PAGE 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended AprilJuly 1, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------- ----------------
Commission File Number 1-8022
CSX CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 62-1051971
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 East Cary Street, Richmond, Virginia 23219-4031
(Address of principal executive offices) (Zip Code)
(804) 782-1400
(Registrant's telephone number, including area code)
No Change
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of AprilJuly 1, 1994: 104,683,674104,731,575 shares.
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PAGE 2
CSX CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JULY 1, 1994
INDEX
PART I. FINANCIAL INFORMATION Page Number
Item 1:
Financial Statements
1. Consolidated Statement of Earnings-
Quarters and Six Months Ended
AprilJuly 1, 1994 and March 31,June 30, 1993 3
2. Consolidated Statement of Cash Flows-
QuartersSix Months Ended AprilJuly 1, 1994 and March 31,June 30, 1993 4
3. Consolidated Statement of Financial Position-
At AprilJuly 1, 1994 and December 31, 1993 5
Notes to Consolidated Financial Statements 6
Item 2:
Management's Discussion and Analysis of Results of
Operations and Financial Condition 10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 1516
Signature 1516
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PAGE 3
CSX CORPORATION AND SUBSIDIARIES
Consolidated Statement of Earnings
(Millions of Dollars, Except Per Share Amounts)
Quarter Ended -----------------------
AprilSix Months Ended
---------------------- ----------------------
July 1, March 31,June 30, July 1, June 30,
1994 1993 1994 1993
-------- ----------------- -------- --------
Operating Revenue
Transportation $ 2,2112,324 $ 2,1082,221 $ 4,535 $ 4,329
Non-Transportation 16 1547 43 63 58
------- ------- -------- --------
Total 2,227 2,1232,371 2,264 4,598 4,387
------- ------- -------- --------
Operating Expense
Transportation 2,015 1,9472,032 1,952 4,047 3,899
Non-Transportation 26 2035 34 61 54
Restructuring Charge --- --- --- 93
------- ------- -------- --------
Total 2,041 2,0602,067 1,986 4,108 4,046
------- ------- -------- --------
Operating Income 186 63304 278 490 341
Other Income (Expense) (1) (1)18 30 17 29
Interest Expense 67 7471 75 138 149
------- ------- -------- --------
Earnings (Loss) before
Income Taxes 118 (12)251 233 369 221
Income Tax Expense (Benefit) 44 (3)89 79 133 76
------- ------- -------- --------
Net Earnings (Loss) $ 74162 $ (9)154 $ 236 $ 145
======= ======= ======== ========
Earnings (Loss) Per Share $ .711.55 $ (.09)1.48 $ 2.26 $ 1.39
======= ======= ======== ========
Average Common Shares
Outstanding (Thousands) 104,452 103,664104,704 103,905 104,578 103,785
======= ======= ======== ========
Common Shares
Outstanding (Thousands) 104,684 103,822104,732 103,972 104,732 103,972
======= ======= ======== ========
Cash Dividends Paid Per
Common Share $ .44 $ .38 $ .88 $ .76
======= ======= ======== ========
See accompanying Notes to Consolidated Financial Statements.
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PAGE 4
CSX CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Millions of Dollars)
QuarterSix Months Ended
-----------------------
April---------------------
July 1, March 31,June 30,
1994 1993
------ -------- ---------
OPERATING ACTIVITIES
Net Earnings (Loss) $ 74236 $ (9)145
Adjustments to Reconcile Earnings
(Loss)
to Cash Provided
Depreciation 143 143288 286
Deferred Income Taxes 22 669 42
Restructuring Charge -- Provision --- 93
Productivity/Restructuring Charge -- Payments (34) (26)(72) (66)
Other Operating Activities 18 123 (27)
Changes in Operating Assets and Liabilities
Accounts Receivable (33) 8(2) (30)
Materials and Supplies (14) (22)(17) (21)
Other Current Assets (3) (9)10 (20)
Accounts Payable and Other Current Liabilities (180) (152)(154) (49)
----- ---------
Cash (Used) Provided by Operating Activities (7) 33381 353
----- ---------
INVESTING ACTIVITIES
Property Additions (143) (125)(320) (326)
Short-Term Investments - Net 80 6860 (33)
Purchases of Long-Term Marketable Securities (11) (49)(22) (100)
Other Investing Activities (5) (35)30 66
----- ---------
Cash Used by Investing Activities (79) (141)(252) (393)
----- ---------
FINANCING ACTIVITIES
Short-Term Debt - Net 242 7144 204
Long-Term Debt Issued 53 81
Long-Term Debt Repaid (85) (36)(216) (143)
Dividends Paid (47) (39)(92) (79)
Other Financing Activities (9) 133 1
----- -----
Cash (Used) Provided by Financing Activities 154 26(108) 64
----- -----
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Increase (Decrease) in Cash and Cash Equivalents 68 (82)21 24
Cash and Cash Equivalents at Beginning of Period 298 374
----- -----
Cash and Cash Equivalents at End of Period 366 292319 398
Short-Term Investments at End of Period 130 87159 189
----- -----
Cash, Cash Equivalents and Short-Term
Investments at End of Period $ 496478 $ 379587
===== =====
See accompanying Notes to Consolidated Financial Statements.
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CSX CORPORATION AND SUBSIDIARIES
Consolidated Statement of Financial Position
(Millions of Dollars)
AprilJuly 1, December 31,
1994 1993
-------- -----------------------
ASSETS
Current Assets
Cash, Cash Equivalents and
Short-Term Investments $ 496478 $ 499
Accounts Receivable 709680 668
Materials and Supplies 213216 199
Deferred Income Taxes 10987 108
Other Current Assets 100123 97
------- -------
Total Current Assets 1,6271,584 1,571
------- -------
Properties and Other Assets
Properties 15,93316,019 15,853
Less Accumulated Depreciation 5,1515,202 5,065
------- -------
Properties - Net 10,78210,817 10,788
Affiliates and Other Companies 262278 268
Other Assets 792766 793
------- -------
Total Properties and Other Assets 11,83611,861 11,849
------- -------
Total Assets $13,463$13,445 $13,420
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Other
Current Liabilities $ 1,7601,790 $ 1,965
Current Maturities of Long-Term Debt 141140 146
Short-Term Debt 406308 164
------- -------
Total Current Liabilities 2,3072,238 2,275
------- -------
Long-Term Debt 3,1072,978 3,133
------- -------
Long-Term Liabilities and Deferred Gains 2,4342,464 2,491
------- -------
Deferred Income Taxes 2,3642,389 2,341
------- -------
Shareholders' Equity
Common Stock 105 104
Other Capital 1,3511,359 1,307
Retained Earnings 1,9532,070 1,927
Minimum Pension Liability Adjustment (158) (158)
------- -------
Total Shareholders' Equity 3,2513,376 3,180
------- -------
Total Liabilities and Shareholders' Equity $13,463$13,445 $13,420
======= =======
See accompanying Notes to Consolidated Financial Statements.
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PAGE 6
CSX CORPORATION AND SUBSIDIARIES
--------------------------------
Notes to Consolidated Financial Statements
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 1. BASIS OF PRESENTATION
In the opinion of management, the accompanying consolidated financial
statements contain all adjustments necessary to present fairly the company's
financial position as of AprilJuly 1, 1994, and December 31, 1993, and the results
of operations for the quarters and six months ended July 1, 1994 and June 30,
1993, and its cash flows for the quarterssix months ended AprilJuly 1, 1994 and March
31,June 30,
1993, such adjustments being of a normal recurring nature.
Earnings per share are based on the weighted average of common shares
outstanding for the quarterssecond quarter and six months ended AprilJuly 1, 1994 and March 31,June
30, 1993. Dilution for the quarters and six months ended AprilJuly 1, 1994 and
March 31,June 30, 1993, which could result if all outstanding common stock equivalents
were exercised, is not significant.
While the company believes that the disclosures presented are
adequate to make the information not misleading, it is suggested that these
financial statements be read in conjunction with the financial statements and
the notes included in the company's latest Annual Report and Form 10-K.
Certain prior-year data have been reclassified to conform to the 1994
presentation.
NOTE 2. CHANGE IN FISCAL REPORTING PERIODS
Effective January 1, 1994, the company changed its fiscal reporting
periods from four calendar quarters to four 13-week quarters. Fiscal 1994
began on January 1, 1994, and will include 52 weeks. The four 13-week
quarters will end on April 1, July 1, September 30 and December 30, 1994.
NOTE 3. ACCOUNTING AND REPORTING CHANGES
Effective January 1, 1994, the company adopted Statement of Financial
Accounting Standards ("SFAS") No. 112, "Employers' Accounting for Post-
employment Benefits." SFAS No. 112 requires that certain benefits provided to
former or inactive employees, after employment but before retirement, such as
workers' compensation and disability benefits, be accrued if attributable to
employees' service already rendered. The financial statement impact of
adopting SFAS No. 112 was not significant.
Effective January 1, 1994, the company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." SFAS No.
115 requires that investments that have readily determinable fair values be
classified as "held-to-maturity," "trading," or "available-for-sale"
securities. Investments in debt securities have been classified as "held-to-
maturity," or "available-for-sale," and reported at amortized cost, which
approximates fair value, in the consolidated statement of financial position.
The financial statement impact of adopting SFAS No. 115 was not significant.
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PAGE 7
CSX CORPORATION AND SUBSIDIARIES
--------------------------------
Notes to Consolidated Financial Statements, Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 4. RESTRUCTURING CHARGE
The company recorded a $93 million pretax charge in the first quarter
of 1993 to recognize the estimated costs of restructuring certain operations
and functions at its container-shipping unit. The restructuring charge
reduced net earnings for the first quartersix months of 1993 by $61 million, 59 cents
per share. As of AprilJuly 1, 1994, payments totaling $42$49 million have been
recorded as a reduction of the liability for the restructuring charge.
NOTE 5. ACCOUNTS RECEIVABLE
During 1993, the company issued $200 million of Trade Receivable
Participation Certificates ("Certificates"), at 5.05%, due September 1998.
The Certificates are collateralized by $234 million of accounts receivable
held in a master trust. The proceeds from the issuance of the Certificates
were used to reduce the amount of accounts receivable sold under a previous
agreement.
In addition, the company has a five-year revolving agreement with a
financial institution to sell with recourse on a monthly basis an undivided
percentage ownership interest in designated pools of accounts receivable up to
a maximum of $200 million. CSX has retained the collection and servicing
responsibility with respect to accounts receivable held in trust or sold.
At AprilJuly 1, 1994 and December 31, 1993, accounts receivable have been
reduced by $372 million and $380 million, respectively, representing
Certificates and accounts receivable sold.
NOTE 6. OPERATING EXPENSE
Quarter Ended -----------------------
AprilSix Months Ended
------------------ ------------------
July 1, March 31,June 30, July 1, June 30,
1994 1993 1994 1993
-------- ----------------- -------- --------
Labor and Fringe Benefits $ 783769 $ 768746 $1,552 $1,514
Materials, Supplies and Other 565 544 5061,109 1,050
Building and Equipment Rent 280 274291 269 571 543
Inland Transportation 190 166198 178 388 344
Depreciation 145 143 143288 286
Fuel 101 11099 106 200 216
Restructuring Charge --- --- --- 93
------ ------ ------ ------
Total $2,041 $2,060$2,067 $1,986 $4,108 $4,046
====== ====== ====== ======
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PAGE 8
CSX CORPORATION AND SUBSIDIARIES
--------------------------------
Notes to Consolidated Financial Statements, Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 7. OTHER INCOME (EXPENSE)
Quarter Ended -----------------------
AprilSix Months Ended
------------------ -----------------
July 1, March 31,June 30, July 1, June 30,
1994 1993 1994 1993
-------- ----------------- ------- --------
Interest Income $ 1216 $ 12
Fees Related to13 $ 28 $ 25
Gain on South Florida Track Sale 22 20 22 20
Net Gain on Investment Transactions 2 15 2 15
Discount on and Servicing of
Accounts Receivable Sold (7)(8) (4) (15) (8)
Minority Interest (4) (2)(3) (8) (5)
Miscellaneous (2) (7)(10) (11) (12) (18)
------ ------ ------ ------
Total Expense $ (1)18 $ (1)30 $ 17 $ 29
====== ====== ====== ======
NOTE 8. INCOME TAXES
The effective income tax rate for the second quarter and first quartersix
months of 1994 reflects the federal statutory rate of 35 percent. The federal
statutory rate for the second quarter and first quartersix months of 1993 was 34
percent.
NOTE 9. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
AprilJuly 1, December 31,
1994 1993
---------------- ------------
Trade Accounts Payable $ 852836 $ 917
Labor and Fringe Benefits (a) 467495 523
Income Taxes and Other 243258 332
Casualty Reserves 198201 193
------ ------
Total $1,760$1,790 $1,965
====== ======
(a) Labor and Fringe Benefits includes separation liabilities of $62
million at April 1, 1994 and $46 million at December 31, 1993.
NOTE 10. COMMITMENTS AND CONTINGENCIES
Sea-Land Service, Inc. ("Sea-Land"), the container-shipping unit of
CSX, has entered into agreements for the construction of four high-
performance, fuel-efficient container vessels and the modification of three
Atlantic Class vessels in its current fleet. Estimated capital expenditures
for the total program are approximately $250 million over the next three
years.
Although the company obtains substantial amounts of commercial
insurance for potential losses for third-party liability and property damage,
reasonable levels of risk are retained on a self-insurance basis. A
substantial portion of the insurance coverage, up to $250 million from rail
operations and up to $175 million from certain other operations, is provided
by insurance companies owned or partially owned by CSX.
CSX Transportation, Inc. ("CSXT") is a party to various proceedings
brought both by private parties and regulatory agencies related to
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PAGE 9 CSX CORPORATION AND SUBSIDIARIES
--------------------------------
Notes to Consolidated Financial Statements, Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 10. COMMITMENTS AND CONTINGENCIES, Continued
CSX Transportation, Inc. ("CSXT") is a party to various proceedings
brought both by private parties and regulatory agencies related to
environmental issues. CSXT has been identified as a potentially responsible
party in a number of governmental investigations and actions relating to
environmentally impaired sites that are or may be subject to remedial action
under the Federal Superfund Statute ("Superfund") or corresponding state
statutes. The majority of these proceedings are based on allegations that
CSXT, or its railroad predecessors, sent hazardous substances to the
facilities in question for disposal. Such proceedings arising under Superfund
typically involve numerous other waste generators and disposal companies and
seek to allocate or recover costs associated with site investigation and
cleanup, which could be substantial.
The assessment of the required response and remedial costs associated
with these sites is extremely complex. Among the variables that management
must assess are imprecise and changing remedial cost estimates and continually
evolving governmental standards.
CSXT frequently reviews its role, if any, with respect to each such
location, giving consideration to the nature of CSXT's alleged connection to
the location (e.g., generator, owner or operator), the extent of CSXT's
alleged connection (e.g., volume of waste sent to the location and other
relevant factors), the accuracy and strength of evidence connecting CSXT to
the location, and the number, connection and financial position of other named
and unnamed potentially responsible parties at the location. Further, CSXT
periodically reviews its exposure in all non-Superfund environmental
proceedings with which it is involved.
Based upon such reviews and updates of the sites with which it is
involved, CSXT has recorded, and periodically reviews for adequacy, reserves
to cover estimated contingent future environmental costs with respect to such
sites. Liabilities are recorded when the company's responsibility for
environmental remedial efforts is deemed probable, and the costs can be
reasonably estimated. Generally, the timing of these accruals coincides with
the completion of a feasibility study or the company's commitment to a formal
plan of action. The company does not currently possess sufficient information
to reasonably estimate the amounts of additional liabilities, if any, on some
sites until completion of future environmental studies. Such additional
liabilities could be significant to future consolidated results of operations
and cash flows. Based upon information currently available, however, the
company believes that its environmental reserves are adequate to accomplish
remedial actions to comply with present laws and regulations.
A number of legal actions, other than environmental, are pending
against CSX and certain subsidiaries in which claims are made in substantial
amounts. While the ultimate results of environmental investigations, lawsuits
and claims involving the company cannot be predicted with certainty,
management does not currently expect that these matters will have a material
adverse effect on the consolidated financial position, results of operations
and cash flows of the company.
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PAGE 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
- - ---------------------
First-QuarterSecond-Quarter 1994 Compared With 1993
- - ---------------------------------------------------------------------------
The company reported net earnings for the firstsecond quarter ended AprilJuly
1, 1994, of $74$162 million, 71 cents$1.55 per share, versus a net loss of $9$154 million, 9 cents$1.48 per
share for the firstsecond quarter ended March 31,June 30, 1993.
Operating revenue for the second quarter of 1994 was $2.4 billion, 5
percent above the prior-year quarter of $2.3 billion. Operating expense was
$2.1 billion for the second quarter of 1994, compared with $2 billion for the
second quarter of 1993. Operating income for the second quarter of 1994 was
$304 million versus $278 million in the second quarter of 1993.
Rail Unit Results
- -----------------
Operating income at the rail unit rose $47 million or 22 percent, to
$261 million for the second quarter of 1994, from $214 million in the prior-
year quarter. The results were driven by a 5 percent increase in revenue and
continued commitment to cost-cutting programs.
For the second quarter of 1994, merchandise traffic grew 7 percent,
with gains in metals, minerals, autos, and food and consumer products. Rail
revenue, at $1.2 billion for the second quarter of 1994, rose $54 million, or
5 percent, from the prior-year quarter.
Domestic coal demand offset continued weakness in export coal to
raise volume to 38.6 million tons, 2 percent above 1993's second quarter
level. Coal shipments to utility, industrial and cogeneration users increased
to 35.4 million tons in the second quarter of 1994, up from 33.3 million tons
in the second quarter of 1993. Export coal totaled 3.2 million tons for the
second quarter of 1994, compared with 4.4 million tons in the prior-year
quarter. The decline in export coal was due to decreased foreign demand, more
attractive domestic markets and increased foreign competition.
Rail operating expense was $914 million in the second quarter of 1994
compared with $907 million in the second quarter of 1993. Despite higher
traffic levels, rail operating expense was held nearly flat at $914 million,
just $7 million, or less than 1 percent, over the expense level in the prior-
year quarter. Labor and fringe benefit expense increased about 2 percent due
to the greater number of train crews required to handle the higher traffic as
well as a modest wage increase mandated by the Presidential Emergency Board
No. 219.
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PAGE 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION, CONTINUED
RESULTS OF OPERATIONS, Continued
- --------------------------------
Rail Unit Results, Continued
- ----------------------------
RAIL OPERATING INCOME
(Millions of Dollars)
-----------------------------
Quarter Ended Year-To-Date Ended
------------------ ------------------
July 1, June 30, Percent July 1, June 30, Percent
1994 1993 Change 1994 1993 Change
-------- -------- ------- ------- -------- -------
Operating Revenue
Merchandise $ 786 $ 739 6% $ 1,544 $ 1,459 6%
Coal 363 354 3% 702 694 1%
Other 26 28 (7%) 49 54 (9%)
------ ------ ------- --------
Total 1,175 1,121 5% 2,295 2,207 4%
Operating Expense 914 907 1% 1,854 1,840 1%
------ ------ ------- --------
Operating Income $ 261 $ 214 22% $ 441 $ 367 20%
====== ====== ======= ========
Operating Ratio 77.8% 80.9% 80.9% 83.4%
====== ====== ======= ========
Container Shipping Unit Results
- -------------------------------
CSX's container-shipping unit regained momentum late in the second
quarter of 1994 to generate $15 million in operating income despite the three-
week nationwide Teamsters' strike in April, which closed Sea-Land's West Coast
operations and disrupted shipments to and from Alaska, Hawaii and Asia.
Operating revenue for the second quarter of 1994 was $826 million,
compared with $815 million in the 1993 second quarter, as the volume of
containers handled rose 2 percent to 309,000 loads. Surging traffic in the
Asia/Middle East/Europe and Latin America trade lanes, coupled with the unit's
success in regaining customers' shipments in the Pacific markets after the
strike, drove the increased volume and revenue.
Container-shipping operating expense rose to $811 million for the
second quarter of 1994, an increase of $50 million from the 1993 second
quarter as a result of handling increased volume, rerouting containers and
ships during the work stoppage, and repositioning equipment for normal
operations.
Intermodal Unit Results
- -----------------------
Intermodal operating income climbed 33 percent to $16 million in the
second quarter of 1994 from 1993's second-quarter level of $12 million on a 19
percent rise in operating revenue. The unit experienced double-digit growth
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PAGE 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION, CONTINUED
RESULTS OF OPERATIONS, Continued
- --------------------------------
Intermodal Unit Results, Continued
- ----------------------------------
across all types of traffic, including shipments from international ocean
carriers, truck partners and direct shippers. Traffic increased to 321,000
loads in the second quarter of 1994, 17 percent above 1993's second quarter.
Barge Unit Results
- ------------------
The barge unit capitalized on strong northbound back-haul shipments
of steel and bulk commodities to temper the impact of a weak export grain
market in the second quarter of 1994. These actions, coupled with ongoing
cost-control efforts, resulted in barge operating income in the second quarter
of 1994 of $11 million, slightly below the results of $12 million in 1993's
second quarter.
Other Income
- ------------
Other income declined to $18 million in the second quarter of 1994
from the 1993 second-quarter level of $30 million, primarily the result of a
one-time gain on the sale of a real estate partnership interest in the 1993
period.
First Six Months 1994 Compared to 1993
- --------------------------------------
For the first six months ended July 1, 1994, the company reported net
earnings of $236 million, $2.26 per share versus $145 million, $1.39 per share
for the six months ended June 30, 1993. The six months results for 1993 first-
quarter results
included a pretax charge of $93 million, $61 million after tax, 59 cents per
share, which solely related to the restructuring of certain operations and
functions at Sea-Land Service Inc., CSX's wholly ownedwholly-owned container-shipping
subsidiary. Excluding the after-tax restructuring charge, earnings for the
first quartersix months of 1993 would have been $52$206 million, 50 cents$1.98 per share.
Operating revenue for the first quarter of 1994 was $2.2 billion, 5
percent above the prior-year quarter of $2.1 billion. Operating expense was
$2 billion for the first quarter of 1994, compared to $2.1 billion for the
first quarter of 1993, which includes the Sea-Land restructuring charge.
Operating income for the first quarter of 1994 was $186 million versus $63
million in the first quarter of 1993. Excluding the 1993 charge, operating
income rose $30 million above the 1993 first-quarter results of $156 million.
Rail Unit Results
- - -----------------
Operating income at the rail unit rose $27 million or 18 percent, to
$180 million for the first quarter of 1994, from $153 million in the prior-
year quarter. The results were driven by a 3 percent increase in revenue,
continued commitment to cost reductions and close attention to safety.
Rail traffic surged late in the first quarter of 1994 as industries
began recovering from the severe winter conditions. For the first quarter of
1994, a 4 percent increase in traffic boosted rail operating revenue 3 percent
versus the 1993 prior-year quarter. Metals, minerals and automotive shipments
for the first quarter of 1994 jumped 21 percent, 16 percent and 14 percent,
respectively, over 1993's first-quarter levels, reflecting the underlying
strength of the industrial sector of the U.S. economy.
Coal originations strengthened late in the first quarter of 1994 as
weather conditions improved, reaching a total of 36.1 million tons versus 36.5
million tons in the first quarter of 1993. Shipments to utilities, which are
anticipated to show gains through the rest of the year, edged up 1 percent
from 1993's first quarter, to 24.9 million tons. Export traffic for the first
quarter of 1994 was 4.2 million tons, 1.2 million tons below the prior-year
level. Coal shipments to other users climbed 9 percent to 7 million tons for
the first quarter of 1994 from the 1993 first quarter.
Rail operating expense was $940 million in the quarter compared with
$933 million in the first quarter of 1993. First quarter 1994 expense
included train crew overtime, relief train crews and damage to track and
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PAGE 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION CONTINUED
RESULTS OF OPERATIONS, Continued
- - --------------------------------
Rail Unit Results, Continued
- - ----------------------------
signal systems directly attributable to the severe weather conditions.
Without these items, first quarter 1994 operating expense would have been
lower than the prior-year amount.
RAIL OPERATING INCOME
(Millions of Dollars)
------------------------------
Quarter Ended
--------------------
April 1, March 31, Percent
1994 1993 Change
-------- --------- -------
Operating Revenue
Merchandise $ 758 $ 720 5 %
Coal 339 340 -- %
Other 23 26 (12)%
------ ------
Total 1,120 1,086 3 %
Operating Expense 940 933 1 %
------ ------
Operating Income $ 180 $ 153 18 %
====== ======
Container Shipping Unit Results
- - -------------------------------
First-quarter 1994 operating revenue was $800 million, 6 percent
above 1993's level of $752 million. Operating income for the quarter was $19
million compared to an operating loss of $88 million in the prior-year
quarter. Excluding the charge in 1993, operating income improved $14 million
on a quarter-to-quarter basis from $5 million in the 1993 quarter.
Volumes advanced 5 percent for the first quarter of 1994 with large
gains recorded in all Pacific trade lanes, Asia/Middle East/Europe routes,
southbound Americas traffic and westbound shipments in the Atlantic. U.S.
consumer spending and increased trade with the fast-growing economies of Latin
America and southeast Asia drove the traffic improvements.
With the increased volume, operating expense for the first quarter of
1994 rose $34 million to $781 million, exclusive of the 1993 restructuring
charge.
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PAGE 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION, CONTINUED
RESULTS OF OPERATIONS, Continued
- - --------------------------------
Intermodal Unit Results
- - -----------------------
CSX's intermodal unit reported operating income for the first quarter
of 1994 of $9 million, the same as in the prior-year quarter, as higher costs
associated with the adverse weather offset revenue from increased volumes.
Operating revenue for the unit was $210 million versus $184 million in the
first quarter of 1993 as volumes grew 12 percent above 1993 first-quarter
levels.
Shipments were strong in all market areas, particularly containers
moving domestically and those from international container-shipping lines.
Barge Unit Results
- - ------------------
The barge unit reported operating income of $2 million, compared to
$8 million in the first quarter of 1993. Operating revenue declined to $92
million, largely reflecting the weak grain market. However, shipments of
metal products, fertilizer and bulk salt showed sizeable gains in the quarter.
FINANCIAL CONDITION
-
- -------------------
Cash, cash equivalents and short-term investments totaled $496$478
million at AprilJuly 1, 1994, a decrease of $3$21 million since December 31, 1993.
Primary uses of cash, and cash equivalents and short-term investments were
property additions, repayment of long-term debt, payment of dividends and
payments relating to productivity/restructuring charge liabilities. Primary
sources of cash, and
cash equivalents and short-term investments were operations,
issuance of short-term debt and a net decrease in short-term investments.
During the first quarter of 1994, net investing activities consumed
$79 million of cash and cash equivalents compared with $141 million consumed
in the first quarter of 1993. The changes in investing activities were
primarily due to increased property additions, offset by an increase in cash
proceeds from net short-term investment activity and reduction in purchases of
long-term marketable securities compared to the quarter ended March 31, 1993.
Financing activities provided $154 million of cash and cash
equivalents for the quarter ended April 1, 1994, a $128 million increase from
1993. The change was primarily due to an increase in proceeds from net short-
term borrowings, offset by reductions in long-term debt issued, and an
increase in long-term debt repayments.
The working capital deficit decreased $24 million during the quarter
ended April 1, 1994. The decrease in the working capital deficit was
primarily due to increased revenue during the end of the first quarter of 1994
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PAGE 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION, CONTINUED
FINANCIAL CONDITION, Continued
- - ------------------------------
During the first six months of 1994, net investing activities
consumed $252 million of cash and relatedcash equivalents compared with $393 million
consumed in the first six months of 1993. The changes in investing activities
were primarily due to an increase in cash proceeds from net short-term
investment activity and a lower level of purchases of long-term marketable
securities compared to the six months ended June 30, 1993.
Financing activities used $108 million of cash and cash equivalents
for the six months ended July 1, 1994. This was a $172 million decrease from
the $64 million of cash provided by financing activities in the first six
months of 1993. The change was primarily due to a reduction in proceeds from
net short-term borrowings, an increase in the company's cash dividends paid
per common share, and a partial redemption of the company's 9 1/2% Sinking
Fund Debentures due July 1, 2016. The company redeemed $100 million of the
$250 million principal amount outstanding on July 1, 1994.
The working capital deficit decreased $50 million during the six
months ended July 1, 1994. The decrease in the working capital deficit was
primarily due to increased customer accounts receivables.receivables for the first six
months of 1994, related to increased revenue. A working capital deficit is
not unusual for CSX and does not indicate a lack of liquidity. CSX continues
to maintain adequate current assets to satisfy current liabilities when they
are due and has sufficient liquidity and financial resources to manage its
day-to-
dayday-to-day cash needs. For the full year, CSX does not expect significant
changes in working capital, property additions, or debt levels from the prior
year.
FINANCIAL DATA
-
- --------------
(Millions of Dollars)
-----------------------------
AprilJuly 1, December 31,
1994 1993
----------------- ------------
Cash, Cash Equivalents and
Short-Term Investments $ 496478 $ 499
Commercial Paper Outstanding -
Short-Term $ 406308 $ 164
Commercial Paper Outstanding -
Long-Term $ 300 $ 300
Working Capital (Deficit) $(680)$(654) $(704)
Current Ratio .71 .69
Debt Ratio 48%46% 49%
Ratio of Earnings to Fixed Charges 2.0x2.5x 2.3x
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PAGE 14
OUTLOOK
- - -------
DuringFor the remainderbalance of 1994, CSX will continue its ongoing
commitment to improve productivity and lower the cost base at each of CSX's major transportation units
anticipates favorable revenue levels compared with 1993. The higher revenue
levels are anticipated to result from the strong domestic economy. The
company also plans to continue the intense focus on productivity improvements
and expense control throughout its transportation units.units over the next six
months.
Entering the second half of 1994, CSXT facedis experiencing solid demand
for coal shipments as U.S. utilities rebuild inventories depleted by 1993's
United Mine Workers strikes and unusually high demand during severe winter
related problems during the early part of
1994, which negatively affected coal loadings and increased operating expense.
However, the unit has seen a rebound in coal traffic as customers began
restoring stockpiles following the extended United Mine Workers' strikes of
1993 and record low temperatures during the first quarter of 1994.weather. Export coal tonnage, althoughshipments, however, remain weak, as a result of
depressed due to slow economiesdemand from abroad, is expected to
exceed 1993 levels.foreign competition and the strong domestic
market. CSXT merchandise traffic, reflecting the underlying strength of the
U.S. industrial sector, of the U.S. economy, is expected to trend up
with the economy. ManagementCSXT
experienced only slight interruptions of service and no structural damage
during mid-July flooding in the southeastern U.S.
Sea-Land anticipates traffic flows in nearly all of its trade lanes
will surpass prior year levels during the balance of the year. While the
nationwide Teamsters' strike disrupted Sea-Land's operations during the second
quarter, the unit quickly regained customer confidence following the strike
and has seen no permanent traffic loss. Strong demand for ocean
transportation should allow Sea-Land to select higher-rated traffic. A more
stable rate environment is expected throughout the industry.
CSX Intermodal expects sustained strong levels of shipments and
revenue during the remaining months of 1994. The unit continues to monitor the strike talks between the
International Brotherhood of Teamsters union and trucking companies. The
current job action has affected the three West Coast terminals of Sea-Land.
Sea-Land continues to participate in efforts to end the current job action and
has implemented contingency plans to continue to deliver cargo to its
customers. The strike could significantly affect the company's second-quarter
operating results.
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PAGE 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION, CONTINUED
OUTLOOK, Continued
- - ------------------
On the maritime reform front, management remains hopeful that current
legislation will pass. With passage, Sea-Land will see a benefit
of
approximately $2 million per ship per yearfrom growth in the program, which is estimated
at 15-20 ships. In addition, Sea-Land would havegeneral economy as well as market share gains.
With the right to reflag those
ships not enrolledexpectation of a healthy grain harvest in the program.second half of
the year, American Commercial Lines anticipates stronger demand for its
services and with this demand, recovery of barge rates.
CSXT will monitor and be actively involved in industrywide labor
contract negotiations which are expected to begin in late 1994. These
negotiations have traditionally taken place over a number of months and have
not resulted in any extended work stoppages.
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PAGE 15
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) Annual meeting held May 3, 1994.
(b) Not applicable.
(c) There were 104,648,925 shares of CSX common stock
outstanding as of March 4, 1994, the record date for the
1994 annual meeting of shareholders. A total of 88,818,478
shares were voted. All of management's nominees for
directors of the corporation were elected with the following
vote:
Votes Broker
Nominee Votes For Withheld Non-Votes
Edward L. Addison 88,359,100 404,182 55,196
Elizabeth E. Bailey 88,359,789 403,493 55,196
Robert L. Burrus, Jr. 88,320,788 442,494 55,196
Bruce C. Gottwald 88,372,498 390,784 55,196
John R. Hall 88,367,703 395,579 55,196
Robert D. Kunisch 88,372,642 390,640 55,196
Hugh L. McColl, Jr. 88,344,110 419,172 55,196
James W. McGlothlin 88,393,628 369,654 55,196
Southwood J. Morcott 88,375,416 387,806 55,256
Charles E. Rice 88,377,331 385,951 55,196
William C. Richardson 88,302,868 460,414 55,196
Frank S. Royal, M.D. 88,293,084 470,198 55,196
John W. Snow 88,374,093 389,189 55,196
William B. Sturgill 88,340,174 423,108 55,196
The appointment of Ernst & Young as independent auditors to audit
and report on CSX's financial statements for the year 1994 was
ratified by the shareholders with the following vote:
Broker
Votes For Votes Against Abstentions Non-Votes
88,261,199 153,961 333,549 69,769
Amendments to the 1987 Long-Term Performance Stock Plan were
approved by the shareholders with the following vote:
Broker
Votes For Votes Against Abstentions Non-Votes
64,002,177 18,519,777 1,045,905 5,250,619
The 1994 Senior Management Incentive Compensation Plan was
approved by the shareholders with the following vote:
Broker
Votes For Votes Against Abstentions Non-Votes
84,431,961 3,211,886 1,104,860 69,771
(d) Not applicable.
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PAGE 16
PART II. OTHER INFORMATION, Continued
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
1. None.
(b) Reports on Form 8-K
1. None.
SignatureSIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CSX CORPORATION
(Registrant)
By: GREGORY R. WEBER
------------------------------
Gregory R. Weber
Vice President, Controller and
ControllerTreasurer
Dated: July 28, 1994 (Principal Accounting Officer)
Dated: April 28, 1994
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