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 June 30,September 29, 1995
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 June 30,September 29, 1995: 105,214,506105,242,305 shares.
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CSX CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30,SEPTEMBER 29, 1995
INDEX
PART I. FINANCIAL INFORMATION Page Number
Item 1:
Financial Statements
1. Consolidated Statement of Earnings-
Quarters and SixNine Months Ended
June 30,September 29, 1995 and July 1,September 30, 1994 3
2. Consolidated Statement of Cash Flows-
SixNine Months Ended June 30,September 29, 1995 and
July 1,September 30, 1994 4
3. Consolidated Statement of Financial Position-
At June 30,September 29, 1995 and December 30, 1994 5
Notes to Consolidated Financial Statements 6
Item 2:
Management's Discussion and Analysis of Results of
Operations and Financial Condition 1011
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 16
Signature 16
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CSX CORPORATION AND SUBSIDIARIES
Consolidated Statement of Earnings
(Millions of Dollars, Except Per Share Amounts)
Quarter Ended SixNine Months Ended
---------------------- ----------------------
JuneSept. 29, Sept. 30, July 1, JuneSept. 29, Sept. 30, July 1,
1995 1994 1995 1994
-------- -------- -------- --------
Operating Revenue
Transportation $ 2,5512,605 $ 2,3242,391 $ 4,9977,602 $ 4,5356,926
Non-Transportation 49 47 71 6360 79 131 142
------- ------- ------- -------
Total 2,600 2,371 5,068 4,5982,665 2,470 7,733 7,068
------- ------- ------- -------
Operating Expense
Transportation 2,212 2,032 4,383 4,0472,239 2,076 6,622 6,123
Non-Transportation 36 35 62 6144 44 106 105
Restructuring Charge 257--- --- 257 ---
------- ------- ------- -------
Total 2,505 2,067 4,702 4,1082,283 2,120 6,985 6,228
------- ------- ------- -------
Operating Income 95 304 366 490382 350 748 840
Other Income (Expense) 7 (6) (2) 18 (9) 1711
Interest Expense 68 71 135 13869 203 207
------- ------- ------- -------
Earnings before
Income Taxes 25 251 222 369321 275 543 644
Income Tax Expense 6 89 82 133119 98 201 231
------- ------- ------- -------
Net Earnings $ 19202 $ 162177 $ 140342 $ 236413
======= ======= ======= =======
Earnings Per Share $ .181.92 $ 1.551.68 $ 1.333.25 $ 2.263.94
======= ======= ======= =======
Average Common Shares
Outstanding (Thousands) 105,164 104,704 105,054 104,578105,202 104,731 105,103 104,629
======= ======= ======= =======
Common Shares
Outstanding (Thousands) 105,215 104,732 105,215 104,732105,242 104,744 105,242 104,744
======= ======= ======= =======
Cash Dividends Paid Per
Common Share $ .44 $ .44 $ .881.32 $ .881.32
======= ======= ======= =======
See accompanying Notes to Consolidated Financial Statements.
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CSX CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Millions of Dollars)
SixNine Months Ended
---------------------
June-----------------------
Sept. 29, Sept. 30, July 1,
1995 1994
-------- ----------------- ---------
OPERATING ACTIVITIES
Net Earnings $ 140342 $ 236413
Adjustments to Reconcile Earnings
to Cash Provided
Depreciation 297 288446 431
Deferred Income Taxes (58) 69(57) 115
Restructuring Charge 257 ---
Productivity/Restructuring Charge Payments (55) (72)(117) (103)
Other Operating Activities 26 2375 42
Changes in Operating Assets and Liabilities
Accounts Receivable (10) (2)(98) (62)
Materials and Supplies (36) (17)(14) 10
Other Current Assets (20) 10(10) 15
Accounts Payable and Other Current Liabilities 41 (154)140 (37)
----- ----
Cash Provided by Operating Activities 582 381964 824
----- ----
INVESTING ACTIVITIES
Property Additions (585) (320)
Short-Term Investments - Net 38 60
Purchases of Long-Term Marketable Securities (67) (22)
Proceeds from Sales of Long-Term Marketable Securities 53 5(819) (517)
Other Investing Activities 50 2539 71
----- ----
Cash Used by Investing Activities (511) (252)(780) (446)
----- ----
FINANCING ACTIVITIES
Short-Term Debt - Net 39 144(46) 180
Long-Term Debt Issued 115 53
Long-Term Debt Repaid (72) (216)(95) (287)
Dividends Paid (93) (92)(139) (138)
Other Financing Activities 4 35 10
----- -----
Cash Used by Financing Activities (7) (108)(160) (182)
----- -----
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Increase in Cash and Cash Equivalents 64 2124 196
Cash and Cash Equivalents at Beginning of Period 265 298
----- -----
Cash and Cash Equivalents at End of Period 329 319289 494
Short-Term Investments at End of Period 233 159274 156
----- -----
Cash, Cash Equivalents and Short-Term
Investments at End of Period $ 562563 $ 478650
===== =====
See accompanying Notes to Consolidated Financial Statements.
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CSX CORPORATION AND SUBSIDIARIES
Consolidated Statement of Financial Position
(Millions of Dollars)
June 30,September 29, December 30,
1995 1994
--------------------- ------------
ASSETS
Current Assets
Cash, Cash Equivalents and
Short-Term Investments $ 562563 $ 535
Accounts Receivable 724811 706
Materials and Supplies 247225 211
Deferred Income Taxes 136139 151
Other Current Assets 8372 62
------- -------
Total Current Assets 1,7521,810 1,665
------- -------
Properties and Other Assets
Properties 16,51716,654 16,315
Less Accumulated Depreciation 5,3985,466 5,271
------- -------
Properties - Net 11,11911,188 11,044
Affiliates and Other Companies 299319 302
Other Assets 724711 713
------- -------
Total Properties and Other Assets 12,14212,218 12,059
------- -------
Total Assets $13,894$14,028 $13,724
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Other
Current Liabilities $ 2,0622,122 $ 1,992
Current Maturities of Long-Term Debt 397387 312
Short-Term Debt 240155 201
------- -------
Total Current Liabilities 2,6992,664 2,505
------- -------
Long-Term Debt 2,5772,564 2,618
------- -------
Deferred Income Taxes 2,5012,505 2,570
------- -------
Long-Term Liabilities and Deferred Gains 2,2962,306 2,300
------- -------
Shareholders' Equity
Common Stock 105 105
Other Capital 1,4061,418 1,368
Retained Earnings 2,4432,599 2,391
Minimum Pension Liability Adjustment (133) (133)
------- -------
Total Shareholders' Equity 3,8213,989 3,731
------- -------
Total Liabilities and Shareholders' Equity $13,894$14,028 $13,724
======= =======
See accompanying Notes to Consolidated Financial Statements.
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CSX CORPORATION AND SUBSIDIARIES
--------------------------------
Notes to Consolidated Financial Statements
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 1. BASIS1.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 June 30,September 29, 1995 and December 30, 1994, the results
of its operations for the quarters and sixnine months ended June 30,September 29, 1995
and July 1,September 30, 1994, and its cash flows for the sixnine months ended June 30,September
29, 1995 and July 1,September 30, 1994, such adjustments being of a normal recurring
nature.
Earnings per share are based on the weighted average of common shares
outstanding for the secondthird quarters and sixnine months ended June 30,September 29, 1995
and July 1,September 30, 1994. Dilution for the quarters and sixnine months ended
June 30,September 29, 1995 and July 1,September 30, 1994, 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 1995
presentation.
NOTE 2. RESTRUCTURING2.RESTRUCTURING CHARGE
In the second quarter, the company recorded a $257 million pretax
restructuring charge, $160 million after-tax, $1.52 per share, to recognize
the cost of initiatives undertaken to revise, restructure, and consolidate
specific operations and administrative functions at its rail and container-
shipping units. The initiatives will resultresulted in a $163 million write-down of
technologicallytelecommunications assets rendered obsolete telecommunications assets,and will further result in
separation payments totaling $80 million to approximately 800 affected
employees and $14 million of lease and facility-related exit costs.
The rail unit initiative accounted forrepresented $196 million of the total
restructuring charge, covering the write-down of assets and cost of employee
separations associated with a contractual agreement with a third partyAT&T Solutions
("AT&T") to replace, manage, and technologically enhance the unit's existing
private telecommunications network. Under the agreement, which was effective
May 1, 1995, AT&T will supply and manage new technology, thereby rendering the
unit's existing telecommunications assets commercially obsolete. The unit
will be obligated to pay minimum charges of approximately $330 million in
equal annual amounts over the next ten years.
The commercially obsolete assets represent the internal company-wide
telecommunications network including the unit's existing microwave and fiber
optic communications systems, portable radios, and road and yard communication
pole line distribution systems. AT&T will provide wireless communications
technology over its existing network to replace the rail unit's network.
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CSX CORPORATION AND SUBSIDIARIES
--------------------------------
Notes to Consolidated Financial Statements, Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 2.RESTRUCTURING CHARGE, Continued
After the phase-in of this technology, AT&T will retain ownership of its
equipment and will grant CSX access to the equipment and the network. The
commercially obsolete assets have no alternative use and their net realizable
value as an obsolete company-wide telecommunications network is not
significant. As a result of the agreement with AT&T, the net book value of
the assets being replaced was reduced by $163 million.
The restructuring initiatives at the container-shipping unit include
its global integration program and the reflagging of five U.S.-flag vessels to
the registry of the Marshall Islands in accordance with approval received from
the Federal Maritime Administration. The global integration program accounted
for $31 million of the total restructuring charge and representsrepresented employee
separation and facility exit costs associated with the global consolidation of
senior management functions and relocation of its corporate headquarters to
Charlotte, North Carolina, as well as the integration of its information
technology requirements. The vessel reflagging initiative accounted for
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CSX CORPORATION AND SUBSIDIARIES
--------------------------------
Notes to Consolidated Financial Statements, Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 2. RESTRUCTURING CHARGE, Continuedrepresented
$30 million of the total restructuring charge, primarily related to the cost
of crew separations on the five vessels.
AsThe $80 million total provision for separation and labor protection
payments under the rail and container-shipping initiatives was based upon
existing collective bargaining agreements with members of June 30,clerical,
electrical, and signal crafts and seafarer trades. The company expects 90% of
the affected employees to be impacted within one year and the remaining 10% to
be impacted within four to five years. Through September 29, 1995, $6 million of
payments514
employee separations have been recorded as a reduction of the liability for the
restructuring charge at the container-shipping unit.finalized and payments totaling $15 million
have been made.
NOTE 3. ACCOUNTS3.ACCOUNTS RECEIVABLE
During 1993, theThe company has issued $200 million of Trade Receivable Participation
Certificates ("Certificates"), at 5.05%, due September 1998. The Certificates
are collateralized by $243 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 revolvingan 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 to a financial
institution. At September 29, 1995 and December 30, 1994, accounts receivable
sold under this agreement totalled $172 million.
CSX has retained the collection and servicing responsibility with
respect to accounts receivable held in trust or sold. At June 30, 1995The receivables sold
and December 30, 1994, accounts receivablerepresented by Certificates issued have been reduced by $372 million, representing Certificates and accounts receivable
sold.
NOTE 4. OPERATING EXPENSE
Quarter Ended Six Months Ended
------------------ ------------------
June 30, July 1, June 30, July 1,
1995 1994 1995 1994
-------- -------- -------- --------
Labor and Fringe Benefits $ 805 $ 769 $1,618 $1,552
Materials, Supplies and Other 652 565 1,255 1,109
Building and Equipment Rent 284 291 571 571
Inland Transportation 239 198 466 388
Depreciation 149 145 298 288
Fuel 119 99 237 200
Restructuring Charge 257 --- 257 ---
------ ------ ------ ------
Total $2,505 $2,067 $4,702 $4,108
====== ====== ====== ======reflected as reductions of
"Accounts Receivable" in the Consolidated Statement of Financial Position.
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CSX CORPORATION AND SUBSIDIARIES
--------------------------------
Notes to Consolidated Financial Statements, Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 5. OTHER4.OPERATING EXPENSE
Quarter Ended Nine Months Ended
------------------- -------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
1995 1994 1995 1994
--------- --------- --------- ---------
Labor and Fringe Benefits $ 823 $ 786 $2,441 $2,338
Materials, Supplies and Other 665 571 1,920 1,680
Building and Equipment Rent 288 292 859 863
Inland Transportation 242 219 708 607
Depreciation 150 144 448 432
Fuel 115 108 352 308
Restructuring Charge --- --- 257 ---
------ ------ ------ ------
Total $2,283 $2,120 $6,985 $6,228
====== ====== ====== ======
NOTE 5.OTHER INCOME (EXPENSE)
Quarter Ended SixNine Months Ended
------------------ -----------------
June------------------- --------------------
Sept. 29, Sept. 30, July 1, JuneSept. 29, Sept. 30, July 1,
1995 1994 1995 1994
-------- -------- ------- ----------------- --------- --------- ----------
Interest Income $ 1519 $ 1612 $ 2948 $ 2840
Gain on South Florida Track Sale --- 22--- --- 22
Net Costs for Accounts Receivable Sold (8) (8) (16) (15)(7) (24) (22)
Minority Interest (6) (4) (11) (8) (5) (19) (13)
Equity Earnings of Other Affiliates ---(1) (2) (4) (8)
Miscellaneous 5 (4) (3) (3) (6)
Miscellaneous (3) (5) (8) (4)
------ ------ ------ ------
Total $ 7 $ (6) $ (2) $ 18 $ (9) $ 1711
====== ====== ====== ======
NOTE 6. ACCOUNTS6.ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
June 30,September 29, December 30,
1995 1994
--------- ------------
Trade Accounts Payable $ 976960 $ 926
Labor and Fringe Benefits 519542 543
Income Taxes and Other 380425 337
Casualty Reserves 187195 186
------ ------
Total $2,062$2,122 $1,992
====== ======
NOTE 7. COMMITMENTS7.COMMITMENTS AND CONTINGENCIES
As part of the restructuring initiative, CSX Transportation, Inc.
("CSXT") entered a contractual agreement with a third partyAT&T to replace and
technologically enhance its existing private telecommunications network. The
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CSX CORPORATION AND SUBSIDIARIES
--------------------------------
Notes to Consolidated Financial Statements, Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 7.COMMITMENTS AND CONTINGENCIES, Continued
agreement was executed during the second quarter of 1995, and requires minimum
payments totaling approximately $330 million over its ten-year term.
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 $100 million per
occurrence for rail and certain other operations, is provided by companies
owned or partially owned by CSX.
CSXT is a party toin various proceedings brought both byinvolving private parties and
regulatory agencies related to environmental issues. CSXT has been identified
as a potentially responsible party ("PRP") in a number of governmental investigations and
actions relating to 106 environmentally impaired sites that are or may be
subject to remedial action under the Federal Superfund statuteStatute ("Superfund")
or corresponding state statutes. The majorityMany of these proceedings are based on
allegations that CSXT, or its railroad predecessors,
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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 7. COMMITMENTS AND CONTINGENCIES, Continued sent hazardous substances
to the facilities in question for disposal. Such proceedings arising under
Superfund or corresponding state statutes 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 thesemost sites is extremely complex. Cost estimates are based on information
available for each site, financial viability of other potentially responsible
parties, where available, and existing technology, laws and regulations.
CSXT's best estimate of the allocation method and percentage of liability when
other potentially responsible parties are involved are based on assessments by
consultants, agreements among potentially responsible parties, or
determinations by the EPA or other regulatory agencies.
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,The ultimate
liability for remediation is difficult to determine with certainty because of
the number of and creditworthiness of PRPs involved. Through the assessment
process, CSXT periodically reviews its exposuremonitors the creditworthiness of such PRPs in all non-Superfund environmental
proceedings with which it is involved.determining
ultimate liability.
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. The recorded liabilities for estimated future environmental costs at
June 30,September 29, 1995, and December 30, 1994, were $139$136 million and $140 million,
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PAGE 10
NOTE 7.COMMITMENTS AND CONTINGENCIES, Continued
respectively. The liability has been accrued for future costs for all sites
where the company's obligation is probable and where such costs can be
reasonably estimated. The liability includes future costs for remediation and
restoration of sites as well as for ongoing monitoring costs, but excludes any
anticipated insurance recoveries. The majority of the June 30,September 29, 1995
environmental liability is expected to be paid out over the next five years,
funded by cash generated from operations.
The company does not currently possess sufficient information to
reasonably estimate the amounts of additional liabilities, if any, on some
sites until completion of future environmental studies. In addition, latent
conditions at any given location could result in exposure, the amount and
materiality of which cannot presently be reliably estimated. Based upon
information currently available, however, the company believes that its
environmental reserves are adequate to accomplish remedial actions to comply
with present laws and regulations. The company believesregulations and that the ultimate liability for these
matters will not materially affect its overall results of operations and
financial condition.
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 1011
ITEM 2. MANAGEMENT'S2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
- ---------------------
Second-QuarterThird-Quarter 1995 Compared With 1994
- --------------------------------------
The company reported net earnings for the secondthird quarter ended
June
30,September 29, 1995, of $19$202 million, 18 cents$1.92 per share, versus $162$177 million,
$1.55$1.68 per share for the secondthird quarter ended July 1,September 30, 1994. Earnings for the quarter
included the effect of a $257 million pre-tax restructuring charge and $8
million pre-tax of associated relocation and training expenses. The
restructuring charge and associated expenses relate to initiatives undertaken
by the company that will revise, restructure, and consolidate specific
operations and administrative functions and result in the technological
obsolescence of certain telecommunications assets, the termination of
employees, and exit costs associated with certain locations.
The restructuring charge reduced net earnings for the second quarter
ended June 30, 1995 by $160 million, $1.52 per share. The associated
relocation and training expenses reduced net earnings for the second quarter
by $5 million, 5 cents per share. Earnings for the quarter would have been
$184 million, $1.75 per share, exclusive of the restructuring charge and
associated expenses.
Operating revenue for the secondthird quarter of 1995 was $2.6$2.7 billion, 10%8%
above the prior year quarter of $2.4$2.5 billion, resulting primarily from higher
rail, container-shipping and barge volumes and an improved rate environment.
Operating expense exclusive of the restructuring charge and
associated expenses, was $2.2$2.3 billion for the secondthird quarter, 8%10% higher than the
$2.1 billion reported for the secondthird quarter of 1994. Operating income exclusive of the restructuring charge and associated expenses, was
$360$382 million for the secondthird quarter of 1995, up $56$32 million from 1994's secondthird
quarter.
Rail Unit Results
- -----------------
CSX's rail unit would have reported all-time quarterlyachieved its sixth consecutive record operating income of $270 million,quarter,
excluding its $196 million portionthe effect of the restructuring charge. This compares with $261 millioncharge recorded in 1994'sthe second
quarter and surpasses the previous quarterly record of $2641995. Third quarter operating income was $269 million, setup 20
percent from 1994's $224 million quarter.
The unit held operating expense flat while handling a 2 percent
increase in 1994's fourth quarter.
Railcarloads. Operating revenue driven by traffic gains in both merchandise and export
coal, increased 3rose 4 percent, over the prior-year quarter to $1.2 billion.billion,
resulting in a quarterly operating ratio of 77.4 percent--the unit's best to
date.
Traffic was strong across virtually all major commodity groups.
Merchandise traffic rose 34 percent, benefiting fromled by gains in a number of
markets, notablychemicals, agricultural
products, and phosphates and fertilizer, metals and
chemicals.fertilizer. Overall, coal volume rose 32 percent
in the quarter to 39.740.2 million tons, as exports surged 81 percent to 5.8 million tons,with strong export coal movements more
than offsetting a slight decline in domestic coal traffic.
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PAGE 1112
ITEM 2. MANAGEMENT'S2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION, CONTINUED
RESULTS OF OPERATIONS, Continued
- --------------------------------
Rail Unit Results, Continued
- ----------------------------
4 percent drop in domestic tonnage. Domestic volume was 33.9 million tons for
the quarter, reflecting lower utility burn rates due to mild winter weather
across the eastern United States.
Excluding the charge, rail operating expense rose 3 percent to $941
million, compared with $914 million in the 1994 quarter. On that basis, the
rail unit would have registered a record operating ratio of 77.7 percent.
Including the charge, the unit reported operating expense of $1.1 billion this
quarter.
RAIL OPERATING INCOME
(Millions of Dollars)
-----------------------------
Quarter Ended SixNine Months Ended
------------------- ------------------
------------------
JuneSept. 29, Sept. 30, July 1, Percent JuneSept. 29, Sept. 30, July 1, Percent
1995 1994 Change 1995 1994 Change
-------- ----------------- ------- ------- -------- -------
Operating Revenue
Merchandise $ 797767 $ 786733 5% $ 2,363 $ 2,277 4%
Coal 388 384 1% $ 1,596 $ 1,544 3%
Coal 379 3631,133 1,086 4%
745 702 6%
Other 35 26 35% 64 49 31%36 30 20% 100 79 27%
------ ------ ------- -------
Total 1,211 1,175 3% 2,405 2,295 5%1,191 1,147 4% 3,596 3,442 4%
Operating Expense 1,137 914 24% 2,085 1,854 12%922 923 --- 3,007 2,777 8%
------ ------ ------- -------
Operating Income $ 74269 $ 261 (72)%224 20% $ 320589 $ 441 (27)665 (11)%
====== ====== ======= =======
Operating Income (a) $ 270269 $ 261 3%224 20% $ 516785 $ 441 17%665 18%
====== ====== ======= =======
Operating Ratio 93.6% 77.8% 86.7% 80.9%77.4% 80.5% 83.6% 80.7%
====== ====== ======= =======
Operating Ratio (a) 77.7% 77.8% 78.5% 80.9%77.4% 80.5% 78.2% 80.7%
====== ====== ======= =======
(a)Pro forma basis, excluding $196 million restructuring charge.
Container ShippingContainer-Shipping Unit Results
- -------------------------------
The container-shipping unit experiencing strong demandgenerated operating income of $70
million, down from $78 million for its
services worldwide, saw its1994's third quarter. The decrease was
largely due to $13 million of relocation expenses associated with the unit's
global integration initiative and $8 million in casualty losses and other
expenses related to a ship collision.
The unit achieved record third quarter operating revenue increase 20of $1.03
billion, 12 percent inhigher than the quarter1994 period. Contributing to $991 million onthe record
revenue were a 166 percent increase in traffic. Excluding the
effect of its $61 million portion of the chargevolume and $8 million of associated
expenses, the unit would have recorded operating income of $67 million,
compared with the $15 million it reportedhigher average rates per
container in 1994's strike-impacted second
quarter.all major trade lanes.
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PAGE 1213
ITEM 2. MANAGEMENT'S2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION, CONTINUED
RESULTS OF OPERATIONS, Continued
- --------------------------------
Container Shipping Unit Results, Continued
- ------------------------------------------
Continued worldwide economic expansion translated into higher volumes
in all major trade lanes, especially from Asia to the United States and intra-
Europe. That growth, in combination with recently announced alliances and
vessel-sharing agreements, presents increasingly favorable market conditions
for Sea-Land.
Operating expense at the container-shipping unit rose to $924
million, excluding the charge and associated expenses, mainly as a result of
the higher volumes. Including the charge and associated expenses, operating
expense was $993 million, compared with $811 million in 1994's second quarter.
Intermodal Unit Results
- -----------------------
The company's intermodal unit, reflecting slower growth rates from
1994's double-digit levels, sawunit's operating revenue increase 3was up 1 percent to
$230$233 million in the quarter. However, intensified motor carrier competition caused the unit's
traffic to declinequarter on a 2 percent on a 9decline in volume. Domestic volume
declined 4 percent drop in domestic volumes thatwhile international traffic rose 1 percent. Operating
expense for the quarter was partially offset by higher international traffic. This mix change and expense
increases resulted in an operating income decline to $3$228 million, from $16versus $213 million in the prior-year quarter.prior-
year period, primarily due to higher volume on the western portion of the
intermodal unit's network and the continuing expense to maintain service
levels in the East.
Barge Unit Results
- ------------------
The company's barge unit reportedmore than doubled its operating income to
$36 million from $16 million in the prior-year quarter. Operating revenue
rose 33 percent over the 1994 period to $152 million, reflecting strong rates
as well as surging demand for transportation of $19 million, a
73grain and other bulk
commodities in the inland waterway system. Operating expense increased 18
percent increase over the prior-year quarter. A morequarter to $116 million, as the company took steps
to expand capacity in response to favorable rate
environment, along with stronger demandmarket conditions.
First Nine Months 1995 Compared to 1994
- ---------------------------------------
For the first nine months of 1995, CSX earned $342 million, $3.25 per
share. Excluding the effect of the second-quarter, $257 million pretax
restructuring charge previously discussed, earnings for grainthe first nine months
of 1995 would have been $502 million, $4.77 per share, up 22 percent from the
1994 period. In the first nine months of 1994, CSX earned $413 million, $3.94
per share.
The results for the first nine months of 1995 reflect the success of
the company's efforts to reduce costs, improve service and profitably respond
to growth in northbound
industrial traffic, drove operating revenue to $121 million, an 11 percent
increase, while operating expense rose only $4 million to $102 million.opportunities and increased demand. In addition, the strength of
the domestic and global economies have positively impacted the year-to-date
results for 1995.
FINANCIAL CONDITION
- -------------------
Cash, cash equivalents and short-term investments totaled $562$563
million at June 30,September 29, 1995, an increase of $27$28 million since December 30,
1994. Primary uses of cash, cash equivalents and short-term investments were
property additions, purchases of long-term marketable securities, repayment of long-term debt, payment of dividends, and
payments relating to productivity/restructuring charge liabilities and a net increase in short-term
investments.liabilities. Primary
sources of cash, cash equivalents and short-term investments were operations
proceeds from sales of marketable securities, and the issuance of short-term and long-term debt.
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PAGE 1314
ITEM 2. MANAGEMENT'S2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION, CONTINUED
FINANCIAL CONDITION, Continued
- ------------------------------
During the first sixnine months of 1995, net investing activities
consumed $511$780 million of cash and cash equivalents compared with $252$446 million
consumed in the first sixnine months of 1994. The increase in investing
activities was primarily due to the timing of property additions compared to
the sixnine months ended July 1,September 30, 1994.
Financing activities used $7$160 million of cash and cash equivalents
for the sixnine months ended June 30,September 29, 1995. This was a $101$22 million decrease
from the $108$182 million of cash used by financing activities in the first sixnine
months of 1994. The change was primarily due to a reduction in proceeds from
net short-
termshort-term borrowings, an increase in proceeds from the issuance of long-termlong-
term debt, and a decrease in the repayment of long-term debt.
The working capital deficit increased $107$14 million during the sixnine
months ended June 30,September 29, 1995. The increase in the working capital deficit
was primarily due to an increase in trade accounts payable and income and
other taxes payable and an increased level of current maturities of long-term
debt. 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-day cash needs. For the full year,
CSX does not expect significant changes in working capital or debt levels from
the prior year. Property additions for the full year are expected to be
approximately $100 million higher than 1994.
FINANCIAL DATA
- --------------
(Millions of Dollars)
-----------------------------
June 30,-------------------------------
September 29, December 30,
1995 1994
--------------------- ------------
Cash, Cash Equivalents and
Short-Term Investments $ 562563 $ 535
Commercial Paper Outstanding -
Short-Term $ 240155 $ 201
Commercial Paper Outstanding -
Long-Term $ 300 $ 300
Working Capital (Deficit) $(947)$(854) $(840)
Current Ratio .65.68 .66
Debt Ratio 40%39% 41%
Ratio of Earnings to Fixed Charges 2.0x2.6x (a) 3.1x
(a) Excluding the pre-tax restructuring charge of $257 million, and
associated relocation and training expenses of $13 million, the ratio
of earnings to fixed charges would have been 3.2x3.4x for the sixnine months
ended June 30,September 29, 1995.
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PAGE 1415
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION, CONTINUED
OUTLOOK
- -------
During the thirdfourth quarter and remainder of 1995, each of CSX's transportation units
continues to anticipateanticipates favorable revenue levels compared with 1994. The higher revenue
levels are expected to result from strong export demand for transportation services
and a stable domestic economy. The company also plans to continue the intense
focus on productivity improvements and expense control throughout its
transportation units.
Entering the thirdfourth quarter of 1995, the rail unit is experiencing
solid demand for export coal shipments as U.S. producers take advantage of
increased economic activity abroad and favorable exchange rates.abroad. Merchandise traffic is expected to
maintain its strength over the second halfremainder of the year. Additionally, the rail
unit anticipates continuing benefits from its cost reduction efforts.
The rail unit continues to monitor and be actively involved in on-
going industrywide labor contract negotiations. These negotiations have
traditionally taken place over a number of months and have not resulted in any
extended work stoppages.
The container-shipping unit anticipates solid traffic flows in the
thirdfourth quarter of 1995 in all of its trade lanes. Strong demand for ocean
transportation should allow the unit to select higher-rated traffic. The unit
expects to incur an additional $20$4 million to $6 million in relocation and
training expenses during the remainder of 1995 associated with its global
integration program.initiative.
The intermodal unit expects lower domestic trailer volumes to
continue in the thirdfourth quarter due to motor carrier competition. The unit
will continue to benefit from stronger international traffic.traffic revenue. The
unit has initiated cost reduction efforts in response to the motor carrier
competition.
The barge unit anticipates continued robust demand for its services,
resulting particularly in export grain shipments. With this demand, strong
barge rates are expected to continue in 1995.
OTHER MATTERS
- 14 -
PAGE 15
PART II. OTHER INFORMATION
Item 4. Submission-------------
At its October 11, 1995 meeting, the Board of Matters toDirectors approved a
Votetwo-for-one split of Security Holders
(a) Annual meeting held April 25, 1995.
(b) Not applicable.
(c) There were 105,098,736 sharesthe company's common stock. Shareholders of CSXrecord as of
December 4, 1995 will receive one new share of common stock outstanding asfor every share
they own on that date. Distribution of February 24, 1995,new shares will start December 21,
1995.
The company is assessing any potential impact of the record dateprovisions of
Statement of Financial Accounting Standards No. 121 "Accounting for the
1995 annual meetingImpairment of shareholders. A totalLong-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which it expects to adopt for its fiscal year ending December 27, 1996. The
company has not completed a determination as to whether or not indicators of
90,692,720
shares were voted. Allimpairment 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 90,254,629 438,091 0
Elizabeth E. Bailey 90,266,011 426,708 0
Robert L. Burrus, Jr. 90,252,630 440,090 0
Bruce C. Gottwald 90,263,938 428,781 0
John R. Hall 90,275,307 417,412 0
Robert D. Kunisch 90,280,754 411,965 0
Hugh L. McColl, Jr. 90,265,832 426,887 0
James W. McGlothlin 90,288,051 404,669 0
Southwood J. Morcott 90,286,284 406,436 0
Charles E. Rice 90,279,116 413,603 0
William C. Richardson 90,228,407 464,312 0
Frank S. Royal, M.D. 90,205,021 487,698 0
John W. Snow 90,226,769 465,950 0
The appointment of Ernst & Young as independent auditors to audit
and report on CSX's financial statements for the year 1995 was
ratified by the shareholders with the following vote:
Broker
Votes For Votes Against Abstentions Non-Votes
90,006,933 309,828 375,958 0
The shareholder proposal concerning equal opportunity reporting
was withdrawn bylong-lived assets are present in its proponent prior to the Annual Meeting.
(d) Not applicable.operating units.
- 15 -
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.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CSX CORPORATION
(Registrant)
By: /s/ GREGORY R. WEBER
------------------------------
Gregory R. Weber
Vice President, Controller and
Treasurer
Dated: July 28,November 7, 1995 (Principal Accounting Officer)
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