
| |
| |
|
| |
|
|
| Total Intermodal | | 537 | | 497 | | | 296 | | | 271 |
| | |
| |
| |
|
| |
|
|
| Total Surface Transportation | | 1,810 | | 1,797 | | $ | 1,834 | | $ | 1,827 |
| | |
| |
| |
|
| |
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION—(Continued)
RESULTS OF OPERATIONS—(Continued)
Surface Transportation Results—(Continued)
Rail—(Continued)
| | | Carloads
(Thousands) Six Months Ended
| | Revenue (Millions of Dollars) Six Months Ended
|
| | | June 28, 2002
| | June 29, 2001
| | June 28, 2002
| | June 29, 2001
|
| Rail: | | | | | | | | | | |
| Merchandise | | | | | | | | | | |
| Phosphates and Fertilizer | | 238 | | 224 | | $ | 172 | | $ | 164 |
| Metals | | 157 | | 164 | | | 198 | | | 202 |
| Food and Consumer Products | | 81 | | 81 | | | 108 | | | 109 |
| Paper and Forest Products | | 238 | | 243 | | | 318 | | | 321 |
| Agricultural Products | | 179 | | 192 | | | 246 | | | 259 |
| Chemicals | | 254 | | 257 | | | 457 | | | 457 |
| Minerals | | 45 | | 47 | | | 68 | | | 71 |
| Emerging Markets | | 208 | | 210 | | | 194 | | | 188 |
| | |
| |
| |
|
| |
|
|
| Total Merchandise | | 1,400 | | 1,418 | | | 1,761 | | | 1,771 |
| Automotive | | 277 | | 266 | | | 431 | | | 407 |
| Coal, Coke and Iron Ore | | | | | | | | | | |
| Coal | | 783 | | 869 | | | 760 | | | 831 |
| Coke | | 17 | | 21 | | | 27 | | | 24 |
| Iron Ore | | 13 | | 18 | | | 8 | | | 11 |
| | |
| |
| |
|
| |
|
|
| Total Coal, Coke and Iron Ore | | 813 | | 908 | | | 795 | | | 866 |
| Other | | — | | — | | | 37 | | | 44 |
| | |
| |
| |
|
| |
|
|
| Total Rail | | 2,490 | | 2,592 | | | 3,024 | | | 3,088 |
| | |
| |
| �� |
|
| |
|
|
| Intermodal: | | | | | | | | | | |
| Domestic | | 462 | | 429 | | | 320 | | | 298 |
| International | | 556 | | 549 | | | 234 | | | 237 |
| Other | | — | | — | | | 4 | | | 6 |
| | |
| |
| |
|
| |
|
|
| Total Intermodal | | 1,018 | | 978 | | | 558 | | | 541 |
| | |
| |
| |
|
| |
|
|
| Total Surface Transportation | | 3,508 | | 3,570 | | $ | 3,582 | | $ | 3,629 |
| | |
| |
| |
|
| |
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION—(Continued)
RESULTS OF OPERATIONS—(Continued)
Surface Transportation Results—(Continued)
Intermodal
CSX Intermodal reported second quarter 2002 operating income of $49 million, compared with $23 million for the corresponding quarter in 2001. Revenue was $296 million for the quarter ended June 28, 2002, compared to $271 million for the quarter ended June 29, 2001. The revenue improvement is attributable to increased volume in both international and domestic markets. Domestic shipments recorded a 7% increase driven by strong eastbound transcontinental domestic container demand and accelerated growth in highway conversions. The international container business realized a 9% increase, benefiting primarily from improvements in consumer demand and some pre-shipments by customers in anticipation of a potential International Longshore and Warehouse Union strike on the West Coast.
Operating expense decreased slightly to $247 million for the quarter ended June 28, 2002 from $248 million for the quarter ended June 29, 2001. Improvements in the operating ratio of 83.4% in 2002, compared to 91.5% in 2001 are attributable to a non-recurring contract dispute settlement of $15 million that is reflected in the inland transportation category.
Marine Services Results
The following tables provide Marine Services operating results for the quarters and six months ended June 28, 2002 and June 29, 2001:
Quarters Ended June 28, 2002 and June 29, 2001
(Millions of Dollars)(Unaudited)
| | | Domestic Container Shipping
| | | International Terminals
| | | Eliminations
| | | Marine Services
| |
| | | 2002
| | | 2001
| | | 2002
| | | 2001
| | | 2002
| | 2001
| | | 2002
| | | 2001
| |
Operating Revenue | | $ | 189 | | | $ | 168 | | | $ | 58 | | | $ | 61 | | | $ | — | | $ | (1 | ) | | $ | 247 | | | $ | 228 | |
Operating Expense | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Labor and Fringe | | | 56 | | | | 52 | | | | 17 | | | | 18 | | | | — | | | — | | | | 73 | | | | 70 | |
| Materials, Supplies and Other | | | 61 | | | | 49 | | | | 16 | | | | 18 | | | | — | | | (1 | ) | | | 77 | | | | 66 | |
| Building and Equipment Rent | | | 13 | | | | 13 | | | | 2 | | | | 2 | | | | — | | | — | | | | 15 | | | | 15 | |
| Inland Transportation | | | 29 | | | | 26 | | | | 1 | | | | 2 | | | | — | | | — | | | | 30 | | | | 28 | |
| Depreciation | | | 5 | | | | 6 | | | | 2 | | | | 1 | | | | — | | | — | | | | 7 | | | | 7 | |
| Fuel | | | 16 | | | | 15 | | | | — | | | | — | | | | — | | | — | | | | 16 | | | | 15 | |
| Miscellaneous | | | — | | | | — | | | | 4 | | | | 2 | | | | — | | | — | | | | 4 | | | | 2 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
| |
|
|
| |
|
|
| |
|
|
|
Total Operating Expense | | | 180 | | | | 161 | | | | 42 | | | | 43 | | | | — | | | (1 | ) | | | 222 | | | | 203 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
| |
|
|
| |
|
|
| |
|
|
|
Operating Income (Loss) | | $ | 9 | | | $ | 7 | | | $ | 16 | | | $ | 18 | | | $ | — | | $ | — | | | $ | 25 | | | $ | 25 | |
Operating Ratio | | | 95.2 | % | | | 95.8 | % | | | 72.4 | % | | | 70.5 | % | | | | | | | | | | 89.9 | % | | | 89.0 | % |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION—(Continued)
RESULTS OF OPERATIONS—(Continued)
Marine Services Results—(Continued)
Six Months Ended June 28, 2002 and June 29, 2001
(Millions of Dollars)(Unaudited)
| | | Domestic Container Shipping
| | | International Terminals
| | | Eliminations
| | | Marine Services
| |
| | | 2002
| | | 2001
| | | 2002
| | | 2001
| | | 2002
| | | 2001
| | | 2002
| | | 2001
| |
Operating Revenue | | $ | 350 | | | $ | 329 | | | $ | 116 | | | $ | 120 | | | $ | (1 | ) | | $ | (2 | ) | | $ | 465 | | | $ | 447 | |
Operating Expense | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Labor & Fringe | | | 108 | | | | 106 | | | | 37 | | | | 35 | | | | — | | | | — | | | | 145 | | | | 141 | |
| Materials, Supplies & Other | | | 114 | | | | 101 | | | | 34 | | | | 38 | | | | (1 | ) | | | (2 | ) | | | 147 | | | | 137 | |
| Building & Equipment Rent | | | 28 | | | | 26 | | | | 4 | | | | 5 | | | | — | | | | — | | | | 32 | | | | 31 | |
| Inland Transportation | | | 53 | | | | 49 | | | | 3 | | | | 4 | | | | — | | | | — | | | | 56 | | | | 53 | |
| Depreciation | | | 9 | | | | 12 | | | | 4 | | | | 3 | | | | — | | | | — | | | | 13 | | | | 15 | |
| Fuel | | | 28 | | | | 31 | | | | — | | | | — | | | | — | | | | — | | | | 28 | | | | 31 | |
| Miscellaneous | | | — | | | | — | | | | 7 | | | | 5 | | | | — | | | | — | | | | 7 | | | | 5 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Total Operating Expense | | | 340 | | | | 325 | | | | 89 | | | | 90 | | | | (1 | ) | | | (2 | ) | | | 428 | | | | 413 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Operating Income | | $ | 10 | | | $ | 4 | | | $ | 27 | | | $ | 30 | | | $ | — | | | $ | — | | | $ | 37 | | | $ | 34 | |
Operating Ratio | | | 97.1 | % | | | 98.8 | % | | | 76.7 | % | | | 75.0 | % | | | | | | | | | | | 92.0 | % | | | 92.4 | % |
Domestic Container Shipping
CSX Lines reported operating income of $9 million for the quarter ended June 28, 2002, compared to $7 million for the quarter ended June 29, 2001. Revenue increased to $189 million in the second quarter of 2002, compared to $168 million for the same period in the prior year. Market share gains in Puerto Rico were significant in this quarter, as CSX Lines benefited from a competitor’s exit from the trade lane.
International Terminals
CSX World Terminals’ operating income was $16 million, $2 million below the prior year primarily due to the weak economy in the Asia and Latin America sectors and expenses associated with new start-up ventures. The Company is aggressively instituting process-improvement and cost-cutting initiatives which are expected to mitigate the negative performance versus the prior year.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION—(Continued)
RESULTS OF OPERATIONS—(Continued)
First Six Months 2002 Compared with 2001
For the first six months of the year, CSX reported net earnings of $160 million, or 75 cents per share, as compared to $128 million, or 60 cents per share, for the same period in 2001. Included in the results for the first half of 2002 is an after-tax charge of $43 million, or 20 cents per share as a cumulative effect of accounting change relating to indefinite lived intangible assets.
The cumulative effect of accounting change relates to the adoption of Statement of Financial Accounting Standard (SFAS) No. 142, (SFAS 142), "Goodwill“Goodwill and Other Intangible Assets."” Under the provisions of SFAS 142, goodwill and other indefinite lived intangible assets are no longer amortized but are reviewed for impairment on a periodic basis. The Company adopted this standard in the first quarter of 2002 and
incurred a pre-tax charge of $83 million, after-tax charge of $43 million, 20
cents per share as a cumulative effect of an accounting change relating to
indefinite lived intangible assets.2002. These indefinite lived intangible assets are permits and licenses that the Company holds relating to a proposed pipeline to transfer natural gas from Alaska'sAlaska’s north slope to the port in Valdez, Alaska. The adoption of SFAS 142 did not have a material effect on prior reporting periods, and the Company doeswill not believe it will have a material effect on future earnings. The Company does not have any other indefinite lived intangible assets.
Before the cumulative effect of accounting change in the current
period,six months ended June 28, 2002, earnings were $68$203 million, 32or 95 cents per share. The increase in earnings over the prior year period is a result of increases in operating income growth and other income, and a decrease inlower interest expense.
Operating income increased 12%
from $18917% to $533 million in the first quarter of 2001 to $212six months ended June 28, 2002 from $454 million in the first quartersame period of 2002the prior year as a result of a decline in thean improved Surface Transportation operating ratio.
Operating revenue decreased 3%ratio of 86.4%, compared to $1.96 billion in the first quarter of 2002
from $2.03 billion in the prior year period. However, operating expenses
decreased 5% to $1.75 billion in the current period, from $1.84 billion88.3 % in the prior year. Operating revenue decreased 1% to $4.04 billion in the six months ended June 28, 2002 from $4.08 billion for the same period in the prior year. However, the 3% decrease in operating expenses to $3.50 billion in the six months ended June 28, 2002 from $3.63 billion in the six months ended June 29, 2001 offset the revenue decline.
Interest expense benefited from
favorablerefinancing at lower interest rates and a
$36
million pre-tax gain from a property sale had a favorable impact on other
income.
Surface Transportation Results
- ------------------------------
Rail
CSX Transportation ("CSXT") earned $177 million in operating income for
the quarter ended March 29, 2002, up $11 million, or 7 percent, from the $166
million reported in the first quartergreater portion of
2001. Operating revenue decreased to
$1.49 billion in the current period from $1.53 in the prior year. Volumes in the
first quarter were down 6 percent year-over-year while revenue was down only 3
percent due to the continued success of CSXT's yield improvement program. Only
volumes for the automotive sector increased year-over-year. Volume decreases
were offset by revenue increases in the food and consumer products and coke
markets, reflecting various pricing initiatives. Further offsetting volume
decreases were increased automotive revenue, resulting from the increase in
volume as well as price increases.
-22-
floating rate debt.ITEM 2. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, CONTINUED
RESULTS OF OPERATIONS, Continued
Surface Transportation Results, Continued
- -----------------------------------------
Rail, Continued
The operating ratio decreased to 88.1% for the quarter ended March 29,
2002 from 89.2% for the quarter ended March 30, 2001. Operating expenses
decreased from $1.37 billion for the quarter ended March 30, 2001 to $1.31
billion for the quarter ended March 29, 2002. The $57 million decrease resulted
primarily from decreases in laborCONDITION—(Continued)
Liquidity and fringe benefits and fuel, offset by
increases in materials, supplies and other, and Conrail operations. Labor and
fringe expense decreased $20 million primarily resulting from headcount
reductions of approximately 2,600 from prior year quarter as part of a continued
effort by management to eliminate inefficiencies. This was somewhat offset by
inflation and health and welfare charges. Operating expenses were further
reduced as compared to the prior year due to a $50 million decrease in fuel
expenses, of which approximately $40 million is the result of a favorable
year-to-year price variance. The remaining decrease is primarily attributed to
the corresponding decrease in carload volumes.
These operating expense decreases were partially offset by increases in
materials, supplies, and other, and Conrail operations. The increase in
materials, supplies and other is due partially to higher expenses related to
casualty losses and property taxes. The unfavorable variance in Conrail's 2002
first quarter operating results was a consequence of a favorable state tax
settlement which enhanced Conrail's 2001 first quarter results.
General merchandise volumes were down 4 percent for the quarter. While
phosphate and fertilizer and food and consumer products volumes were flat for
the quarter, all other markets were down year-over-year. Agricultural products
were down 8 percent due to a decline in export grain shipments. All other
merchandise markets were down 4 to 5 percent. With the exception of minerals and
phosphates and fertilizers, all other merchandise commodity groups showed
improved revenue yield as CSXT's pricing program continued to show significant
vibrancy.
Automotive volumes were up 2 percent versus last year, reflecting a 3
percent increase in North American auto production and continuing aggressive
dealer incentive programs. Actual vehicle sales were in line with production, so
dealer inventory levels continue to be at or close to normal.
Coal, Coke & Iron Ore volumes in the first quarter were 11 percent
below last year, due to generally mild weather conditions and the lack of the
inventory build-up that was occurring during the first quarter of 2001. Yield
improvements helped offset some of the volume shortfall.
-23-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, CONTINUED
RESULTS OF OPERATIONS, Continued
Surface Transportation Results, Continued
- -----------------------------------------
Rail, Continued
The following table provides rail carload and revenue data by service
group and commodity for the quarters ended March 29, 2002 and March 30, 2001:
Carloads Revenue
(Thousands) (Millions of Dollars)
----------------------------- -----------------------------
March 29, March 30, March 29, March 30,
2002 2001 2002 2001
------------- -------------- ------------- --------------
Merchandise
Phosphates and Fertilizer 119 119 $ 89 $ 89
Metals 77 81 97 99
Food and Consumer Products 39 39 53 52
Paper and Forest Products 116 122 156 160
Agricultural Products 92 100 127 134
Chemicals 125 130 224 232
Minerals 22 23 34 36
Emerging Markets 93 97 88 88
------------- -------------- ------------- --------------
Total Merchandise 683 711 868 890
Automotive 129 127 200 194
Coal, Coke & Iron Ore
Coal 393 439 381 416
Coke 8 10 13 11
Iron Ore 4 5 3 3
------------- -------------- ------------- --------------
Total Coal, Coke & Iron Ore 405 454 397 430
Other - - 21 18
------------- -------------- ------------- --------------
Total Rail 1,217 1,292 1,486 1,532
------------- -------------- ------------- --------------
Intermodal
Domestic 220 202 152 143
International 261 279 110 123
Other - - - 4
------------- ------------ ------------- --------------
Total Intermodal 481 481 262 270
------------- ------------ ------------- --------------
Total Surface Transportation 1,698 1,773 $ 1,748 $ 1,802
============= ============ ============= ==============
-24-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, CONTINUED
RESULTS OF OPERATIONS, Continued
Surface Transportation Results, Continued
- -----------------------------------------
Intermodal
CSX Intermodal reported first quarter 2002 operating income of $17
million, compared with $16 million in 2001. Revenue was $262 million for the
quarter ended March 29, 2002, compared to $270 million for the quarter ended
March 30, 2001. The revenue decline is attributable to decreased volume in
international markets, partially offset by increases in the domestic market.
Domestic shipments recorded a 9 percent increase, driven by strong domestic
container traffic and diversion of Mexican auto parts traffic from the highway.
The international container business reflected worldwide economic conditions,
with volumes declining 6 percent. The loss of three customers had a negative
impact on revenue. Operating expense decreased to $245 million for the quarter
ended March 29, 2002 from $254 for the quarter ended March 30, 2001.
Improvements in the operating ratio of 93.5% in 2002, compared to 94.1% in 2001
are attributable to continued cost reduction initiatives.
Marine Services Results
- -----------------------
Domestic Container Shipping
CSX Lines reported operating income of $1 million for the quarter ended
March 29, 2002, compared to a loss of $3 million for the quarter ended March 30,
2001. Revenue remained flat between years at $161 million. Market share gains in
Hawaii/Guam and Puerto Rico were offset by overall market declines from the
impact of the September 11th tragedy on the tourism-reliant Hawaii/Guam trade.
Operating expenses decreased from $164 million in the first quarter of 2001 to
$160 million for the first quarter of 2002, primarily related to reduced fuel
costs as well as various cost reduction initiatives implemented in the second
half of 2001.
International Terminals
CSX World Terminals' operating income was $11 million for the quarter
ended March 29, 2002, compared with $12 million for the quarter ended March 30,
2001. Revenue declined to $61 million in the first quarter of 2002 from $68 in
the prior year due to weakness in the Latin America sector and the slow recovery
in the Hong Kong economy. The revenue decrease was partially offset by a
decrease in the operating expenses to $50 million in 2002 from $56 million in
2001. This improvement is attributed to cost cutting and productivity gains. The
operating ratio decrease from 82.4% in the first quarter of 2001 to 82.0% in the
first quarter of 2002 is also a result of continued cost cutting and
productivity gains.
-25-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, CONTINUED
LIQUIDITY AND CAPITAL RESOURCES
Capital Resources Cash, cash equivalents and short-term investments totaled $781$731 million at March 29,June 28, 2002, an increase of $163$113 million since December 28, 2001.
Primary sources of cash and cash equivalents during the threesix months ended March 29,June 28, 2002 were the normal transportation operations and the issuance of $450$474 million of long-term debt. Primary uses of cash and cash equivalents were property additions,scheduled repayments of long-term debt, and the payment of dividends. Long-term debt totaling $991 million was repaid in the first six months of 2002 using cash from the issuance of a $400 million note in the first quarter of 2002 and other short-term commercial paper borrowings. The quarterly dividend for the current period was 10 cents per share, compared to 30 cents per share for the corresponding quarter in the prior year. CSX'sTotal dividends paid for the six-month period was $43 million as compared to $128 million in the same period of the prior year.
CSX’s working capital deficit at March 29,June 28, 2002 was $685$803 million, down from $1.2 billion at December 28, 2001. This decrease is partiallyprimarily attributable to $225 million in notes due to Conrail being reclassified from short-term to
long-term due to the renegotiation of the notes to a long-term basis. At March
29, 2002, CSX had $450 million of debentures that will becurrently maturing in May 2002.
CSX hasnotes being refinanced with the intentproceeds of $400 million of newly issued long-term notes and ability to retire the entire amount at that time.
available cash.
A working capital deficit is not unusual for the Company and does not indicate a lack of liquidity. The Company continues to maintain adequate current assets to satisfy current liabilities and maturing obligations when they come due and has sufficient financial capacity to manage its day-to-day cash requirements and any obligations arising from legal, tax and other regulatory
rulings.requirements. CSX also has $1.1 billion of remaining capacity under a shelf registration that may be used,
subject to market conditions, to issue debt or other securities at the
Company's
discretion.
During the quarter ended March 29, 2002, the Company issued $400
million aggregate principal amountCompany’s discretion, and $1.3 billion in available line of
6.30% notes due 2012. Proceeds of the
notes willcredit facilities which can be used
to refinance other debt that comes due inat the
second quarter
of 2002.
-26-
Company’s discretion.Financial Data
| | | (Millions of Dollars) | |
| | | June 28, 2002
| | | December 28, 2001
| |
| Cash, Cash Equivalents and Short-Term Investments | | $ | 731 | | | $ | 618 | |
| Working Capital (Deficit) | | $ | (803 | ) | | $ | (1,229 | ) |
| Current Ratio | | | 0.7 | | | | 0.6 | |
| Debt Ratio | | | 51 | % | | | 51 | % |
| Ratio of Earnings to Fixed Charges | | | 2.1 | x | | | 1.7 | x |
ITEM 2. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, CONTINUED
FINANCIAL DATA
(Millions of Dollars)
-------------------------
March 29, December 28,
2002 2001
--------- ------------
Cash, Cash Equivalents and
Short-Term Investments $ 781 $ 618
Working Capital (Deficit) $ (685) $ (1,229)
Current Ratio 0.8 0.6
Debt Ratio 52 % 51 %
Ratio of Earnings to Fixed Charges 1.8 x 1.7 x
OUTLOOK
CONDITION—(Continued)
Outlook
During the remainder of 2002, CSX expects that its financial performance
shouldresults will improve significantly whenas the industrial sector slowly recovers from the current economic slowdown.industrial recession that impacted the company’s volumes negatively over the last seven quarters. CSX believes that its Surface Transportation units are ready to capitalize and benefit significantly from an economic recovery through the inherent operating leverage that these units possess. Even if an economic recovery does not materialize until 2003, CSX still anticipates that the Surface Transportation units will post quarterly year-over-year improvements in earnings throughout the remainder of the year.
The Marine Services units continue to contribute operating income to CSX and the expectation is that these units will experience earnings greater than in 2001 should the economic recovery occur as expected in the second half of 2002. CSX Lines has successfully cut costs and continues to have quarter over quarter improvements in earnings. Despite lower revenue, CSX World Terminals continues to successfully manage costs through a slowdown in international containerized volume and expects to keep operating income at a level consistentclose to prior year.
Investment in and Integrated Rail Operations with prior year.
INVESTMENT IN AND INTEGRATED RAIL OPERATIONS WITH CONRAIL
Conrail
Background
- ----------
CSX and Norfolk Southern Corporation (Norfolk Southern)(“Norfolk Southern”) completed the acquisition of Conrail Inc. (Conrail)(“Conrail”) in May 1997. Conrail owns the primary freight railroad system serving the northeastern United States, and its rail network extends into several midwestern states and into Canada. CSX and Norfolk Southern, through a jointly owned acquisition entity, hold economic interests in Conrail of 42% and 58%, respectively, and voting interests of 50% each. CSX and Norfolk Southern operate over allocated portions of the Conrail lines.
The rail subsidiaries of CSX and Norfolk Southern operate their respective portions of the Conrail system pursuant to various operating agreements. Under these agreements, the railroads pay operating fees to Conrail for the use of right-of-way and rent for the use of equipment. Conrail continues to provide rail service in certain shared geographic areas
("(“Shared Asset
Areas"Areas”) for the joint benefit of CSX and Norfolk Southern for which it is compensated on the basis of usage by the respective railroads.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, CONTINUED
INVESTMENT IN AND INTEGRATED RAIL OPERATIONS WITH CONRAIL, CONTINUED
Accounting and Financial Reporting Effects
- ------------------------------------------
Upon integration, substantially all of Conrail'sConrail’s customer freight contracts were assumed by CSX and Norfolk Southern. As a result, CSX'sCSX’s rail and intermodal operating revenue includes revenue from traffic previously moving on Conrail. Operating expenses reflect corresponding increases for costs incurred to handle the new traffic and operate the former Conrail lines. Rail operating expenses includes an expense category, "Conrail“Conrail Operating Fee, Rent and Services,"” which reflects payments to Conrail for the use of right-of-way and equipment, as well as charges for transportation, switching, and terminal services in the Shared Asset Areas Conrail operates for the joint benefit of CSX and Norfolk Southern. This expense category also includes amortization of the fair value write-up arising from the acquisition of Conrail, as well as CSX'sCSX’s proportionate share of Conrail'sConrail’s net income or loss recognized under the equity method of accounting.
Conrail's
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION—(Continued)
INVESTMENT IN AND INTEGRATED RAIL OPERATIONS WITH CONRAIL—(Continued)
Conrail’s Results of Operations
- -------------------------------
Conrail reported net incomeoperating revenue of $36$222 million and $447 million for the first quarter ofand six-months ended June 28, 2002, compared to net income of $45$229 million and $462 million for the same period last year.quarter and six-months ended June 29, 2001. The revenue decline reflects a decrease in revenue and a favorable state tax settlement
during the first quarter of 2001.
Conrail's first-quarter operating revenues were $225 million, compared
to $233 in the same prior-year period. The decrease is attributed to lower operating fees, largely a result of reduced operating costs in the Shared AssetsAsset Areas, and for the six-month period, lower revenues at Conrail'sConrail’s Indiana Harbor Belt subsidiary.
Conrail reported
Conrail’s operating expenses of $164for the quarter ended June 30, 2002 were $158 million, compared with $153 million for the first
quartersame period of 2002, down from $169 million in the prior year period. The decreaseyear. This increase is primarily a result of increased casualty and other claim expenses. Conrail’s operating expenses remained flat at $322 million for the reduction in expenses associated withsix-month periods ended June 30, 2002 and June 30, 2001.
Conrail reported net income of $42 million and $78 million for the revenue decline.
Conrail'squarter and six-months ended June 28, 2002, compared to $47 and $92 million for the quarter and six-months ended June 29, 2001. The net income decline reflects a state tax settlement that benefited the six-months ended June 30, 2001.
Conrail had a working capital deficit was $124of $79 million at March 31,June 30, 2002, compared with working capital of $438 million at December 31, 2001. The change is largely the result of the exchange of the demand notes receivable from NS and CSX for new longer-term notes. Conrail is expected to have sufficient cash flow to meet its ongoing obligations.
OTHER MATTERS
Other Matters
Sale of International Container-Shipping Assets
In December 1999, CSX sold certain assets comprising
Sea-Land'sSea-Land’s international liner business to A. P. Moller-Maersk Line (Maersk). Maersk acquired vessels, containers, certain terminal facilities and various other assets and related liabilities of the international liner business. The agreement with Maersk provides for a post-closing working capital adjustment to the sales price based on the change in working capital, as defined in the agreement, between June 25, 1999, and December 10, 1999. The Company has recorded a receivable of approximately $70 million in connection with the post-closing working capital adjustment and this amount is currently in dispute. This matter, together with other issues relating to the contractual obligations of the Company, has been submitted to arbitration.
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ITEM 2. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, CONTINUED
CONDITION—(Continued)
OTHER MATTERS, CONTINUED
MATTERS—(Continued)
Sale of International Container-Shipping Assets, Continued
Assets—(Continued)
In addition to the disputes relating to the sale of the international container shipping assets, CSX has received a claim amounting to approximately $180 million plus interest from Europe Container Terminals bv (ECT), owner of the Rotterdam Container Terminal previously operated by Sea-Land prior to its sale to Maersk. ECT has claimed that the sale of the international liner business to Maersk resulted in a breach of the Sea-Land terminal agreements. ECT has refused to accept containers at the former Sea-Land facility tendered by Maersk Sea-Land and is seeking compensation from CSX related to the alleged breach. CSX has also advised Maersk that CSX will hold themit responsible for any damages that may result from this dispute. A finalAn initial arbitration hearing has been held to establish whether CSX is liable on ECT’s claim, and a ruling on ECT's claim, which
has advanced to formal binding arbitrationthat issue is expected in Rotterdam, is not expected before
late summerDecember 2002, after the filing of 2002.post-hearing briefs. Management believes that valid defenses to this claim exist. If the arbitration panel determines that there is liability, then a separate hearing will be set to fix the amount of any damages.
Although management believes it will prevail in some or all of the Maersk and ECT disputes and arbitrations, it can give no assurance in this regard. An adverse outcome could have a material effect on the determination of the final loss on sale of Sea-Land'sSea-Land’s International Liner business and the financial results in future reporting periods.
New Orleans Tank Car Fire Litigation
- ------------------------------------
In
September 1997 a state court jury in New Orleans, Louisiana
returned a $2.5 billion punitive damages award against CSXT. The award was made
in a class-action lawsuit against a group of nine companies based on personal
injuries alleged to have arisen from a 1987 tank car fire. In October 1997 the
Louisiana Supreme Court set aside the punitive damages judgment, ruling the
judgment should not have been entered until all liability issues were resolved.
Six of the nine defendants settled with the plaintiffs' representatives in 1999.
On November 5, 1999, the trial court granted CSXT's motion for judgment
notwithstanding the verdict, and effectively reduced the amount of the punitive
damages verdict from $2.5 billion to $850 million.
A judgment reflecting the $850 million punitive award has been
entered against CSXT. In June 2001 the Louisiana Court of Appeal for the Fourth
Circuit affirmed the judgment of the trial court, which reduced the punitive
damages verdict from $2.5 billion to $850 million. CSXT then filed with the
Louisiana Supreme Court an application that the court take jurisdiction over and
reverse the 1997 punitive damages award.
In November 2001 CSXT
announced that it had reached a
proposed settlement of the
New Orleans Tank Car Fire litigation,
which was subject to a fairness hearing and court approval. The amount to be paid by CSXT under the settlement is $220 million,
to resolve
all claims arising out of the 1987 fire and evacuation (whether or not included
in the present class-action lawsuit). CSXT incurred a charge of $60$85 million
before tax, $37 million after tax, 17 cents per share in the fourth quarter of
2001 to account for the expense of the settlement, net of insurance recoveries.
InThe fairness hearing occurred in April 2002,
and the
trial court held a fairness hearing respectingCourt approved the
proposed CSXT settlement. The
same day,time has run for appeals. The Company is fully accrued for this settlement, which is subject to plaintiffs’ attorneys reaching agreement with the
trial court issued an ordergroup of plaintiffs. The Company expects that
among other things, (1) gave final approvalagreement to
the settlement; (2) provided that
any and all liability of CSXT pursuant to any of the judgments previously
entered in the litigation was satisfied; and (3) determined that upon the "final
settlement date" as defined in the preliminary settlement agreement between CSXTbe obtained and the
plaintiffs' representatives, the case willsettlement is expected to be
finally dismissed against
CSXT. The "final settlement date" is defined as the date by which the April 2002
order becomes final and non-appealable (calculated as June 10, 2002, if no
appeals from the order are taken) or all appeals from the order are finally
resolved, and the date by which certain other events must occur as providedpaid in
the preliminary settlement agreement.
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2002.ITEM 2. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, CONTINUED
FORWARD LOOKING STATEMENTS
Estimates and forecasts in Management's Discussion and Analysis and in
other sections of thisCONDITION—(Continued)
Forward Looking Statements
This Quarterly Report are based on many assumptions about
complex economic and operating factorscontains forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to, among other items: projections and estimates of earnings, revenues, cost-savings, expenses, or other financial items; statements of management’s plans, strategies and objectives for future operation, and management’s expectations as to future performance and operations and the time by which objectives will be achieved; statements concerning proposed new products and services; and statements regarding future economic, industry performance,
general business and economicor market conditions and other matters that cannot be
predicted accurately and that are subject to contingencies over which the
Company has no control. Such forward-lookingor performance. Forward-looking statements are subject to
uncertainties and other factors that may cause actual results to differ
materially from the views, beliefs, and projections expressed intypically identified by words or phrases such statements. The words "believe"as “believe”, "expect"“expect”, "anticipate"“anticipate”, "project"“project”, and similar expressions signify forward-looking statements. Readers are cautioned not to
place undue reliance on any forward-lookingexpressions. Forward-looking statements made by or on behalf of
the Company. Any such statement speaksspeak only as of the date they are made, and the statement was
made. The Company undertakes no obligation to update or revise any forward-looking statement. If the Company does update any forward-looking statement, no inference should be drawn that the Company will make additional updates with respect to that statement or any other forward-looking statements.
Forward-looking statements are subject to a number of risks and uncertainties, and actual performance or results could differ materially from that anticipated by these forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by these forward-looking statements include, among
others,others: (i) the
following possibilities: (i) generalCompany’s success in implementing its financial and operational initiatives, (ii) changes in domestic or international economic or business conditions,
either
nationally or internationally, an increase in fuel prices, a tighteningincluding those affecting the rail industry (such as the impact of
the
labor market or changes in demands of organized labor resulting in higher wages,
or increased benefits or other costs or disruption of operations may adversely
affect the businesses of the Company; (ii))industry competition, conditions, performance and consolidation); (iii) legislative or regulatory
changes,
including possible enactmentchanges; and (iv) the outcome of
initiativesclaims and litigation involving or affecting the Company. Other important assumptions and factors that could cause actual results to
reregulate the rail industry, may
adversely affect the businesses of the Company; (iii) possible additional
consolidation of the rail industrydiffer materially from those in the
near future may adversely affect the
operationsforward-looking statements are specified elsewhere in this Quarterly Report and
businesses of the Company; and (iv) changes may occur in the
securitiesCompany’s other SEC reports, accessible on the SEC’s website at www.sec.gov and
capital markets.
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the Company’s website at www.csx.com. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We address our exposure to market risks, principally the market risk of changes in interest rates, through a controlled program of risk management that includes the use of interest rate swap agreements.agreements on $1.4 billion of debt. We do not hold or issue derivative financial instruments for trading purposes. In the event of a 1% increase or decreasevariance in the LIBOR interest rate, the interest expense related to these agreements would increase or decreasebe changed by $14 million on an annual basis. The Company is exposed to credit loss in the event of non-performance by any counter-party to the interest rate swap agreements. The Company does not anticipate non-performance by such counter-parties, and no material loss would be expected from non-performance.
At March 29,June 28, 2002 and December 28, 2001, CSX had approximately $475
million$1.1 billion and $625 million, respectively, of floating rate debt outstanding. A 1% variance in interest rates would have a $4.8$11 million affecteffect on annual interest expense.
The Company is subject to risk relating to changes in the price of diesel fuel. Forward purchase agreements have been entered into with various suppliers for approximately 220144 million gallons of fuel, which is approximately 50% of the remaining 2002 requirement, at a weighted average price of 7778 cents per gallon. The Company is subject to fluctuations in prices for the remainder of its 2002 needs. A one cent change in the price per gallon of fuel would impactaffect fuel expense by approximately $2$1.4 million.
While the Company's container-shipping terminal management subsidiaryCompany’s International Terminals segment does business in several foreign countries, a substantial portion of its revenue and expenses are transacted in U.S. dollars.dollars or in currencies with little fluctuation against the U.S. dollar. For this reason, CSX does not believe its foreign currency market risk is significant.
A substantial increase in the fair market value of the
Company'sCompany’s stock price could negatively
impactaffect earnings per share due to the dilutive effect of stock options and convertible debt.
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PART II. OTHER INFORMATION
Item
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) Annual meeting held April 23, 2002.
(b) Not applicable.
(c) There were 214,304,426 shares of CSX common stock outstanding as of February 22, 2002, the record date for the 2002 annual meeting of shareholders. A total of 192,451,806 shares were voted. All of the nominees for directors of the corporation were elected with the following vote:
Nominee
| | Votes For
| | Votes Withheld
| | Broker Non-Votes
|
| Elizabeth E. Bailey | | 187,643,745 | | 4,808,061 | | — |
| Robert L. Burrus, Jr. | | 186,049,534 | | 6,402,272 | | — |
| Bruce C. Gottwald | | 141,140,848 | | 51,310,958 | | — |
| John R. Hall | | 186,409,785 | | 6,042,021 | | — |
| Robert D. Kunisch | | 187,671,675 | | 4,780,131 | | — |
| James W. McGlothlin | | 174,692,574 | | 17,759,232 | | — |
| Southwood J. Morcott | | 187,703,103 | | 4,748,703 | | — |
| Charles E. Rice | | 187,472,806 | | 4,978,000 | | — |
| William C. Richardson | | 187,742,655 | | 4,709,151 | | — |
| Frank S. Royal | | 186,932,969 | | 5,518,837 | | — |
| John W. Snow | | 186,997,333 | | 5,454,473 | | — |
| Michael J. Ward | | 187,798,612 | | 4,653,194 | | — |
The appointment of Ernst & Young LLP as independent auditors to audit and report on CSX’s financial statements for the year 2002 was ratified by the shareholders with the following vote:
Votes For
| | Votes Against
| | Abstentions
| | Broker Non-Votes
|
| 188,157,959 | | 3,190,152 | | 1,103,695 | | 0 |
The shareholder proposal regarding poison pill provisions was approved with the following vote:
Votes For
| | Votes Against
| | Abstentions
| | Broker Non-Votes
|
| 102,372,081 | | 61,412,427 | | 3,598,633 | | 25,068,665 |
ITEM 6. Exhibits and Reports on FormEXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
3.2* Bylaws of the Registrant, amended as of February 13,July 10, 2002
(b) Reports on Form 8-K
Form 8-K filed on 3/5/02 to announce the public offering of
$400,000,000 aggregate principal amount of the Company's 6.30% Notes
due 2012.
* Filed herewith
Signature
---------
None
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CSX CORPORATION
(Registrant)
By: /s/ CAROLYN T. SIZEMORE
-----------------------
Carolyn T. Sizemore
Vice President and Controller
(Principal Accounting Officer)
CSX CORPORATION (Registrant) |
|
| By: | | /s/ CAROLYN T. SIZEMORE
|
| | Carolyn T. Sizemore Vice President and Controller (Principal Accounting Officer) |
Dated: May 3,July 29, 2002
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