Exhibit 99.2
500 Water Street
15th Floor, C900
Jacksonville, FL 32202
http://www. csx.com
Contact:
David Baggs
(904) 359-4812
Table of Contents
Page | ||||
Consolidated Financial Statements | 2 | |||
Business Segments | 5 | |||
Surface Transportation Results | 6 | |||
International Terminals Results | 10 | |||
Consolidated Highlights | 10 |
The accompanying unaudited financial information should be read in conjunction with the Company’s 2003 Annual Report on Form 10-K, 2004 Quarterly Reports on Form 10-Q, and any Current Reports on Form 8-K.
CSX REPORTS THIRD-QUARTER EARNINGS
JACKSONVILLE, Fla., October 28, 2004 - CSX Corporation (NYSE: CSX) today reported its financial results for the third quarter of 2004.
• | Net earnings were $123 million, or 57 cents per share, including a net gain on the Conrail spin-off transaction; | |||
• | Consolidated operating income was $264 million; | |||
• | Surface Transportation revenue, including rail and intermodal, increased $115 million to $1.94 billion; | |||
• | In the quarter, merchandise revenue was up 6% and coal revenue was up 10%. |
“This is the third consecutive quarter in which CSX delivered consistent, continuous improvement in year-over-year Surface Transportation operating income,” said Michael J. Ward, CSX chairman, president and chief executive officer. “In addition, it is the tenth consecutive quarter that the company has demonstrated revenue growth, reflecting the strength in the economy and the importance of rail transportation.”
Ward added, “We are encouraged by these results and remain committed to further improving CSX’s service and costs. This will allow CSX to capitalize even more on both growth and yield.”
Third quarter 2004 net earnings include a favorable impact of $14 million, or 7 cents per share, associated with the net gain from the Conrail spin-off transaction slightly offset by management restructuring charges. The 2003 third quarter had a net loss of $103 million, or 48 cents per share, including after-tax charges of $219 million, or $1.02 per share, reflecting various expenses taken in that quarter for occupational, arbitration settlements and management restructuring. Excluding these 2003 and 2004 charges, CSX’s consolidated 2004 third-quarter net earnings would have been $109 million, or 50 cents per share, versus $116 million, or 54 cents per share, in 2003. Improvements in Surface Transportation operating income were offset by a decline in non-core earnings.
Surface Transportation operating income for the third quarter 2004 was $247 million versus a loss of $16 million in the prior year quarter. This year’s third quarter includes a management restructuring charge of $3 million and 2003 includes the pretax effect of the occupational and management restructuring charges of $239 million. Adjusting for these charges in both years, operating income at our Surface Transportation business would have increased $27 million to $250 million in third quarter 2004, reflecting an increase of 12 percent.
CSX Corporation, based in Jacksonville, Fla., owns the largest rail network in the eastern United States. CSX Transportation Inc. and its 34,000 employees provide rail transportation services over a 23,000 route-mile network in 23 states, the District of Columbia and two Canadian provinces. CSX Corporation also provides intermodal and global container terminal operations through other subsidiaries.
This press release and other statements by the Company contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to, among other items: projections and estimates of earnings, revenues, cost-savings, expenses, or other financial items; statements of management’s plans, strategies and objectives for future operation, and management’s expectations as to future performance and operations and the time by which objectives will be achieved; statements concerning proposed new products and services; and statements regarding future economic, industry or market conditions or performance. Forward- looking statements are typically identified by words or phrases such as “believe,” “expect,” “anticipate,” “project,” and similar expressions. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise any forward-looking statement. If the Company does update any forward-looking statement, no inference should be drawn that the Company will make additional updates with respect to that statement or any other forward-looking statements.
Forward-looking statements are subject to a number of risks and uncertainties, and actual performance or results could differ materially from that anticipated by these forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by these forward-looking statements include, among others: (i) the Company’s success in implementing its financial and operational initiatives, (ii) changes in domestic or international economic or business conditions, including those affecting the rail industry (such as the impact of industry competition, conditions, performance and consolidation); (iii) legislative or regulatory changes; (iv) the inherent business risks associated with safety and security; and (v) the outcome of claims and litigation involving or affecting the Company. Other important assumptions and factors that could cause actual results to differ materially from those in the forward-looking statements are specified in the Company’s SEC reports, accessible on the SEC’s website at www.sec.gov and the Company’s website at www.csx.com.
1
CSX Corporation and Subsidiaries | QuarterlyFlash | |
CONSOLIDATED INCOME STATEMENTS |
(Dollars in Millions, Except Per Share Amounts)
(Unaudited) | ||||||||||||||||||
Quarters Ended | Nine Months Ended | |||||||||||||||||
Sept. 24, | Sept. 26, | Sept. 24, | Sept. 26, | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||||
Revenue and Expense | Operating Revenue | $ | 1,980 | $ | 1,882 | $ | 5,976 | $ | 5,840 | |||||||||
Operating Expense | 1,716 | 1,980 | 5,260 | 5,476 | ||||||||||||||
Operating Income | 264 | (98 | ) | 716 | 364 | |||||||||||||
Other Income | 25 | 21 | 17 | 30 | ||||||||||||||
Interest Expense | 106 | 103 | 323 | 311 | ||||||||||||||
Earnings | Earnings Before Income Taxes and Cumulative Effect of Accounting Change | 183 | (180 | ) | 410 | 83 | ||||||||||||
Income Tax Expense (Benefit) | 60 | (77 | ) | 138 | 17 | |||||||||||||
Earnings Before Cumulative Effect of Accounting Change | 123 | (103 | ) | 272 | 66 | |||||||||||||
Cumulative Effect of Accounting Change - Net of Tax | — | — | — | 57 | ||||||||||||||
Net Earnings | $ | 123 | $ | (103 | ) | $ | 272 | $ | 123 | |||||||||
Per Common Share | Earnings Per Share, Assuming Dilution: | |||||||||||||||||
Before Cumulative Effect of Accounting Change | $ | 0.57 | $ | (0.48 | ) | $ | 1.26 | $ | 0.31 | |||||||||
Cumulative Effect of Accounting Change | — | — | — | 0.26 | ||||||||||||||
Net Earnings | $ | 0.57 | $ | (0.48 | ) | $ | 1.26 | $ | 0.57 | |||||||||
Average Diluted Common Shares Outstanding(Thousands) | 215,252 | 213,955 | 215,183 | 214,281 | ||||||||||||||
Cash Dividends Paid Per Common Share | $ | 0.10 | $ | 0.10 | $ | 0.30 | $ | 0.30 | ||||||||||
Notes to Consolidated Financial Statements
(a) | Statement of Financial Accounting Standard (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations,” was issued in 2001. In conjunction with the group- life method of accounting for asset costs, the Company historically accrued crosstie removal costs as a component of depreciation, which is not permitted under SFAS 143. With the adoption of SFAS 143 in fiscal year 2003, CSX recorded pretax income of $93 million, $57 million after tax, as a cumulative effect of an accounting change in the first quarter, representing the reversal of the accrued liability for crosstie removal costs. The adoption of SFAS 143 did not have a material effect on prior reporting periods, and the Company does not believe it will have a material effect on future earnings. | |
(b) | In February 2003, CSX conveyed most of its interest in its domestic container-shipping subsidiary, CSX Lines LLC (“CSX Lines”), to a new venture formed with the Carlyle Group for approximately $300 million (gross cash proceeds of approximately $240 million, $214 million net of transaction costs, and $60 million of securities). CSX Lines was subsequently renamed Horizon Lines LLC (“Horizon”). A deferred pretax gain of approximately $127 million as a result of the transaction is being recognized over the 12-year sub-lease term. Horizon subleased equipment from certain affiliates of CSX covering the primary financial obligations related to $265 million of vessel and equipment leases under which CSX or one of its affiliates will remain a lessee or guarantor. In the third quarter of 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. However, CSX and one of its affiliates will continue to remain a lessee or guarantor on certain vessels and equipment as long as the subleases remain in effect. | |
(c) | In the third quarter of 2003, the Company changed its estimate of casualty reserves to include an estimate of incurred but not reported claims for asbestos and other occupational injuries to be received over the next seven years. In conjunction with the change in estimate, the Company recorded a charge of $232 million, $145 million after tax, in the third quarter of 2003 to increase its provision for these claims. | |
(d) | Effective for the third quarter 2003, CSX entered into two settlement agreements with Maersk, which resolved all material disputes pending between the companies arising out of the 1999 sale of the international container-shipping assets. The effect reduced the Company’s earnings by $108 million pretax, $67 million after tax. This charge is reflected in the financial statements as the Additional Loss on Sale of the international container-shipping assets. | |
(e) | In the first quarter of 2004, the Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 46, “Consolidation of Variable Interest Entities.” The Company consolidated Four Rivers Transportation (“FRT”), a short-line railroad, which was previously accounted for under the equity method. The third quarter of 2004 includes revenues, operating expenses and after-tax income of approximately $16 million, $9 million and $1 million for FRT, respectively. The nine months ended September 24, 2004, include revenues, operating expenses, and after-tax income of approximately $46 million, $27 million, and $4 million, respectively. The nine months ended September 26, 2003, include net equity earnings of FRT of approximately $2 million (included in other income). | |
(f) | In the third quarters of 2003 and 2004, the Company recorded a charge of $10 million pretax and $3 million pretax, respectively, for separation expenses related to management restructuring. The nine months ended September 24, 2004, include pretax restructuring charges of $77 million, with $71 million at Surface Transportation and $6 million at International Terminals. | |
(g) | In the third quarter of 2004, CSX completed a corporate reorganization of Conrail that resulted in the direct ownership of certain Conrail assets by CSX Transportation (“CSXT”). This transaction was accounted for at fair value and resulted in a net gain of $16 million after tax, which is included in other income. See the Consolidated Balance Sheets for information on the impact to the balance sheet. |
2
CSX Corporation and Subsidiaries | QuarterlyFlash | |
CONSOLIDATED BALANCE SHEETS(a) |
(Unaudited) | ||||||||||
Sept. 24, | Dec. 26, | |||||||||
2004 | 2003 | |||||||||
Assets | Current Assets | |||||||||
Cash, Cash Equivalents and Short-term Investments | $ | 629 | $ | 368 | ||||||
Accounts Receivable - Net | 1,171 | 1,163 | ||||||||
Materials and Supplies | 167 | 170 | ||||||||
Deferred Income Taxes | 126 | 136 | ||||||||
Other Current Assets | 222 | 66 | ||||||||
Total Current Assets | 2,315 | 1,903 | ||||||||
Properties | 25,861 | 19,267 | ||||||||
Accumulated Depreciation | 5,882 | 5,537 | ||||||||
Properties - Net | 19,979 | 13,730 | ||||||||
Investment in Conrail | 567 | 4,678 | ||||||||
Affiliates and Other Companies | 602 | 515 | ||||||||
Other Long-term Assets | 902 | 934 | ||||||||
Total Assets | $ | 24,365 | $ | 21,760 | ||||||
Liabilities | Current Liabilities | |||||||||
Accounts Payable | $ | 862 | $ | 827 | ||||||
Labor and Fringe Benefits Payable | 435 | 397 | ||||||||
Casualty, Environmental and Other Reserves | 238 | 280 | ||||||||
Current Maturities of Long-term Debt | 181 | 426 | ||||||||
Short-term Debt | 103 | 2 | ||||||||
Income and Other Taxes Payable | 101 | 123 | ||||||||
Other Current Liabilities | 97 | 155 | ||||||||
Total Current Liabilities | 2,017 | 2,210 | ||||||||
Casualty, Environmental and Other Reserves | 812 | 836 | ||||||||
Long-term Debt | 7,096 | 6,886 | ||||||||
Deferred Income Taxes | 6,051 | 3,752 | ||||||||
Other Long-term Liabilities | 1,553 | 1,623 | ||||||||
Total Liabilities | 17,529 | 15,307 | ||||||||
Shareholders’ Equity | Common Stock, $1 Par Value | 215 | 215 | |||||||
Other Capital | 1,597 | 1,579 | ||||||||
Retained Earnings | 5,167 | 4,957 | ||||||||
Accumulated Other Comprehensive Loss | (143 | ) | (298 | ) | ||||||
Total Shareholders’ Equity | 6,836 | 6,453 | ||||||||
Total Liabilities and Shareholders’ Equity | $ | 24,365 | $ | 21,760 | ||||||
(a) | In August 2004, CSX, Norfolk Southern and Conrail completed a corporate reorganization of Conrail that resulted in the direct ownership and control by CSXT of routes and assets that had previously been operated by CSXT under operating and lease agreements with a Conrail subsidiary. As a part of the reorganization, CSXT issued new unsecured debt obligations, which were exchanged for unsecured debt obligations of Consolidated Rail Corporation (“CRC”), a Conrail subsidiary. In addition, CSXT entered into new lease and sublease arrangement with CRC to support CRC’s secured debt and lease obligations, and the long-term note due to Conrail was eliminated. The reorganization did not affect the Shared Assets Areas, which continue to be owned and operated by CRC and are reflected in CSX’s remaining Investment in Conrail as shown in the Consolidated Balance Sheets. | |||
The distribution was accounted for at fair value, resulting in a net gain of $16 million after tax, which is included in other income in the Consolidated Income Statement. | ||||
Net change in the 2004 Consolidated Balance Sheet related to the Conrail spin-off transaction is as follows: |
Current Assets | $ | 7 | ||
Properties – Net | 6,018 | |||
Investment in Conrail | (4,130 | ) | ||
Other Long-term Assets | 136 | |||
Total Assets | $ | 2,031 | ||
Current Liabilities | $ | 7 | ||
Long-term Liabilities | 15 | |||
Long-term Debt | (93 | ) | ||
Deferred Taxes | 2,086 | |||
Retained Earnings | 16 | |||
Total Liabilities and Retained Earnings | $ | 2,031 | ||
3
CSX Corporation and Subsidiaries | QuarterlyFlash | |||
CONSOLIDATED CASH FLOW STATEMENTS |
(Unaudited) | ||||||||||
Nine Months Ended | ||||||||||
Sept. 24, | Sept. 26, | |||||||||
2004 | 2003 | |||||||||
Operating Activities | Net Earnings | $ | 272 | $ | 123 | |||||
Adjustments to Reconcile Net Earnings to Net Cash Provided: | ||||||||||
Depreciation | 511 | 482 | ||||||||
Deferred Income Taxes | 115 | 22 | ||||||||
Cumulative Effect of Accounting Change - Net of Tax | — | (57 | ) | |||||||
Additional Loss on Sale | — | 108 | ||||||||
Provision for Casualty Reserves | — | 232 | ||||||||
Restructuring Charge | 77 | — | ||||||||
Net Gain on Conrail Spin-off - After tax | (16 | ) | — | |||||||
Other Operating Activities | (111 | ) | 17 | |||||||
Changes in Operating Assets and Liabilities: | ||||||||||
Accounts Receivable | 2 | (48 | ) | |||||||
Termination of Sale of Receivables Program | — | (380 | ) | |||||||
Other Current Assets | 4 | 7 | ||||||||
Accounts Payable | (1 | ) | 18 | |||||||
Other Current Liabilities | 12 | (120 | ) | |||||||
Net Cash Provided by Operating Activities | 865 | 404 | ||||||||
Investing Activities | Property Additions | (734 | ) | (757 | ) | |||||
Net Proceeds from Divestitures | 55 | 226 | ||||||||
Short-term Investments - Net | (349 | ) | (213 | ) | ||||||
Other Investing Activities | (24 | ) | (38 | ) | ||||||
Net Cash Used by Investing Activities | (1,052 | ) | (782 | ) | ||||||
Financing Activities | Short-term Debt - Net | 101 | 586 | |||||||
Long-term Debt Issued | 412 | 433 | ||||||||
Long-term Debt Repaid | (385 | ) | (292 | ) | ||||||
Dividends Paid | (64 | ) | (64 | ) | ||||||
Other Financing Activities | 18 | (27 | ) | |||||||
Net Cash Provided by Financing Activities | 82 | 636 | ||||||||
Cash, Cash Equivalents and Short-term Investments | Net (Decrease) Increase in Cash and Cash Equivalents | (105 | ) | 258 | ||||||
Cash and Cash Equivalents at Beginning of Period | 296 | 127 | ||||||||
Cash and Cash Equivalents at End of Period | 191 | 385 | ||||||||
Short-term Investments at End of Period | 438 | 351 | ||||||||
Cash, Cash Equivalents and Short-term Investments at End of Period | $ | 629 | $ | 736 | ||||||
4
CSX Corporation and Subsidiaries | QuarterlyFlash | |
BUSINESS SEGMENTS (Unaudited)(a) |
Quarters Ended Sept. 24, 2004, and Sept. 26, 2003
Surface | International | Eliminations/ | ||||||||||||||||||||||||||||||||||||||||||||||
Rail | Intermodal | Transportation | Terminals | Other(b) | Total | |||||||||||||||||||||||||||||||||||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||||||||||||||||||
Operating Revenue | $ | 1,616 | $ | 1,510 | $ | 322 | $ | 313 | $ | 1,938 | $ | 1,823 | $ | 42 | $ | 59 | $ | — | $ | — | $ | 1,980 | $ | 1,882 | ||||||||||||||||||||||||
Operating Expense | ||||||||||||||||||||||||||||||||||||||||||||||||
Labor and Fringe | 659 | 626 | 19 | 17 | 678 | 643 | 10 | 12 | — | 1 | 688 | 656 | ||||||||||||||||||||||||||||||||||||
Materials, Supplies and Other | 352 | 318 | 51 | 48 | 403 | 366 | 15 | 20 | 1 | 1 | 419 | 387 | ||||||||||||||||||||||||||||||||||||
Conrail Rents, Fees and Services | 63 | 86 | — | — | 63 | 86 | — | — | — | — | 63 | 86 | ||||||||||||||||||||||||||||||||||||
Building and Equipment Rent | 104 | 109 | 36 | 38 | 140 | 147 | 2 | 2 | (3 | ) | (3 | ) | 139 | 146 | ||||||||||||||||||||||||||||||||||
Inland Transportation | (104 | ) | (100 | ) | 176 | 174 | 72 | 74 | — | 2 | — | — | 72 | 76 | ||||||||||||||||||||||||||||||||||
Depreciation | 161 | 145 | 9 | 7 | 170 | 152 | 5 | 3 | 2 | 3 | 177 | 158 | ||||||||||||||||||||||||||||||||||||
Fuel | 162 | 132 | — | — | 162 | 132 | — | — | — | — | 162 | 132 | ||||||||||||||||||||||||||||||||||||
Miscellaneous | — | — | — | — | — | — | 2 | — | (9 | ) | (11 | ) | (7 | ) | (11 | ) | ||||||||||||||||||||||||||||||||
Provision for Casualty Claims(d) | — | 229 | — | — | — | 229 | — | — | — | 3 | — | 232 | ||||||||||||||||||||||||||||||||||||
Additional Loss on Sale(e) | — | — | — | — | — | — | — | — | — | 108 | — | 108 | ||||||||||||||||||||||||||||||||||||
Restructuring Charge(c) | 3 | 10 | — | — | 3 | 10 | — | — | — | — | 3 | 10 | ||||||||||||||||||||||||||||||||||||
Total Operating Expense | 1,400 | 1,555 | 291 | 284 | 1,691 | 1,839 | 34 | 39 | (9 | ) | 102 | 1,716 | 1,980 | |||||||||||||||||||||||||||||||||||
Operating Income (Loss) | $ | 216 | $ | (45 | ) | $ | 31 | $ | 29 | $ | 247 | $ | (16 | ) | $ | 8 | $ | 20 | $ | 9 | $ | (102 | ) | $ | 264 | $ | (98 | ) | ||||||||||||||||||||
Operating Ratio | 86.6 | % | 103.0 | % | 90.4 | % | 90.7 | % | 87.3 | % | 100.9 | % | 81.0 | % | 66.1 | % | ||||||||||||||||||||||||||||||||
Nine Months Ended Sept. 24, 2004, and Sept. 26, 2003
Surface | International | Eliminations/ | ||||||||||||||||||||||||||||||||||||||||||||||
Rail | Intermodal | Transportation | Terminals | Other(b) | Total | |||||||||||||||||||||||||||||||||||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||||||||||||||||||
Operating Revenue | $ | 4,893 | $ | 4,614 | $ | 955 | $ | 929 | $ | 5,848 | $ | 5,543 | $ | 128 | $ | 169 | $ | — | $ | 128 | $ | 5,976 | $ | 5,840 | ||||||||||||||||||||||||
Operating Expense | ||||||||||||||||||||||||||||||||||||||||||||||||
Labor and Fringe | 1,980 | 1,919 | 56 | 54 | 2,036 | 1,973 | 35 | 38 | 2 | 61 | 2,073 | 2,072 | ||||||||||||||||||||||||||||||||||||
Materials, Supplies and Other | 1,090 | 988 | 151 | 144 | 1,241 | 1,132 | 50 | 55 | 2 | 50 | 1,293 | 1,237 | ||||||||||||||||||||||||||||||||||||
Conrail Rents, Fees and Services | 232 | 259 | — | — | 232 | 259 | — | — | — | — | 232 | 259 | ||||||||||||||||||||||||||||||||||||
Building and Equipment Rent | 309 | 308 | 111 | 108 | 420 | 416 | 6 | 6 | (10 | ) | — | 416 | 422 | |||||||||||||||||||||||||||||||||||
Inland Transportation | (308 | ) | (297 | ) | 524 | 522 | 216 | 225 | — | 6 | — | 16 | 216 | 247 | ||||||||||||||||||||||||||||||||||
Depreciation | 459 | 438 | 28 | 23 | 487 | 461 | 11 | 7 | 6 | 7 | 504 | 475 | ||||||||||||||||||||||||||||||||||||
Fuel | 467 | 426 | — | — | 467 | 426 | — | — | — | 15 | 467 | 441 | ||||||||||||||||||||||||||||||||||||
Miscellaneous | — | — | — | — | — | — | 4 | 5 | (22 | ) | (32 | ) | (18 | ) | (27 | ) | ||||||||||||||||||||||||||||||||
Provision for Casualty Claims(d) | — | 229 | — | — | — | 229 | — | — | — | 3 | — | 232 | ||||||||||||||||||||||||||||||||||||
Additional Loss on Sale(e) | — | — | — | — | — | — | — | — | — | 108 | — | 108 | ||||||||||||||||||||||||||||||||||||
Restructuring Charge(c) | 67 | 10 | 4 | — | 71 | 10 | 6 | — | — | — | 77 | 10 | ||||||||||||||||||||||||||||||||||||
Total Operating Expense | 4,296 | 4,280 | 874 | 851 | 5,170 | 5,131 | 112 | 117 | (22 | ) | 228 | 5,260 | 5,476 | |||||||||||||||||||||||||||||||||||
Operating Income (Loss) | $ | 597 | $ | 334 | $ | 81 | $ | 78 | $ | 678 | $ | 412 | $ | 16 | $ | 52 | $ | 22 | $ | (100 | ) | $ | 716 | $ | 364 | |||||||||||||||||||||||
Operating Ratio | 87.8 | % | 92.8 | % | 91.5 | % | 91.6 | % | 88.4 | % | 92.6 | % | 87.5 | % | 69.2 | % | ||||||||||||||||||||||||||||||||
(a) | Prior periods have been reclassified to conform to the current presentation. | |
(b) | Eliminations/Other consists of the following: |
(1) | Reclassification of International Terminals minority interest expense | |
(2) | Operations of CSX Lines for 2003 and gain amortization in both years | |
(3) | Charge incurred upon entering into settlement agreements with Maersk | |
(4) | Other items |
(c) | Restructuring charge is for (1) separation expenses related to the management restructuring at Surface Transportation for the quarter and nine months ended September 24, 2004 and September 26, 2003 and for (2) International Terminals restructuring initiatives in an effort to maintain and improve productivity standards in light of current business conditions that occurred in the first quarter of 2004. | |
(d) | Represents charge recorded in connection with the Company’s change in estimating casualty reserves, which impacted Surface Transportation operating income by $229 million and operating ratio by 12.6 percent. | |
(e) | Represents the charge incurred upon entering into settlement agreements with Maersk. |
5
CSX Corporation and Subsidiaries | QuarterlyFlash | |
SURFACE TRANSPORTATION TRAFFIC AND REVENUE(a) | ||
Loads (Thousands); Revenue (Dollars in Millions) |
Third Quarter Loads | Third Quarter Revenue | |||||||||||||||||||||||
2004 | 2003 | % Change | 2004 | 2003 | % Change | |||||||||||||||||||
Merchandise | ||||||||||||||||||||||||
Phosphates and Fertilizers | 107 | 114 | (6 | )% | $ | 75 | $ | 74 | 1 | % | ||||||||||||||
Metals | 95 | 85 | 12 | 129 | 107 | 21 | ||||||||||||||||||
Forest Products | 115 | 115 | — | 171 | 158 | 8 | ||||||||||||||||||
Food and Consumer | 59 | 61 | (3 | ) | 93 | 89 | 4 | |||||||||||||||||
Agricultural Products | 82 | 88 | (7 | ) | 117 | 116 | 1 | |||||||||||||||||
Chemicals | 139 | 136 | 2 | 266 | 248 | 7 | ||||||||||||||||||
Emerging Markets | 126 | 130 | (3 | ) | 120 | 125 | (4 | ) | ||||||||||||||||
723 | 729 | (1 | ) | 971 | 917 | 6 | ||||||||||||||||||
Automotive | 112 | 120 | (7 | ) | 185 | 193 | (4 | ) | ||||||||||||||||
Coal, Coke and Iron Ore | ||||||||||||||||||||||||
Coal | 406 | 391 | 4 | 423 | 384 | 10 | ||||||||||||||||||
Coke and Iron Ore | 17 | 17 | — | 15 | 14 | 7 | ||||||||||||||||||
423 | 408 | 4 | 438 | 398 | 10 | |||||||||||||||||||
Other | — | — | — | 22 | 2 | 1,000 | ||||||||||||||||||
Total Rail | 1,258 | 1,257 | — | 1,616 | 1,510 | 7 | ||||||||||||||||||
Intermodal | ||||||||||||||||||||||||
Domestic | 239 | 263 | (9 | ) | 184 | 195 | (6 | ) | ||||||||||||||||
International | 320 | 301 | 6 | 128 | 120 | 7 | ||||||||||||||||||
Other | — | — | — | 10 | (2 | ) | 600 | |||||||||||||||||
Total Intermodal | 559 | 564 | (1 | ) | 322 | 313 | 3 | |||||||||||||||||
Total Surface Transportation | 1,817 | 1,821 | — | % | $ | 1,938 | $ | 1,823 | 6 | % | ||||||||||||||
Nine Months Loads | Nine Months Revenue | |||||||||||||||||||||||
2004 | 2003 | % Change | 2004 | 2003 | % Change | |||||||||||||||||||
Merchandise | ||||||||||||||||||||||||
Phosphates and Fertilizers | 348 | 344 | 1 | % | $ | 252 | $ | 246 | 2 | % | ||||||||||||||
Metals | 284 | 260 | 9 | 373 | 325 | 15 | ||||||||||||||||||
Forest Products | 344 | 345 | — | 496 | 469 | 6 | ||||||||||||||||||
Food and Consumer | 179 | 181 | (1 | ) | 272 | 262 | 4 | |||||||||||||||||
Agricultural Products | 263 | 268 | (2 | ) | 375 | 368 | 2 | |||||||||||||||||
Chemicals | 418 | 406 | 3 | 786 | 741 | 6 | ||||||||||||||||||
Emerging Markets | 372 | 356 | 4 | 366 | 355 | 3 | ||||||||||||||||||
2,208 | 2,160 | 2 | 2,920 | 2,766 | 6 | |||||||||||||||||||
Automotive | 372 | 390 | (5 | ) | 607 | 625 | (3 | ) | ||||||||||||||||
Coal, Coke and Iron Ore | ||||||||||||||||||||||||
Coal | 1,219 | 1,164 | 5 | 1,254 | 1,155 | 9 | ||||||||||||||||||
Coke and Iron Ore | 51 | 47 | 9 | 48 | 42 | 14 | ||||||||||||||||||
1,270 | 1,211 | 5 | 1,302 | 1,197 | 9 | |||||||||||||||||||
Other | — | — | — | 64 | 26 | 146 | ||||||||||||||||||
Total Rail | 3,850 | 3,761 | 2 | 4,893 | 4,614 | 6 | ||||||||||||||||||
Intermodal | ||||||||||||||||||||||||
Domestic | 760 | 775 | (2 | ) | 575 | 570 | 1 | |||||||||||||||||
International | 937 | 880 | 6 | 370 | 354 | 5 | ||||||||||||||||||
Other | — | — | — | 10 | 5 | 100 | ||||||||||||||||||
Total Intermodal | 1,697 | 1,655 | 3 | 955 | 929 | 3 | ||||||||||||||||||
Total Surface Transportation | 5,547 | 5,416 | 2 | % | $ | 5,848 | $ | 5,543 | 6 | % | ||||||||||||||
(a) | Prior periods have been reclassified to conform to the current presentation. |
6
CSX Corporation and Subsidiaries | QuarterlyFlash | |
SURFACE TRANSPORTATION OPERATING RESULTS |
REVENUE
Merchandise
Merchandise showed improved yield in the third quarter. Overall revenue was up 6% while volume declined 1%. Most markets showed year-over-year improvement in revenue and revenue per car due to continued yield management efforts and the company’s fuel surcharge program.
• | Phosphates and Fertilizers– Phosphate revenue was slightly favorable in third quarter on 6% less volume. Price increases, fuel surcharges and length of haul mix changes are contributing to revenue-per-car gains. However, revenue and volume were negatively impacted by hurricane disruptions, which caused fertilizer production curtailments and rail operational disruptions in the region. |
• | Metals– Strong demand continues across all commodity lines. Steel production and mill utilization have reached their highest levels since June. Scrap and finished steel product prices have recently stabilized, with supply becoming more available. Metals led all merchandise units in the third quarter with 21% revenue growth on 12% volume growth. |
• | Forest Products– Stronger than expected housing market is positively influencing the panel and lumber markets. In addition, yield management efforts and fuel surcharge have increased revenue despite flat carload growth. |
• | Food and Consumer– Volume down slightly due to continued efforts to improve traffic mix. Continued interest in rail due to tightening truck capacity; however, the consistent service levels demanded by these customers limit traffic conversions at this time. Strong housing demand fueled strength in building products, roofing granules and appliance markets. Yield management efforts and fuel surcharge continue to contribute to revenue-per-car gains. |
• | Agricultural Products– Strong crop production in the southeast, lack of soybean availability, and targeted wheat price increases have negatively impacted volume. Despite the volume decline, revenue has increased on the strength of feed demand, ethanol growth and increases in price. Consumption of processed products remains flat. Previous contract renewals in corn sweeteners and recent price increases in other areas continue to improve yield. Length of haul mix changes in grain also contributed to revenue-per-car gains. |
• | Chemicals– Chemicals continue to experience strong market demand across most commodities. Overall chemical industry shipments were up more than 6% in the third quarter. Chloralkali and plastics led the way with revenue growth. Plant utilization rates for these two segments continue in the mid to high 90% range. Yield management strategies continue to contribute to revenue-per-car gains. |
• | Emerging Markets– Volume and revenue weakness was primarily driven by declines in industrial waste, auto shredder residue and military shipments. Slightly unfavorable yield was mostly driven by mix change, as most individual commodities experienced revenue-per-car gains. Hurricane disruptions adversely affected strong demand for aggregates, cement, lime, and fly ash business in the southeast. Aggregates growth has been limited by unit train resource availability. |
Automotive
Coal, Coke and Iron Ore
Other
Intermodal
• | Domestic –Gains in truck brokerage were offset by weakness in transcontinental domestic business. The yield in the truck brokerage business is benefiting from system and process improvements. Service levels continue to be a challenge. Some weakening in volume was due to the company’s Network Simplification Initiative. |
• | International –Volume growth continued due to larger vessels and increased traffic levels with several key international shippers. Revenue decreases were due primarily to mix changes as several shippers have converted previously transcontinental traffic to core traffic. Westbound empty movements are increasing. |
7
CSX Corporation and Subsidiaries | QuarterlyFlash | |
SURFACE TRANSPORTATION OPERATING RESULTS(continued) |
EXPENSE
Labor and Fringeexpenses increased $35 million during the third quarter of 2004 versus prior year quarter. This increase is attributable to the effects of inflation, along with increases in the Company’s incentive compensation plan of $35 million and a $5 million increase resulting from the consolidation of FRT. These costs were partially offset by benefits realized from reduced staffing levels.
Materials, Supplies and Otherexpenses increased $37 million for the quarter versus last year’s quarter. This is due to increased maintenance and crew travel costs, other operational costs and the consolidation of FRT. These costs were partially offset by decreases in cost of risk expenses.
Conrail Rents, Fees and Servicesdecreased $23 million for the quarter primarily due to the Conrail spin-off transaction that occurred this quarter. This transaction effectively decreased rents paid to Conrail beginning in September, as assets previously leased from Conrail are now owned directly by CSX.
Building and Equipment Rentdecreased $7 million versus the prior quarter as a result of favorable mix and volume, which was partially offset due to unfavorable asset utilization.
Inland Transportationdecreased $2 million during the third quarter 2004 compared to the third quarter 2003 primarily due to lower trucking expenses.
Fuelexpenses increased $30 million for the quarter versus prior year quarter. This increase is primarily due to higher fuel prices, net of hedging benefits.
Depreciationexpenses increased $18 million for the third quarter 2004 due to an increased depreciation base, mainly attributable to the Conrail spin-off transaction, as assets previously leased from Conrail are now owned directly by CSX.
Provision for Casualty Claimsdecreased $229 million for the third quarter 2004 compared to the third quarter 2003. This is due to a third quarter 2003 charge of $229 million that was recorded in conjunction with the company’s change in estimate for its casualty reserves to include an estimate of incurred but not reported claims for asbestos and other occupational injuries to be received over the next seven years.
Restructuring Chargedecreased $7 million quarter over quarter. The third quarter 2004 charge represents the final costs related to management restructuring.
8
CSX Corporation and Subsidiaries | QuarterlyFlash | |
RAIL OPERATING STATISTICS(a) |
Third Quarter | Nine Months | |||||||||||||||||||||||||
2004 | 2003 | % Change | 2004 | 2003 | % Change | |||||||||||||||||||||
Coal (Millions of Tons) | Domestic: | |||||||||||||||||||||||||
Utility | 34.8 | 32.6 | 7 | % | 102.9 | 98.9 | 4 | % | ||||||||||||||||||
Other | 5.1 | 7.0 | (27 | ) | 16.0 | 18.6 | (14 | ) | ||||||||||||||||||
Total Domestic | 39.9 | 39.6 | 1 | 118.9 | 117.5 | 1 | ||||||||||||||||||||
Export | 3.1 | 2.0 | 55 | 10.4 | 6.2 | 68 | ||||||||||||||||||||
Total | 43.0 | 41.6 | 3 | 129.3 | 123.7 | 5 | ||||||||||||||||||||
Revenue Ton-Miles (Billions) | Merchandise | 33.0 | 33.4 | (1 | ) | 102.3 | 99.4 | 3 | ||||||||||||||||||
Automotive | 1.9 | 2.0 | (5 | ) | 6.3 | 6.5 | (3 | ) | ||||||||||||||||||
Coal | 18.5 | 17.5 | 6 | 56.2 | 52.6 | 7 | ||||||||||||||||||||
Intermodal | 5.2 | 5.4 | (4 | ) | 16.4 | 16.0 | 3 | |||||||||||||||||||
Total | 58.6 | 58.3 | 1 | 181.2 | 174.5 | 4 | ||||||||||||||||||||
Gross Ton-Miles(b) (Billions) | Total Gross Ton-Miles | 110.5 | 111.7 | (1 | )% | 343.4 | 333.9 | 3 | % | |||||||||||||||||
Service Measurements(c) | Personal Injury Frequency Index (Per 100 Employees) | 2.25 | 2.38 | 5 | % | 2.25 | 2.22 | (1 | )% | |||||||||||||||||
FRA Train Accidents Frequency (Per Million Train Miles) | 4.03 | 4.53 | 11 | 4.39 | 4.61 | 5 | ||||||||||||||||||||
Average Velocity, All Trains (Miles Per Hour) | 20.1 | 21.0 | (4 | ) | 20.2 | 21.0 | (4 | ) | ||||||||||||||||||
Average System Dwell Time (Hours) | 28.8 | 25.4 | (13 | ) | 28.4 | 24.8 | (15 | ) | ||||||||||||||||||
Average Total Cars-On-Line | 233,469 | 229,754 | (2 | ) | 233,302 | 229,610 | (2 | ) | ||||||||||||||||||
On -Time Originations | 50.9 | % | 64.4 | % | (21 | ) | 47.7 | % | 63.7 | % | (25 | ) | ||||||||||||||
On -Time Arrivals | 40.6 | % | 57.4 | % | (29 | ) | 40.8 | % | 58.1 | % | (30 | ) | ||||||||||||||
Average Recrews (Per Day) | 62.2 | 54.3 | (15 | )% | 65.0 | 49.0 | (33 | )% | ||||||||||||||||||
(a) | Amounts for 2004 are estimated. | |
(b) | Amounts exclude locomotive gross ton-miles. | |
(c) | Percent changes included in brackets represent unfavorable variances. |
SURFACE TRANSPORTATION FUEL STATISTICS
Third Quarter | Nine Months | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
Diesel No. 2: | ||||||||||||||||
Estimated Fuel Consumption (Millions of Gallons) | 142.5 | 145.1 | 452.9 | 439.1 | ||||||||||||
Price Per Gallon (Dollars) | $ | 1.1370 | $ | 0.9090 | $ | 1.0628 | $ | 0.9700 | ||||||||
Impact of Year-to-Year Price Variance on Operating Expense (Dollars in Millions) | $ | (32.5 | ) | $ | (42.0 | ) | ||||||||||
9
CSX Corporation and Subsidiaries | QuarterlyFlash | |
INTERNATIONAL TERMINALS |
OPERATING RESULTS
Revenue decreased $17 million to $42 million for the third quarter of 2004, compared to the third quarter of 2003, primarily due to the loss of a significant customer at its Hong Kong operations.
Expense decreased $5 million to $34 million for the third quarter of 2004, compared to the third quarter of 2003. This is attributable to lower expenses due to decreased customer volume in Hong Kong offset by a write-down of capitalized software.
Operating income decreased $12 million for the third quarter of 2004, as compared to the third quarter of 2003.
OPERATING STATISTICS(a)
(Unaudited) | ||||||||||||||||
Third Quarter | Nine Months | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
Gross Revenue (Dollars in Millions) | $ | 98 | $ | 106 | $ | 282 | $ | 303 | ||||||||
Gross Lifts | 975,741 | 845,023 | 2,605,411 | 2,393,941 | ||||||||||||
Average Port Productivity (Port Moves Per Crane Per Hour) | 27.0 | 31.0 | 28.9 | 31.5 | ||||||||||||
(a) | Includes all consolidated and unconsolidated subsidiaries of CSX World Terminals. |
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
(Dollars in Millions, Except Per Share Amounts) (All Per Share Amounts Assume Dilution)
Revenue | Operating Income | Earnings Per Share | ||||||||||||||||||||||||||||||||||
2004 | 2003(b) | 2002(b) | 2004(e)(f)(g) | 2003(c)(d) | 2002(b) | 2004(e)(f)(g) | 2003(b)(c)(d) | 2002(a) | ||||||||||||||||||||||||||||
First Quarter | $ | 1,963 | $ | 2,016 | $ | 1,964 | $ | 161 | $ | 177 | $ | 212 | $ | .14 | $ | .46 | $ | .12 | ||||||||||||||||||
Second Quarter | 2,033 | 1,942 | 2,073 | 291 | 285 | 321 | .55 | .59 | .63 | |||||||||||||||||||||||||||
Third Quarter | 1,980 | 1,882 | 2,055 | 264 | (98 | ) | 276 | .57 | (.48 | ) | .60 | |||||||||||||||||||||||||
Fourth Quarter | 1,953 | 2,060 | 262 | 318 | .57 | .64 | ||||||||||||||||||||||||||||||
Year | $ | 5,976 | $ | 7,793 | $ | 8,152 | $ | 716 | $ | 626 | $ | 1,127 | $ | 1.26 | $ | 1.14 | $ | 1.99 | ||||||||||||||||||
2002
(a) | First Quarter – Includes a charge of $43 million after tax, as a result of the cumulative effect of an accounting change for indefinite lived intangible assets. |
2003
(b) | First Quarter – (1) Includes a credit of $57 million after tax, as a result of a cumulative effect of an accounting change for asset retirement obligations; (2) CSX conveyed its interest in CSX Lines. Revenue from CSX Lines is included in previous quarters of $127 million in the first quarter of 2003, $161 million, $189 million, $215 million and $189 million for the first, second, third and fourth quarters of 2002, respectively. CSX Lines’ operating income is included in previous quarters of $1 million in the first quarter of 2003, $1 million, $9 million, $22 million and $6 million for the first, second, third and fourth quarters of 2002, respectively. |
(c) | Third Quarter – (1) Includes a charge of $232 million pretax, $145 million after tax, as a result of the Company’s change in its estimate of casualty reserves; (2) Includes a charge of $108 million pretax, $67 million after tax, as a result of the settlement agreements with Maersk; (3) The Company recorded $10 million pretax, $7 million after tax, as a result of management restructuring. |
(d) | Fourth Quarter – (1) The Company recorded $34 million pretax, $21 million after tax, as the initial charge for separation expenses related to the management restructuring announced in November 2003 at Surface Transportation; (2) The Company recorded a $22 million pretax, $14 million after tax, credit related to revised estimates for railroad retirement taxes and the amounts of benefits to be paid to individuals under the $1.3 billion charges for separation plans initially recorded in 1991 and 1992. |
2004
(e) | First Quarter — The Company recorded $59 million pretax, $37 million after tax, for (a) separation expenses related to the management restructuring announced in November 2003 at Surface Transportation and for (b) International Terminals restructuring initiatives in an effort to maintain and improve productivity standards in light of current business conditions. | |
(f) | Second Quarter – The Company recorded $15 million pretax, $9 million after tax, for separation expenses related to the management restructuring announced in November 2003 at Surface Transportation. | |
(g) | Third Quarter – (1) The Company recorded a net gain of $16 million after tax, related to the Conrail spin-off transaction; (2) The Company recorded $3 million pretax, $2 million after tax, for separation expenses related to the management restructuring announced in November 2003 at Surface Transportation. |
10
CSX Corporation and Subsidiaries | QuarterlyFlash | |
FINANCIAL MEASURES (Unaudited) |
Nine Months Ended | ||||||||
Sept. 24, | Sept. 26, | |||||||
2004 | 2003 | |||||||
Working Capital (Deficit) (Dollars in Millions) | $ | 298 | $ | (644 | ) | |||
Current Ratio | 1.1 | 0.8 | ||||||
Short-term Debt (Dollars in Millions) | $ | 103 | $ | 729 | ||||
Debt Ratio(a) | 49 | % | 52 | % | ||||
All-in Debt Ratio(b) | 52 | % | 55 | % | ||||
12-Month Rolling Return on Assets | 1.8 | % | 1.0 | % | ||||
12-Month Rolling Return on Equity | 6.1 | % | 3.2 | % | ||||
(a) | Adjusted to include 42 percent of Conrail obligations. | |
(b) | Adjusted to include off-balance sheet financing, leases, and 42 percent of Conrail obligations. |
OTHER INCOME (EXPENSE) (Unaudited)
(Dollars in Millions)
Quarters Ended | Nine Months Ended | |||||||||||||||
Sept. 24, | Sept, 26, | Sept. 24, | Sept. 26, | |||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
Interest Income | $ | 5 | $ | 8 | $ | 13 | $ | 16 | ||||||||
Income (Loss) from Real Estate and Resort Operations | 19 | 25 | 17 | 58 | ||||||||||||
Discounts on Sales of Accounts Receivable | — | — | — | (10 | ) | |||||||||||
Net Gain on Conrail Spin-off - After Tax | 16 | — | 16 | — | ||||||||||||
Minority Interest | (11 | ) | (12 | ) | (28 | ) | (32 | ) | ||||||||
Miscellaneous | (4 | ) | — | (1 | ) | (2 | ) | |||||||||
Total | $ | 25 | $ | 21 | $ | 17 | $ | 30 | ||||||||
Gross Revenue from Real Estate and Resort Operations Included in Other Income | $ | 69 | $ | 74 | $ | 146 | $ | 184 | ||||||||
EMPLOYEE COUNTS BY SEGMENT - - ESTIMATED(a)
2004 | 2003 | |||||||||||||||||||||||||||
Aug. | May | Feb. | Nov. | Aug. | May | Feb. | ||||||||||||||||||||||
Surface Transportation | ||||||||||||||||||||||||||||
Rail | 32,123 | 32,184 | 32,022 | 32,160 | 33,245 | 33,533 | 32,547 | |||||||||||||||||||||
Intermodal | 1,079 | 1,087 | 1,126 | 1,114 | 1,115 | 1,115 | 1,122 | |||||||||||||||||||||
Technology and Corporate | 547 | 550 | 697 | 810 | 839 | 858 | 887 | |||||||||||||||||||||
Total Surface Transportation | 33,749 | 33,821 | 33,845 | 34,084 | 35,199 | 35,506 | 34,556 | |||||||||||||||||||||
International Terminals | 643 | 778 | 874 | 1,001 | 1,006 | 1,013 | 1,035 | |||||||||||||||||||||
Other | 1,633 | 1,417 | 1,095 | 1,623 | 1,851 | 1,752 | 1,129 | |||||||||||||||||||||
Total | 36,025 | 36,016 | 35,814 | 36,708 | 38,056 | 38,271 | 36,720 | |||||||||||||||||||||
(a) | Prior periods have been reclassified to conform to current presentation. |
11