Exhibit 99.2
CSX REPORTS SECOND-QUARTER EARNINGS
JACKSONVILLE, Fla., July 24, 2003 – CSX Corporation (NYSE: CSX) today reported second quarter net earnings of $127 million, or 59 cents per share, versus $135 million, or 63 cents per share, a year ago.
Revenue at Surface Transportation, which includes CSX’s rail and intermodal units, was $1.89 billion, up from $1.83 billion in the second quarter of 2002. Surface Transportation operating income was $259 million compared to $293 million in the prior-year period. The quarter also included previously announced expenses of $17 million related to new asbestos claims filed in West Virginia; while the 2002 second quarter included $11 million in net favorable settlements of contract disputes. Operating income on a consolidated basis totaled $285 million, down from $321 million a year ago.
”We continued to see strong revenue growth in the quarter, and have successfully converted more than one million truck loads from the highway to our railroad since the beginning of 2001,” said Michael J. Ward, CSX chairman and chief executive officer. “Despite a continued sluggish economy, our modal conversion efforts produced solid gains in the forest products, metals, waste and intermodal markets. In addition, coal rebounded in the quarter and showed solid year-over-year improvement.
“However, we continued to be challenged by slowed operations as the railroad struggled to recover from a difficult operating environment during the early parts of the quarter. Reduced network fluidity caused a significant increase in labor expenses, partially offsetting the strong revenue gains. Looking ahead, we will regain our operational discipline and push more of our revenue to the bottom line,” Ward added.
Ward said Surface Transportation revenue growth outpaced the nation’s gross domestic product in the first half of 2003 and that revenue growth will continue even as questions about the economy remain. He also noted that the company is still on target to meet its year-end staff reduction and free cash flow plans.
On a consolidated basis, revenues were $1.94 billion versus $2.07 billion a year ago. Operating income at the company’s international terminal business was $17 million, compared to $16 million in the second quarter of 2002. A significant real estate sale in the second quarter of 2003 benefited the “Other Income” category.
CSX Corporation, based in Jacksonville, Fla., operates one of the largest rail networks in the United States and also provides intermodal and international terminal management services.More information about the company is available at its Internet address:www.csx.com
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; and (iv) 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 atwww.sec.gov and the Company’s website atwww.csx.com
500 Water Street
15th Floor, C900
Jacksonville, FL 32202
http://www.csx.com
Contact:
Fredrik Eliasson
(904) 359-3305
TABLE OF CONTENTS
Page | ||
Consolidated Financial Statements | 2 | |
Business Segments | 5 | |
Surface Transportation Results | 6 | |
International Terminals Results | 10 | |
Consolidated Highlights | 11 |
The accompanying unaudited financial information should be read in conjunction with the Company’s 2002 Annual Report on Form 10-K, 2003 Quarterly Reports on Form 10-Q, and any Current Reports on Form 8-K.
CSX Corporation and Subsidiaries | Quarterly Flash |
CONSOLIDATED INCOME STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited) | |||||||||||||||
Quarters Ended | Six Months Ended | ||||||||||||||
June 27, 2003 | June 28, 2002 | June 27, 2003 | June 28, 2002 | ||||||||||||
Revenue | Operating Revenue | $ | 1,942 | $ | 2,073 | $ | 3,958 | $ | 4,037 | ||||||
and Expense | Operating Expense | 1,657 | 1,752 | 3,496 | 3,504 | ||||||||||
Operating Income | 285 | 321 | 462 | 533 | |||||||||||
Other Income | 19 | 4 | 9 | 13 | |||||||||||
Interest Expense | 105 | 116 | 208 | 230 | |||||||||||
Earnings | Earnings Before Income Taxes and Cumulative Effect of Accounting Change | 199 | 209 | 263 | 316 | ||||||||||
Income Tax Expense | 72 | 74 | 94 | 113 | |||||||||||
Earnings Before Cumulative Effect of Accounting Change | 127 | 135 | 169 | 203 | |||||||||||
Cumulative Effect of Accounting Change—Net of Tax | — | — | 57 | (43 | ) | ||||||||||
Net Earnings | $ | 127 | $ | 135 | $ | 226 | $ | 160 | |||||||
Per Common | Earnings Per Share, Assuming Dilution: | ||||||||||||||
Share | Before Cumulative Effect of Accounting Change | $ | 0.59 | $ | 0.63 | $ | 0.79 | $ | 0.95 | ||||||
Cumulative Effect of Accounting Change | — | — | 0.26 | (0.20 | ) | ||||||||||
Net Earnings | $ | 0.59 | $ | 0.63 | $ | 1.05 | $ | 0.75 | |||||||
Average Diluted Common Shares Outstanding(Thousands) | 214,297 | 213,541 | 214,230 | 213,364 | |||||||||||
Cash Dividends Paid Per Common Share | $ | 0.10 | $ | 0.10 | $ | 0.20 | $ | 0.20 | |||||||
Notes to Consolidated Financial Statements
(1) | Statement of Financial Accounting Standard (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations,” was issued in 2001. This statement addresses financial accounting and reporting for legal obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. 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, or 26 cents per share, 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. On an ongoing basis, depreciation expense will be reduced, while labor and fringe and materials, supplies and other expense will be increased. |
(2) | 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”). Horizon has subleased equipment from CSX covering CSX’s primary financial obligations related to $319 million of vessel and equipment leases under which CSX will remain a lessee. A deferred pretax gain of approximately $127 million as a result of the transaction will be recognized over the 12-year sublease term. Approximately $3 million of this gain was recognized in the second quarter, with $4 million being recognized year to date. The $60 million of securities have a term of 7 years and a preferred return feature. CSX will account for the investment under the cost method. |
(3) | SFAS 142, “Goodwill and Other Intangible Assets,” was issued in 2001. Under the provisions of SFAS 142, goodwill and other indefinite lived intangible assets are no longer amortized but are reviewed for impairment on a periodic basis. The Company adopted this standard at the beginning of fiscal year 2002 and incurred a pretax charge of $83 million, $43 million after tax and consideration of minority interest, 20 cents per share, as a cumulative effect of an accounting change, which represents the difference between book value and the fair value of indefinite lived intangible assets. These indefinite lived intangible assets are permits and licenses that the Company holds relating to a proposed pipeline to transfer natural gas from Alaska’s north slope to the port in Valdez, Alaska. The fair value was determined using a discount method of projected future cash flows relating to these assets. The carrying value of these assets is now approximately $3 million. The adoption of SFAS 142 did not have a material effect on prior reporting periods and it does not have a material effect on future earnings. |
2
CSX Corporation and Subsidiaries | Quarterly Flash |
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited) | ||||||||||
June 27, 2003 | Dec. 27, 2002 | |||||||||
Assets | Current Assets | |||||||||
Cash, Cash Equivalents and Short-term Investments | $ | 311 | $ | 264 | ||||||
Accounts Receivable—Net | 1,219 | 799 | ||||||||
Materials and Supplies | 178 | 180 | ||||||||
Deferred Income Taxes | 139 | 128 | ||||||||
Other Current Assets | 185 | 155 | ||||||||
Domestic Container Assets Held for Disposition | — | 263 | ||||||||
Total Current Assets | 2,032 | 1,789 | ||||||||
Properties—Net | 13,504 | 13,286 | ||||||||
Investment in Conrail | 4,658 | 4,653 | ||||||||
Affiliates and Other Companies | 487 | 381 | ||||||||
Other Long-term Assets | 858 | 842 | ||||||||
Total Assets | $ | 21,539 | $ | 20,951 | ||||||
Liabilities | Current Liabilities | |||||||||
Accounts Payable | $ | 768 | $ | 802 | ||||||
Labor and Fringe Benefits Payable | 402 | 457 | ||||||||
Casualty, Environmental and Other Reserves | 223 | 246 | ||||||||
Current Maturities of Long-term Debt | 586 | 391 | ||||||||
Short-term Debt | 704 | 143 | ||||||||
Income and Other Taxes Payable | 102 | 144 | ||||||||
Other Current Liabilities | 135 | 167 | ||||||||
Domestic Container Liabilities Held for Disposition | — | 104 | ||||||||
Total Current Liabilities | 2,920 | 2,454 | ||||||||
Casualty, Environmental and Other Reserves | 629 | 604 | ||||||||
Long-term Debt | 6,204 | 6,519 | ||||||||
Deferred Income Taxes | 3,715 | 3,567 | ||||||||
Other Long-term Liabilities | 1,635 | 1,566 | ||||||||
Total Liabilities | 15,103 | 14,710 | ||||||||
Shareholders’ Equity | Common Stock, $1 Par Value | 215 | 215 | |||||||
Other Capital | 1,554 | 1,547 | ||||||||
Retained Earnings | 4,981 | 4,797 | ||||||||
Accumulated Other Comprehensive Loss | (314 | ) | (318 | ) | ||||||
Total Shareholders’ Equity | 6,436 | 6,241 | ||||||||
Total Liabilities and Shareholders’ Equity | $ | 21,539 | $ | 20,951 | ||||||
3
CSX Corporation and Subsidiaries | Quarterly Flash |
CONSOLIDATED CASH FLOW STATEMENTS
(Dollars in Millions)
(Unaudited) | ||||||||||
Six Months Ended | ||||||||||
June 27, 2003 | June 28, 2002 | |||||||||
Operating Activities | Net Earnings | $ | 226 | $ | 160 | |||||
Adjustments to Reconcile Net Earnings to Net Cash (Used) Provided: | ||||||||||
Depreciation | 322 | 312 | ||||||||
Deferred Income Taxes | 98 | 50 | ||||||||
Cumulative Effect of Accounting Change—Net of Tax | (57 | ) | 43 | |||||||
Other Operating Activities | 16 | (13 | ) | |||||||
Changes in Current Operating Assets and Liabilities: | ||||||||||
Accounts Receivable | (65 | ) | 17 | |||||||
Termination of Sale of Receivables Program | (380 | ) | — | |||||||
Other Current Assets | (42 | ) | (34 | ) | ||||||
Accounts Payable | (15 | ) | (54 | ) | ||||||
Other Current Liabilities | (138 | ) | 30 | |||||||
Net Cash (Used) Provided by Operating Activities | (35 | ) | 511 | |||||||
Investing Activities | Property Additions | (479 | ) | (431 | ) | |||||
Net Proceeds from Divestitures | 214 | — | ||||||||
Other Investing Activities | (20 | ) | 2 | |||||||
Net Cash Used by Investing Activities | (285 | ) | (429 | ) | ||||||
Financing Activities | Short-term Debt—Net | 561 | 576 | |||||||
Long-term Debt Issued | 83 | 474 | ||||||||
Long-term Debt Repaid | (218 | ) | (991 | ) | ||||||
Dividends Paid | (43 | ) | (43 | ) | ||||||
Other Financing Activities | (16 | ) | 16 | |||||||
Net Cash Provided by Financing Activities | 367 | 32 | ||||||||
Cash, Cash Equivalents and Short-term Investments | Net Increase in Cash and Cash Equivalents | 47 | 114 | |||||||
Cash and Cash Equivalents at Beginning of Period | 127 | 137 | ||||||||
Cash and Cash Equivalents at End of Period | 174 | 251 | ||||||||
Short-Term Investments at End of Period | 137 | 480 | ||||||||
Cash, Cash Equivalents and Short-term | ||||||||||
Investments at End of Period | $ | 311 | $ | 731 | ||||||
4
CSX Corporation and Subsidiaries | Quarterly Flash |
BUSINESS SEGMENTS (Unaudited)(1)
(Dollars in Millions)
Quarters Ended June 27, 2003, and June 28, 2002
Rail | Intermodal | Surface Transportation | International Terminals | Eliminations/ Other(2) | Total | |||||||||||||||||||||||||||||||||||||||||||
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||||||||||||||||||||||||
Operating Revenue | $ | 1,573 | $ | 1,538 | $ | 314 | $ | 296 | $ | 1,887 | $ | 1,834 | $ | 54 | $ | 58 | $ | 1 | $ | 181 | $ | 1,942 | $ | 2,073 | ||||||||||||||||||||||||
Operating Expense | ||||||||||||||||||||||||||||||||||||||||||||||||
Labor and Fringe | 645 | 625 | 18 | 16 | 663 | 641 | 13 | 15 | 1 | 57 | 677 | 713 | ||||||||||||||||||||||||||||||||||||
Materials, Supplies and Other | 331 | 325 | 47 | 44 | 378 | 369 | 16 | 18 | 2 | 64 | 396 | 451 | ||||||||||||||||||||||||||||||||||||
Conrail | 87 | 79 | — | — | 87 | 79 | — | — | — | — | 87 | 79 | ||||||||||||||||||||||||||||||||||||
Building and Equipment Rent | 92 | 107 | 39 | 33 | 131 | 140 | 2 | 2 | (3 | ) | 12 | 130 | 154 | |||||||||||||||||||||||||||||||||||
Inland Transportation | (98 | ) | (92 | ) | 175 | 146 | 77 | 54 | 2 | 1 | — | 22 | 79 | 77 | ||||||||||||||||||||||||||||||||||
Depreciation | 148 | 138 | 8 | 8 | 156 | 146 | 2 | 2 | 2 | 7 | 160 | 155 | ||||||||||||||||||||||||||||||||||||
Fuel | 136 | 112 | — | — | 136 | 112 | — | — | — | 16 | 136 | 128 | ||||||||||||||||||||||||||||||||||||
Miscellaneous | — | — | — | — | — | — | 2 | 4 | (10 | ) | (9 | ) | (8 | ) | (5 | ) | ||||||||||||||||||||||||||||||||
Total Operating Expense | 1,341 | 1,294 | 287 | 247 | 1,628 | 1,541 | 37 | 42 | (8 | ) | 169 | 1,657 | 1,752 | |||||||||||||||||||||||||||||||||||
Operating Income | $ | 232 | $ | 244 | $ | 27 | $ | 49 | $ | 259 | $ | 293 | $ | 17 | $ | 16 | $ | 9 | $ | 12 | $ | 285 | $ | 321 | ||||||||||||||||||||||||
Operating Ratio | 85.3 | % | 84.1 | % | 91.4 | % | 83.4 | % | 86.3 | % | 84.0 | % | 68.5 | % | 72.4 | % | ||||||||||||||||||||||||||||||||
Six Months Ended June 27, 2003, and June 28, 2002
Rail | Intermodal | Surface Transportation | International Terminals | Eliminations/ Other(2) | Total | |||||||||||||||||||||||||||||||||||||||||||
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||||||||||||||||||||||||
Operating Revenue | $ | 3,104 | $ | 3,024 | $ | 616 | $ | 558 | $ | 3,720 | $ | 3,582 | $ | 110 | $ | 116 | $ | 128 | $ | 339 | $ | 3,958 | $ | 4,037 | ||||||||||||||||||||||||
Operating Expense | ||||||||||||||||||||||||||||||||||||||||||||||||
Labor and Fringe | 1,293 | 1,265 | 37 | 33 | 1,330 | 1,298 | 26 | 31 | 60 | 110 | 1,416 | 1,439 | ||||||||||||||||||||||||||||||||||||
Materials, Supplies and Other | 670 | 649 | 96 | 85 | 766 | 734 | 35 | 40 | 49 | 119 | 850 | 893 | ||||||||||||||||||||||||||||||||||||
Conrail | 173 | 166 | — | — | 173 | 166 | — | — | — | — | 173 | 166 | ||||||||||||||||||||||||||||||||||||
Building and Equipment Rent | 199 | 209 | 70 | 64 | 269 | 273 | 4 | 4 | 3 | 25 | 276 | 302 | ||||||||||||||||||||||||||||||||||||
Inland Transportation | (197 | ) | (178 | ) | 348 | 295 | 151 | 117 | 4 | 3 | 16 | 43 | 171 | 163 | ||||||||||||||||||||||||||||||||||
Depreciation | 293 | 276 | 16 | 15 | 309 | 291 | 4 | 4 | 4 | 12 | 317 | 307 | ||||||||||||||||||||||||||||||||||||
Fuel | 294 | 216 | — | — | 294 | 216 | — | — | 15 | 28 | 309 | 244 | ||||||||||||||||||||||||||||||||||||
Miscellaneous | — | — | — | — | — | — | 5 | 7 | (21 | ) | (17 | ) | (16 | ) | (10 | ) | ||||||||||||||||||||||||||||||||
Total Operating Expense | 2,725 | 2,603 | 567 | 492 | 3,292 | 3,095 | 78 | 89 | 126 | 320 | 3,496 | 3,504 | ||||||||||||||||||||||||||||||||||||
Operating Income | $ | 379 | $ | 421 | $ | 49 | $ | 66 | $ | 428 | $ | 487 | $ | 32 | $ | 27 | $ | 2 | $ | 19 | $ | 462 | $ | 533 | ||||||||||||||||||||||||
Operating Ratio | 87.8 | % | 86.1 | % | 92.0 | % | 88.2 | % | 88.5 | % | 86.4 | % | 70.9 | % | 76.7 | % | ||||||||||||||||||||||||||||||||
(1) | Prior periods have been reclassified to conform to the current presentation. |
(2) | Eliminations/Other consists of the following: |
(a) | Reclassification of International Terminals minority interest expense |
(b) | Operations of CSX Lines and gain amortization |
(c) | Expenses related to the 2003 retirement of the Company’s former Chairman and Chief Executive Officer |
(d) | Other items |
5
CSX Corporation and Subsidiaries | Quarterly Flash |
SURFACE TRANSPORTATION TRAFFIC AND REVENUE(1)
Loads (Thousands); Revenue (Dollars in Millions)
Second Quarter Loads | Second Quarter Revenue | |||||||||||||
2003 | 2002 | % Change | 2003 | 2002 | % Change | |||||||||
Merchandise | ||||||||||||||
Phosphates and Fertilizers | 113 | 119 | (5) % | $ | 85 | $ | 83 | 2 % | ||||||
Metals | 87 | 80 | 9 | 108 | 100 | 8 | ||||||||
Forest and Industrial Products | 153 | 152 | 1 | 207 | 197 | 5 | ||||||||
Agricultural and Food | 113 | 110 | 3 | 165 | 159 | 4 | ||||||||
Chemicals | 134 | 140 | (4) | 244 | 246 | (1) | ||||||||
Emerging Markets | 125 | 115 | 9 | 118 | 107 | 10 | ||||||||
725 | 716 | 1 | 927 | 892 | 4 | |||||||||
Automotive | 139 | 148 | (6) | 224 | 231 | (3) | ||||||||
Coal, Coke and Iron Ore | ||||||||||||||
Coal | 400 | 391 | 2 | 401 | 380 | 6 | ||||||||
Coke and Iron Ore | 18 | 18 | — | 15 | 19 | (21) | ||||||||
418 | 409 | 2 | 416 | 399 | 4 | |||||||||
Other | — | — | — | 6 | 16 | (63) | ||||||||
Total Rail | 1,282 | 1,273 | 1 | 1,573 | 1,538 | 2 | ||||||||
Intermodal | ||||||||||||||
Domestic | 265 | 242 | 10 | 192 | 168 | 14 | ||||||||
International | 300 | 295 | 2 | 121 | 124 | (2) | ||||||||
Other | — | — | — | 1 | 4 | (75) | ||||||||
Total Intermodal | 565 | 537 | 5 | 314 | 296 | 6 | ||||||||
Total Surface Transportation | 1,847 | 1,810 | 2 % | $ | 1,887 | $ | 1,834 | 3 % | ||||||
Six Months Loads | Six Months Revenue | |||||||||||||
2003 | 2002 | % Change | 2003 | 2002 | % Change | |||||||||
Merchandise | ||||||||||||||
Phosphates and Fertilizers | 230 | 238 | (3) % | $ | 172 | $ | 172 | — % | ||||||
Metals | 175 | 157 | 11 | 218 | 198 | 10 | ||||||||
Forest and Industrial Products | 301 | 296 | 2 | 402 | 386 | 4 | ||||||||
Agricultural and Food | 227 | 225 | 1 | 332 | 325 | 2 | ||||||||
Chemicals | 272 | 275 | (1) | 495 | 484 | 2 | ||||||||
Emerging Markets | 226 | 208 | 9 | 230 | 195 | 18 | ||||||||
1,431 | 1,399 | 2 | 1,849 | 1,760 | 5 | |||||||||
Automotive | 270 | 277 | (3) | 432 | 431 | 0 | ||||||||
Coal, Coke and Iron Ore | ||||||||||||||
Coal | 773 | 784 | (1) | 771 | 761 | 1 | ||||||||
Coke and Iron Ore | 30 | 30 | — | 28 | 35 | (20) | ||||||||
803 | 814 | (1) | 799 | 796 | — | |||||||||
Other | — | — | — | 24 | 37 | (35) | ||||||||
Total Rail | 2,504 | 2,490 | 1 | 3,104 | 3,024 | 3 | ||||||||
Intermodal | ||||||||||||||
Domestic | 512 | 462 | 11 | 375 | 320 | 17 | ||||||||
International | 579 | 556 | 4 | 234 | 234 | — | ||||||||
Other | — | — | — | 7 | 4 | 75 | ||||||||
Total Intermodal | 1,091 | 1,018 | 7 | 616 | 558 | 10 | ||||||||
Total Surface Transportation | 3,595 | 3,508 | 2 % | $ | 3,720 | $ | 3,582 | 4 % | ||||||
(1) | Certain prior period traffic has been reclassified to conform to the current presentation. |
6
CSX Corporation and Subsidiaries | Quarterly Flash |
SURFACE TRANSPORTATION OPERATING RESULTS
REVENUE
Merchandise
Merchandise revenue in the second quarter of 2003 was up 4 percent on 1 percent volume growth as compared to the 2002 quarter. All markets except chemicals showed quarter-over-quarter revenue improvement.
• | Phosphates and Fertilizers –Strong demand for domestic phosphates was offset by reduced export shipments through Tampa area ports. Export shipments to China were down compared with a very strong 2002. |
• | Metals – Inventory replenishments, increased modal conversions of sheet metal and strong scrap volume contributed to the quarter-over-quarter improvement. |
• | Forest and Industrial Products – Paper showed strength quarter-over-quarter due to modal conversions and imports. Volume gains in building products reflected increased demand in residential construction and home improvement markets. |
• | Agricultural and Food – Feed grain and soybean demand remains strong. Sweeteners continue to be negatively impacted by source shifts and a plant closure. Shipments of refrigerated products and canned goods were strong in the second quarter. |
• | Chemicals – Plastics and other chemicals were negatively impacted by high oil and natural gas prices, and weak demand. Producers limited production to minimize the impact of higher feedstock costs. |
• | Emerging Markets – Emerging markets benefited from continued growth in waste and military shipments. Southern aggregate shipments were strong due to increased regional construction. |
Automotive
Automotive revenue decreased $7 million or 3 percent. Vehicle production declined 9 percent versus 2002. Haul extensions on existing business, and new business activities partially mitigated the impact of reduced vehicle production.
Coal, Coke and Iron Ore
Coal, coke and iron ore revenue increased 4 percent quarter-over-quarter on 2 percent volume growth. Strong utility demand and modal conversion initiatives drove performance. Favorable yield was due to improved mix and continued pricing success.
Intermodal
• | Domestic –Transloading of international container imports into domestic equipment, new 53 foot containers, and strength in load board volumes all contributed to double-digit revenue growth. |
• | International –Unfavorable quarter-over-quarter comparisons with strong 2002 West Coast strike-related volumes and increased transloading activity caused a decline in revenue. Growth in low revenue per unit empty volume and a reduction in loaded volume negatively impacted revenue per unit. |
7
CSX Corporation and Subsidiaries | Quarterly Flash |
SURFACE TRANSPORTATION OPERATING RESULTS(continued)
EXPENSE
Labor and Fringe expenses were up $22 million in the second quarter of 2003, as compared to the prior year quarter. The effects of inflation continue to drive labor and fringe expense increases, while greater labor needs associated with diminished network fluidity and volume increased expenses. Costs related to variable deferred compensation plans tied to market performance also contributed to the quarter-over-quarter increase.
Materials, Supplies and Other expenses increased $9 million period-over-period. Increased occupational and personal injury claims, including a charge relating to new asbestos claims filed in West Virginia during the second quarter 2003, were primary drivers of the increase. These increases were offset, in part, by favorable resolution of property tax litigation in the state of New York.
Conrailexpenses increased $8 million in the second quarter as compared to the prior year period due primarily to less favorable claims experience on personal injury and occupational reserves and increased usage charges on the Shared Asset Areas.
Building and Equipment Rent decreased $9 million quarter-over-quarter because of favorable mix and due to renegotiated carhire rates which more than offset unfavorable utilization due to the network fluidity decline.
Inland Transportation costs increased $23 million primarily due to the inclusion of a positive $15 million contract settlement in 2002. The remainder of the increase relates to increased volumes.
Depreciation expenses increased $10 million in the second quarter, as compared to the same period of 2002. The increase is primarily due to property additions, but was also negatively impacted by higher depreciation rates resulting from an asset life study. These increases were somewhat offset by a decrease in the depreciation of crossties due to the adoption of SFAS 143 in the first quarter of 2003.
Fuelexpenses increased $24 million quarter-over-quarter. Fuel prices increased expense by $23 million, but the net impact on operating income was $8 million, as $15 million was recovered through fuel surcharges included in revenue.
8
CSX Corporation and Subsidiaries | Quarterly Flash |
RAIL OPERATING STATISTICS(1)
Second Quarter | Six Months | |||||||||||||||||
2003 | 2002 | % Change | 2003 | 2002 | % Change | |||||||||||||
Coal | Domestic: | |||||||||||||||||
(Millions of Tons) | Utility | 33.9 | 32.4 | 5% | 66.3 | 65.3 | 2% | |||||||||||
Other | 6.6 | 6.7 | (1) | 11.5 | 11.9 | (3) | ||||||||||||
Total Domestic | 40.5 | 39.1 | 4 | 77.8 | 77.2 | 1 | ||||||||||||
Export | 2.0 | 2.4 | (17) | 4.2 | 5.9 | (29) | ||||||||||||
Total | 42.5 | 41.5 | 2 | 82.0 | 83.1 | (1) | ||||||||||||
Revenue Ton-Miles | Merchandise | 32.2 | 32.1 | — | 65.0 | 63.3 | 3 | |||||||||||
(Billions) | Automotive | 2.4 | 2.5 | (4) | 4.6 | 4.6 | — | |||||||||||
Coal | 18.4 | 17.9 | 3 | 35.3 | 36.1 | (2) | ||||||||||||
Intermodal | 5.5 | 5.4 | 2 | 10.6 | 10.3 | 3 | ||||||||||||
Total | 58.5 | 57.9 | 1 | 115.5 | 114.3 | 1 | ||||||||||||
Gross Ton-Miles(2) | Total Gross Ton-Miles | 112.8 | 112.0 | 1 | 221.6 | 219.9 | 1 | |||||||||||
(Billions) | ||||||||||||||||||
Safety Statistics | Personal Injury Frequency Index (Per 100 Employees) | 1.88 | 1.84 | (2) | 2.04 | 1.97 | (4) | |||||||||||
FRA Train Accidents Frequency (Per Million Train Miles) | 4.14 | 2.80 | (48) | 3.99 | 3.07 | (30) | ||||||||||||
Inventory | Average Total Cars-On-Line | 227,565 | 231,036 | 2 | 229,537 | 232,303 | 1 | |||||||||||
Velocity | Average, All Trains (Miles Per Hour) | 20.8 | 22.5 | (8) | 21.0 | 22.7 | (7) | |||||||||||
Crews | Average Recrews (Per Day) | 47.0 | 26.0 | (81) | 46.0 | 24.0 | (92) | |||||||||||
Yard/Terminal | Average System Dwell Time (Hours) | 24.1 | 22.6 | (7) | 24.5 | 23.0 | (7) | |||||||||||
On-Time Originations | 63.2 | % | 77.3 | % | (18) | 63.3 | % | 77.0 | % | (18) | ||||||||
On-Time Destinations | 57.0 | % | 78.0 | % | (27) | 59.0 | % | 79.0 | % | (25) | ||||||||
Locomotives | Average Setback Hours (Per Day) | 88 | 11 | (700)% | 65 | 11 | (491)% | |||||||||||
(1) | Amounts for 2003 are estimated. |
(2) | Amounts exclude locomotive gross ton-miles. |
SURFACE TRANSPORTATION FUEL STATISTICS
Second Quarter | Six Months | |||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||
Diesel No. 2: | ||||||||||||||
Estimated Fuel Consumption (Millions of Gallons) | 145.5 | 144.0 | 294.0 | 289.6 | ||||||||||
Price Per Gallon (Dollars) | $ | 0.9381 | $ | 0.7769 | $ | 1.0005 | $ | 0.7463 | ||||||
Impact of Year-to-Year Price Variance on Operating Expense (Dollars in Millions) | $ | (23 | ) | $ | (75 | ) | ||||||||
9
CSX Corporation and Subsidiaries | Quarterly Flash |
INTERNATIONAL TERMINALS
OPERATING RESULTS
Revenue decreased $4 million, or 7 percent to $54 million for the 2003 quarter, compared to $58 million in the prior year quarter, primarily due to the discontinuance of transpacific operations by one of Hong Kong’s major customers.
Expenses decreased $5 million to $37 million for the second quarter, compared to $42 million for the 2002 quarter. Reduced labor and fringe and materials, supplies and other costs were also due to reduced volume at its Hong Kong operations.
Operating income increased $1 million for the 2003 quarter, as compared to the 2002 quarter, as strong performance in several operating units and aggressive cost focus more than offset the revenue decline in Hong Kong.
OPERATING STATISTICS(1)
(Unaudited) | ||||||||||||
Second Quarter | Six Months | |||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||
Gross Revenue (Dollars in Millions) | $ | 99 | $ | 96 | $ | 197 | $ | 185 | ||||
Gross Lifts | 819,242 | 515,707 | 1,548,918 | 1,008,730 | ||||||||
Average Port Productivity (Port Moves Per Crane Per Hour) | 32.1 | 31.5 | 31.5 | 32.5 | ||||||||
(1) Includes all consolidated and unconsolidated subsidiaries of CSX World Terminals.
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CSX Corporation and Subsidiaries | Quarterly Flash |
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
(Dollars in Millions, Except Per Share Amounts) (All Per Share Amounts Assume Dilution)
Revenue | Operating Income | Earnings Per Share | |||||||||||||||||||||||||
2003 | 2002(4) | 2001(4) | 2003 | 2002(4) | 2001(1)(4) | 2003(2) | 2002(3) | 2001(1) | |||||||||||||||||||
First Quarter | $ | 2,016 | $ | 1,964 | $ | 2,025 | $ | 177 | $ | 212 | $ | 189 | $ | .46 | $ | .12 | $ | .10 | |||||||||
Second Quarter | 1,942 | 2,073 | 2,057 | 285 | 321 | 265 | .59 | .63 | .51 | ||||||||||||||||||
Third Quarter | 2,055 | 2,019 | 276 | 282 | .60 | .47 | |||||||||||||||||||||
Fourth Quarter | 2,060 | 2,009 | 318 | 221 | .64 | .31 | |||||||||||||||||||||
Year | $ | 3,958 | $ | 8,152 | $ | 8,110 | $ | 462 | $ | 1,127 | $ | 957 | $ | 1.99 | $ | 1.38 | |||||||||||
(1) | Fourth quarter 2001 includes a charge of $60 million pretax, $37 million after tax, 17 cents per share, for the settlement of the 1997 New Orleans tank car fire litigation. |
(2) | First quarter 2003 includes a credit of $57 million after tax, 26 cents per share, as a result of a cumulative effect of an accounting change for asset retirement obligations. |
(3) | First quarter 2002 includes a charge of $43 million after tax, 20 cents per share, as a result of the cumulative effect of an accounting change for indefinite lived intangible assets. |
(4) | In the first quarter of 2003, CSX conveyed its interest in CSX Lines. Revenue from CSX Lines is included in previous quarters of $189 million in second quarter of 2002 and $168 million in second quarter of 2001. CSX Lines’ operating income of $9 million and $7 million is included in the second quarters of 2002 and 2001, respectively. |
FINANCIAL MEASURES (Unaudited)
Six Months Ended | ||||||||
June 27, 2003 | June 28, 2002 | |||||||
Working Capital Deficit (Dollars in Millions) | $ | (888 | ) | $ | (803 | ) | ||
Current Ratio | 0.7 | 0.7 | ||||||
Commercial Paper—Short-term (Dollars in Millions) | $ | 704 | $ | 578 | ||||
Debt Ratio(1) | 52 | % | 51 | % | ||||
All-in Debt Ratio(2) | 55 | % | 57 | % | ||||
12-Month Rolling Return on Assets | 2.1 | % | 2.0 | % | ||||
12-Month Rolling Return on Equity | 6.8 | % | 6.6 | % | ||||
(1) | Adjusted to include 42 percent of Conrail obligations. |
(2) | Adjusted to include off-balance sheet financing, leases, and 42 percent of Conrail obligations. |
OTHER INCOME (EXPENSE)(1)(Unaudited)
(Dollars in Millions)
Quarters Ended | Six Months Ended | |||||||||||||||
June 27, 2003 | June 28, 2002 | June 27, 2003 | June 28, 2002 | |||||||||||||
Interest Income | $ | 4 | $ | 8 | $ | 8 | $ | 15 | ||||||||
Income from Real Estate and Resort Operations | 32 | 11 | 33 | 43 | ||||||||||||
Discounts on Sales of Accounts Receivable | (4 | ) | (7 | ) | (10 | ) | (14 | ) | ||||||||
Minority Interest | (9 | ) | (10 | ) | (20 | ) | (18 | ) | ||||||||
Miscellaneous | (4 | ) | 2 | (2 | ) | (13 | ) | |||||||||
Total | $ | 19 | $ | 4 | $ | 9 | $ | 13 | ||||||||
Gross Revenue from Real Estate and Resort Operations | ||||||||||||||||
Included in Other Income | $ | 75 | $ | 51 | $ | 110 | $ | 114 | ||||||||
(1) | Prior periods have been reclassified to conform to current presentation. |
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CSX Corporation and Subsidiaries | Quarterly Flash |
EBITDA (Unaudited)
(Dollars in Millions)
This computation of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) is presented because management believes it is a financial indicator used by investors and analysts to evaluate companies on the basis of operating performance. This is not considered to be better information than is available in the Company’s publicly available reports filed with the Securities and Exchange Commission and does not conform with generally accepted accounting principles. CSX owns a 42 percent undivided interest in Conrail Inc., and operates over a portion of the Conrail territory under the terms of an operating agreement. Conrail loans its excess cash to its owners under loan agreements at market interest rates. The calculation of EBITDA combines CSX and Conrail financial data for analytical purposes only and is not intended to suggest that CSX has control over Conrail’s operations.
CSX Consolidated | 42% of Conrail | Other(1) | Combined EBITDA | |||||||||||||||||||||||||||||
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||||||||||||
Quarters Ended June 27, 2003, and June 28, 2002 | ||||||||||||||||||||||||||||||||
Net Earnings (Loss) | $ | 127 | $ | 135 | $ | 16 | $ | 18 | $ | (16 | ) | $ | (18 | ) | $ | 127 | $ | 135 | ||||||||||||||
Depreciation and Amortization | 160 | 156 | 36 | 34 | 18 | 16 | 214 | 206 | ||||||||||||||||||||||||
Interest Income | (4 | ) | (8 | ) | (2 | ) | (3 | ) | 1 | 3 | (5 | ) | (8 | ) | ||||||||||||||||||
Discounts on Sales of Accounts Receivable | 4 | 7 | — | — | — | — | 4 | 7 | ||||||||||||||||||||||||
Interest Expense | 105 | 116 | 10 | 11 | (1 | ) | (3 | ) | 114 | 124 | ||||||||||||||||||||||
Income Tax Expense | 72 | 74 | 9 | 11 | (5 | ) | (3 | ) | 76 | 82 | ||||||||||||||||||||||
Combined EBITDA | $ | 464 | $ | 480 | $ | 69 | $ | 71 | $ | (3 | ) | $ | (5 | ) | $ | 530 | $ | 546 | ||||||||||||||
Six Months Ended June 27, 2003, and June 28, 2002 | ||||||||||||||||||||||||||||||||
Net Earnings (Loss) Before Cumulative | ||||||||||||||||||||||||||||||||
Effect of Accounting Change | $ | 169 | $ | 203 | $ | 32 | $ | 33 | $ | (32 | ) | $ | (33 | ) | $ | 169 | $ | 203 | ||||||||||||||
Depreciation and Amortization | 317 | 307 | 70 | 68 | 42 | 39 | 429 | 414 | ||||||||||||||||||||||||
Interest Income | (8 | ) | (15 | ) | (4 | ) | (5 | ) | 3 | 4 | (9 | ) | (16 | ) | ||||||||||||||||||
Discounts on Sales of Accounts Receivable | 10 | 14 | — | — | — | — | 10 | 14 | ||||||||||||||||||||||||
Interest Expense | 208 | 230 | 21 | 22 | (3 | ) | (4 | ) | 226 | 248 | ||||||||||||||||||||||
Income Tax Expense | 94 | 113 | 18 | 19 | (11 | ) | (9 | ) | 101 | 123 | ||||||||||||||||||||||
Combined EBITDA | $ | 790 | $ | 852 | $ | 137 | $ | 137 | $ | (1 | ) | $ | (3 | ) | $ | 926 | $ | 986 | ||||||||||||||
(1) | Other includes purchase price amortization, eliminations and reclassifications. |
EMPLOYEE COUNTS BY SEGMENT—ESTIMATED
2003 | 2002 | |||||||||||||
May | Feb. | Nov. | Aug. | May | Feb. | |||||||||
Surface Transportation | ||||||||||||||
Rail | 33,427 | 32,445 | 33,271 | 33,912 | 33,878 | 32,951 | ||||||||
Intermodal | 1,115 | 1,122 | 1,124 | 1,110 | 1,077 | 1,063 | ||||||||
Technology and Corporate | 858 | 884 | 900 | 912 | 896 | 878 | ||||||||
Total Surface Transportation | 35,400 | 34,451 | 35,295 | 35,934 | 35,851 | 34,892 | ||||||||
International Terminals | 1,013 | 1,035 | 1,238 | 1,242 | 1,264 | 1,275 | ||||||||
Other | 1,858 | 1,234 | 3,272 | 3,496 | 3,260 | 2,742 | ||||||||
Total | 38,271 | 36,720 | 39,805 | 40,672 | 40,375 | 38,909 | ||||||||
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