þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Virginia (State or other jurisdiction of incorporation or organization) | 62-1051971 (I.R.S. Employer Identification No.) |
500 Water Street, 15th Floor, Jacksonville, FL (Address of principal executive offices) | 32202 (Zip Code) |
2
(Dollars in Millions, Except Per Share Amounts) | Quarters Ended | Six Months Ended | ||||||||||||||||||||||
July 1, | June 25, | July 1, | June 25, | |||||||||||||||||||||
Quarters Ended | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||||||
Operating Revenue | $ | 2,166 | $ | 1,997 | $ | 4,274 | $ | 3,917 | ||||||||||||||||
Operating Expense | ||||||||||||||||||||||||
Labor and Fringe | 707 | 665 | 1,403 | 1,343 | ||||||||||||||||||||
Materials, Supplies and Other | 438 | 435 | 907 | 859 | ||||||||||||||||||||
Depreciation | 205 | 159 | 410 | 321 | ||||||||||||||||||||
Fuel | 176 | 151 | 355 | 305 | ||||||||||||||||||||
Building and Equipment Rent | 127 | 140 | 259 | 277 | ||||||||||||||||||||
Inland Transportation | 64 | 70 | 120 | 144 | ||||||||||||||||||||
Conrail Rents Fees and Services | 19 | 82 | 39 | 169 | ||||||||||||||||||||
Restructuring Charge | — | 15 | — | 68 | ||||||||||||||||||||
Miscellaneous | (1 | ) | (2 | ) | (4 | ) | (3 | ) | ||||||||||||||||
April 1, | March 26, | |||||||||||||||||||||||
2005 | 2004 | |||||||||||||||||||||||
(Dollars in Millions, Except Per Share Amounts) | ||||||||||||||||||||||||
Operating Income | ||||||||||||||||||||||||
Operating Revenue | $ | 2,108 | $ | 1,920 | ||||||||||||||||||||
Operating Expense (Note 9) | 1,754 | 1,768 | ||||||||||||||||||||||
Total Operating Expenses | 1,735 | 1,715 | 3,489 | 3,483 | ||||||||||||||||||||
Operating Income | 354 | 152 | 431 | 282 | 785 | 434 | ||||||||||||||||||
Other Income and Expense | ||||||||||||||||||||||||
Other Expense - Net (Note 10) | 2 | 4 | ||||||||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||
Other Income — Net (Note 9) | 30 | 5 | 28 | 1 | ||||||||||||||||||||
Debt Repurchase Expense (Note 4) | (192 | ) | — | (192 | ) | — | ||||||||||||||||||
Interest Expense | 114 | 108 | (110 | ) | (109 | ) | (224 | ) | (217 | ) | ||||||||||||||
Earnings | ||||||||||||||||||||||||
Earnings from Continuing Operations before Income Taxes | 238 | 40 | 159 | 178 | 397 | 218 | ||||||||||||||||||
Income Tax Expense | 84 | 13 | ||||||||||||||||||||||
Income Tax (Benefit) Expense | (6 | ) | 60 | 78 | 73 | |||||||||||||||||||
Earnings from Continuing Operations | 154 | 27 | 165 | 118 | 319 | 145 | ||||||||||||||||||
Discontinued Operations — Net of Tax (Note 3) | 425 | 3 | — | 1 | 425 | 4 | ||||||||||||||||||
Net Earnings | $ | 579 | $ | 30 | $ | 165 | $ | 119 | $ | 744 | $ | 149 | ||||||||||||
Per Common Share | ||||||||||||||||||||||||
Earnings Per Share (Note 2): | ||||||||||||||||||||||||
Income from Continuing Operations | $ | 0.72 | $ | 0.13 | $ | 0.76 | $ | 0.55 | $ | 1.48 | $ | 0.68 | ||||||||||||
Discontinued Operations | 1.97 | 0.01 | — | — | 1.97 | 0.01 | ||||||||||||||||||
Net Earnings | $ | 2.69 | $ | 0.14 | $ | 0.76 | $ | 0.55 | $ | 3.45 | $ | 0.69 | ||||||||||||
Earnings Per Share, Assuming Dilution (Note 2): | ||||||||||||||||||||||||
Income from Continuing Operations | $ | 0.68 | $ | 0.13 | $ | 0.73 | $ | 0.53 | $ | 1.41 | $ | 0.66 | ||||||||||||
Discontinued Operations | 1.88 | 0.01 | — | — | 1.88 | 0.01 | ||||||||||||||||||
Net Earnings | $ | 2.56 | $ | 0.14 | $ | 0.73 | $ | 0.53 | $ | 3.29 | $ | 0.67 | ||||||||||||
Average Common Shares Outstanding (Thousands) | 215,356 | 214,670 | 216,418 | 214,734 | 215,887 | 214,702 | ||||||||||||||||||
Average Common Shares Outstanding, Assuming Dilution (Thousands) | 226,246 | 224,880 | 227,453 | 224,877 | 226,850 | 224,879 | ||||||||||||||||||
Cash Dividends Paid Per Common Share | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.20 | $ | 0.20 | ||||||||||||
3
CONSOLIDATED BALANCE SHEETS
(Unaudited) | (Unaudited) | |||||||||||||||
(Dollars in Millions) | April 1, 2005 | December 31, 2004 | July 1, 2005 | December 31, 2004 | ||||||||||||
ASSETS | ASSETS | |||||||||||||||
Current Assets: | ||||||||||||||||
Cash, Cash Equivalents and Short-term Investments (Note 1) | $ | 1,823 | $ | 859 | $ | 513 | $ | 859 | ||||||||
Accounts Receivable — Net (Note 8) | 1,163 | 1,143 | 1,123 | 1,143 | ||||||||||||
Materials and Supplies | 190 | 165 | 196 | 165 | ||||||||||||
Deferred Income Taxes | 115 | 20 | 120 | 20 | ||||||||||||
Other Current Assets — Net (Note 8) | 288 | 157 | 252 | 157 | ||||||||||||
International Terminals Assets Held for Sale (Note 3) | — | 643 | — | 643 | ||||||||||||
Total Current Assets | 3,579 | 2,987 | 2,204 | 2,987 | ||||||||||||
Properties | 25,964 | 25,852 | 26,121 | 25,852 | ||||||||||||
Accumulated Depreciation | (6,082 | ) | (5,907 | ) | (6,240 | ) | (5,907 | ) | ||||||||
Properties — Net | 19,882 | 19,945 | 19,881 | 19,945 | ||||||||||||
Investment in Conrail (Note 7) | 577 | 574 | 583 | 574 | ||||||||||||
Affiliates and Other Companies | 302 | 296 | 310 | 296 | ||||||||||||
Other Long-term Assets — Net (Note 8) | 752 | 779 | 772 | 804 | ||||||||||||
Total Assets | $ | 25,092 | $ | 24,581 | $ | 23,750 | $ | 24,606 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||
Current Liabilities: | ||||||||||||||||
Accounts Payable | $ | 939 | $ | 879 | $ | 885 | $ | 879 | ||||||||
Labor and Fringe Benefits Payable | 352 | 371 | 429 | 371 | ||||||||||||
Casualty, Environmental and Other Reserves (Note 12) | 314 | 312 | ||||||||||||||
Casualty, Environmental and Other Reserves (Note 11) | 315 | 312 | ||||||||||||||
Current Maturities of Long-term Debt | 912 | 983 | 618 | 983 | ||||||||||||
Short-term Debt | 3 | 101 | 3 | 101 | ||||||||||||
Income and Other Taxes Payable | 463 | 170 | 206 | 170 | ||||||||||||
Other Current Liabilities | 79 | 115 | 53 | 115 | ||||||||||||
International Terminals Liabilities Held for Sale (Note 3) | — | 386 | — | 386 | ||||||||||||
Total Current Liabilities | 3,062 | 3,317 | 2,509 | 3,317 | ||||||||||||
Casualty, Environmental and Other Reserves (Note 12) | 726 | 735 | ||||||||||||||
Casualty, Environmental and Other Reserves (Note 11) | 697 | 735 | ||||||||||||||
Long-term Debt | 6,208 | 6,234 | 5,399 | 6,234 | ||||||||||||
Deferred Income Taxes | 6,080 | 5,979 | 6,006 | 5,979 | ||||||||||||
Other Long-term Liabilities | 1,528 | 1,505 | 1,522 | 1,530 | ||||||||||||
Total Liabilities | 17,604 | 17,770 | 16,133 | 17,795 | ||||||||||||
Shareholders’ Equity: | ||||||||||||||||
Common Stock, $1 Par Value | 217 | 216 | 217 | 216 | ||||||||||||
Other Capital | 1,657 | 1,605 | 1,678 | 1,605 | ||||||||||||
Retained Earnings | 5,768 | 5,210 | 5,912 | 5,210 | ||||||||||||
Accumulated Other Comprehensive Loss (Note 1) | (154 | ) | (220 | ) | (190 | ) | (220 | ) | ||||||||
Total Shareholders’ Equity | 7,488 | 6,811 | 7,617 | 6,811 | ||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 25,092 | $ | 24,581 | $ | 23,750 | $ | 24,606 | ||||||||
4
(Dollars in Millions) | Quarters Ended | Six Months Ended | ||||||||||||||
April 1, | March 26, | July 1, | June 25, | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||
Net Earnings | $ | 579 | $ | 30 | $ | 744 | $ | 149 | ||||||||
Adjustments to Reconcile Net Earnings to Net Cash Provided: | ||||||||||||||||
Depreciation | 209 | 167 | 418 | 332 | ||||||||||||
Deferred Income Taxes | 8 | 16 | (51 | ) | 67 | |||||||||||
Gain on Sale of International Terminals — Net of Tax (Note 3) | (428 | ) | — | (428 | ) | — | ||||||||||
Restructuring Charge (Note 16) | — | 53 | ||||||||||||||
Restructuring Charge (Note 15) | — | 68 | ||||||||||||||
Other Operating Activities | (59 | ) | 7 | (124 | ) | (38 | ) | |||||||||
Changes in Operating Assets and Liabilities: | ||||||||||||||||
Accounts Receivable | (14 | ) | 4 | 41 | (47 | ) | ||||||||||
Other Current Assets | (41 | ) | (51 | ) | (45 | ) | (18 | ) | ||||||||
Accounts Payable | 84 | 27 | 16 | 31 | ||||||||||||
Other Current Liabilities | (29 | ) | (49 | ) | (242 | ) | (25 | ) | ||||||||
Net Cash Provided by Operating Activities | 309 | 204 | 329 | 519 | ||||||||||||
INVESTING ACTIVITIES | ||||||||||||||||
Property Additions | (167 | ) | (264 | ) | (381 | ) | (484 | ) | ||||||||
Net Proceeds from Sale of International Terminals (Note 3) | 1,110 | — | 1,110 | — | ||||||||||||
Purchase of Minority Interest in an International Terminals’ Subsidiary (Note 3) | (110 | ) | — | (110 | ) | — | ||||||||||
Purchases of Short-term Investments | (1,093 | ) | (343 | ) | (1,576 | ) | (719 | ) | ||||||||
Proceeds from Sales of Short-term Investments | 305 | 211 | ||||||||||||||
Proceeds from Sale of Short-term Investments | 1,679 | 644 | ||||||||||||||
Other Investing Activities | (2 | ) | (25 | ) | 1 | (37 | ) | |||||||||
Net Cash Provided by (Used in) Investing Activities | 43 | (421 | ) | 723 | (596 | ) | ||||||||||
FINANCING ACTIVITIES | ||||||||||||||||
Short-term Debt — Net | (97 | ) | 152 | (98 | ) | 702 | ||||||||||
Long-term Debt Issued | 26 | 50 | 27 | 62 | ||||||||||||
Long-term Debt Repaid | (112 | ) | (32 | ) | (1,213 | ) | (379 | ) | ||||||||
Dividends Paid | (22 | ) | (22 | ) | (44 | ) | (43 | ) | ||||||||
Other Financing Activities | 41 | 3 | 55 | 3 | ||||||||||||
Net Cash (Used in) Provided by Financing Activities | (164 | ) | 151 | (1,273 | ) | 345 | ||||||||||
Net Increase (Decrease) in Cash and Cash Equivalents | 188 | (66 | ) | |||||||||||||
Net (Decrease) Increase in Cash and Cash Equivalents | (221 | ) | 268 | |||||||||||||
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS | ||||||||||||||||
Cash and Cash Equivalents at Beginning of Period | 522 | 296 | 522 | 296 | ||||||||||||
Cash and Cash Equivalents at End of Period | 710 | 230 | 301 | 564 | ||||||||||||
Short-term Investments at End of Period | 1,113 | 217 | 212 | 164 | ||||||||||||
Cash, Cash Equivalents and Short-term Investments at End of Period | $ | 1,823 | $ | 447 | $ | 513 | $ | 728 | ||||||||
5
10-K, 2005 First Quarterly Report on Form 10-Q and any Current Reports on Form 8-K.
Balance | Net Gain | Balance | ||||||||||
(Dollars in Millions) | December 31, 2004 | (Loss) | April 1, 2005 | |||||||||
Minimum Pension Liability | ||||||||||||
(net of $161 of taxes as of December 31, 2004 and April 1, 2005) | $ | (292 | ) | $ | — | $ | (292 | ) | ||||
Fair Value of Fuel Derivatives | 72 | 67 | 139 | |||||||||
(net of $45 and $88 of taxes as of December 31, 2004 and April 1, 2005, respectively) | ||||||||||||
Other | — | (1 | ) | (1 | ) | |||||||
Total | $ | (220 | ) | $ | 66 | $ | (154 | ) | ||||
Balance | Net Gain | Balance | ||||||||||
(Dollars in Millions) | December 31, 2004 | (Loss) | July 1, 2005 | |||||||||
Minimum Pension Liability (net of $161 of taxes as of December 31, 2004 and July 1, 2005) | $ | (292 | ) | $ | — | $ | (292 | ) | ||||
Fair Value of Fuel Derivatives (net of $45 and $65 of taxes as of December 31, 2004 and July 1, 2005, respectively) | 72 | 31 | 103 | |||||||||
Other | — | (1 | ) | (1 | ) | |||||||
Total | $ | (220 | ) | $ | 30 | $ | (190 | ) | ||||
derivative instruments and a reduction in the Company’s additional minimum pension liability. (See Note 10. Derivative Financial Instruments.)
6
(Dollars In Millions, Except Per Share Amounts) | Quarters Ended | Six Months Ended | ||||||||||||||||||||||
July 1, | June 25, | July 1, | June 25, | |||||||||||||||||||||
Quarters Ended | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||||||
April 1, | March 26, | |||||||||||||||||||||||
2005 | 2004 | |||||||||||||||||||||||
Numerator (Millions): | ||||||||||||||||||||||||
Numerator: | ||||||||||||||||||||||||
Earnings from Continuing Operations | $ | 154 | $ | 27 | $ | 165 | $ | 118 | $ | 319 | $ | 145 | ||||||||||||
Interest Expense on Convertible Debt — Net of Tax | 1 | 1 | 1 | 1 | 2 | 2 | ||||||||||||||||||
Net Earnings from Continuing Operations, If-Converted | 155 | 28 | 166 | 119 | 321 | 147 | ||||||||||||||||||
Discontinued Operations — Net of Tax | 425 | 3 | — | 1 | 425 | 4 | ||||||||||||||||||
Net Earnings, If-Converted | 580 | 31 | 166 | 120 | 746 | 151 | ||||||||||||||||||
Interest Expense on Convertible Debt — Net of Tax | (1 | ) | (1 | ) | (1 | ) | (1 | ) | (2 | ) | (2 | ) | ||||||||||||
Net Earnings | $ | 579 | $ | 30 | $ | 165 | $ | 119 | $ | 744 | $ | 149 | ||||||||||||
Denominator (Thousands): | ||||||||||||||||||||||||
Average Common Shares Outstanding | 215,356 | 214,670 | 216,418 | 214,734 | 215,887 | 214,702 | ||||||||||||||||||
Convertible Debt | 9,728 | 9,728 | 9,728 | 9,728 | 9,728 | 9,728 | ||||||||||||||||||
Effect of Potentially Dilutive Common Shares | 1,162 | 482 | 1,307 | 415 | 1,235 | 449 | ||||||||||||||||||
Average Common Shares Outstanding, Assuming Dilution | 226,246 | 224,880 | 227,453 | 224,877 | 226,850 | 224,879 | ||||||||||||||||||
Earnings Per Share: | ||||||||||||||||||||||||
Income from Continuing Operations | $ | 0.72 | $ | 0.13 | $ | 0.76 | $ | 0.55 | $ | 1.48 | $ | 0.68 | ||||||||||||
Discontinued Operations | 1.97 | 0.01 | — | — | 1.97 | 0.01 | ||||||||||||||||||
Net Earnings | $ | 2.69 | $ | 0.14 | $ | 0.76 | $ | 0.55 | $ | 3.45 | $ | 0.69 | ||||||||||||
Earnings Per Share, Assuming Dilution: | ||||||||||||||||||||||||
Income from Continuing Operations | $ | 0.68 | $ | 0.13 | $ | 0.73 | $ | 0.53 | $ | 1.41 | $ | 0.66 | ||||||||||||
Discontinued Operations | 1.88 | 0.01 | — | — | 1.88 | 0.01 | ||||||||||||||||||
Net Earnings | $ | 2.56 | $ | 0.14 | $ | 0.73 | $ | 0.53 | $ | 3.29 | $ | 0.67 | ||||||||||||
Quarters Ended | ||||||||
April 1, 2005 | March 26, 2004 | |||||||
Number of Stock Options Exercised (Thousands) | 1,084 | 78 |
(In Thousands) | Quarters Ended | Six Months Ended | ||||||||||||||
July 1, 2005 | June 25, 2004 | July 1, 2005 | June 25, 2004 | |||||||||||||
Number of Stock Options Exercised | 382 | 114 | 1,466 | 192 |
7
Quarters Ended | ||||||||
April 1, 2005 | March 26, 2004 | |||||||
Number of Shares (Thousands) | 7,431 | 18,400 | ||||||
Average Exercise / Conversion Price | $ | 47.16 | $ | 42.43 |
Quarters Ended | ||||||||
July 1, 2005 | June 25, 2004 | |||||||
Number of Shares (Millions) | 7 | 22 | ||||||
Average Exercise / Conversion Price | $ | 47.61 | $ | 40.82 |
business through the closing date of the transaction in February 2005. Discontinued operations for the quarter and six months ended June 25, 2004 include revenue of $38 million and $86 million, respectively.
8
NOTE 3. Discontinued Operations, Continued
The following table provides information about amounts classified as International Terminals Assets and Liabilities Held for Sale within the Consolidated Balance Sheets.
December 31, | ||||
2004 | ||||
(Dollars in Millions) | ||||
Balance Sheet Information: | ||||
Accounts Receivable — Net | $ | 25 | ||
Other Current Assets | 3 | |||
Properties — Net | 87 | |||
Affiliates and Other Companies | 523 | |||
Other Long-term Assets | 5 | |||
International Terminals Assets Held for Sale | $ | 643 | ||
Current Liabilities | $ | 26 | ||
Short-term Debt | 203 | |||
Long-term Deferred Income Taxes | 16 | |||
Other Long-term Liabilities | 141 | |||
International Terminals Liabilities Held for Sale | $ | 386 | ||
The following table provides information about amounts classified in Discontinued Operations within the Consolidated Income Statements.
Quarters Ended | ||||||||
April 1, | March 26, | |||||||
2005 | 2004 | |||||||
(Dollars in Millions) (Unaudited) | ||||||||
Income Statement Information: | ||||||||
Revenues | $ | 14 | $ | 48 | ||||
Expenses | 21 | 39 | ||||||
Operating Income | $ | (7 | ) | $ | 9 | |||
Other Expense | — | (5 | ) | |||||
(Loss) Earnings Before Income Taxes | (7 | ) | 4 | |||||
Income Tax (Benefit) Expense | (4 | ) | 1 | |||||
Net (Loss) Income | $ | (3 | ) | $ | 3 | |||
Discontinued Operations for the three months ended April 1, 2005 includes the results of operations from January 1, 2005 to the closing date of the transaction on February 22, 2005.
Discontinued Operations for the three months ended March 26, 2004 includes International Terminals restructuring initiatives of $6 million for the quarter ended March 26, 2004, in an effort to maintain and improve productivity standards.
9
CSX CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
In December 2003, CSX executed a $75 million revolving loan facility with a maturity date in 2005. Borrowings under the facility bore interest at a rate that fluctuated with LIBOR. In addition, the Company paid an annual commitment fee of 0.15% for the period the facility was not drawn. As of December 31, 2004, the Company had $75 million in aggregate principal amount outstanding under this borrowing. In JanuaryJune 2005, the Company repurchased $1.0 billion of its publicly-traded notes listed below pursuant to offers to purchase that commenced in May 2005, and expired in June 2005.
Aggregate Principal | ||||||||
Amount of Tendered | ||||||||
Principal Amount | Notes Accepted for | |||||||
Notes | Outstanding | Purchase | ||||||
CSX 2.75% Notes due 2006 | $ | 200 | $ | 186 | ||||
CSX 9% Notes due 2006 | 300 | 206 | ||||||
CSX Floating Rate Notes due 2006 | 300 | 58 | ||||||
CSX 8.625% Notes due 2022 | 200 | 84 | ||||||
CSX 7.95% Notes due 2027 | 500 | 227 | ||||||
CSX 8.10% Notes due 2022 | 150 | 57 | ||||||
CSX 7.25% Notes due 2027 | 250 | 167 | ||||||
CSX 7.90% Notes due 2017 | 400 | 15 | ||||||
$ | 2,300 | $ | 1,000 | |||||
repurchase.
9
In February 2003, CSX conveyed most of its interestShare-Based Compensation
(Dollars in Millions) | Quarters Ended | Six Months Ended | ||||||||||||||
July 1, | June 25, | July 1, | June 25, | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Stock Option Compensation Expense | $ | 1 | $ | 2 | $ | 2 | $ | 9 |
In July 2004, Horizon was acquired by an unrelated third party, and CSX received $59 million, which included $48 million for the purchase of its ownership interest in Horizon, $4 million of interest, and a performance payment of $7 million, which will also be recognized over the 12-year sub-lease term. However, CSX and one of its affiliates will continue to remain a lessee / sublessor or guarantor on certain vessels and equipment as long as the subleases remain in effect. (See Note 13. Commitments and Contingencies.)
CSX sold its International Terminals business on February 22, 2005. (See Note 3. Discontinued Operations.)
(Dollars in Millions, Except Per Share Amounts) | Quarters Ended | Six Months Ended | ||||||||||||||
July 1, | June 25, | July 1, | June 25, | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Net Earnings — As Reported | $ | 165 | $ | 119 | $ | 744 | $ | 149 | ||||||||
Add: Stock-Based Employee Compensation Expense Included in Reported Net Income — Net of Tax | 7 | 3 | 11 | 8 | ||||||||||||
Deduct: Total Stock-Based Employee Compensation Expense Determined under the Fair Value Based Method for All Awards — Net of Tax | (8 | ) | (5 | ) | (14 | ) | (19 | ) | ||||||||
Pro Forma Net Earnings | $ | 164 | $ | 117 | $ | 741 | $ | 138 | ||||||||
Interest Expense on Convertible Debt — Net of Tax | 1 | 1 | 2 | 2 | ||||||||||||
Pro Forma Net Earnings, If-Converted | $ | 165 | $ | 118 | $ | 743 | $ | 140 | ||||||||
Earnings Per Share: | ||||||||||||||||
Basic — As Reported | $ | 0.76 | $ | 0.55 | $ | 3.45 | $ | 0.69 | ||||||||
Basic — Pro Forma | $ | 0.76 | $ | 0.54 | $ | 3.43 | $ | 0.64 | ||||||||
Diluted — As Reported | $ | 0.73 | $ | 0.53 | $ | 3.29 | $ | 0.67 | ||||||||
Diluted — Pro Forma | $ | 0.73 | $ | 0.52 | $ | 3.28 | $ | 0.62 |
10
SFAS 148, “Accounting for Stock-Based Compensation – Transition and Disclosure — an amendment of SFAS 123” was issued in
The Company recognized pretax expense of $1 million and $7 million in fiscal quarters ended April 1, 2005, and March 26, 2004, respectively, for stock options granted in May 2003. Stock compensation expense for the fiscal quarter ended March 26, 2004 includes $5 million pretax recorded in conjunction with the Company’s management restructuring related to recognition of unamortized expense for 2003 stock option awards retained by terminated employees (see Note 16. Management Restructuring). In addition to stock option expense, stock-based employee compensation expense included in reported net income consists of restricted stock awards, stock issued to directors and the Company’s long-term incentive compensation program for all periods presented.
The following table illustrates the pro forma effect on net earnings and earnings per share as if the fair value based method had been applied to all outstanding and unvested awards in each period:
April 1, | March 26, | |||||||
Dollars in Millions, Except Per Share Amounts | 2005 | 2004 | ||||||
Net Earnings — As Reported | $ | 579 | $ | 30 | ||||
Add: Stock-Based Employee Compensation Expense Included in Reported Net Income — Net of Tax | 4 | 5 | ||||||
Deduct: Total Stock-Based Employee Compensation Expense Determined under the Fair Value Based Method for All Awards — Net of Tax | (6 | ) | (14 | ) | ||||
Pro Forma Net Earnings | $ | 577 | $ | 21 | ||||
Interest Expense on Convertible Debt — Net of Tax | 1 | 1 | ||||||
Pro Forma Net Earnings, If-Converted | $ | 578 | $ | 22 | ||||
Earnings Per Share: | ||||||||
Basic — As Reported | $ | 2.69 | $ | 0.14 | ||||
Basic — Pro Forma | $ | 2.68 | $ | 0.10 | ||||
Diluted — As Reported | $ | 2.56 | $ | 0.14 | ||||
Diluted — Pro Forma | $ | 2.55 | $ | 0.10 |
As discussed below, the Company will comply with SFAS 123(R), “Share-Based Payment”, effective January 1, 2006.
11
CSX CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
NOTE 6. New Accounting Pronouncements, Continued
On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS 123(R), “Share-Based Payment”, which is a revision of SFAS 123, “Accounting for Stock-Based Compensation”. Currently, the Company uses the Black-Scholes-Merton formula to estimate the value of stock options granted to employees and expects to continue to use this acceptable option valuation model upon the required adoption of SFAS 123(R) on January 1, 2006. BecauseCompensation cost for unvested awards that were not recognized under SFAS 123 will be recognized under SFAS 123(R). The new rules must be applied not only to new and existing unvested awards but to previously granted awards that are not fully vested on the effective date, and because thedate. The Company adopted SFAS 123 using the prospective transition method (which applied only to awards granted, modified or settled after the adoption date), compensation cost for some previously granted awards that were not recognized under SFAS 123 will be recognized under SFAS 123(R). However, hadHad CSX adopted SFAS 123(R) in prior periods, the impact of that standard would have approximatedestimated the impact of SFAS 123 as described in the disclosure of pro forma net income and earnings per share above.in Note 5. Share-Based Compensation. SFAS 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. The Company is currently evaluating the impact of SFAS 123(R) on its consolidated financial statements, but does not expect the impact to be material.
In 2003,
12
CSX CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
Accounting and Financial Reporting Effects
Prior to the spin-off transaction, CSX’s rail and intermodal operating revenue includes revenue from traffic moving on Conrail property. Operating expenses include costs incurred to handle such traffic and operate the Conrail lines. Rail operating expense includes an expense category, “Conrail Rents, Fees and Services,” which reflects:
Conrail will continue to own, manage, and operate the Shared Assets Areas for the joint benefit of CSXT and NSR. However, the spin-off transaction effectively decreased rents paid to Conrail after the transaction date, as some assets previously leased from Conrail are now owned by CSXT.
1311
1. | Right-of-way usage fees paid to Conrail through August 2004. | ||
2. | Equipment rental payments to Conrail through August 2004. | ||
3. | Transportation, switching, and terminal service charges levied by Conrail in the Shared Assets Areas that Conrail operates for the joint benefit of CSXT and NSR. | ||
4. | Amortization of the fair value write-up arising from the acquisition of Conrail and certain other adjustments. | ||
5. | CSX’s 42% share of Conrail’s income before the cumulative effect of accounting change recognized under the equity method of accounting. |
Periods Ended | ||||||||
April 1, | December 31, | |||||||
2005 | 2004 | |||||||
(Dollars in Millions) | ||||||||
CSX Payable to Conrail | $ | 53 | $ | 59 |
Quarters Ended | ||||||||
April 1, | March 26, | |||||||
2005 | 2004 | |||||||
(Dollars in Millions) | ||||||||
Interest Expense Related to Conrail Advances | $ | — | $ | 2 |
(Dollars in Millions) | Periods Ended | |||||||
July 1, | December 31, | |||||||
2005 | 2004 | |||||||
CSX Payable to Conrail | $ | 39 | $ | 59 |
On
12
(Dollars in Millions) | Quarters Ended | Six Months Ended | ||||||||||||||
July 1, | June 25, | July 1, | June 25, | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Interest Income | $ | 15 | $ | 5 | $ | 22 | $ | 8 | ||||||||
Income (Loss) from Real Estate and Resort Operations | 24 | 5 | 16 | (2 | ) | |||||||||||
Minority Interest | (7 | ) | (4 | ) | (10 | ) | (7 | ) | ||||||||
Miscellaneous | (2 | ) | (1 | ) | — | 2 | ||||||||||
Other Income — Net | $ | 30 | $ | 5 | $ | 28 | $ | 1 | ||||||||
1413
NOTE 9. Operating Expense
CSX consolidated Operating Expense consists of the following:
Quarters Ended | ||||||||
April 1, | March 26, | |||||||
2005 | 2004 | |||||||
(Dollars in Millions) | ||||||||
Labor and Fringe | $ | 704 | $ | 686 | ||||
Materials, Supplies and Other | 461 | 416 | ||||||
Depreciation | 205 | 162 | ||||||
Fuel | 179 | 154 | ||||||
Building and Equipment Rent | 132 | 137 | ||||||
Inland Transportation | 56 | 74 | ||||||
Conrail Rents, Fees and Services | 20 | 87 | ||||||
Miscellaneous | (3 | ) | (1 | ) | ||||
Restructuring Charges | — | 53 | ||||||
Total | $ | 1,754 | $ | 1,768 | ||||
NOTE 10. Other Income (Expense)
Other Income (Expense) consists of the following:
Quarters Ended | ||||||||
April 1, | March 26, | |||||||
2005 | 2004 | |||||||
(Dollars in Millions) | ||||||||
Interest Income | $ | 7 | $ | 3 | ||||
Loss from Real Estate and Resort Operations | (8 | ) | (7 | ) | ||||
Minority Interest | (3 | ) | (3 | ) | ||||
Miscellaneous | 2 | 3 | ||||||
Other Income (Expense) | $ | (2 | ) | $ | (4 | ) | ||
15
CSX CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
Notional Amount | Fixed Interest | |||||||
Maturity Date | (Millions) | Rate | ||||||
June 22, 2005 | 50 | 6.46 | % | |||||
August 15, 2006 | 300 | 9.00 | % | |||||
May 1, 2007 | 450 | 7.45 | % | |||||
May 1, 2032 | 150 | 8.30 | % | |||||
Total/Average | $ | 950 | 8.02 | % | ||||
Maturity Date | Notional Amount | Fixed Interest Rate | ||||||
August 15, 2006 | $ | 94 | 9.00 | % | ||||
May 1, 2007 | 450 | 7.45 | % | |||||
May 1, 2032 | 150 | 8.30 | % | |||||
Total/Average | $ | 694 | 7.84 | % |
1614
April 1, | ||||
2005 | ||||
Approximate Gallons Hedged (Millions) | 271 | |||
Average Price Per Gallon | $ | 0.80 | ||
Swap Maturities | April 2005 - July 2006 |
2005 | 2006 | |||||||
Estimated % of Future Fuel Purchases Hedged at April 1, 2005 | 47 | % | 9 | % | ||||
July 1, | ||||
2005 | ||||
Approximate Gallons Hedged (Millions) | 187 | |||
Average Price Per Gallon | $0.81 | |||
Swap Maturities | July 2005 — July 2006 |
2005 | 2006 | |||||||
Estimated % of Future Fuel Purchases Hedged at end of period | 43 | % | 9 | % |
1715
April 1, 2005 | December 31, 2004 | |||||||||||||||||||||||||||||||||||||||||||||||
Current | Long-term | Total | Current | Long-term | Total | |||||||||||||||||||||||||||||||||||||||||||
(Dollars in Millions) | July 1, 2005 | December 31, 2004 | ||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in Millions) | Current | Long-term | Total | Current | Long-term | Total | ||||||||||||||||||||||||||||||||||||||||||
Casualty and Other | $ | 274 | $ | 556 | $ | 830 | $ | 272 | $ | 561 | $ | 833 | $ | 275 | $ | 543 | $ | 818 | $ | 272 | $ | 561 | $ | 833 | ||||||||||||||||||||||||
Separation | 20 | 130 | 150 | 20 | 135 | 155 | 20 | 114 | 134 | 20 | 135 | 155 | ||||||||||||||||||||||||||||||||||||
Environmental | 20 | 40 | 60 | 20 | 39 | 59 | 20 | 40 | 60 | 20 | 39 | 59 | ||||||||||||||||||||||||||||||||||||
Total | $ | 314 | $ | 726 | $ | 1,040 | $ | 312 | $ | 735 | $ | 1,047 | $ | 315 | $ | 697 | $ | 1,012 | $ | 312 | $ | 735 | $ | 1,047 | ||||||||||||||||||||||||
While the final outcome of casualty-related matters cannot be predicted with certainty, considering among other things the meritorious legal defenses available and liabilities that have been recorded, it is the opinion of CSX management that none of these items, when finally resolved, will have a material adverse effect on the Company’s financial position or liquidity. However, should a number of these items occur in the same period, it could have a material adverse effect on the results of operations in a particular quarter or fiscal year.
1816
Asbestos and other occupational claim filings against the Company have been inconsistent. Accordingly, while the Company had concluded that a probable loss had occurred, it did not believe it could estimate the range of reasonably possible loss because of the lack of experience with such claims and the lack of detailed employment records for the population of exposed employees. Claim filings increased and when they continued into 2003, the Company concluded that an estimate for incurred but not reported asbestos exposure liability needed to be recorded.
Quarter Ended | Year Ended | Six Months Ended | Twelve Months Ended | |||||||||||||
April 1, 2005 | December 31, 2004 | July 1, 2005 | December 31, 2004 | |||||||||||||
Asserted Claims: | ||||||||||||||||
Asserted Claims: | ||||||||||||||||
Open Claims — Beginning of Period | 11,460 | 13,478 | 11,460 | 13,478 | ||||||||||||
New Claims Filed | 273 | 1,178 | 432 | 1,178 | ||||||||||||
Claims Settled | (354 | ) | (2,758 | ) | (746 | ) | (2,758 | ) | ||||||||
Claims Dismissed | (40 | ) | (438 | ) | (304 | ) | (438 | ) | ||||||||
Open Claims — End of Period | 11,339 | 11,460 | 10,842 | 11,460 | ||||||||||||
17
19
CSX CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
NOTE 12. Casualty, Environmental and Other Reserves, Continued
Environmental Reserves
Separation Liability
Separation liabilities at April 1, 2005 and December 31, 2004 provide for the estimated costs of implementing workforce reductions, improvements in productivity and other cost reductions at the Company’s major transportation units since 1991. These liabilities are expected to be paid out over the next 15 to 20 years through general corporate funds.
20
CSX CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
The Company has various commitments to purchase technology and communications services. The terms for the various agreements call for CSX to pay $36 million, $29 million and $26 million for the fiscal years ending 2005, 2006 and 2007, respectively. The largest obligation is for purchased communications services of $24 million per year for the years 2005 through 2007.
STB Proceeding
In 2001 Duke Energy Corporation (“Duke”) filed a complaint before the STB alleging that certain CSX common carrier coal rates were unreasonably high. In February 2004, the STB issued a decision finding that the CSX common carrier rates were reasonable. While approving the rate levels, the STB also invited Duke to request a phase-in of rate increases over some time period. The nature and amount of any such phase-in is uncertain, and would only apply to billings subsequent to December 2001. In October 2004, the STB issued a decision denying Duke’s petition for reconsideration of its February 2004 ruling. In November 2004, Duke advised the STB that it would request phase-in relief, and filed a Petition for Review of the STB’s decisions in the United States Court of Appeals for the District of Columbia Circuit. CSX will continue to consider and pursue all available legal defenses in this matter. Administrative proceedings and legal appeals could take several years to resolve. A favorable outcome could result in gain realization in amounts that could be material to results of operations in the quarters received.
Self-Insurance
The Company uses a combination of third-party and self-insurance, obtaining substantial amounts of commercial insurance for potential losses for third-party liability and property damages. Specified levels of risk (up to $35 million for property and $25 million for liability per occurrence) are retained on a self-insurance basis.
2118
are as follows:
1. | Guarantees of approximately | |||
2. | Guarantee of approximately $87 million of obligations of a former subsidiary, CSX Energy, in connection with a sale-leaseback transaction. The Company is, in turn, indemnified by several subsequent owners of the subsidiary against payments made with respect to this guarantee. CSX management does not expect that the Company will be required to make any payments under this guarantee for which CSX will not be reimbursed. | |||
3. | Guarantee of approximately $13 million of lease commitments assumed by A.P. Moller-Maersk (“Maersk”) for which the Company is contingently liable. CSX believes Maersk will fulfill its contractual commitments with respect to such | |||
Upon consummation of the sale of the International Terminals business in the first quarter of 2005, the Company was no longer liable for the guarantees related to construction and cash deficiency support at several of the Company’s international terminals locations under development.
19
2220
conveyance being recognized over the 12-year sublease term. The Other column also includes net sublease income from assets formerly included in the Marine Services segment and other items.
Surface Transportation | ||||||||||||||||||||
Rail | Intermodal | Total | Other | Total | ||||||||||||||||
(Dollars in Millions) | ||||||||||||||||||||
Quarter Ended April 1, 2005 | ||||||||||||||||||||
Revenues from External Customers | $ | 1,779 | $ | 329 | 2,108 | $ | — | $ | 2,108 | |||||||||||
Intersegment Revenues | — | — | — | — | — | |||||||||||||||
Segment Operating Income | 299 | 52 | 351 | 3 | 354 | |||||||||||||||
Assets | 20,265 | 747 | 21,012 | — | 21,012 | |||||||||||||||
Quarter Ended March 26, 2004 | ||||||||||||||||||||
Revenues from External Customers | $ | 1,605 | $ | 315 | $ | 1,920 | $ | — | $ | 1,920 | ||||||||||
Intersegment Revenues | — | — | — | — | — | |||||||||||||||
Segment Operating Income | 132 | 19 | 151 | 1 | 152 | |||||||||||||||
Assets | 12,848 | 590 | 13,438 | 1,035 | 14,473 |
Surface Transportation | ||||||||||||||||||||
Rail | Intermodal | Total | Other | Total | ||||||||||||||||
Quarter Ended July 1, 2005 | ||||||||||||||||||||
Revenues from External Customers | $ | 1,836 | $ | 330 | $ | 2,166 | $ | — | $ | 2,166 | ||||||||||
Segment Operating Income | 367 | 55 | 422 | 9 | 431 | |||||||||||||||
Assets | 20,401 | 797 | 21,198 | — | 21,198 | |||||||||||||||
Quarter Ended June 25, 2004 | ||||||||||||||||||||
Revenues from External Customers | $ | 1,672 | $ | 325 | $ | 1,997 | $ | — | $ | 1,997 | ||||||||||
Segment Operating Income | 249 | 31 | 280 | 2 | 282 | |||||||||||||||
Assets | 13,119 | 623 | 13,742 | 1,045 | 14,787 | |||||||||||||||
Six Months Ended July 1, 2005 | ||||||||||||||||||||
Revenues from External Customers | $ | 3,615 | $ | 659 | $ | 4,274 | $ | — | $ | 4,274 | ||||||||||
Segment Operating Income | 666 | 107 | 773 | 12 | 785 | |||||||||||||||
Assets | 20,401 | 797 | 21,198 | — | 21,198 | |||||||||||||||
Six Months Ended June 25, 2004 | ||||||||||||||||||||
Revenues from External Customers | $ | 3,277 | $ | 640 | $ | 3,917 | $ | — | $ | 3,917 | ||||||||||
Segment Operating Income | 381 | 50 | 431 | 3 | 434 | |||||||||||||||
Assets | 13,119 | 623 | 13,742 | 1,045 | 14,787 |
2321
(Dollars in Millions) | ||||||||
Quarters Ended | ||||||||
April 1, | March 26, | |||||||
2005 | 2004 | |||||||
Revenues: | ||||||||
Total External Revenues for Business Segments | $ | 2,108 | $ | 1,920 | ||||
Intersegment Revenues for Business Segments | — | — | ||||||
Elimination of Intersegment Revenues | — | — | ||||||
Total Consolidated Revenues | $ | 2,108 | $ | 1,920 | ||||
Operating Income: | ||||||||
Total Operating Income for Business Segments | $ | 354 | $ | 152 | ||||
Unallocated Corporate Expenses | — | — | ||||||
Total Consolidated Operating Income | $ | 354 | $ | 152 | ||||
Assets: | ||||||||
Assets for Business Segments | $ | 21,012 | $ | 14,473 | ||||
Investment in Conrail | 577 | 4,683 | ||||||
Elimination of Intersegment Payables (Receivables) | (593 | ) | 100 | |||||
Non-segment Assets | 4,096 | 2,817 | ||||||
Total Consolidated Assets | $ | 25,092 | $ | 22,073 | ||||
24
CSX CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
Quarter Ended | ||||||||
July 1, | June 25, | |||||||
2005 | 2004 | |||||||
Assets: | ||||||||
Assets for Business Segments | $ | 21,223 | $ | 14,787 | ||||
Investment in Conrail | 583 | 4,691 | ||||||
Elimination of Intersegment Payables (Receivables) | (622 | ) | 131 | |||||
Non-segment Assets | 2,566 | 2,843 | ||||||
Total Consolidated Assets | $ | 23,750 | $ | 22,452 | ||||
22
Quarters Ended | ||||||||||||||||||||||||||||||||
(Dollars in Millions) | Pension Benefits | Other Benefits | Pension Benefits | Other Benefits | ||||||||||||||||||||||||||||
April 1, | March 26, | April 1, | March 26, | |||||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | July 1, 2005 | June 25, 2004 | July 1, 2005 | June 25, 2004 | |||||||||||||||||||||||||
Service Cost | $ | 8 | $ | 11 | $ | 2 | $ | 2 | $ | 8 | $ | 9 | $ | 2 | $ | 2 | ||||||||||||||||
Interest Cost | 27 | 28 | 6 | 6 | 27 | 28 | 6 | 6 | ||||||||||||||||||||||||
Expected Return on Plan Assets | (30 | ) | (34 | ) | (1 | ) | — | (30 | ) | (33 | ) | — | — | |||||||||||||||||||
Amortization of Prior Service Cost | 1 | 1 | 3 | (1 | ) | 1 | 1 | (1 | ) | (1 | ) | |||||||||||||||||||||
Amortization of Net Loss | 6 | 3 | — | 4 | 6 | 4 | 3 | 4 | ||||||||||||||||||||||||
Net Periodic Benefit Cost | $ | 12 | $ | 9 | $ | 10 | $ | 11 | $ | 12 | $ | 9 | $ | 10 | $ | 11 | ||||||||||||||||
SFAS 88 Curtailment Charges | — | 6 | — | 15 | — | — | — | 3 | ||||||||||||||||||||||||
Net Periodic Benefit Cost, Including Termination Benefits | $ | 12 | $ | 15 | $ | 10 | $ | 26 | $ | 12 | $ | 9 | $ | 10 | $ | 14 | ||||||||||||||||
Six Months Ended | ||||||||||||||||
(Dollars in Millions) | Pension Benefits | Other Benefits | ||||||||||||||
July 1, 2005 | June 25, 2004 | July 1, 2005 | June 25, 2004 | |||||||||||||
Service Cost | $ | 16 | $ | 20 | $ | 4 | $ | 4 | ||||||||
Interest Cost | 54 | 56 | 12 | 12 | ||||||||||||
Expected Return on Plan Assets | (60 | ) | (67 | ) | — | — | ||||||||||
Amortization of Prior Service Cost | 2 | 2 | (2 | ) | (2 | ) | ||||||||||
Amortization of Net Loss | 12 | 7 | 6 | 8 | ||||||||||||
Net Periodic Benefit Cost | $ | 24 | $ | 18 | $ | 20 | $ | 22 | ||||||||
SFAS 88 Curtailment Charges | — | 6 | — | 18 | ||||||||||||
Net Periodic Benefit Cost, Including Termination Benefits | $ | 24 | $ | 24 | $ | 20 | $ | 40 | ||||||||
As of July 1, 2005, CSX has contributed approximately $1 million to its pension plans.
23
25
CSX CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
CSX | CSX Vessel | |||||||||||||||||||
(Dollars in Millions) | Corporation | Leasing | Other | Eliminations | Consolidated | |||||||||||||||
Quarter ended April 1, 2005 | ||||||||||||||||||||
Operating Revenue | $ | — | $ | — | $ | 2,108 | $ | — | $ | 2,108 | ||||||||||
Operating Expense | (48 | ) | — | 1,802 | — | 1,754 | ||||||||||||||
Operating Income | 48 | — | 306 | — | 354 | |||||||||||||||
Equity in Earnings of Subsidiaries | 142 | — | — | (142 | ) | — | ||||||||||||||
Other Income (Expense) | 46 | 1 | (28 | ) | (21 | ) | (2 | ) | ||||||||||||
Interest Expense | 93 | — | 42 | (21 | ) | 114 | ||||||||||||||
Earnings from Continuing Operations before Income Taxes | 143 | 1 | 236 | (142 | ) | 238 | ||||||||||||||
Income Tax Expense (Benefit) | (8 | ) | — | 92 | — | 84 | ||||||||||||||
Earnings from Continuing Operations | 151 | 1 | 144 | (142 | ) | 154 | ||||||||||||||
Discontinued Operations — Net of Tax | 428 | — | (3 | ) | — | 425 | ||||||||||||||
Net Earnings (Loss) | $ | 579 | $ | 1 | $ | 141 | $ | (142 | ) | $ | 579 | |||||||||
Quarter ended March 26, 2004 | ||||||||||||||||||||
Operating Revenue | $ | — | $ | — | $ | 1,920 | $ | — | $ | 1,920 | ||||||||||
Operating Expense | (23 | ) | — | 1,791 | — | 1,768 | ||||||||||||||
Operating Income | 23 | — | 129 | — | 152 | |||||||||||||||
Equity in Earnings of Subsidiaries | 88 | — | — | (88 | ) | — | ||||||||||||||
Other Income (Expense) | (10 | ) | 1 | 12 | (7 | ) | (4 | ) | ||||||||||||
Interest Expense | 97 | — | 18 | (7 | ) | 108 | ||||||||||||||
Earnings from Continuing Operations before Income Taxes | 4 | 1 | �� | 123 | (88 | ) | 40 | |||||||||||||
Income Tax Expense (Benefit) | (26 | ) | — | 39 | — | 13 | ||||||||||||||
Earnings from Continuing Operations | 30 | 1 | 84 | (88 | ) | 27 | ||||||||||||||
Discontinued Operations — Net of Tax | — | — | 3 | — | 3 | |||||||||||||||
Net Earnings (Loss) | $ | 30 | $ | 1 | $ | 87 | $ | (88 | ) | $ | 30 | |||||||||
CSX Corporation | CSX Vessel Leasing | Other | Eliminations | Consolidated | ||||||||||||||||
Quarter Ended July 1, 2005 | ||||||||||||||||||||
Operating Revenue | $ | — | $ | — | $ | 2,166 | $ | — | $ | 2,166 | ||||||||||
Operating Expense | (26 | ) | — | 1,761 | — | 1,735 | ||||||||||||||
Operating Income | 26 | — | 405 | — | 431 | |||||||||||||||
Equity in Earnings of Subsidiaries | 272 | — | — | (272 | ) | — | ||||||||||||||
Other Income — Net | 89 | 1 | (4 | ) | (56 | ) | 30 | |||||||||||||
Debt Repurchase Expense | (192 | ) | — | — | — | (192 | ) | |||||||||||||
Interest Expense | (117 | ) | — | (49 | ) | 56 | (110 | ) | ||||||||||||
Earnings (Loss) from Continuing Operations before Income Taxes | 78 | 1 | 352 | (272 | ) | 159 | ||||||||||||||
Income Tax (Benefit) Expense | (97 | ) | — | 91 | — | (6 | ) | |||||||||||||
Net Earnings (Loss) | $ | 175 | $ | 1 | $ | 261 | $ | (272 | ) | $ | 165 | |||||||||
CSX Corporation | CSX Vessel Leasing | Other | Eliminations | Consolidated | ||||||||||||||||
Quarter Ended June 25, 2004 | ||||||||||||||||||||
Operating Revenue | $ | — | $ | — | $ | 1,997 | $ | — | $ | 1,997 | ||||||||||
Operating Expense | (38 | ) | — | 1,753 | — | 1,715 | ||||||||||||||
Operating Income | 38 | — | 244 | — | 282 | |||||||||||||||
Equity in Earnings of Subsidiaries | 169 | — | — | (169 | ) | — | ||||||||||||||
Other Income — Net | (8 | ) | 2 | 22 | (11 | ) | 5 | |||||||||||||
Interest Expense | (101 | ) | — | (16 | ) | 8 | (109 | ) | ||||||||||||
Earnings (Loss) from Continuing Operations before Income Taxes | 98 | 2 | 250 | (172 | ) | 178 | ||||||||||||||
Income Tax (Benefit) Expense | (21 | ) | — | 81 | — | 60 | ||||||||||||||
Earnings from Continuing Operations | 119 | 2 | 169 | (172 | ) | 118 | ||||||||||||||
Discontinued Operations — Net of Tax | — | — | 1 | — | 1 | |||||||||||||||
Net Earnings (Loss) | $ | 119 | $ | 2 | $ | 170 | $ | (172 | ) | $ | 119 | |||||||||
2624
CSX Corporation | CSX Vessel Leasing | Other | Eliminations | Consolidated | ||||||||||||||||
Six Months Ended July 1, 2005 | ||||||||||||||||||||
Operating Revenue | $ | — | $ | — | $ | 4,274 | $ | — | $ | 4,274 | ||||||||||
Operating Expense | (74 | ) | — | 3,563 | — | 3,489 | ||||||||||||||
Operating Income | 74 | — | 711 | — | 785 | |||||||||||||||
Equity in Earnings of Subsidiaries | 414 | — | — | (414 | ) | — | ||||||||||||||
Other Income — Net | 90 | 2 | 13 | (77 | ) | 28 | ||||||||||||||
Debt Repurchase Expense | (192 | ) | — | — | — | (192 | ) | |||||||||||||
Interest Expense | (210 | ) | — | (91 | ) | 77 | (224 | ) | ||||||||||||
Earnings (Loss) from Continuing Operations before Income Taxes | 176 | 2 | 633 | (414 | ) | 397 | ||||||||||||||
Income Tax (Benefit) Expense | (110 | ) | — | 188 | — | 78 | ||||||||||||||
Earnings from Continuing Operations | 286 | 2 | 445 | (414 | ) | 319 | ||||||||||||||
Discontinued Operations — Net of Tax | 428 | — | (3 | ) | — | 425 | ||||||||||||||
Net Earnings (Loss) | $ | 714 | $ | 2 | $ | 442 | $ | (414 | ) | $ | 744 | |||||||||
CSX Corporation | CSX Vessel Leasing | Other | Eliminations | Consolidated | ||||||||||||||||
Six Months Ended June 25, 2004 | ||||||||||||||||||||
Operating Revenue | $ | — | $ | — | $ | 3,917 | $ | — | $ | 3,917 | ||||||||||
Operating Expense | (61 | ) | — | 3,544 | — | 3,483 | ||||||||||||||
Operating Income | 61 | — | 373 | — | 434 | |||||||||||||||
Equity in Earnings of Subsidiaries | 257 | — | — | (257 | ) | — | ||||||||||||||
Other Income — Net | (18 | ) | 2 | 35 | (18 | ) | 1 | |||||||||||||
Interest Expense | (198 | ) | — | (34 | ) | 15 | (217 | ) | ||||||||||||
Earnings (Loss) from Continuing Operations before Income Taxes | 102 | 2 | 374 | (260 | ) | 218 | ||||||||||||||
Income Tax Expense (Benefit) | (47 | ) | — | 120 | — | 73 | ||||||||||||||
Earnings from Continuing Operations | 149 | 2 | 254 | (260 | ) | 145 | ||||||||||||||
Discontinued operations — Net of Tax | — | — | 4 | — | 4 | |||||||||||||||
Net Earnings (Loss) | $ | 149 | $ | 2 | $ | 258 | $ | (260 | ) | $ | 149 | |||||||||
25
CSX Vessel | ||||||||||||||||||||
April 1, 2005 | CSX Corporation | Leasing | Other | Eliminations | Consolidated | |||||||||||||||
(Dollars in Millions) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current Assets | ||||||||||||||||||||
Cash, Cash Equivalents and Short-term Investments | $ | 1,978 | $ | 46 | $ | (201 | ) | $ | — | $ | 1,823 | |||||||||
Accounts Receivable — Net | (503 | ) | 8 | 1,676 | (18 | ) | 1,163 | |||||||||||||
Materials and Supplies | — | — | 190 | — | 190 | |||||||||||||||
Deferred Income Taxes | 9 | — | 106 | — | 115 | |||||||||||||||
Other Current Assets | 1 | — | 413 | (126 | ) | 288 | ||||||||||||||
International Terminals Assets Held for Sale | — | — | — | — | — | |||||||||||||||
Total Current Assets | 1,485 | 54 | 2,184 | (144 | ) | 3,579 | ||||||||||||||
Properties | 25 | — | 25,939 | — | 25,964 | |||||||||||||||
Accumulated Depreciation | 24 | — | 6,058 | — | 6,082 | |||||||||||||||
Properties — Net | 1 | — | 19,881 | — | 19,882 | |||||||||||||||
Investment in Conrail | — | — | 577 | — | 577 | |||||||||||||||
Affiliates and Other Companies | — | — | 302 | — | 302 | |||||||||||||||
Investment in Consolidated Subsidiaries | 12,808 | — | — | (12,808 | ) | — | ||||||||||||||
Other Long-term Assets | 1,439 | — | (582 | ) | (105 | ) | 752 | |||||||||||||
Total Assets | $ | 15,733 | $ | 54 | $ | 22,362 | $ | (13,057 | ) | $ | 25,092 | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
Current Liabilities | ||||||||||||||||||||
Accounts Payable | $ | 134 | $ | 4 | $ | 819 | $ | (18 | ) | $ | 939 | |||||||||
Labor and Fringe Benefits Payable | 15 | — | 337 | — | 352 | |||||||||||||||
Payable to Affiliates | — | — | — | — | — | |||||||||||||||
Casualty, Environmental and Other Reserves | — | — | 440 | (126 | ) | 314 | ||||||||||||||
Current Maturities of Long-term Debt | 765 | — | 147 | — | 912 | |||||||||||||||
Short-term Debt | — | — | 3 | — | 3 | |||||||||||||||
Income and Other Taxes Payable | 401 | — | 62 | — | 463 | |||||||||||||||
Other Current Liabilities | 17 | — | 62 | — | 79 | |||||||||||||||
International Terminals Assets Held for Sale | — | — | — | — | — | |||||||||||||||
Total Current Liabilities | 1,332 | 4 | 1,870 | (144 | ) | 3,062 | ||||||||||||||
Casualty, Environmental and Other Reserves | — | — | 726 | — | 726 | |||||||||||||||
Long-term Debt | 5,010 | — | 1,198 | — | 6,208 | |||||||||||||||
Deferred Income Taxes | — | — | 6,080 | — | 6,080 | |||||||||||||||
Long-term Payable to Affiliates | — | — | 105 | (105 | ) | — | ||||||||||||||
Other Long-term Liabilities | 1,903 | 40 | (416 | ) | 1 | 1,528 | ||||||||||||||
Total Liabilities | $ | 8,245 | $ | 44 | $ | 9,563 | $ | (248 | ) | $ | 17,604 | |||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
Common Stock | 217 | — | 181 | (181 | ) | 217 | ||||||||||||||
Other Capital | 1,657 | 1 | 8,084 | (8,085 | ) | 1,657 | ||||||||||||||
Retained Earnings | 5,768 | 9 | 4,395 | (4,404 | ) | 5,768 | ||||||||||||||
Accumulated Other Comprehensive Loss | (154 | ) | — | 139 | (139 | ) | (154 | ) | ||||||||||||
Total Shareholders’ Equity | 7,488 | 10 | 12,799 | (12,809 | ) | 7,488 | ||||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 15,733 | $ | 54 | $ | 22,362 | $ | (13,057 | ) | $ | 25,092 | |||||||||
CSX Corporation | CSX Vessel Leasing | Other | Eliminations | Consolidated | ||||||||||||||||
July 1, 2005 | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current Assets: | ||||||||||||||||||||
Cash, Cash Equivalents and Short-term Investments | $ | 415 | $ | 46 | $ | 52 | $ | — | $ | 513 | ||||||||||
Accounts Receivable — Net | — | 15 | 1,121 | (13 | ) | 1,123 | ||||||||||||||
Other Current Assets | — | — | 695 | (127 | ) | 568 | ||||||||||||||
Total Current Assets | 415 | 61 | 1,868 | (140 | ) | 2,204 | ||||||||||||||
Properties — Net | 1 | — | 19,880 | — | 19,881 | |||||||||||||||
Investment in Consolidated Subsidiaries | 12,985 | — | — | (12,985 | ) | — | ||||||||||||||
Other Long-term Assets | 1,465 | — | 303 | (103 | ) | 1,665 | ||||||||||||||
Total Assets | $ | 14,866 | $ | 61 | $ | 22,051 | $ | (13,228 | ) | $ | 23,750 | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||
Accounts Payable | $ | 619 | $ | 20 | $ | 260 | $ | (14 | ) | $ | 885 | |||||||||
Other Current Liabilities | 2,051 | — | (301 | ) | (126 | ) | 1,624 | |||||||||||||
Total Current Liabilities | 2,670 | 20 | (41 | ) | (140 | ) | 2,509 | |||||||||||||
Other Long-term Liabilities | 4,579 | 30 | 9,118 | (103 | ) | 13,624 | ||||||||||||||
Total Liabilities | $ | 7,249 | $ | 50 | $ | 9,077 | $ | (243 | ) | $ | 16,133 | |||||||||
Shareholders’ Equity: | ||||||||||||||||||||
Common Stock | 217 | — | 181 | (181 | ) | 217 | ||||||||||||||
Other Capital | 1,678 | 1 | 8,084 | (8,085 | ) | 1,678 | ||||||||||||||
Retained Earnings | 5,912 | 10 | 4,606 | (4,616 | ) | 5,912 | ||||||||||||||
Accumulated Other Comprehensive Loss | (190 | ) | — | 103 | (103 | ) | (190 | ) | ||||||||||||
Total Shareholders’ Equity | 7,617 | 11 | 12,974 | (12,985 | ) | 7,617 | ||||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 14,866 | $ | 61 | $ | 22,051 | $ | (13,228 | ) | $ | 23,750 | |||||||||
CSX Corporation | CSX Vessel Leasing | Other | Eliminations | Consolidated | ||||||||||||||||
December 31, 2004 | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current Assets: | ||||||||||||||||||||
Cash, Cash Equivalents and Short-term Investments | $ | 1,110 | $ | 46 | $ | (297 | ) | $ | — | $ | 859 | |||||||||
Accounts Receivable — Net | (482 | ) | 19 | 1,631 | (25 | ) | 1,143 | |||||||||||||
Other Current Assets | 9 | — | 1,246 | (270 | ) | 985 | ||||||||||||||
Total Current Assets | 637 | 65 | 2,580 | (295 | ) | 2,987 | ||||||||||||||
Properties — Net | 1 | — | 19,944 | — | 19,945 | |||||||||||||||
Investment in Consolidated Subsidiaries | 13,078 | — | — | (13,078 | ) | — | ||||||||||||||
Other Long-term Assets | 1,345 | — | 553 | (224 | ) | 1,674 | ||||||||||||||
Total Assets | $ | 15,061 | $ | 65 | $ | 23,077 | $ | (13,597 | ) | $ | 24,606 | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||
Accounts Payable | $ | 88 | $ | 19 | $ | 796 | $ | (24 | ) | $ | 879 | |||||||||
Other Current Liabilities | 1,034 | — | 1,540 | (136 | ) | 2,438 | ||||||||||||||
Total Current Liabilities | 1,122 | 19 | 2,336 | (160 | ) | 3,317 | ||||||||||||||
Other Long-term Liabilities | 7,128 | 37 | 7,560 | (247 | ) | 14,478 | ||||||||||||||
Total Liabilities | $ | 8,250 | $ | 56 | $ | 9,896 | $ | (407 | ) | $ | 17,795 | |||||||||
Shareholders’ Equity: | ||||||||||||||||||||
Common Stock | 216 | — | 296 | (296 | ) | 216 | ||||||||||||||
Other Capital | 1,605 | 1 | 8,107 | (8,108 | ) | 1,605 | ||||||||||||||
Retained Earnings | 5,210 | 8 | 4,706 | (4,714 | ) | 5,210 | ||||||||||||||
Accumulated Other Comprehensive Loss | (220 | ) | — | 72 | (72 | ) | (220 | ) | ||||||||||||
Total Shareholders’ Equity | 6,811 | 9 | 13,181 | (13,190 | ) | 6,811 | ||||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 15,061 | $ | 65 | $ | 23,077 | $ | (13,597 | ) | $ | 24,606 | |||||||||
26
CSX Corporation | CSX Vessel Leasing | Other | Eliminations | Consolidated | ||||||||||||||||
Six Months Ended July 1, 2005 | ||||||||||||||||||||
Operating Activities | ||||||||||||||||||||
Net Cash Provided (Used) by Operating Activities | $ | (453 | ) | $ | — | $ | 918 | $ | (136 | ) | $ | 329 | ||||||||
Investing Activities | ||||||||||||||||||||
Property Additions | — | — | (381 | ) | — | (381 | ) | |||||||||||||
Net Proceeds from Sale of International Terminals | 1,110 | — | — | — | 1,110 | |||||||||||||||
Purchase of Minority Interest in an International Terminals’ Subsidiary | (110 | ) | — | — | — | (110 | ) | |||||||||||||
Purchases of Short Term Investments | (1,576 | ) | — | — | — | (1,576 | ) | |||||||||||||
Proceeds from Sale of Short-term Investments | 1,679 | — | — | — | 1,679 | |||||||||||||||
Other Investing Activities | 75 | — | 241 | (315 | ) | 1 | ||||||||||||||
Net Cash Provided (Used) by Investing Activities | 1,178 | — | (140 | ) | (315 | ) | 723 | |||||||||||||
Financing Activities | ||||||||||||||||||||
Short-term Debt — Net | (100 | ) | — | 2 | — | (98 | ) | |||||||||||||
Long-term Debt Issued | — | — | 27 | — | 27 | |||||||||||||||
Long-term Debt Repaid | (1,125 | ) | — | (88 | ) | — | (1,213 | ) | ||||||||||||
Cash Dividends Paid | (44 | ) | — | (118 | ) | 118 | (44 | ) | ||||||||||||
Other Financing Activities | (48 | ) | — | (230 | ) | 333 | 55 | |||||||||||||
Net Cash Provided (Used) by Financing Activities | (1,317 | ) | — | (407 | ) | 451 | (1,273 | ) | ||||||||||||
Net Increase (Decrease) in Cash and Cash Equivalents | (592 | ) | — | 371 | — | (221 | ) | |||||||||||||
Cash and Cash Equivalents at Beginning of Period | 816 | 46 | (340 | ) | — | 522 | ||||||||||||||
Cash and Cash Equivalents at End of Period | $ | 224 | $ | 46 | $ | 31 | $ | — | $ | 301 | ||||||||||
CSX Corporation | CSX Vessel Leasing | Other | Eliminations | Consolidated | ||||||||||||||||
Six Months Ended June 25, 2004 | ||||||||||||||||||||
Operating Activities | ||||||||||||||||||||
Net Cash Provided (Used) by Operating Activities | $ | 10 | $ | — | $ | 610 | $ | (101 | ) | $ | 519 | |||||||||
Investing Activities | ||||||||||||||||||||
Property Additions | — | — | (484 | ) | — | (484 | ) | |||||||||||||
Purchases of Short-term Investments | (82 | ) | (637 | ) | — | (719 | ) | |||||||||||||
Proceeds from Sales of Short-term Investments | — | — | 644 | — | 644 | |||||||||||||||
Other Investing Activities | (4 | ) | — | (23 | ) | (10 | ) | (37 | ) | |||||||||||
Net Cash Provided (Used) by Investing Activities | (86 | ) | — | (500 | ) | (10 | ) | (596 | ) | |||||||||||
Financing Activities | ||||||||||||||||||||
Short-term Debt — Net | 701 | — | 1 | — | 702 | |||||||||||||||
Long-term Debt Issued | 62 | — | — | — | 62 | |||||||||||||||
Long-term Debt Repaid | (300 | ) | — | (79 | ) | — | (379 | ) | ||||||||||||
Dividends Paid | (43 | ) | — | (99 | ) | 99 | (43 | ) | ||||||||||||
Other Financing Activities | 6 | 1 | (16 | ) | 12 | 3 | ||||||||||||||
Net Cash Provided (Used) by Financing Activities | 426 | 1 | (193 | ) | 111 | 345 | ||||||||||||||
Net Increase (Decrease) in Cash and Cash Equivalents | 350 | 1 | (83 | ) | — | 268 | ||||||||||||||
Cash and Cash Equivalents at Beginning of Period | 1,163 | 45 | (912 | ) | — | 296 | ||||||||||||||
Cash and Cash Equivalents at End of Period | $ | 1,513 | $ | 46 | $ | (995 | ) | $ | — | $ | 564 | |||||||||
27
NOTE 17. Summarized Consolidating Financial Data, Continued
Consolidating Balance Sheet
CSX | CSX Vessel | |||||||||||||||||||
December 31, 2004 | Corporation | Leasing | Other | Eliminations | Consolidated | |||||||||||||||
(Dollars in Millions) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current Assets: | ||||||||||||||||||||
Cash, Cash Equivalents and Short-term Investments | $ | 1,110 | $ | 46 | $ | (297 | ) | $ | — | $ | 859 | |||||||||
Accounts Receivable — Net | (482 | ) | 19 | 1,631 | (25 | ) | 1,143 | |||||||||||||
Materials and Supplies | — | — | 165 | — | 165 | |||||||||||||||
Deferred Income Taxes | 9 | — | 11 | — | 20 | |||||||||||||||
Other Current Assets | — | — | 283 | (126 | ) | 157 | ||||||||||||||
International Terminals Assets Held for Sale | — | — | 787 | (144 | ) | 643 | ||||||||||||||
Total Current Assets | 637 | 65 | 2,580 | (295 | ) | 2,987 | ||||||||||||||
Properties | 25 | — | 25,827 | — | 25,852 | |||||||||||||||
Accumulated Depreciation | (24 | ) | — | (5,883 | ) | — | (5,907 | ) | ||||||||||||
Properties — Net | 1 | — | 19,944 | — | 19,945 | |||||||||||||||
Investment in Conrail | — | — | 574 | — | 574 | |||||||||||||||
Affiliates and Other Companies | — | — | 306 | (10 | ) | 296 | ||||||||||||||
Investment in Consolidated Subsidiaries | 13,078 | — | — | (13,078 | ) | — | ||||||||||||||
Other Long-term Assets | 1,345 | — | (352 | ) | (214 | ) | 779 | |||||||||||||
Total Assets | $ | 15,061 | $ | 65 | $ | 23,052 | $ | (13,597 | ) | $ | 24,581 | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||
Accounts Payable | $ | 88 | $ | 19 | $ | 796 | $ | (24 | ) | $ | 879 | |||||||||
Labor and Fringe Benefits Payable | 23 | — | 348 | — | 371 | |||||||||||||||
Payable to Affiliates | — | — | 126 | (126 | ) | — | ||||||||||||||
Casualty, Environmental and Other Reserves | — | — | 312 | — | 312 | |||||||||||||||
Current Maturities of Long-term Debt | 839 | — | 144 | — | 983 | |||||||||||||||
Short-term Debt | 100 | — | 1 | — | 101 | |||||||||||||||
Income and Other Taxes Payable | 54 | — | 116 | — | 170 | |||||||||||||||
Other Current Liabilities | 18 | — | 98 | (1 | ) | 115 | ||||||||||||||
International Terminals Assets Held for Sale | — | — | 395 | (9 | ) | 386 | ||||||||||||||
Total Current Liabilities | 1,122 | 19 | 2,336 | (160 | ) | 3,317 | ||||||||||||||
Casualty, Environmental and Other Reserves | — | — | 735 | — | 735 | |||||||||||||||
Long-term Debt | 5,021 | — | 1,213 | — | 6,234 | |||||||||||||||
Deferred Income Taxes | — | — | 5,979 | — | 5,979 | |||||||||||||||
Long-term Payable to Affiliates | 107 | — | 108 | (215 | ) | — | ||||||||||||||
Other Long-term Liabilities | 2,000 | 37 | (500 | ) | (32 | ) | 1,505 | |||||||||||||
Total Liabilities | $ | 8,250 | $ | 56 | $ | 9,871 | $ | (407 | ) | $ | 17,770 | |||||||||
Shareholders’ Equity: | ||||||||||||||||||||
Preferred Stock | — | — | 107 | (107 | ) | — | ||||||||||||||
Common Stock | 216 | — | 189 | (189 | ) | 216 | ||||||||||||||
Other Capital | 1,605 | 1 | 8,107 | (8,108 | ) | 1,605 | ||||||||||||||
Retained Earnings | 5,210 | 8 | 4,706 | (4,714 | ) | 5,210 | ||||||||||||||
Accumulated Other Comprehensive Loss | (220 | ) | — | 72 | (72 | ) | (220 | ) | ||||||||||||
Total Shareholders’ Equity | 6,811 | 9 | 13,181 | (13,190 | ) | 6,811 | ||||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 15,061 | $ | 65 | $ | 23,052 | $ | (13,597 | ) | $ | 24,581 | |||||||||
28
CSX CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
NOTE 17. Summarized Consolidating Financial Data, Continued
Consolidating Cash Flow Statements
CSX | CSX | |||||||||||||||||||
(Dollars in Millions) | Corporation | Vessel Leasing | Other | Eliminations | Consolidated | |||||||||||||||
Three Months Ended April 1, 2005 | ||||||||||||||||||||
Operating Activities | ||||||||||||||||||||
Net Cash Provided (Used) by Operating Activities | $ | 48 | $ | — | $ | 378 | $ | (117 | ) | $ | 309 | |||||||||
Investing Activities | ||||||||||||||||||||
Property Additions | — | — | (167 | ) | — | (167 | ) | |||||||||||||
Net Proceeds from Sale of International Terminals | 1,110 | — | — | — | 1,110 | |||||||||||||||
Purchase of Minority Interest in an International Terminals Subsidiary | (110 | ) | — | — | — | (110 | ) | |||||||||||||
Purchases of Short-term Investments | (782 | ) | — | (311 | ) | — | (1,093 | ) | ||||||||||||
Proceeds from Sales of Short-term Investments | — | — | 305 | — | 305 | |||||||||||||||
Other Investing Activities | 74 | — | 238 | (314 | ) | (2 | ) | |||||||||||||
Net Cash Provided (Used) by Investing Activities | 292 | — | 65 | (314 | ) | 43 | ||||||||||||||
Financing Activities | ||||||||||||||||||||
Short-term Debt — Net | (100 | ) | — | 3 | — | (97 | ) | |||||||||||||
Long-term Debt Issued | — | — | 26 | — | 26 | |||||||||||||||
Long-term Debt Repaid | (75 | ) | — | (37 | ) | — | (112 | ) | ||||||||||||
Cash Dividends Paid | (22 | ) | — | (59 | ) | 59 | (22 | ) | ||||||||||||
Other Financing Activities | (58 | ) | — | (273 | ) | 372 | 41 | |||||||||||||
Net Cash Provided (Used) by Financing Activities | (255 | ) | — | (340 | ) | 431 | (164 | ) | ||||||||||||
Net Increase in Cash and Cash Equivalents | 85 | — | 103 | — | 188 | |||||||||||||||
Cash and Cash Equivalents at Beginning of Period | 816 | 46 | (340 | ) | — | 522 | ||||||||||||||
Cash and Cash Equivalents at End of Period | $ | 901 | $ | 46 | $ | (237 | ) | $ | — | $ | 710 | |||||||||
29
CSX CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
NOTE 17. Summarized Consolidating Financial Data, Continued
Consolidating Cash Flow Statements
CSX | CSX | |||||||||||||||||||
(Dollars in Millions) | Corporation | Vessel Leasing | Other | Eliminations | Consolidated | |||||||||||||||
Three Months Ended March 26, 2004 | ||||||||||||||||||||
Operating Activities | ||||||||||||||||||||
Net Cash Provided (Used) by Operating Activities | $ | 5 | $ | 1 | $ | 249 | $ | (51 | ) | $ | 204 | |||||||||
Investing Activities | ||||||||||||||||||||
Property Additions | — | — | (264 | ) | — | (264 | ) | |||||||||||||
Purchases of Short-term Investments | (131 | ) | — | (212 | ) | — | (343 | ) | ||||||||||||
Proceeds from Sales of Short-term Investments | — | — | 211 | — | 211 | |||||||||||||||
Other Investing Activities | (1 | ) | — | (24 | ) | — | (25 | ) | ||||||||||||
Net Cash Used by Investing Activities | (132 | ) | — | (289 | ) | — | (421 | ) | ||||||||||||
Financing Activities | ||||||||||||||||||||
Short-term Debt — Net | 150 | — | 2 | — | 152 | |||||||||||||||
Long-term Debt Issued | 50 | — | — | — | 50 | |||||||||||||||
Long-term Debt Repaid | — | — | (32 | ) | — | (32 | ) | |||||||||||||
Cash Dividends Paid | (21 | ) | — | (51 | ) | 50 | (22 | ) | ||||||||||||
Other Financing Activities | 21 | — | (19 | ) | 1 | 3 | ||||||||||||||
Net Cash Provided (Used) by Financing Activities | 200 | — | (100 | ) | 51 | 151 | ||||||||||||||
Net Increase (Decrease) in Cash and Cash Equivalents | 73 | 1 | (140 | ) | — | (66 | ) | |||||||||||||
Cash and Cash Equivalents at Beginning of Period | 1,163 | 45 | (912 | ) | — | 296 | ||||||||||||||
Cash and Cash Equivalents at End of Period | $ | 1,236 | $ | 46 | $ | (1,052 | ) | $ | — | $ | 230 | |||||||||
30
CSX CORPORATION
year-over-year volume decline.
unfavorable year-over-year volume comparison.
28
Operations
efficiency.
First Quarter | ||||||||||||||
2005 | 2004 | % Change | ||||||||||||
Service Measurements | Average Velocity, All Trains (Miles Per Hour) | 19.5 | 20.9 | (7) | % | |||||||||
Average System Dwell Time (Hours) | 30.0 | 27.2 | (10) | |||||||||||
Average Total Cars-On-Line | 234,209 | 230,746 | (2) | |||||||||||
On -Time Originations | 49.9 | % | 52.8 | % | (5) | |||||||||
On -Time Arrivals | 37.7 | % | 47.4 | % | (20) | |||||||||
Average Recrews (Per Day) | 65 | 60 | (8) | % |
Second Quarter | ||||||||||||||
% | ||||||||||||||
Improvement/ | ||||||||||||||
2005 | 2004 | (Decline) | ||||||||||||
Service Measurements | Average Velocity, All Trains (Miles Per Hour) | 19.1 | 19.5 | (2) | % | |||||||||
Average System Dwell Time (Hours) | 30.4 | 29.3 | (4) | |||||||||||
Average Total Cars-On-Line | 235,819 | 235,688 | (0) | |||||||||||
On-Time Originations | 47.7 | % | 39.3 | % | 21 | |||||||||
On-Time Arrivals | 36.2 | % | 34.1 | % | 6 | |||||||||
Average Recrews (Per Day) | 67 | 73 | 8 | % | ||||||||||
Amounts for 2005 are estimated. |
3129
Expenses
The table below provides operating revenues and expenses by category for the three months ended April 1, 2005, compared to the three months ended March 26, 2004.
SurfaceTransportation
April 1, | March 26 | |||||||||||
(Dollars in Millions) | 2005 | 2004 | $ Change | |||||||||
Operating Revenue | $ | 2,108 | $ | 1,920 | $ | 188 | ||||||
Operating Expense | ||||||||||||
Labor and Fringe | 702 | 685 | 17 | |||||||||
Materials, Supplies and Other | 462 | 416 | 46 | |||||||||
Depreciation | 203 | 160 | 43 | |||||||||
Fuel | 179 | 154 | 25 | |||||||||
Building and Equipment Rent | 135 | 140 | (5 | ) | ||||||||
Inland Transportation | 56 | 74 | (18 | ) | ||||||||
Conrail Rents, Fees and Services | 20 | 87 | (67 | ) | ||||||||
Restructuring Charge — Net | — | 53 | (53 | ) | ||||||||
Total Operating Expense | 1,757 | 1,769 | (12 | ) | ||||||||
Operating Income | $ | 351 | $ | 151 | $ | 200 | ||||||
Operating Ratio | 83.3 | % | 92.1 | % |
International Terminals Divestiture
CSX recognized income of $683 million pretax, $428 million after tax, for the quarter ended April 1, 2005 as a result of the sale of its International Terminals business in February 2005. Discontinued Operations for the three months ended April 1, 2005 also includes an after-tax loss on operations of $3 million from the International Terminals business.
32
CSX CORPORATIONITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONSAND FINANCIAL CONDITION
2005 Expectations
fuel.
Improvement in
Availability of Resources:levels. Locomotive and train and engine (“T&E”) employee availability are critical to operating plan execution. Management believes current resource plans, which include the hiring additionalof significant numbers of train and engine employees and the acquisition of 100 new locomotives in the second half of 2005, will be sufficient to manage anticipated volume while improving service levels.
Volume:If volume growth significantly exceeds management’s expectations, additional train crew hiring and locomotive resources may be required, depending on the type and location of the volume growth. Deployment of additional resources could lag any surge in demand by several months due to the time required to hire and train employees or secure additional locomotives, subject to availability, which could negatively impact overall service levels during that period.
3330
union members.
3431
3532
In addition, Congressional efforts to reduce or eliminate funding for Amtrak, if successful, could result in significant costs to the Company, including, but not limited to: loss of revenue from trackage rights; uncertainty relating to operating agreements; loss of other contractual rights, such as indemnification; adverse network implications, such as potential coordination with numerous state commuter rail agencies; and increased payments into the Railroad Retirement system to supplement lost contributions from Amtrak and its employees.
33
36
CSX CORPORATIONITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONSAND FINANCIAL CONDITION
RESULTS OF OPERATIONS
CONSOLIDATED (a)(b) | CONSOLIDATED(a)(b) | |||||||||||||||||||||||
April 1, | March 26, | $ | July 1, | June 25, | $ | |||||||||||||||||||
2005 | 2004 | Change | ||||||||||||||||||||||
(Dollars in Millions) | 2005 | 2004 | Change | |||||||||||||||||||||
(Dollars in Millions)(Unaudited) | (Unaudited) | |||||||||||||||||||||||
Operating Revenue | $ | 2,108 | $ | 1,920 | $ | 188 | $ | 2,166 | $ | 1,997 | $ | 169 | ||||||||||||
Operating Expense | ||||||||||||||||||||||||
Labor and Fringe | 704 | 686 | 18 | 707 | 665 | 42 | ||||||||||||||||||
Materials, Supplies and Other | 461 | 416 | 45 | 438 | 435 | 3 | ||||||||||||||||||
Depreciation | 205 | 162 | 43 | 205 | 159 | 46 | ||||||||||||||||||
Fuel | 179 | 154 | 25 | 176 | 151 | 25 | ||||||||||||||||||
Building and Equipment Rent | 132 | 137 | (5 | ) | 127 | 140 | (13 | ) | ||||||||||||||||
Inland Transportation | 56 | 74 | (18 | ) | 64 | 70 | (6 | ) | ||||||||||||||||
Conrail Rents, Fees & Services | 20 | 87 | (67 | ) | 19 | 82 | (63 | ) | ||||||||||||||||
Restructuring Charge | — | 15 | (15 | ) | ||||||||||||||||||||
Miscellaneous | (3 | ) | (1 | ) | (2 | ) | (1 | ) | (2 | ) | 1 | |||||||||||||
Restructuring Charge | — | 53 | (53 | ) | ||||||||||||||||||||
Total Operating Expense | 1,754 | 1,768 | (14 | ) | 1,735 | 1,715 | 20 | |||||||||||||||||
Operating Income | $ | 354 | $ | 152 | $ | 202 | $ | 431 | $ | 282 | $ | 149 | ||||||||||||
(a) | Prior periods have been reclassified to conform to the current presentation. | |
(b) | Consolidated operating income includes the operating results of Surface Transportation illustrated on page 36 and other operating income. Other operating income includes the gain amortization on the CSX Lines conveyance, net sublease income from assets formerly included in the Marine Services segment, and other |
Consolidated Operating Revenue
The three months ended April 1, 2005 demonstrated revenue growth increasing 10% or $188 million compared to the prior year comparable quarter primarily driven by yield management success, strong demand and the Company’s fuel surcharge program.
Consolidated Operating Income
Consolidated operating expenses remained relatively flat as decreases in Conrail Rents, Fees and Services and the absence of the restructuring charges offset increases in other expense items. Overall consolidated operating income increased $202 million or 133% quarter over quarter.
3734
35
Surface | ||||||||||||||||||||||||||||||||||||
Rail | Intermodal | Transportation | ||||||||||||||||||||||||||||||||||
2005 | 2004 | Change | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||||||||||||
Operating Revenue | $ | 1,836 | $ | 1,672 | $ | 164 | $ | 330 | $ | 325 | $ | 5 | $ | 2,166 | $ | 1,997 | $ | 169 | ||||||||||||||||||
Operating Expense | ||||||||||||||||||||||||||||||||||||
Labor and Fringe | 687 | 646 | 41 | 19 | 18 | 1 | 706 | 664 | 42 | |||||||||||||||||||||||||||
Materials, Supplies and Other | 394 | 382 | 12 | 45 | 52 | (7 | ) | 439 | 434 | 5 | ||||||||||||||||||||||||||
Depreciation | 193 | 148 | 45 | 10 | 9 | 1 | 203 | 157 | 46 | |||||||||||||||||||||||||||
Fuel | 176 | 151 | 25 | — | — | — | 176 | 151 | 25 | |||||||||||||||||||||||||||
Building and Equipment Rent | 104 | 103 | 1 | 33 | 41 | (8 | ) | 137 | 144 | (7 | ) | |||||||||||||||||||||||||
Inland Transportation | (104 | ) | (103 | ) | (1 | ) | 168 | 173 | (5 | ) | 64 | 70 | (6 | ) | ||||||||||||||||||||||
Conrail Rents, Fees and Services | 19 | 82 | (63 | ) | — | — | — | 19 | 82 | (63 | ) | |||||||||||||||||||||||||
Restructuring Charge | — | 14 | (14 | ) | — | 1 | (1 | ) | — | 15 | (15 | ) | ||||||||||||||||||||||||
Total Operating Expense | 1,469 | 1,423 | 46 | 275 | 294 | (19 | ) | 1,744 | 1,717 | 27 | ||||||||||||||||||||||||||
Operating Income | $ | 367 | $ | 249 | $ | 118 | $ | 55 | $ | 31 | $ | 24 | $ | 422 | $ | 280 | $ | 142 | ||||||||||||||||||
Operating Ratio | 80.0 | % | 85.1 | % | 83.3 | % | 90.5 | % | 80.5 | % | 86.0 | % |
Prior periods have been reclassified to conform to the current presentation. |
36
Second Quarter Loads | Second Quarter Revenue | ||||||||||||||||||||||||
2005 | 2004 | % Change | 2005 | 2004 | % Change | ||||||||||||||||||||
Merchandise | |||||||||||||||||||||||||
Phosphates and Fertilizers | 117 | 121 | (3 | )% | $ | 91 | $ | 88 | 3 | % | |||||||||||||||
Metals | 92 | 95 | (3 | ) | 140 | 125 | 12 | ||||||||||||||||||
Forest Products | 113 | 115 | (2 | ) | 181 | 166 | 9 | ||||||||||||||||||
Food and Consumer | 63 | 61 | 3 | 109 | 92 | 18 | |||||||||||||||||||
Agricultural Products | 87 | 89 | (2 | ) | 133 | 127 | 5 | ||||||||||||||||||
Chemicals | 135 | 140 | (4 | ) | 270 | 264 | 2 | ||||||||||||||||||
Emerging Markets | 136 | 134 | 1 | 137 | 129 | 6 | |||||||||||||||||||
Total Merchandise | 743 | 755 | (2 | ) | 1,061 | 991 | 7 | ||||||||||||||||||
Automotive | 124 | 135 | (8 | ) | 211 | 220 | (4 | ) | |||||||||||||||||
Coal, Coke and Iron Ore | |||||||||||||||||||||||||
Coal | 438 | 410 | 7 | 519 | 426 | 22 | |||||||||||||||||||
Coke and Iron Ore | 21 | 17 | 24 | 22 | 16 | 38 | |||||||||||||||||||
Total Coal, Coke and Iron Ore | 459 | 427 | 7 | 541 | 442 | 22 | |||||||||||||||||||
Other | — | — | — | 23 | 19 | 21 | |||||||||||||||||||
Total Rail | 1,326 | 1,317 | 1 | 1,836 | 1,672 | 10 | |||||||||||||||||||
Intermodal | |||||||||||||||||||||||||
Domestic | 223 | 267 | (16 | ) | 185 | 199 | (7 | ) | |||||||||||||||||
International | 320 | 322 | (1 | ) | 124 | 124 | — | ||||||||||||||||||
Other | — | — | — | 21 | 2 | NM | |||||||||||||||||||
Total Intermodal | 543 | 589 | (8 | ) | 330 | 325 | 2 | ||||||||||||||||||
Total Surface Transportation | 1,869 | 1,906 | (2 | )% | $ | 2,166 | $ | 1,997 | 8 | % |
Prior periods have been reclassified to conform to the current presentation. NM — Not Meaningful |
37
38
39
40
CONSOLIDATED(a)(b) | ||||||||||||
July 1, | June 25, | $ | ||||||||||
(Dollars in Millions) | 2005 | 2004 | Change | |||||||||
(Unaudited) | ||||||||||||
Operating Revenue | $ | 4,274 | $ | 3,917 | $ | 357 | ||||||
Operating Expense | ||||||||||||
Labor and Fringe | 1,403 | 1,343 | 60 | |||||||||
Materials, Supplies and Other | 907 | 859 | 48 | |||||||||
Depreciation | 410 | 321 | 89 | |||||||||
Fuel | 355 | 305 | 50 | |||||||||
Building and Equipment Rent | 259 | 277 | (18 | ) | ||||||||
Inland Transportation | 120 | 144 | (24 | ) | ||||||||
Conrail Rents, Fees & Services | 39 | 169 | (130 | ) | ||||||||
Restructuring Charge | — | 68 | (68 | ) | ||||||||
Miscellaneous | (4 | ) | (3 | ) | (1 | ) | ||||||
Total Operating Expense | 3,489 | 3,483 | 6 | |||||||||
Operating Income | $ | 785 | $ | 434 | $ | 351 | ||||||
(a) | Prior periods have been reclassified to conform to the current presentation. | |
(b) | Consolidated operating income includes the operating results of Surface Transportation illustrated on page 36 and other operating income. Other operating income includes the gain amortization on the CSX Lines conveyance, net sublease income from assets formerly included in the Marine Services segment, and other items and amounted to $12 million and $3 million for the six months ended July 1, 2005 and June 25, 2004, respectively. |
41
second quarter of 2005.
3842
RAIL | ||||||||||||
April 1, | March 26, | $ | ||||||||||
2005 | 2004 | Change | ||||||||||
(Dollars in Millions)(Unaudited) | ||||||||||||
Operating Revenue | $ | 1,779 | $ | 1,605 | $ | 174 | ||||||
Operating Expense | ||||||||||||
Labor and Fringe | 682 | 666 | 16 | |||||||||
Materials, Supplies and Other | 410 | 365 | 45 | |||||||||
Depreciation | 193 | 150 | 43 | |||||||||
Fuel | 179 | 154 | 25 | |||||||||
Building and Equipment Rent | 101 | 102 | (1 | ) | ||||||||
Conrail Rents, Fees & Services | 20 | 87 | (67 | ) | ||||||||
Inland Transportation | (105 | ) | (101 | ) | (4 | ) | ||||||
Restructuring Charge – Net | — | 50 | (50 | ) | ||||||||
Total Operating Expense | 1,480 | 1,473 | 7 | |||||||||
Operating Income | $ | 299 | $ | 132 | $ | 167 | ||||||
Operating Ratio | 83.2 | % | 91.8 | % |
INTERMODAL | ||||||||||||
April 1, | March 26, | $ | ||||||||||
2005 | 2004 | Change | ||||||||||
(Dollars in Millions)(Unaudited) | ||||||||||||
Operating Revenue | $ | 329 | $ | 315 | $ | 14 | ||||||
Operating Expense | ||||||||||||
Inland Transportation | 161 | 175 | (14 | ) | ||||||||
Materials, Supplies and Other | 52 | 51 | 1 | |||||||||
Building and Equipment Rent | 34 | 38 | (4 | ) | ||||||||
Labor and Fringe | 20 | 19 | 1 | |||||||||
Depreciation | 10 | 10 | — | |||||||||
Restructuring Charge – Net | — | 3 | (3 | ) | ||||||||
Total Operating Expense | 277 | 296 | (19 | ) | ||||||||
Operating Income | $ | 52 | $ | 19 | $ | 33 | ||||||
Operating Ratio | 84.2 | % | 94.0 | % |
Surface | ||||||||||||||||||||||||||||||||||||
Rail | Intermodal | Transportation | ||||||||||||||||||||||||||||||||||
2005 | 2004 | Change | 2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||||||||||||
Operating Revenue | $ | 3,615 | $ | 3,277 | $ | 338 | $ | 659 | $ | 640 | $ | 19 | $ | 4,274 | $ | 3,917 | $ | 357 | ||||||||||||||||||
Operating Expense | ||||||||||||||||||||||||||||||||||||
Labor and Fringe | 1,361 | 1,304 | 57 | 39 | 37 | 2 | 1,400 | 1,341 | 59 | |||||||||||||||||||||||||||
Materials, Supplies and Other | 812 | 755 | 57 | 97 | 103 | (6 | ) | 909 | 858 | 51 | ||||||||||||||||||||||||||
Depreciation | 386 | 298 | 88 | 20 | 19 | 1 | 406 | 317 | 89 | |||||||||||||||||||||||||||
Fuel | 355 | 305 | 50 | — | — | — | 355 | 305 | 50 | |||||||||||||||||||||||||||
Building and Equipment Rent | 205 | 205 | — | 67 | 79 | (12 | ) | 272 | 284 | (12 | ) | |||||||||||||||||||||||||
Inland Transportation | (209 | ) | (204 | ) | (5 | ) | 329 | 348 | (19 | ) | 120 | 144 | (24 | ) | ||||||||||||||||||||||
Conrail Rents, Fees and Services | 39 | 169 | (130 | ) | — | — | — | 39 | 169 | (130 | ) | |||||||||||||||||||||||||
Restructuring Charge | — | 64 | (64 | ) | — | 4 | (4 | ) | — | 68 | (68 | ) | ||||||||||||||||||||||||
Total Operating Expense | 2,949 | 2,896 | 53 | 552 | 590 | (38 | ) | 3,501 | 3,486 | 15 | ||||||||||||||||||||||||||
Operating Income | $ | 666 | $ | 381 | $ | 285 | $ | 107 | $ | 50 | $ | 57 | $ | 773 | $ | 431 | $ | 342 | ||||||||||||||||||
Operating Ratio | 81.6 | % | 88.4 | % | 83.8 | % | 92.2 | % | 81.9 | % | 89.0 | % | ||||||||||||||||||||||||
3943
The following tables provide Surface Transportation carload and revenue data by service group and commodity:
First Quarter Loads | First Quarter Revenue | |||||||||||||||||||||||
2005 | 2004 | % Change | 2005 | 2004 | % Change | |||||||||||||||||||
Merchandise | ||||||||||||||||||||||||
Phosphates and Fertilizers | 117 | 120 | (3) | % | $ | 90 | $ | 89 | 1 | % | ||||||||||||||
Metals | 93 | 94 | (1 | ) | 138 | 119 | 16 | |||||||||||||||||
Forest Products | 113 | 114 | (1 | ) | 176 | 159 | 11 | |||||||||||||||||
Food and Consumer | 63 | 59 | 7 | 105 | 88 | 19 | ||||||||||||||||||
Agricultural Products | 92 | 92 | — | 137 | 131 | 5 | ||||||||||||||||||
Chemicals | 140 | 139 | 1 | 275 | 256 | 7 | ||||||||||||||||||
Emerging Markets | 115 | 112 | 3 | 117 | 116 | 1 | ||||||||||||||||||
Total Merchandise | 733 | 730 | 0 | 1,038 | 958 | 8 | ||||||||||||||||||
Automotive | 125 | 125 | — | 208 | 202 | 3 | ||||||||||||||||||
Coal, Coke and Iron Ore | ||||||||||||||||||||||||
Coal | 437 | 403 | 8 | 482 | 405 | 19 | ||||||||||||||||||
Coke and Iron Ore | 21 | 17 | 24 | 24 | 17 | 41 | ||||||||||||||||||
Total Coal, Coke and Iron Ore | 458 | 420 | 9 | 506 | 422 | 20 | ||||||||||||||||||
Other | — | — | — | 27 | 23 | 17 | ||||||||||||||||||
Total Rail | 1,316 | 1,275 | 3 | 1,779 | 1,605 | 11 | ||||||||||||||||||
Intermodal | ||||||||||||||||||||||||
Domestic | 212 | 254 | (17 | ) | 167 | 192 | (13 | ) | ||||||||||||||||
International | 316 | 295 | 7 | 124 | 117 | 6 | ||||||||||||||||||
Other | — | — | — | 38 | 6 | 533 | ||||||||||||||||||
Total Intermodal | 528 | 549 | (4 | ) | 329 | 315 | 4 | |||||||||||||||||
Total Surface Transportation | 1,844 | 1,824 | 1 | % | $ | 2,108 | $ | 1,920 | 10 | % | ||||||||||||||
Six Months Loads | Six Months Revenue | |||||||||||||||||||||||
2005 | 2004 | % Change | 2005 | 2004 | % Change | |||||||||||||||||||
Merchandise | ||||||||||||||||||||||||
Phosphates and Fertilizers | 234 | 241 | (3 | )% | $ | 181 | $ | 177 | 2 | % | ||||||||||||||
Metals | 185 | 189 | (2 | ) | 278 | 244 | 14 | |||||||||||||||||
Forest Products | 226 | 229 | (1 | ) | 357 | 325 | 10 | |||||||||||||||||
Food and Consumer | 126 | 120 | 5 | 213 | 179 | 19 | ||||||||||||||||||
Agricultural Products | 179 | 181 | (1 | ) | 270 | 258 | 5 | |||||||||||||||||
Chemicals | 275 | 279 | (1 | ) | 546 | 520 | 5 | |||||||||||||||||
Emerging Markets | 251 | 246 | 2 | 254 | 246 | 3 | ||||||||||||||||||
Total Merchandise | 1,476 | 1,485 | (1 | ) | 2,099 | 1,949 | 8 | |||||||||||||||||
Automotive | 249 | 260 | (4 | ) | 419 | 422 | (1 | ) | ||||||||||||||||
Coal, Coke and Iron Ore | ||||||||||||||||||||||||
Coal | 875 | 813 | 8 | 1,001 | 831 | 20 | ||||||||||||||||||
Coke and Iron Ore | 42 | 34 | 24 | 46 | 33 | 39 | ||||||||||||||||||
Total Coal, Coke and Iron Ore | 917 | 847 | 8 | 1,047 | 864 | 21 | ||||||||||||||||||
Other | — | — | — | 50 | 42 | 19 | ||||||||||||||||||
Total Rail | 2,642 | 2,592 | 2 | 3,615 | 3,277 | 10 | ||||||||||||||||||
Intermodal | ||||||||||||||||||||||||
Domestic | 435 | 521 | (17 | ) | 352 | 391 | (10 | ) | ||||||||||||||||
International | 636 | 617 | 3 | 247 | 241 | 2 | ||||||||||||||||||
Other | — | — | — | 60 | 8 | NM | ||||||||||||||||||
Total Intermodal | 1,071 | 1,138 | (6 | ) | 659 | 640 | 3 | |||||||||||||||||
Total Surface Transportation | 3,713 | 3,730 | (0 | )% | $ | 4,274 | $ | 3,917 | 9 | % | ||||||||||||||
4044
RESULTS OF OPERATIONS, Continued
Rail
Rail Operating Revenue
Rail revenue increased $174 million or 11% for the quarter ended April 1, 2005 compared to the quarter ended March 26, 2004.
Merchandise
Merchandise revenue was up 8% on relatively flat volume during the first quarter of 2005. All markets showed year-over-year improvement in revenue per car due to continued price increases and the Company’s fuel surcharge program.
41
CSX CORPORATIONITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONSAND FINANCIAL CONDITION
RESULTS OF OPERATIONS, Continued
Automotive
Revenue increased 3% on flat volume as a result of yield improvements. North American light vehicle production decreased 179,285 units, or roughly 4%, year over year. Inventory levels remain high, at 69 days for most manufacturers and 79 days for the Big 3. Manufacturers are using production downtime and incentives to address excess inventory.
Coal, Coke and Iron Ore
Overall coal, coke and iron ore revenues were favorable 20% year over year. Volume was favorable 9% or 38,000 carloads. Growth was driven by volume gains in export, industrial, coke, and northern utility markets. Revenue per car growth was the result of market price increases and the Company’s fuel surcharge program offsetting slightly unfavorable mix. All lines of business reflect favorable year over year revenue-per-car gains.
Rail Operating Expense
Labor and Fringeexpenses increased $16 million in the first quarter of 2005 versus the prior year quarter. The effects of inflation continue to drive labor and fringe expense increases, along with increases in incentive compensation. These costs were partially offset by benefits realized from reduced staffing levels.
Materials, Supplies and Otherexpenses increased $45 million during the first quarter of 2005 as compared to the prior year quarter. The increase is associated with volume and inflation related expenses as well as an increase in expenses related to the resolution of certain legal matters and higher reserve requirements for non-trade uncollectible accounts.
Depreciationincreased $43 million for the first quarter of 2005 due to an increased depreciation base, mainly attributable to the Conrail transaction, as assets previously leased from Conrail are now owned directly by CSX.
Fuelincreased $25 million for the quarter versus the prior year due to higher fuel prices, net of hedging benefits.
Conrail Rents, Fees and Servicesdecreased $67 million for the quarter primarily due to the Conrail transaction completed in the third quarter of 2004. This transaction decreased rents paid to Conrail, as assets previously leased from Conrail are now owned directly by CSX.
Restructuring Chargeof $50 million represents the 2004 charge for separation expenses related to the management restructuring announced in November 2003 at Surface Transportation.
Rail Operating Income
Operating income was $299 million for the quarter ended April 1, 2005 compared to $132 million for the quarter ended March 26, 2004.
42
CSX CORPORATIONITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONSAND FINANCIAL CONDITION
RESULTS OF OPERATIONS, Continued
Intermodal
Intermodal Operating Revenue
Domestic
The Network Simplification Initiative (NSI), severe west coast weather and service issues led to a 17% decrease in volume. Market rate increases partially offset the volume reduction and significantly improved revenue per unit.
International
Revenue gains were largely driven by increases in traffic on the core network. Decreases in off-core and transcontinental traffic were impacted by marketing changes and the west coast embargo which was caused by severe weather.
Other
Overall revenue strength was driven by favorable changes in incentive refund programs, fuel surcharge and an increase in per-diem and supplemental charges related to asset utilization.
Intermodal Operating Expense
Intermodal operating expense decreased $19 million, or 6%, compared to the prior year quarter, resulting primarily from reduction in volume associated with NSI and western linehaul routes unfavorably impacted by the significant weather on the west coast.
Intermodal Operating Income
Intermodal operating income increased $33 million, or 174%, compared to the prior year quarter due to favorable changes in incentive refund programs, fuel surcharge and an increase in per-diem and supplemental charges related to asset utilization. Continued yield improvements in the domestic business segment are also driving the increase.
43
CSX CORPORATIONITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONSAND FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
publicly-traded notes.
Other current liabilities decreased $36 million to $79 million primarily due to payments for the purchase of freight cars.
See Note 4. Debt and Credit Agreements, for discussion of the Company’s revolving credit agreements.
If CSX’s short-term commercial paper ratings were reduced to A-3 and P-3, it would increase the Company’s borrowing costs in the commercial paper market and reduce the Company’s access to this source of funds because of the more limited demand for lower rated commercial paper.
4445
LIQUIDITY AND CAPITAL RESOURCES, Continued
(Dollars in Millions) | ||||||||
April 1, | December 31, | |||||||
2005 | 2004 | |||||||
Current Ratio | 1.2 | 0.9 | ||||||
Debt Ratio | 41 | % | 48 | % | ||||
Ratio of Earnings to Fixed Charges | 2.0x | 2.0 x |
OTHER MATTERS
• | Casualty, Environmental and Legal Reserves | ||
• | Pension and Postretirement Medical Plan Accounting | ||
• | Depreciation Policies for Assets Under the Group-Life Method | ||
• | Income Taxes |
4546
• | Expectations as to operating results and operational improvements; | ||
• | Expectations as to the effect of claims, lawsuits, environmental costs, commitments, contingent liabilities, labor negotiations or agreements on our financial condition; | ||
• | Management’s plans, goals, strategies and objectives for future operations and other similar expressions concerning matters that are not historical facts, and management’s expectations as to future performance and operations and the time by which objectives will be achieved; and | ||
• | Future economic, industry or market conditions or performance. |
• | The Company’s success in implementing its operational objectives and improving Surface Transportation operating efficiency; | ||
• | Changes in operating conditions and costs or commodity concentrations; | ||
• | Material changes in domestic or international economic or business conditions, including those affecting the rail industry such as customer demand, effects of adverse economic conditions affecting shippers, and adverse economic conditions in the industries and geographic areas that consume and produce freight; | ||
• | Labor costs and labor difficulties, including stoppages affecting either the Company’s operations or the customers’ ability to deliver goods to the Company for shipment; | ||
• | The inherent risks associated with safety and security, including adverse economic or operational effects from terrorist activities and any governmental response; | ||
• | Changes in fuel prices; |
4647
• | Legislative, regulatory, or legal developments involving taxation, including the outcome of tax claims and litigation; the potential enactment of initiatives to re-regulate the rail industry and the ultimate outcome of shipper and rate claims subject to adjudication; | ||
• | Competition from other modes of freight transportation such as trucking and competition and consolidation within the transportation industry generally; | ||
• | Natural events such as extreme weather conditions, fire, floods, earthquakes, or other unforeseen disruptions of the Company’s operations, systems, property or equipment; and | ||
• | The outcome of litigation and claims, including those related to environmental contamination, personal injuries and occupational illnesses. |
4748
Millions)
July 1, | ||||
2005 | ||||
Interest Rate Swap Agreements | $ | 694 | ||
Effect of 1% Increase or Decrease in LIBOR Interest Rate | $ | 7 | ||
Exclusive
July 1, | ||||
2005 | ||||
Floating Rate Debt Outstanding | $ | 370 | ||
Effect of 1% Variance in Interest Rates | $ | 4 | ||
4849
4950
(a) | Annual meeting held May 4, 2005 | ||
(b) | Not applicable | ||
(c) | There were 215,916,402 shares of CSX common stock outstanding as of March 4, 2005, the record date for the 2005 annual meeting of shareholders. A total of 188,595,880 shares were voted. All of the nominees for directors of the corporation were elected with the following vote: |
Votes | Votes | |||
Nominee | For | Withheld | ||
Elizabeth E. Bailey | 182,339,153 | 6,256,727 | ||
John B. Breaux | 183,232,590 | 5,363,290 | ||
Edward J. Kelly III | 179,489,361 | 9,106,519 | ||
Robert D. Kunisch | 182,270,542 | 6,325,338 | ||
Southwood J. Morcott | 182,252,294 | 6,343,586 | ||
David M. Ratcliffe | 181,422,683 | 7,173,197 | ||
Charles E. Rice | 181,596,295 | 6,999,585 | ||
William C. Richardson | 182,264,510 | 6,331,370 | ||
Frank S. Royal | 181,717,480 | 6,878,400 | ||
Donald J. Shepard | 183,657,178 | 4,938,702 | ||
Michael J. Ward | 182,234,468 | 6,361,412 |
Votes | Broker | |||||||||||
Votes For | Against | Abstentions | Non-Votes | |||||||||
183,383,311 | 3,670,429 | 1,542,140 | — |
51
None.
Votes | Broker | |||||||||||
Votes For | Against | Abstentions | Non-Votes | |||||||||
12,808,601 | 152,114,061 | 2,560,640 | 21,112,578 |
Votes | Broker | |||||||||||
Votes For | Against | Abstentions | Non-Votes | |||||||||
125,425,384 | 39,507,833 | 2,550,085 | 21,112,578 |
52
None.
Exhibits
Exhibits |
31.1* | Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* | Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1* | Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2* | Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
* | Filed herewith |
50
CSX CORPORATION (Registrant) | ||||
By: | /s/ CAROLYN T. SIZEMORE | |||
Carolyn T. Sizemore | ||||
Vice President and Controller (Principal Accounting Officer) | ||||
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