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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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, VA. 23219-4031
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (804) 782-1400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------------------- -----------------------------
Common Stock, $1 Par Value New York Stock Exchange
9 1/2% Sinking Fund Debentures,
Due 2016 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 ( )
On January 31, 1994, the aggregate market value of the Registrant's voting
stock held by nonaffiliates was $9.3 billion.
On January 31, 1994, there were 104,194,525 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Proxy Statement for the annual meeting of security holders on May 3, 1994,
for Part III (Items 11, 12 and 13) is incorporated by reference.
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CSX CORPORATION
EDGAR Index - Form 10-K Annual Report
Item No. Page & Note Reference
- -------- ---------------------
PART I
1. Business 4-7, 16-35 and Note 17 to
Consolidated Financial
Statements
2. Properties 4, 16-35 and Notes 7
and 10 to Consolidated
Financial Statements
3. Legal Proceedings Note 14 to Consolidated
Financial Statements
4. Not Applicable
PART II
5. Market for the Registrant's
Common Equity and Related
Stockholder Matters 77-82
6. Selected Financial Data 5-7
7. Management's Discussion and 17-36, and Notes 2, 3,
Analysis of Financial Condition 4, 6, 10, 13, 14,
and Results of Operations and 17 to Consolidated
Financial Statements
8. Financial Statements and
Supplementary Data
The response to this item is
submitted in Item 14.
9. Not Applicable
PART III
10. Directors and Executive Officers 72-76
of the Registrant
11. Executive Compensation (a)
12. Security Ownership of Certain (a)
Beneficial Owners and Management
13. Certain Relationships and Related (a)
Transactions
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CSX CORPORATION
EDGAR Index - Form 10-K Report
Item No. Page & Note Reference
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PART IV
14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K
a. Consolidated Statement of
Earnings for the Years Ended
December 31, 1993, 1992 and 1991 38
Consolidated Statement of
Cash Flows for the Years Ended
December 31, 1993, 1992 and 1991 39-40
Consolidated Statement of
Financial Position at
December 31, 1993, 1992 and 1991 41
Notes to Consolidated Financial
Statements for the Years Ended
December 31, 1993, 1992 and 1991 42-71
Report of Independent Auditors 37
Index to Exhibits E-1
b. Reports on Form 8-K
None.
(a) Items Number 11, 12 and 13 are incorporated by reference from the
registrant's 1994 Proxy Statement pursuant to instructions G(1) and
G(3) of the General Instructions to Form 10-K.
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THIS IS CSX
CSX Corporation (CSX) is a family of international transportation
companies offering a wide variety of rail, container-shipping, intermodal,
barging, trucking, contract logistics and related services worldwide, through
the business units described below.
Address: 901 E. Cary St., Richmond, VA 23219, (804) 782-1400
CSX Transportation Inc. (CSXT) provides rail transportation and
distribution services over 18,779 route miles and 32,844 track miles in 20
states in the East, Midwest and South; the District of Columbia; and Ontario,
Canada.
Address: 500 Water St., Jacksonville, FL 32202, (904) 359-3100
Sea-Land Service Inc. (Sea-Land) is a leader in container-shipping
transportation and related trade services worldwide. Sea-Land operates a fleet
of 83 container ships and more than 160,000 containers in U.S. and foreign
trade and serves 100 ports in 70 countries and territories.
Address: 150 Allen Rd., Liberty Corner, NJ 07938, (908) 558-6000
CSX Intermodal Inc. (CSXI) provides transcontinental intermodal
transportation services and operates a network of dedicated intermodal
terminals across North America. CSXI also offers truck drayage and chassis
management and leasing services.
Address: 200 International Circle, Hunt Valley, MD 21030, (410) 584-0100
American Commercial Lines Inc. (ACL) is a leader in barge
transportation, operating more than 120 towboats and 3,300 barges in both U.S.
and foreign waterways. Additionally, ACL operates marine construction
facilities, river terminals and communication services.
Address: 1701 E. Market St., Jeffersonville, IN 47130, (812) 288-0100
Customized Transportation Inc. (CTI) is a provider of dedicated
contract logistics services. The company provides an array of premium
distribution, warehousing, processing and assembly, dedicated contract
carriage and just-in-time delivery services.
Address: 10407 Centurion Parkway, North, Suite 400, Jacksonville,
FL 32256-0516, (904) 928-1400
Non-Transportation: Resort holdings include The Greenbrier in White
Sulphur Springs, W.Va., and the Grand Teton Lodge Company in Moran, Wyo. CSX
Real Property Inc. is responsible for sales, leasing and development of CSX-
owned properties no longer needed for operations.
CSX holds a majority interest in Yukon Pacific Corporation, which is
promoting construction of the Trans-Alaska Gas System to transport natural gas
from Alaska's North Slope to Valdez where the gas will be liquefied and
shipped to markets in Japan, Korea and Taiwan.
Address: 1049 W. 5th Ave., Anchorage, AK 99501, (907) 265-3180
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CSX CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Millions of Dollars, Except Per Share Amounts)
1993(b) 1992 1991(c) 1990 1989(d)
------- ------- ------- ------- -------
SUMMARY OF OPERATIONS
Operating Revenue $ 8,940 $ 8,734 $ 8,636 $ 8,205 $ 7,745
------- ------- ------- ------- -------
Operating Expense 7,934 7,769 7,782 7,337 6,876
Productivity/Restructuring
Charge (a) 93 699 755 53 ---
------- ------- ------- ------- -------
Total Operating Expense 8,027 8,468 8,537 7,390 6,876
------- ------- ------- ------- -------
Operating Income $ 913 $ 266 $ 99 $ 815 $ 869
======= ======= ======= ======= =======
Earnings (Loss) From
Continuing Operations $ 359 $ 20 $ (76) $ 365 $ 427
======= ======= ======= ======= =======
PER COMMON SHARE
Earnings (Loss) From
Continuing Operations $ 3.46 $ .19 $ (.75) $ 3.63 $ 4.09
======= ======= ======= ======= =======
Cash Dividends $ 1.58 $ 1.52 $ 1.43 $ 1.40 $ 1.28
======= ======= ======= ======= =======
Market Price - High $ 88.13 $ 73.63 $ 58.00 $ 38.13 $ 38.63
- Low $ 66.38 $ 54.50 $ 29.75 $ 26.00 $ 29.75
======= ======= ======= ======= =======
PERCENTAGE CHANGE FROM
PRIOR YEAR
Operating Revenue 2.4% 1.1% 5.3% 5.9% 2.0%
======= ======= ======= ======= =======
Operating Expense (5.2)% (.8)% 15.5% 7.5% (7.3)%
======= ======= ======= ======= =======
Operating Expense,
excluding Productivity/
Restructuring Charge 2.1% (.2)% 6.1% 6.7% 2.9%
======= ======= ======= ======= =======
Cash Dividends Per Common
Share 3.9% 6.3% 2.1% 9.4% 3.2%
======= ======= ======= ======= =======
SUMMARY OF FINANCIAL POSITION
Cash, Cash Equivalents and
Short-Term Investments $ 499 $ 530 $ 465 $ 609 $ 591
======= ======= ======= ======= =======
Working Capital (Deficit) $ (704) $ (859) $ (942) $ (578) $ (620)
======= ======= ======= ======= =======
Total Assets $13,420 $13,049 $12,798 $12,804 $12,298
======= ======= ======= ======= =======
Long-Term Debt $ 3,133 $ 3,245 $ 2,804 $ 3,025 $ 2,727
======= ======= ======= ======= =======
Shareholders' Equity (e) $ 3,180 $ 2,975 $ 3,182 $ 3,541 $ 3,397
======= ======= ======= ======= =======
Book Value Per Common
Share $ 30.53 $ 28.75 $ 31.08 $ 35.93 $ 33.24
======= ======= ======= ======= =======
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CSX CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS, CONTINUED
1993(b) 1992 1991(c) 1990 1989(d)
------- ------- ------- ------- -------
EMPLOYEE COUNT (f) (Continuing Operations)
Rail 29,216 30,916 33,239 35,672 37,685
Other 17,847 16,681 16,644 15,259 14,897
------- ------- ------- ------- -------
Total 47,063 47,597 49,883 50,931 52,582
======= ======= ======= ======= =======
See Notes 1, 2, and 4 to Consolidated Financial Statements.
(a) In 1993, the company recorded a $93 million pretax charge to
recognize the estimated costs of restructuring certain operations and
functions at its container-shipping unit. The restructuring charge
reduced net earnings by $61 million, 59 cents per share. In 1992,
the company recorded a charge to recognize the estimated costs of
buying out certain trip-based compensation elements paid to train
crews. The pretax charge amounted to $699 million and reduced net
earnings for 1992 by $450 million, $4.38 per share. In 1991, the
company recorded a charge to provide for the estimated costs of
implementing work-force reductions, improvements in productivity and
other cost reductions at its major transportation units. The pretax
charge amounted to $755 million and reduced 1991 net earnings by $490
million, $4.88 per share. In 1990, the company recorded a $53
million restructuring charge related to its container-shipping unit.
On an after-tax basis, the restructuring charge was $36 million, 37
cents per share.
(b) The company revised its estimated annual effective tax rate in 1993
to reflect the change in the federal statutory income tax rate from
34 to 35 percent. The effect of this change was to increase income
tax expense for 1993 by $56 million, 54 cents per share. Of this
amount, $51 million, 48 cents per share, related to applying the
newly enacted statutory income tax rates to deferred tax balances as
of January 1, 1993.
(c) During 1991, the company consummated the sale of a one-third interest
in Sea-Land Orient Terminals Ltd., the sale of the stock of RF&P
Corporation and other investment transactions. After taxes and
minority interest, the transactions resulted in a net gain of $32
million, 32 cents per share.
(d) During 1989, the company consummated the sales of its partnership
interest in LIGHTNET, and Rockresorts, Inc. and certain related
properties. Those sales resulted in an after-tax gain of $73
million, 73 cents per share.
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CSX CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS, CONTINUED
(e) During 1989, the company purchased 9.9 million shares of its common
stock, which had the effect of reducing shareholders' equity by $324
million. This completed the 60 million share purchase program, which
began in the prior year. The average price of all shares acquired
was $32.03.
(f) Employee count based on annual averages.
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To Our Shareholders:
Any sailor can navigate a calm sea. Just as turbulence helps define a
mariner's skills, adversity tests the competence and agility of a
corporation's management team. Though potentially destructive, adversity has
its benefits. It forces people -- and corporations -- to push themselves
harder, to try new approaches and to challenge the status quo.
Clearly, CSX faced serious difficulties in 1993, a year in which a
series of unforeseeable and unwelcome events sought to impede the company's
efforts to improve the performance of its core transportation businesses. But
it also was a splendid year for the company, because the men and women of CSX
met the myriad challenges that arose. Not only did we remain on course toward
meeting our long-term objectives, we emerged stronger, wiser and better able
to handle whatever problems or opportunities the future may bring.
While CSX's 1993 earnings were below our expectations, the company's
overall operating performance was remarkable, particularly in light of the
unusual circumstances we faced. This ability to produce solid results during
demanding times reflects the fundamental improvements each of our business
units has made in recent years, and it bodes well for CSX's future
performance.
Overcoming Adversity
The difficulties that CSX confronted in 1993 were widespread. A
protracted strike by the United Mine Workers of America (UMWA) and weak
foreign demand for export coal dealt punishing blows to our rail and barge
units. Weak economies abroad hurt U.S. exports and reduced our
container-shipping unit's volumes in key trade lanes. Even Mother Nature added
to our trials, as a severe winter storm in March virtually shut down our
railroad for several days, and catastrophic flooding throughout the spring and
summer in the Midwest caused severe disruptions for our barge unit and, to a
lesser extent, our intermodal unit.
Facing such calamitous external conditions, it would have been easy
to pursue short-term performance goals at the expense of our overriding
long-term objective of improving the strength and fundamental earning power of
the company. Instead, each CSX business unit moved quickly to limit the impact
of adverse conditions on its business while maintaining its focus on
developing stronger, more competitive operations for the long term.
Strong Results
CSX delivered solid financial results in 1993. Total revenue rose
$206 million from 1992's level to $8.94 billion. Excluding a restructuring
charge at our container-shipping unit, operating income exceeded $1 billion
for the first time.
Earnings per share were $4.53, down 4 cents from 1992's level, after
excluding charges from both years and the 1993 impact of applying an increase
in the corporate tax rate. Despite increasing the quarterly dividend by 16
percent and making $293 million in productivity improvement payments that will
enhance future earnings, the company generated $238 million of free cash flow.
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Pro Forma Net Earnings
---------------------------------------------
(Millions of Dollars, Except Per Share Amounts)
1993 1992
----------------- -----------------
Description (All After Tax) Amount Per Share Amount Per Share
--------------------------- ------ --------- ------ ---------
Net Earnings as Reported $359 $3.46 $ 20 $ .19
Statutory Tax Rate Adjustment 51 .48 --- ---
Restructuring/Productivity Charge 61 .59 450 4.38
---- ----- ---- -----
Pro Forma Total, Excluding Charges
and Tax Rate Adjustment $471 $4.53 $470 $4.57
==== ===== ==== =====
CSX closed the year on a positive note by posting record operating
income in the fourth quarter. The strong results were driven by exceptional
performances at each of the company's units, which together offset a 17
percent decline in coal originations by our rail unit during the quarter. UMWA
strikes against selected eastern coal producers ran for 238 days during 1993
and affected nearly 25 percent of the coal traffic handled by our rail unit in
the prior year. With the work stoppages having ended December 15, we expect
domestic coal traffic to return to more normal levels in 1994.
The stock market continued to recognize the progress CSX is making
toward building a better company. For the third consecutive year, the total
return of CSX stock outpaced the S&P 500 Stock Index and other key market
barometers. In 1993 alone, $1.5 billion in additional value was created for
our shareholders, in the form of dividends and share price appreciation.
The favorable performance of CSX stock relative to other
transportation stocks and the overall market reflects Wall Street's
recognition of the progress the company has made in recent years, as well as
expectations for further gains in 1994 and beyond. Our goal is to meet and
exceed those expectations by continuing to master the basics of our business.
We are committed to enhancing shareholder value over the long term by
improving the fundamental earning power of CSX and increasing free cash flow.
We are pleased to report that CSX crossed a critical threshold in
1993 on the path to increased shareholder value: The corporation earned its
cost of capital on a consolidated basis for the first time. Achieving this
long-time goal is a major milestone for CSX, one we intend to build upon in
1994 and beyond.
Creating Value
We strongly endorse the management concept known as "economic value
added," or EVA, which is rapidly gaining favor among leading corporations. In
basic terms, EVA holds that corporations create wealth only when they generate
returns above their cost of capital. EVA provides a formula for measuring an
operation's real profitability -- one that holds managers accountable for
specific financial results.
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Since our major restructuring in 1988, CSX has measured the financial
performance of each of its business enterprises by comparing that unit's
return on invested capital (ROIC) with CSX's cost of capital. ROIC is the
measure CSX uses to determine how effectively we are deploying our investors'
capital in an operating activity -- whether it employs locomotives, freight
cars, vessels, barges, containers, facilities, working capital, or any other
asset. In basic terms, we calculate ROIC by dividing operating profit, after
the payment of cash taxes, by total invested capital. When the ROIC of a CSX
business unit or specific activity exceeds the corporation's overall cost of
capital, EVA is enhanced.
Our focus on generating returns in excess of the cost of capital has
produced impressive results throughout the company. By calculating what
capital costs the company, our management team is better able to evaluate the
performance of specific operations and to determine the financial targets that
must be reached. This discipline forces us to manage assets as efficiently as
possible and deploy capital where it will generate the best returns. Over
time, the additional value created within CSX will be reflected in the
financial markets, thus creating wealth for our shareholders.
Managing More Effectively
This focus on EVA has spread throughout CSX. It is EVA that has
spearheaded many of our successful efforts to improve the long-term
profitability of the company -- by cutting costs, utilizing assets more
productively, conserving capital and growing our business prudently.
Possibly the clearest example of how EVA has worked for CSX is the
dramatic turnaround in the profitability of our intermodal business, which
combines rail and truck operations. Six years ago when we closely evaluated
this business, we discovered it was losing nearly $50 million a year -- thus
eroding shareholder value.
To remedy the situation, CSX formed a strategic business unit -- CSX
Intermodal Inc. (CSXI) -- to manage our intermodal operations. In its first
year, CSXI retrenched to its core business by closing 14 terminals, releasing
more than 75 locomotives for other rail service and shedding nearly $100
million in revenue from money-losing operations.
Over the next five years, CSXI grew rapidly by concentrating on its
profitable niches, deploying its assets more productively and developing new
business opportunities. In 1993, CSXI earned operating income of $53 million
and produced a return on its capital investment well above CSX's cost of
capital.
Attacking Unnecessary Costs
The same management strategies that transformed our inefficient
intermodal business into a flourishing enterprise are producing positive
results throughout CSX. The most impressive results so far have come from our
aggressive campaign to reduce the cost base of our businesses by driving out
unnecessary expenses.
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Our rail unit, CSX Transportation Inc. (CSXT), has led the assault on
costs through its Performance Improvement Team (PIT) initiative begun in 1992.
Benchmarking the railroad's performance against that of its peers' best
practices, CSXT identified performance gaps and established action teams to
close them. The PIT process has produced permanent cost savings of $263
million since 1992, and CSXT has targeted well over $100 million in savings
for 1994.
Last year, the PIT process spread to Sea-Land Service Inc.
(Sea-Land), our container-shipping unit. Sea-Land expects its performance
teams to help the company capture cost reductions and productivity savings in
excess of $100 million this year. That will be on top of the $262 million in
savings Sea-Land has achieved during the past two years.
Our barge unit, American Commercial Lines Inc. (ACL), also has teams
hard at work refining the company's work processes and operational
efficiencies following recent acquisitions. Last year, ACL initiated a major
effort to re-engineer work processes to maintain its position as the carrier
of choice on the U.S. inland waterway system. ACL has achieved productivity
improvements of $28 million since 1992, including greater asset utilization
and significant reductions in general and administrative costs.
Reducing costs, however, is just one component of CSX's campaign to
enhance the fundamental value of the company. Each of our business units is
committed to working smarter in every way -- both individually and in close
cooperation with other CSX units -- to improve safety, productivity,
competitiveness and profitability. That commitment has become ingrained in the
culture of CSX.
Growth Opportunities
While we expect additional cost reductions to have the greatest
impact on the company's operating income over the next few years, we also see
significant growth opportunities ahead. In fact, each of our transportation
companies currently expects to produce higher revenue during 1994.
The railroad's merchandise traffic should remain relatively strong,
and coal carloadings are expected to return to more normal levels this year.
CSXI should achieve record revenue and operating income. Sea-Land will expand
its market share in major trade lanes, in strategic commodity groups and among
key multinational customers. Customized Transportation Inc. (CTI) -- a leading
provider of dedicated contract logistics services and the newest member of the
CSX family of transportation companies -- will continue to grow rapidly by
expanding its service to the U.S. automotive industry and branching out into
new markets. And ACL will continue to augment its main revenue sources -- coal
and grain -- by increasing its handling of higher-margin commodities, such as
liquids and chemicals.
We are excited about the numerous opportunities we see flowing from
the expansion of international trade. Sea-Land, because of its strength as a
full-service provider of global transportation services, is especially
well-positioned to pursue attractive returns and strong growth in developing
markets -- particularly China, Southeast Asia, South America and Eastern
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Europe. CSXT, which serves more ocean ports than any other U.S. railroad, will
benefit from increased trade between America and the rest of the world, as
will our intermodal company. And ACL is testing foreign waters with a new
barging venture in Venezuela.
Global Transportation
When we compare CSX with other freight transportation systems, we
take great pride in the breadth of our expertise and in the fact that we
already have a strong international base. These attributes give us a unique
opportunity to take advantage of the growing globalization of trade and
transportation services.
All of our units -- but particularly Sea-Land and ACL -- should
benefit from the recent conclusion of negotiations under the General Agreement
on Tariffs and Trade, which is expected to increase trade between the United
States and Europe in both merchandise and agricultural products. Likewise, our
units should benefit from implementation of the North American Free Trade Act.
We are especially optimistic about plans to gain direct access to the
burgeoning Mexican market with a rail-marine link between the U.S. Gulf Coast
and some of Mexico's largest markets. Under this scenario, CSXT rail cars
would be rolled aboard custom-designed vessels for delivery to the Mexican
Gulf Coast, where the cars would be transferred to the Mexican national
railroad. Several CSX units have joined forces to produce an action plan that
we expect to begin implementing late this year.
Investing in the Future
CSXT will make a major investment in the reliability and efficiency
of its locomotive fleet beginning this year. Over the next four years, CSXT
will purchase 300 highly efficient locomotives, including 250
alternating-current (AC) locomotives, 53 of which will be powered by
6,000-horsepower engines. Each of the new locomotives is expected to replace
approximately two older models, resulting in lower maintenance costs,
increased fuel efficiency and greater service reliability.
Crew-reduction and work-rule agreements implemented over the past few
years also will contribute to the enhanced efficiency of our railroad in the
years ahead. As a result of agreements negotiated in 1993 and similar ones
implemented over the past several years, CSXT now can operate through-freight
trains with only a conductor and engineer on virtually its entire system.
Efforts to implement these agreements in local and yard service are well under
way. These new crew-consist agreements, together with more flexible work rules
and other productivity improvements, are strengthening the competitiveness of
our railroad -- and the rail industry as a whole.
Our ocean-shipping unit is moving to improve its competitiveness by
investing $250 million over the next three years to enhance its fleet.
Sea-Land will acquire four high-performance, fuel-efficient container ships.
When delivered in the second half of 1995 and early 1996, the new vessels will
replace higher-cost capacity in the competitive trans-Pacific trade. The
company also will modify three existing Atlantic Class vessels to increase
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their service speed, allowing the ships to be deployed in any of several key
trade lanes. This program will enable Sea-Land to replace higher-cost assets,
improve efficiency and enhance customer service.
Another way CSX is preparing for the future is by investing in the
people who serve this company. The CSX Way, the framework for shaping our
corporate culture that we unveiled in 1991, recognizes that the ultimate
success of the company will be determined by its employees. With that in mind,
we began a concerted effort last year to foster and develop the
professionalism of our work force. These employee training and development
programs promote the highest standards of professionalism and ethical conduct,
both at senior levels of management and throughout the organization.
Public policy issues
As always, CSX's fortunes will be affected by external factors in
1994, not the least of which will be issues of public policy and regulation.
Increasing rail passenger service offers significant opportunities
for our nation. However, renewed interest in the use of our railroad's
existing rights of way by commuter and high-speed intercity passenger services
raises serious issues. First, our railroad must be fairly compensated for the
use of its tracks. Liability protection also must be provided. And, finally,
there is the issue of passenger or commuter service limiting our ability to
adequately serve freight customers.
We must not sacrifice the quality of our freight system. We are
actively negotiating with local commuter authorities on the number of trains
allowed to use our rights of way and the adequate level of compensation, and
we hope for a fair outcome for all parties. The reality is that our tracks
have limited capacity. The preferred solution will be to build new tracks for
passengers within existing rail rights of way.
Like most U.S. companies, we are closely studying the Clinton
Administration's health-care proposals. CSX provides generous benefits to its
employees worldwide and last year spent more than $300 million on health care.
With more than 40,000 employees in the United States alone, CSX clearly has a
large stake in the outcome of this debate.
We also are alert to possible efforts to increase the tax burden on
corporations. The retroactive increase in the statutory corporate tax rate
from 34 to 35 percent last year hurt the competitiveness of American
businesses and reduced CSX earnings significantly. We believe that requiring
corporations to pay higher income taxes is a mistake. In reality, it is
shareholders, customers and employees who bear the brunt of higher corporate
taxes. Moreover, corporate taxes drain funds that would otherwise be available
for investment in productive assets.
While we were disappointed to see higher corporate taxes enacted last
year, we were relieved to see the demise of various proposals to assess severe
taxes on energy consumption. Taxing the carbon or BTU content of energy would
have placed an unreasonable burden on coal, a key commodity of our rail and
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PAGE 14
barge units and an important source of energy for many CSX customers. We will
continue to oppose government policies that favor certain fuel sources to the
disadvantage of others.
Another proposed tax that was firmly rejected by Congress was the
unwise proposal to place a $1-per-gallon user fee on fuel used by barge
operators on the inland waterways. This would have been a more than fivefold
increase in the already substantial fuel taxes paid by the barge industry.
Maritime Reform Progress
One positive development on the political front was the progress made
toward enactment of maritime policy reform, which culminated in the House of
Representatives overwhelmingly approving the Maritime Security and
Competitiveness Act. This is a major step toward revitalizing the U.S.
Merchant Marine. We are encouraged that the Clinton Administration supports
maritime reform and has earmarked funding for it in its fiscal 1995 budget
proposal.
We are diligently working with other carriers and our unions to
ensure that maritime policy reform becomes a reality in 1994. However, one way
or another, we intend to overcome the competitive disadvantages of being a
U.S.-flag operator. If significant reform is not enacted in 1994, we expect
the U.S. government to approve our request to transfer a number of container
ships to foreign registry, thus enabling Sea-Land to compete on more equal
terms with heavily subsidized, foreign-flag competitors.
We can't accurately predict the outcome of public policy issues or
the impact economic and political developments may have on our business. But
we will continue to move swiftly to limit the adverse consequences of
unwelcome events beyond our control and to seize opportunities as they arise.
Building on Our Strengths
In 1994, CSX will build on its strengths, while continuing to
identify and correct weaknesses. Our business units will benchmark specific
operations and functions against the best of their peers, both within and
outside the transportation industry. As we identify and develop best business
practices, we will spread them throughout our organization.
Already, CSX is reaping the rewards of increased cooperation among
its business units. Our companies are working closely together, sharing
intelligence and economies of scale, and cooperating across a wide spectrum of
activities -- including purchasing, safety, quality, technology, marketing and
operations. By leveraging the strengths of our vast network of transportation
companies, we are creating value for our shareholders.
Improving the performance of our individual units continues to be our
foremost objective. Beyond that, however, we intend to demonstrate that the
true value of CSX is greater than the sum of its parts.
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PAGE 15
Long-term Outlook
Our units, having made enormous strides in recent years improving
virtually every aspect of their performance, are now poised to use these
achievements as a springboard to further progress. We believe CSX has an
opportunity to create an organization that stands among the best, not only
within the transportation industry, but among all corporations worldwide. We
are excited about the future and eager to demonstrate the improving earning
power of CSX.
No matter what 1994 brings -- and it would be hard to imagine
circumstances as adverse as those we faced in 1993 -- we intend to deliver
solid results. We have high aspirations and are setting new standards for
performance excellence. And in so doing, we are laying the foundation for a
bright future for our employees, customers and shareholders.
Sincerely,
/s/ JOHN W. SNOW
- ----------------
John W. Snow
Chairman and Chief Executive Officer
- 15 -
PAGE 16
CSX CORPORATION AND SUBSIDIARIES
FINANCIAL SECTION
A Message to Shareholders on CSX's Financial Principles
The management of CSX Corporation is dedicated to reporting the
company's financial condition and results of operations in an accurate, timely
and conservative manner in order to give shareholders all the information they
need to make decisions about investment in the company. CSX management also
strives to present to shareholders a clear picture of the company's financial
objectives and the principles that guide its employees in achieving those
goals.
In this section, financial information is presented to assist you in
understanding the sources of earnings and financial resources of the company
and the contributions of the major business units. In addition, certain
information needed to meet the Securities and Exchange Commission's Form 10-K
requirements has been included in the Notes to Consolidated Financial
Statements.
The key objective of CSX is to increase shareholder value by
improving the return on capital invested in its businesses and maximizing free
cash flow. The company defines "free cash flow" as the amount of cash
available for debt service and other purposes generated by operating
activities after deducting capital expenditures, present value of new leases
and cash dividends.
To achieve these goals, managers utilize the following guidelines in
conducting the financial activities of the company:
Capital expenditures -- CSX business units are expected to earn returns on
capital expenditures in excess of the CSX cost of capital, unless such
expenditures are necessary to meet safety, environmental or other regulatory
requirements. Business units that do not earn above the CSX cost of capital
and do not generate an adequate level of free cash flow over an appropriate
period of time will be evaluated for sale or other disposition.
Taxes -- CSX will pursue all available opportunities to pay the lowest
possible federal, state and foreign taxes, consistent with applicable laws and
regulations and the company's obligation to carry a fair share of the cost of
government. CSX also works through the legislative process to keep effective
tax rates as low as possible.
Debt ratings -- The company will strive to maintain its investment grade debt
ratings, which allow cost-effective access to major financial markets
worldwide. The company will manage its financial condition in a manner
consistent with meeting this objective, including its debt levels and the
amount of fixed charges it incurs.
Dividends -- Every quarter, the cash dividend will be reviewed in light of the
current rate of inflation and competitive dividend yields. The dividend may be
increased periodically if cash flow projections show the higher payout level
could be adequately maintained.
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PAGE 17
Management's Responsibility for Financial Reporting
The consolidated financial statements of CSX Corporation have been
prepared by management, which is responsible for their content and accuracy.
The statements present the results of operations, cash flows and financial
position of the company in conformity with generally accepted accounting
principles and, accordingly, include amounts based on management's judgments
and estimates.
CSX and its subsidiaries have established and maintain an internal
control structure designed to provide reasonable assurance that assets are
safeguarded and that transactions are properly authorized by management and
recorded in conformance with generally accepted accounting principles. This
structure includes accounting controls, written policies and procedures and a
code of corporate conduct that stresses the highest ethical standards and is
routinely communicated to all employees. This structure also includes an
internal audit staff to monitor the compliance with and effectiveness of
established policies and procedures.
The Audit Committee of the board of directors, which is composed
solely of outside directors, meets periodically with management, internal
auditors and the independent auditors to review audit findings, adherence to
corporate policies and other financial matters.
The firm of Ernst & Young, Independent Auditors, has been engaged to
audit and report on the company's consolidated financial statements. Its audit
was conducted in accordance with generally accepted auditing standards and
included a review of internal accounting controls to the extent deemed
necessary for the purpose of its report, which appears on page 37.
ANALYSIS OF OPERATIONS
CSX is a worldwide freight transportation company with autonomous
units providing rail, intermodal, ocean container-shipping, barging and
trucking services. In addition, these units offer a range of related services,
including warehousing, distribution, logistics management and inland marine
construction and repair.
Each unit of CSX is charged with earning a return on invested capital
greater than the corporate cost of capital and generating free cash flow and
operating income that meet annual targets set in conjunction with corporate
goals. Consistent with these unit objectives, CSX has as its foremost goal the
creation of shareholder value.
While each CSX unit faced challenges during 1993 and will meet new
hurdles in 1994 and beyond, the company is committed to achieving the goals
set forth above. During 1993, CSX made significant progress in reducing
costs, increasing productivity and improving customer service -- progress that
translated into increased market value for CSX shareholders.
CSX Transportation Inc. (CSXT), the rail unit, serves all major
industrial and consumer markets east of the Mississippi River, with the
exception of New England, and more ocean ports than any other U.S. railroad.
CSXT accounted for 49% of CSX's 1993 total operating revenue and 74% of total
- 17 -
PAGE 18
operating income. These percentages and those of the other units exclude the
effect of a restructuring charge recorded at the container-shipping unit.
Sea-Land Service Inc. (Sea-Land), is the largest U.S.-flag
container-shipping company and the only U.S. carrier serving all major ocean
trade lanes. Sea-Land contributed 36% of overall operating revenue and 19% of
operating income.
CSX Intermodal Inc. (CSXI), the nation's only full-service,
coast-to-coast intermodal transportation company, offers a wide variety of
services to domestic and international shippers through its North American
network of dedicated terminals. In 1993, CSXI provided 9% of total operating
revenue and 5% of total operating income.
American Commercial Lines Inc. (ACL), provides barge and other marine
services, primarily along the U.S. inland waterway system. It generated 5% of
CSX's operating revenue and 4% of overall operating income.
Customized Transportation Inc. (CTI), CSX's newest business unit,
supplies contract logistics services, including just-in-time deliveries. CTI
provided 2% of total operating revenue and 1% of operating income. The
financial results of CTI are included in other transportation operations and
interunit eliminations. (See Table 1.)
The consolidated statements of earnings, cash flows and financial
position presented on pages 38-41 reflect the combined performance of the
company's business units.
Discussion of Earnings
Consolidated operating revenue for 1993 was $8.9 billion, 2% higher
than in 1992 and 4% above 1991's level. The higher 1993 revenue resulted from
greater volumes handled by the container-shipping and intermodal units. These
gains, attributable to expanded service and improved market share, were
sufficient to overcome lower revenue at other units. Rail revenue suffered
from a decline in the export coal market, as well as from the effects of a
238-day strike against selected eastern coal operators. These events depressed
shipments of the largest commodity moved by CSXT. Barging revenue also
declined significantly on a year-to-year basis as disastrous flooding along
the upper Mississippi River and its tributaries halted most barge traffic
along the inland waterway system for 89 days during the summer. ACL also felt
the impact of weakened coal exports and the coal strike.
Compared with 1991, all units generated higher revenue in 1993,
primarily due to volume gains. Driving the increases were an improved level of
economic activity, expanded service and market share gains. In addition, the
barge unit's revenue benefited from the 1992 acquisition of the Valley Line
Companies' barges.
Consolidated operating expense was $8 billion in 1993, including
Sea-Land's $93 million pretax restructuring charge. Operating expense was $8.5
billion for both 1992 and 1991. The decrease in 1993's operating expense was
due to a lower charge and also reflected significant cost improvement
strategies employed at all units. Operating expense in 1992 included a $699
million pretax productivity charge, and 1991's operating expense included a
- 18 -
PAGE 19
pretax productivity charge of $755 million. Both of these charges related
primarily to train-crew reductions at the rail unit.
Excluding the restructuring and productivity charges from all three
years, 1993 operating expense would have been $7.9 billion, up slightly from
$7.8 billion in 1992 and 1991.
Consolidated operating income for 1993 was $913 million. This
represents a significant increase over both 1992 and 1991 levels, due to the
large productivity charges recorded in these years. Excluding the productivity
and restructuring charges from all years, operating income increased 4% from
1992 and 18% from 1991.
Other income totaled $18 million, compared with $3 million in 1992
and $94 million in 1991. Other income for 1993 included an increase in the
gain recognized on the installment sale of track in South Florida. Other
income for 1991 included one-time gains on the sales of RF&P Corporation stock
and an interest in Sea-Land Orient Terminals Ltd.
Interest expense increased $22 million from 1992's level, but
decreased $8 million compared with 1991. The increase from 1992 is due largely
to higher levels of short-term commercial paper issued by the company to
provide cash reserves in the event of a disruptive and prolonged coal strike.
This higher level of interest expense was partially offset by earnings on the
company's cash reserves.
Net earnings totaled $359 million, $3.46 per share, compared with $20
million, 19 cents per share in 1992, and a loss of $76 million, 75 cents per
share in 1991, before a change in accounting.
Net earnings for 1993 included the effect of the $93 million pretax
restructuring charge posted in the first quarter to recognize the expense
associated with reorganizing and downsizing the European and North American
operations of Sea-Land. After taxes, this charge was $61 million, 59 cents per
share. Additionally, CSX recognized $51 million, 48 cents per share of income
tax expense related to applying the newly enacted statutory income tax rate to
deferred tax balances as of January 1, 1993.
Earnings for 1991 included a charge to provide for the estimated
costs of implementing work-force reductions, improvements in productivity and
other cost reductions at the major transportation units. The charge amounted
to $755 million on a pretax basis and reduced 1991 net earnings by $490
million, $4.88 per share. Earnings for 1992 included a charge principally to
recognize the estimated additional costs of buying out certain trip-based
compensation elements paid to train crews. The additional pretax charge
amounted to $699 million and reduced net earnings for 1992 by $450 million,
$4.38 per share.
Excluding the Sea-Land restructuring charge and the effect of the
corporate tax rate change, earnings for 1993 would have been $471 million,
$4.53 per share. These adjusted results were 4 cents per share lower than
1992's level of $470 million, $4.57 per share, and 72 cents per share above
1991's $382 million, $3.81 per share, on a like basis.
- 19 -
PAGE 20
Discussion of Cash Flows
For 1993, cash provided by operating activities, together with
proceeds from disposition of properties, was adequate to fund property
additions and cash dividends.
Cash provided by operating activities totaled $962 million in 1993,
compared with $939 million in 1992 and $866 million in 1991. This amount
continued to be negatively impacted by payments related to the 1992 and 1991
productivity charges to implement two-member crew agreements on CSXT's rail
system.
During 1993, CSXT successfully concluded agreements providing for
two-member train crews on through-freight assignments across virtually its
entire rail system. These agreements, like those previously negotiated,
provided for the buyout of excess positions, productivity funds and short-crew
allowances.
To date, the company has paid $640 million related to its 1992 and
1991 productivity charges, largely due to the implementation of these
agreements. CSX estimates cumulative savings of approximately $60 million to
$70 million in 1992 and 1993 as a result of its reduced crew sizes. Payments
also were made in conjunction with implementation of Sea-Land's European and
North American restructuring activities as well as other CSXT severance
programs.
With completion of two-member crew negotiations and payments made to
date, CSX anticipates a significant decrease in future cash payments made from
productivity and restructuring reserves. These payments are expected to be
between $100 million and $125 million in 1994 and under $100 million annually
after 1994.
Property additions totaled $768 million for the year. This compares
with additions of $1 billion in 1992, which included $137 million for
acquisition of the assets of the Valley Line companies, and $864 million in
1991. This reduced level of capital spending reflects CSX's success in
rationing capital and utilizing assets wisely.
Additional capital was committed in the form of new and renewed
operating leases. The present value of future payments on these equipment and
facility leases totaled $108 million in 1993, for total new capital investment
of $876 million in 1993. This compares with totals of $1 billion and $881
million in 1992 and 1991, respectively.
CSX's cash dividends per common share rose 4% from 1992's level and
10% above 1991's level, to $l.58, compared with $1.52 and $1.43 for 1992 and
1991, respectively. This resulted from the 16% increase in the quarterly
dividend beginning with the fourth quarter of 1993. The number of CSX shares
outstanding rose slightly, to 104 million, as a result of stock issued under
the provisions of incentive and benefit plans and the dividend reinvestment
plan available to shareholders.
CSX anticipates achieving cash flows from operations sufficient to
meet future operating and capital needs, cash dividends and anticipated labor
buyout and restructuring payments.
- 20 -
PAGE 21
The company also expects that it will continue its successful record
of extracting significant cash value from disposition or lease of rights of
way, real estate and non-core asset holdings. CSX expects to have access to
financial markets, as necessary, to fund operating, working capital and other
requirements.
Discussion of Financial Position
Cash, cash equivalents and short-term investments totaled $499
million at December 31, 1993, compared with $530 million at year-end 1992, and
$465 million at year-end 1991.
CSX adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," effective
January 1, 1994. Investments in short-term and long-term debt securities held
as of that date have been classified as "held to maturity."
The working capital deficit decreased by $155 million during 1993,
largely due to reclassification of current deferred income taxes. CSX had
year-end working capital deficits of $704 million in 1993, $859 million in
1992, and $942 million in 1991. A working capital deficit is not unusual for
CSX and does not indicate a lack of liquidity. CSX maintains adequate
resources to satisfy current liabilities when they are due and has sufficient
financial capacity to manage its day-to-day cash requirements.
Under Statement of Financial Accounting Standards No. 109, CSX
reclassified $108 million of its long-term deferred income tax balances to a
current account during 1993 to match the life of this deferred benefit with
the underlying components that gave rise to the deferred income taxes.
Environmental concerns have drawn considerable attention. CSX, like
many American companies today, faces the challenge of dealing with this issue
and is addressing its environmental responsibilities and managing the related
expenditures. Environmental management is an important part of CSX's strategic
planning, which includes promotion of policies and procedures that emphasize
environmental awareness throughout the company.
CSX has established formal environmental departments at each
operating unit to monitor operations. As a result, there is an active focus on
finding the most efficient, cost-effective solutions for dealing responsibly
with waste materials generated from past and present business operations.
These solutions range from simple recycling and cleanup efforts to high-tech
remediation initiatives.
CSX has systematically examined the products it uses in daily
processes and has avoided the use of toxic chemicals or substituted more
benign products to the greatest extent possible. The company also has
large-scale office waste recycling programs in place at each of its units.
Total expenditures associated with protecting the environment and
remedial environmental cleanup efforts amounted to $42 million in 1993. This
compares with $27 million in 1992 and $30 million in 1991.
Future levels of environmental costs and capital spending are
difficult to estimate since they depend upon a number of variables.
- 21 -
PAGE 22
These include evolving legal requirements, technologies, insurance coverage,
responsibility and credit worthiness of other parties and assessment of the
remediation required at sites.
CSX continues to assess its responsibility at environmentally
sensitive locations. The company periodically reviews its environmental
reserves as new developments arise and determines whether adjustments are
needed. Based upon information currently available, the company believes that
such reserves are adequate to meet remedial actions to comply with present
laws and regulations. However, there can be no assurance that, as new facts
become available or as new environmentally sensitive locations are identified,
additional liabilities and related settlements would not be significant to
future consolidated results of operations and cash flows.
CSX's debt-to-total-capital ratio was 49.2% at year-end 1993,
compared with 51.7% for 1992 and 46.5% for 1991. The company anticipates using
excess cash to reduce debt over the next few years.
Consistent with this objective, long-term debt decreased to $3.1
billion in 1993 from $3.2 billion in 1992. This level compares with $2.8
billion in 1991. The company issued additional debt in 1992 to finance
productivity payments and property acquisitions.
RESOURCES AVAILABLE DECEMBER 31, 1993
-------------------------------------
(Millions of Dollars)
-------------------
Cash, Cash Equivalents and Short-Term Investments $ 499
Total Credit Lines Available 880
Outstanding Borrowings:
Bank Lines ---
Commercial Paper (464)
-----
Total Liquidity $ 915
=====
Working Capital (Deficit) $(704)
=====
- 22 -
PAGE 23
Rail Assets
(Owned and leased as of December 31, 1993)
Freight Cars
Boxcars 15,012
Open-top hoppers 35,928
Covered hoppers 18,808
Gondolas 20,604
Other cars 14,784
-------
Total 105,136
-------
Locomotives 2,810
Track
Route miles 18,779
Track miles 32,844
Rail Results
CSXT met the challenges of a prolonged U.S. coal strike and sharp
decline in its export coal markets in 1993 by continuing to lower the cost of
its operations while increasing its focus on merchandise markets. This dual
emphasis allowed the unit to earn operating income of $746 million, $6 million
above 1992's comparable $740 million, despite a significant decline in coal
volumes. Operating income rose 21% compared with 1991 earnings of $617 million
on a like basis. These comparisons exclude net productivity charges of $619
million and $647 million in 1992 and 1991, respectively, associated with labor
reductions. Including these charges, the rail unit recorded operating income
of $121 million in 1992 and an operating loss of $30 million in 1991.
Operating revenue was $4.38 billion, a 1% decline from $4.43 billion
a year earlier, but a slight increase from 1991's revenue of $4.37 billion.
The decrease in 1993 was caused by a 13% decline in coal revenue, the largest
source of CSXT revenue. Coal revenue also was 13% lower than 1991's level.
Total coal originated by CSXT was 144.1 million tons in 1993, 11% and 13%
below levels originated in 1992 and 1991, respectively.
Weakened demand for U.S. coal from the European Community nations and
Japan, due to lower levels of economic growth, continued government subsidies
and intensified foreign competition, caused CSXT's export coal shipments to
decline significantly from the prior two years. In addition, both domestic and
export shipments were negatively affected by selective coal strikes against
eastern coal operators, which diminished shipments during nine months of 1993.
While CSXT anticipates only a slight recovery in the export coal market, the
company does expect notably higher carloadings of coal to utilities since the
strikes ended in December 1993.
Rail merchandise volume and revenue jumped 4% and 5% from 1992's
levels and 6% and 9% from 1991's results, respectively, to 2.6 million
carloads and $2.9 billion in revenue. The gains reflected expansion in the
domestic economy and improved conditions in key industries served by CSXT.
- 23 -
PAGE 24
With U.S. auto producers enjoying large gains in market share and
increased demand from consumers, CSXT's automotive traffic led the growth in
merchandise carloadings and revenue. CSXT also recorded large gains in metals,
due to surging scrap demand from U.S. mini-mill steel producers. Minerals
traffic advanced due to renewed activity in construction and highway projects.
CSXT's agriculture volumes and revenues moved well beyond prior-year levels,
benefiting from export of 1992's bumper grain crop through late summer and
continued expansion in the southeastern poultry and feed grain businesses
throughout the year. The strengthening economy and higher level of auto
production contributed to a sizeable increase in chemical traffic.
With foreign demand for U.S.-mined phosphates remaining depressed,
phosphate and fertilizer carloadings declined further. The forest products
market also was off slightly from 1992 and 1991 levels as a result of excess
paper production during 1992.
CSXT anticipates modest improvement in merchandise traffic volume and
revenue for 1994, reflecting continued expansion of the U.S. economy. Also,
while no marked improvement is forecast in export phosphate demand, increased
shipments of fertilizer products to the U.S. Midwest are expected as farmers
replenish fields following last year's flooding.
Rail operating expense was $3.6 billion, a decline of 2% from
comparable 1992 expense and 3% from 1991 expense, excluding the previously
mentioned productivity charges. Commitment to expense reduction and
productivity improvement, coupled with volume declines, led to the lower
expense level in 1993.
Labor expense continued to decline, to $1.8 billion, from a level of
$1.81 billion and $1.86 billion in 1992 and 1991, respectively, despite the
negative impact of a greater number of crew starts associated with moving a
larger proportion of merchandise traffic. The 1993 expense includes a 3% wage
increase awarded to most contract employees mid-year and also reflected a
decrease in employment levels due to implementation of two-member crews and
continued personnel reductions. A 4% wage increase is scheduled for mid-1994.
CSXT expects to continue to decrease the size of its work force over the next
few years.
CSXT estimated the average size of its train crews for through, local
and yard trains to be 2.7 members at year-end. The unit plans to lower its
average crew size for all trains to 2.3 over the next few years through
implementation of smaller yard and local crews as contemplated by the 1992 and
1991 productivity charges.
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PAGE 25
CSX CORPORATION AND SUBSIDIARIES
--------------------------------
(All Tables in Millions of Dollars)
Table 1. TRANSPORTATION OPERATING RESULTS
1993
----
Container Elim/
Total Rail Shipping Intermodal Barge Other
------ ------ --------- ---------- ------ -----
Operating Revenue $8,767 $4,380 $3,246 $ 793 $ 417 $ (69)
------ ------ ------ ----- ----- -----
Operating Expense
Labor and Fringe Benefits 2,922 1,797 822 81 107 115
Materials, Supplies and
Other (a) 2,144 891 814 108 175 156
Building and Equipment
Rents 1,048 369 573 64 19 23
Inland Transportation 721 --- 608 475 --- (362)
Depreciation 558 352 127 11 29 39
Fuel 413 225 109 1 42 36
Productivity/
Restructuring Charge 93 --- 93 --- --- ---
------ ------ ------ ----- ----- -----
Total 7,899 3,634 3,146 740 372 7
------ ------ ------ ----- ----- -----
Operating Income (Loss) $ 868 $ 746 $ 100 $ 53 $ 45 $ (76)
====== ====== ====== ===== ===== =====
Operating Income (Loss)(b) $ 961 $ 746 $ 193 $ 53 $ 45 $ (76)
====== ====== ====== ===== ===== =====
Operating Ratio(b) 83.0% 94.1% 93.3% 89.2%
====== ====== ===== =====
Average Employment 29,216 9,440 1,510 2,747
====== ====== ===== =====
Property Additions and
Present Value of New
Operating Leases $ 818 $ 576 $ 172 $ 50 $ 13 7
====== ====== ====== ===== ===== =====
- 25-
PAGE 26
1992
----
Container Elim/
Total Rail Shipping Intermodal Barge Other
------ ------ --------- ---------- ------ -----
Operating Revenue $8,550 $4,434 $3,148 $ 739 $ 443 $(214)
------ ------ ------ ----- ----- -----
Operating Expense
Labor and Fringe Benefits 2,853 1,814 795 70 114 60
Materials, Supplies and
Other (a) 2,147 939 789 110 174 135
Building and Equipment
Rents 1,029 374 576 54 25 ---
Inland Transportation 678 --- 605 454 --- (381)
Depreciation 513 332 117 11 23 30
Fuel 424 235 115 1 47 26
Productivity/
Restructuring Charge 681 619 17 45 --- ---
------ ------ ------ ----- ----- -----
Total 8,325 4,313 3,014 745 383 (130)
------ ------ ------ ----- ----- -----
Operating Income (Loss) $ 225 $ 121 $ 134 $ (6) $ 60 $ (84)
====== ====== ====== ===== ===== =====
Operating Income (Loss)(b) $ 906 $ 740 $ 151 $ 39 $ 60 $ (84)
====== ====== ====== ===== ===== =====
Operating Ratio(b) 83.3% 95.2% 94.7% 86.5%
====== ====== ===== =====
Average Employment 30,916 9,495 1,382 2,905
====== ====== ===== =====
Property Additions and
Present Value of New
Operating Leases $ 986 $ 570 $ 236 $ 28 $ 152
====== ====== ====== ===== =====
- 26-
PAGE 27
1991
----
Container Elim/
Total Rail Shipping Intermodal Barge Other
------ ------ --------- ---------- ------ -----
Operating Revenue $8,419 $4,373 $3,238 $ 686 $ 352 $(230)
------ ------ ------ ----- ----- -----
Operating Expense
Labor and Fringe Benefits 2,860 1,857 788 59 101 55
Materials, Supplies and
Other (a) 2,132 952 832 98 131 119
Building and Equipment
Rents 1,028 377 578 48 25 ---
Inland Transportation 697 --- 642 448 --- (393)
Depreciation 482 323 105 8 16 30
Fuel 444 247 127 1 44 25
Productivity/
Restructuring Charge 714 647 67 --- --- ---
------ ------ ------ ----- ----- -----
Total 8,357 4,403 3,139 662 317 (164)
------ ------ ------ ----- ----- -----
Operating Income (Loss) $ 62 $ (30) $ 99 $ 24 $ 35 $ (66)
====== ====== ====== ===== ===== =====
Operating Income (Loss)(b) $ 776 $ 617 $ 166 $ 24 $ 35 $ (66)
====== ====== ====== ===== ===== =====
Operating Ratio(b) 85.9% 94.9% 96.5% 90.1%
====== ====== ===== =====
Average Employment 33,239 9,284 1,192 2,694
====== ====== ===== =====
Property Additions and
Present Value of New
Operating Leases $ 829 $ 634 $ 141 $ 22 $ 32
====== ====== ====== ===== =====
(a) A portion of intercompany interest income received from the CSX
parent company has been classified as a reduction of materials,
supplies and other, by the container shipping unit. These amounts
were $64 million in 1993 and 1992 and $65 million in 1991,
respectively, and the corresponding charge is included in
eliminations and other.
(b) Excludes productivity/restructuring charges.
Materials, supplies and other expense, which includes the cost of
maintenance, information services and personal injury, decreased significantly
from 1992 and 1991 levels. The results of CSXT's intensive Performance
Improvement Team (PIT) program and the company's ongoing commitment to safety
continue to be seen in this cost category.
CSXT's PIT process has been responsible for marked reductions in the
expense base of rail operations over the past two years and is expected to
contribute additional savings in 1994 and 1995.
- 27 -
PAGE 28
While shrinking expenses, this program also has led to significant
improvements in reliability, performance and efficiency. Major strides have
been made in locomotive and freight car maintenance and repair, information
technology, contract labor scheduling, and purchasing among other areas of
rail activity. Specifically, through PIT initiatives, CSXT reduced expenses by
$147 million and $116 million in 1993 and 1992, respectively. Further savings
of over $100 million each year are targeted for 1994 and 1995.
Fuel expense fell to $225 million from $235 million and $247 million
in 1992 and 1991, respectively. Fuel consumption decreased from levels in
earlier years, reflecting the level of operation and increased fuel
efficiency. In 1993, CSXT locomotives consumed 1.33 gallons of diesel fuel per
thousand gross ton miles, compared with 1.37 gallons in the prior year and 1.4
gallons in 1991. CSXT diesel fuel averaged 64 cents per gallon versus 65 cents
in 1992 and 68 cents in 1991, net of the CSX hedging program.
Building and equipment rent expense declined slightly from earlier
years, reflecting lower traffic levels. Depreciation expense increased
slightly from earlier years as new equipment was purchased and deployed in the
business.
With continued effort throughout CSXT to lower its expense base, the
company anticipates only a slight increase in total operating expense for
1994, assuming modest improvements in traffic levels and no unusual operating
conditions.
Capital additions for 1993 totaled $579 million, which included $10
million in present value of new operating leases, compared with $561 million
and $649 million for the years 1992 and 1991, respectively. Included in the
1993 total was $323 million for roadway improvements, including 400 miles of
rail that were installed or replaced. With $101 million used to acquire 75 new
locomotives, CSXT's fleet totaled 2,810 units at year-end, compared with 2,965
and 3,123 for year-end 1992 and 1991.
CSXT's car fleet benefited from $73 million in new capital.
Additional capital was spent on terminals, technology and other equipment.
For 1994, CSXT projects an increase of approximately 10% in its
capital additions program. As in past years, the largest share of the total
will be directed to track and roadway improvements.
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PAGE 29
Table 2. RAIL COMMODITIES BY CARLOADS AND REVENUE
Market
Share (a) Carloads Revenue
(Percent) (Thousands) (Millions of Dollars)
--------- -------------------- ----------------------
1993 1993 1992 1991 1993 1992 1991
---- ----- ----- ----- ----- ------ ------
Automotive 27 326 288 265 $ 461 $ 413 $ 367
Chemicals 40 371 356 347 652 619 587
Minerals 36 374 345 327 332 310 290
Food and Consumer 34 166 161 164 196 196 201
Agricultural Products 30 284 264 262 327 297 295
Metals 22 258 225 199 243 219 200
Forest Products 30 435 441 439 442 448 425
Phosphates and Fertilizer 70 423 457 475 256 268 269
Coal 40 1,566 1,760 1,816 1,363 1,565 1,573
----- ----- ----- ----- ------ ------
Total 4,203 4,297 4,294 4,272 4,335 4,207
===== ===== =====
Other Revenue 108 99 166
------ ------ ------
Total Operating Revenue $4,380 $4,434 $4,373
====== ====== ======
(a) Market share is defined as CSX carloads versus carloads handled by
all major Eastern railroads.
CSXT has embarked on a four-year program to acquire 300 locomotives,
with 80 of these to be delivered in 1994. Included will be 50 Dash-9-44CW
direct current (DC) powered and 250 alternating current (AC) locomotives, 197
of these at 4,400 horsepower and 53 at 6,000 horsepower. The first of the AC
units will be delivered in mid-1994. This new technological breakthrough for
the railroad industry will allow CSXT to replace an average of two units in
its existing fleet with each new unit.
Remaining capital in the 1994 budget has been earmarked for car
acquisitions, technology and a rail-barge venture to transfer freight between
CSXT's rail territory in the southeastern United States and ports along
Mexico's eastern coast.
Container-Shipping Results
Sea-Land achieved solid operating results in 1993, driven by expense
reductions throughout its business activities, efficiencies resulting from
restructuring its Atlantic operations, and modest improvement in most traffic
lanes. Excluding the $93 million pretax charge associated with this
restructuring, Sea-Land would have earned record operating income of $193
million in 1993. This compares with $151 million in 1992, excluding a $17
million productivity charge; and $166 million in 1991, excluding a $67 million
charge. Including the charges, reported operating income was $100 million,
$134 million and $99 million for the years 1993, 1992 and 1991, respectively.
- 29 -
PAGE 30
Through ongoing management commitment and re-engineering of a number
of operations, Sea-Land removed $124 million from its expense base and has
targeted further significant reductions for 1994. This emphasis on the
efficiency of its ocean and related inland transportation services enabled
Sea-Land to deliver improved service levels to customers as well. Major
improvements were recorded in vessel on-time port arrivals, which rose to 88%
from the prior year's 86%.
Sea-Land's results stand out in a year when Japanese and major
European economies recorded little or no growth, adversely affecting demand
for transportation services. On a comparable basis, Sea-Land's 28% increase in
operating income was earned on a marginal 3% rise in container loads versus
the prior year and a similar 3% growth in revenue. Operating revenue totaled
$3.25 billion in 1993, compared with $3.15 billion in 1992 and $3.24 billion
in 1991.
Sea-Land experienced solid growth in both eastbound and westbound
Pacific lanes. Eastbound gains resulted from new, major account customers and
improving U.S. consumer markets. While Sea-Land successfully increased its
volume of westbound container shipments, rates deteriorated from earlier
levels due to the lagging Japanese economy. Fast-paced growth in southeast
Asia, particularly China, added volume to the intra-Asian trade lane. Overall,
Pacific rates remained flat in 1993. Continued U.S. consumer confidence,
coupled with rapid expansion of Chinese trade, leads the company to expect
improvement in these trade lanes during 1994. Sea-Land does not anticipate
significant improvement in the Japanese economy within the next year.
Container volumes in Sea-Land's Atlantic services declined primarily
as a result of the company's restructuring. The core of the business was
strengthened as functions were streamlined, agencies were closed and service
to certain outlying, non-profitable ports was curtailed. These measures, along
with conference rate agreements reached during the year, caused a 2% increase
in the average rate for Atlantic cargoes, but revenue for this business
segment declined due to the lower volumes.
Modest improvement is forecast for the economies of Germany and the
United Kingdom -- the major economies of Europe. Accordingly, Sea-Land
anticipates only modest growth in Atlantic volume in the near future. However,
as Europe recovers and as trade expands under the General Agreement on Tariffs
and Trade, the unit expects increased demand and revenue from these routes.
Strong growth in shipments between Asia and Europe and to the Middle
East and Indian Subcontinent led to a 19% increase in Asia/Middle East/Europe
(AME) traffic. These lanes experienced intense rate competition for
incremental volume, causing average rates to fall 8% from the prior year.
However, carrier efforts to stabilize rates took hold late in 1993 and are
expected to lead to an improved rate structure in 1994. With expectations of
7% market growth, Sea-Land anticipates that its AME traffic will continue to
increase this year.
Sea-Land recorded solid volume and revenue gains in its domestic
routes, namely Hawaii, Alaska and Puerto Rico. Market share gains were
achieved and further benefit was derived from rising economic demand.
Continued revenue increases are forecast despite possible expansion by the
- 30 -
PAGE 31
leading Alaskan competitor and the pending sale of the state-run Puerto Rican
shipping company.
Service expansion to the Caribbean and Latin American markets spurred
growth in the Americas trade lanes. Refrigerated cargo movements continue to
make a major contribution to profit improvement. Total Americas revenue
climbed 9% from 1992 and 20% from 1991 levels.
Sea-Land's 1993 operating expense rose $56 million from 1992's level
and decreased $19 million from 1991's expense, excluding productivity and
restructuring charges from all years. These results reflect Sea-Land's efforts
to use expense reductions and productivity improvements to offset global
inflation and the cost of carrying higher volumes. Including restructuring and
productivity charges, 1993's total operating expense was $3.15 billion,
compared with $3.01 billion in 1992 and $3.14 billion in 1991.
Container-Shipping Assets
(Owned and leased as of December 31, 1993)
Containers
40- and 20-foot dry vans 131,354
45-foot dry vans 8,833
Refrigeration vans 15,989
Other specialized equipment 5,252
-------
Total 161,428
=======
Container ships 83
Terminals
Exclusive-use 8
Preferred berthing rights 15
Labor and fringe benefits expense rose slightly despite a reduction
in Sea-Land's worldwide labor force. This increase reflected higher average
wages, stronger business activity and inflation. Sea-Land anticipates no
increase in the overall size of its work force in 1994, but a modest increase
in the average wage.
Materials, supplies and other expense rose 3% from the prior year but
decreased 2% from 1991's level as a result of efforts to improve terminal
productivity and contain vessel and equipment maintenance costs.
Rent expense remained flat over the three-year period from 1991-93 as
Sea-Land undertook efforts to replace short-term leased containers with owned
assets and carefully controlled vessel-charter and facility-lease expense.
Inland transportation expense remained at 1992's level but was 5%
lower than in 1991, a year influenced by military operations in the Middle
East. The unit has achieved significant gains in reducing this major expense
category through centralization of vendor selection and other controls.
Reflecting new capital additions, depreciation expense rose over the
three-year period 1991-93.
- 31 -
PAGE 32
Fuel expense, net of CSX's hedging program, declined from prior years
due to declining prices for bunker fuel, the lower-grade fuel used to power
container ships. Sea-Land paid an average of 32 cents, 34 cents and 37 cents
per gallon of fuel in 1993, 1992 and 1991, respectively. Annual fuel
consumption remained steady over the three-year period at approximately 340
million gallons.
Sea-Land's management is committed to obtaining more than $100
million in additional expense reductions during 1994 while improving the
quality of customer service. By the late 1990's, the company hopes to reach a
90% ratio of operating expense to operating revenue through cost-control and
productivity-improvement efforts. This objective requires the unit to
continually offset inflation through expense reductions.
Additional reductions in operating expense could be realized through
Congressional reform of U.S. maritime policy. CSX is optimistic that
legislation authorizing subsidies and/or foreign registry of vessels currently
under U.S.-flag registration will be approved by Congress and funded by the
Administration during 1994. Sea-Land does not foresee any material cost
associated with implementing changes currently proposed in U.S. maritime
policy or reflagging.
Sea-Land's capital additions totaled $172 million for 1993, including
$125 million in expenditures and $47 million in present value of new long-term
operating lease commitments. The total compares with $236 million in the prior
year and $141 million for 1991.
Early last year, Sea-Land launched an upgraded express service
between Southeast Asia and the U.S. Westcoast at an investment of $53 million.
This total included new vessel charters and containers.
In addition, Sea-Land spent $40 million to purchase or refurbish
containers. Over the past two years, Sea-Land spent significant capital to
expand its fleet of owned containers. This represents replacement of leased
containers, rather than enlargement of the container fleet.
The unit also invested $20 million in its vessel fleet during 1993
with the remaining portion of its capital dedicated to terminal facilities,
technology and other areas.
Sea-Land's level of 1994 maintenance capital is expected to remain at
or below 1993's level. Capital will be focused on upgrading and increasing the
number of refrigerated containers and continuing to reduce short-term
equipment leases through acquisition. Additional capital will be required to
maintain vessels and to upgrade and expand terminal capacity.
During the first quarter of 1994, Sea-Land will enter into contracts
covering the construction of four high-performance, fuel-efficient container
vessels and the modification of three Atlantic Class Vessels (ACVs) in its
current fleet, at a total expenditure of approximately $250 million over a
three-year period. The four new vessels will replace higher-cost capacity in
the very competitive trans-Pacific trade. The three ACVs will have their speed
increased from roughly 19 knots to 21 knots, while their effective capacity
will remain unchanged. This combined program will enable Sea-Land to replace
higher-cost assets, improve efficiency and enhance service to its customers.
- 32 -
PAGE 33
Intermodal Results
CSXI grew operating income 36% in 1993, to a level of $53 million,
excluding a 1992 productivity charge. Prior-year results for this unit would
have been $39 million in 1992, exclusive of the $45 million productivity
charge, and $24 million in 1991. Beginning in 1993, separate results were
publicly reported for CSXI. Previously, earnings were reported with those of
the rail unit.
Operating revenue was $793 million, 7% higher than the prior year and
16% greater than 1991's level. Rail containers and trailers handled by CSXI
totaled 1.14 million in 1993, with significant increases over prior years in
shipments from domestic customers, international steamship lines other than
Sea-Land, and truckline partners. CSXI anticipates continued volume growth in
1994 in these same categories of traffic. The unit has undertaken a program to
enhance the size and prominence of its national sales force during 1993 and
1994 and expects greater rates of revenue growth as it continues to win
customers with its superior product and service.
Intermodal Assets
(Owned and leased as of December 31, 1993)
Equipment
Domestic Containers 2,520
Rail Trailers 8,672
Facilities
CSX Intermodal Terminals 33
Motor Carrier Operations Terminals 24
CSX Services Facilities 17
Operating expense was $740 million in 1993. This compares with $745
million in the prior year and $662 million in 1991. The unit's 1992 expense
included a $45 million transfer of the productivity charge recorded by CSXT
related to locomotive-crew buyouts. Excluding the charge, 1993 expense
increased 6% and 12% from 1992 and 1991, respectively, as result of the higher
volumes handled by the unit.
Capital additions for the year of $50 million were focused on
terminal improvements and equipment acquisition. This total compares with $28
million in 1992 and $22 million in 1991. CSXI plans to further expand its
domestic trailer and container fleet in 1994 as well as to complete a number
of expansion and upgrade projects at major facilities across the United
States, including Chicago, Atlanta and Little Ferry, N.J. Reflecting its
growth plans, CSXI's capital program is expected to total approximately $60
million in 1994.
Barge Results
ACL suffered a one-year setback in operating income due to extensive
flooding along the Mississippi River system. Operating income declined from
1992's $60 million to $45 million as ACL faced closings and restrictions on
the waterway system during the second and third quarters of 1993. Operating
- 33 -
PAGE 34
income was higher than the $35 million reported in 1991, as ACL increased its
fleet size by one-third through acquisitions of barge assets during late 1991
and 1992.
Total operating revenue was $417 million, compared with 1992's
revenue of $443 million and $352 million in 1991. Barge ton miles totaled 45
billion for 1993, a decrease of 3 billion ton miles from the prior year, but 5
billion ton miles above 1991's levels. Mirroring this lower volume, revenue
from barging activity declined 5% from the prior year, but was 12% higher than
in 1991 due to the recent acquisitions. Midwest flooding, depressed export
coal shipments and lower grain movements caused the year-over-year decline.
The barge unit, however, did record sizeable gains in the movement of
non-bulk commodities and bulk products other than coal and grain. Non-bulk
commodities, such as scrap metal, pig iron and aluminum slabs, surged with
demand from industrial consumers. Tonnages of salt and fertilizer grew,
reflecting increased demand and the need of Midwest farmers to replenish
fields following last summer's floods.
Soft demand for export coal is expected through 1994 while weak grain
exports are anticipated through the second quarter of 1994. These two factors
will limit both the growth in barge movements and rate improvement, though
continued strength in the non-bulk sector is expected. The company
anticipates a return to typical business levels with a normal grain harvest in
the fall of 1994.
ACL's other marine revenue, which includes revenue from terminal
operations and Jeffboat, the unit's marine construction company, declined from
the prior year due to the Midwest floods but increased from 1991's level as a
result of the acquisitions. Jeffboat currently has a backlog of new orders
through mid-summer 1994 and anticipates successfully entering the market to
build vessels for the expanding riverboat gaming industry.
Barge operating expense was $372 million, a 3% decrease from 1992's
$383 million, resulting from re-engineering of many operations and business
practices and the lower level of barging activity. Expenses were 17% greater
than 1991's $317 million, due to the unit's larger barge fleet.
Labor and fringe benefits expense declined from the prior years as a
result of downsizing the administrative functions and layoffs of boat
personnel during the summer floods.
As a result of the ongoing high level of activity at Jeffboat,
materials, supplies and other expense was flat compared with 1992's level.
This expense increased 34% from 1991's level, due primarily to the fleet
expansion.
The lower level of barging activity caused fuel consumption to
decline 7% and expense to fall 11% from the prior year. Compared with 1991,
consumption rose 8% while expense declined 5%, with the larger barge fleet
accounting for the increase in fuel consumption, offset by lower oil prices.
ACL consumed 70 million gallons of fuel during 1993 at an average price of 58
cents per gallon.
- 34 -
PAGE 35
ACL trimmed its level of capital additions to $13 million in 1993.
This compares with $152 million a year earlier, which included $137 million
for the assets of the Valley Line companies, and $32 million in 1991. The
majority of 1993 capital was used to upgrade and expand the chemical barge
fleet. ACL anticipates that 1994's level of capital expenditures will be
similar to last year's level.
Barging Assets
(Owned and leased as of December 31, 1993)
Towboats 123
Barges
Covered/open-top hoppers 3,117
Tankers 236
Marine Services
River terminals 11
Fleeting operations 15
Shipyards 2
- 35 -
PAGE 36
Consolidated Outlook
With growing strength in the domestic economy, especially in the
industrial base served by CSXT, and limited recovery of the major economies of
Europe and Japan, CSX expects to improve earnings in 1994. As always, this
outlook is subject to external factors similar to those that affected the
company's performance during 1993 -- severe weather conditions, work stoppages
at major customers and stalled growth in foreign economies.
The management and employees of CSX remain committed to improving the
efficiency and productivity of their businesses while reducing the cost of
supplying customers with continually improving levels of transportation
services. CSX is also dedicated to recognizing growth opportunities in the
markets it serves and pursuing new markets that offer adequate returns on
investment. These efforts should be reflected in improved operating
performance and operating ratios at each of the CSX transportation units.
- 36 -
PAGE 37
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of CSX Corporation
We have audited the accompanying consolidated statement of financial
position of CSX Corporation and subsidiaries as of December 31, 1993, 1992 and
1991, and the related consolidated statements of earnings and cash flows for
the years then ended. Our audits also included the financial statement
schedule listed in the index at Item 14(a). These financial statements and
schedule are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above (appearing on Pages 38-71) present fairly, in all material respects, the
consolidated financial position of CSX Corporation and subsidiaries at
December 31, 1993, 1992 and 1991, and the consolidated results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
As discussed in Notes 1 and 13 to the consolidated financial
statements, the company changed its method of accounting for post-retirement
benefits other than pensions in 1991.
/s/ ERNST & YOUNG
-----------------
Ernst & Young
Richmond, Virginia
January 28, 1994
- 37 -
PAGE 38
CSX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Millions of Dollars, Except Per Share Amounts)
Years Ended December 31,
1993 1992 1991
------ ------ ------
OPERATING REVENUE
Transportation $8,767 $8,550 $8,419
Non-Transportation 173 184 217
------ ------ ------
Total 8,940 8,734 8,636
------ ------ ------
OPERATING EXPENSE
Transportation 7,806 7,644 7,643
Non-Transportation 128 125 139
Productivity/Restructuring Charge 93 699 755
------ ------ ------
Total 8,027 8,468 8,537
------ ------ ------
OPERATING INCOME 913 266 99
Other Income 18 3 94
Interest Expense 298 276 306
------ ------ ------
EARNINGS (LOSS) BEFORE INCOME TAXES 633 (7) (113)
Income Tax Expense (Benefit) 274 (27) (37)
------ ------ ------
EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING 359 20 (76)
Cumulative Effect on Years Prior to 1991
of Change in Accounting for Post-
retirement Benefits Other than Pensions --- --- (196)
------ ------ ------
NET EARNINGS (LOSS) $ 359 $ 20 $ (272)
====== ====== ======
EARNINGS (LOSS) PER SHARE BEFORE
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING $ 3.46 $ .19 $ (.75)
Cumulative Effect on Years Prior to 1991
of Change in Accounting for Post-
retirement Benefits Other than Pensions --- --- (1.95)
------- ------- -------
EARNINGS (LOSS) PER SHARE $ 3.46 $ .19 $ (2.70)
======= ======= =======
AVERAGE COMMON SHARES
OUTSTANDING (THOUSANDS) 103,915 102,907 100,489
======= ======= =======
COMMON SHARES OUTSTANDING
AT END OF YEAR (THOUSANDS) 104,143 103,476 102,362
======= ======= =======
CASH DIVIDENDS PAID PER COMMON SHARE $ 1.58 $ 1.52 $ 1.43
======= ======= =======
See accompanying Notes to Consolidated Financial Statements.
- 38 -
PAGE 39
CSX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of Dollars)
Years Ended December 31,
1993 1992 1991
------- ------- -------
OPERATING ACTIVITIES
Earnings (Loss) Before Cumulative Effect of
Change in Accounting $ 359 $ 20 $ (76)
Adjustments to Reconcile Earnings to
Cash Provided
Depreciation 572 527 501
Deferred Income Taxes 181 (72) (165)
Productivity/Restructuring Charge - Provision 93 699 755
- Payments (293) (445) (93)
Net Gains from Investment Transactions --- --- (75)
Other Operating Activities 35 67 (39)
Changes in Operating Assets and
Liabilities
Accounts Receivable (15) 145 (3)
Materials and Supplies (10) 18 49
Other Current Assets 3 35 (13)
Accounts Payable and Other Current
Liabilities 37 (55) 25
----- ----- ------
Cash Provided by Operating Activities 962 939 866
----- ----- ------
INVESTING ACTIVITIES
Property Additions (768) (1,041) (864)
Purchase of Long-Term Marketable Securities (115) --- ---
Proceeds from Property Dispositions 59 65 78
Proceeds from Sales of Affiliates --- 7 203
Other Investing Activities (46) (16) (6)
----- ----- ------
Cash Used by Investing Activities (870) (985) (589)
----- ----- ------
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PAGE 40
CSX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS, CONTINUED
(Millions of Dollars)
Years Ended December 31,
1993 1992 1991
------- ------- -------
FINANCING ACTIVITIES
Short-Term Debt-Net 150 (154) (128)
Long-Term Debt Issued 81 664 379
Long-Term Debt Repaid (249) (260) (431)
Cash Dividends Paid (164) (157) (144)
Other Financing Activities 14 37 41
----- ----- -------
Cash (Used) Provided by Financing Activities (168) 130 (283)
----- ----- -------
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
(Decrease) Increase in Cash and Cash Equivalents (76) 84 (6)
Cash and Cash Equivalents at Beginning of Year 374 290 296
----- ----- -------
Cash and Cash Equivalents at End of Year 298 374 290
Short-Term Investments 201 156 175
----- ----- -------
Cash, Cash Equivalents and Short-Term
Investments at End of Year $ 499 $ 530 $ 465
===== ===== =======
See accompanying Notes to Consolidated Financial Statements.
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PAGE 41
CSX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Millions of Dollars)
December 31,
1993 1992 1991
------- ------- -------
ASSETS
Current Assets
Cash, Cash Equivalents and
Short-Term Investments $ 499 $ 530 $ 465
Accounts Receivable 668 605 728
Materials and Supplies 199 189 206
Deferred Income Taxes 108 --- ---
Other Current Assets 97 97 136
------- ------- -------
Total Current Assets 1,571 1,421 1,535
------- ------- -------
Properties and Other Assets
Properties-Net 10,788 10,636 10,177
Affiliates and Other Companies 268 264 238
Other Assets 793 728 848
------- ------- -------
Total Properties and Other Assets 11,849 11,628 11,263
------- ------- -------
Total Assets $13,420 $13,049 $12,798
======= ======= =======
LIABILITIES
Current Liabilities
Accounts Payable and Other Current
Liabilities $ 1,965 $ 2,066 $ 2,079
Current Maturities of Long-Term Debt 146 200 230
Short-Term Debt 164 14 168
------- ------- -------
Total Current Liabilities 2,275 2,280 2,477
------- ------- -------
Long-Term Debt 3,133 3,245 2,804
------- ------- -------
Long-Term Liabilities and Deferred Gains 2,491 2,467 2,114
------- ------- -------
Deferred Income Taxes 2,341 2,082 2,221
------- ------- -------
SHAREHOLDERS' EQUITY
Common Stock, $1 Par Value 104 103 102
Other Capital 1,307 1,250 1,217
Retained Earnings 1,927 1,729 1,866
Minimum Pension Liability Adjustment (158) (107) (3)
------- ------- -------
Total Shareholders' Equity 3,180 2,975 3,182
------- ------- -------
Total Liabilities and
Shareholders' Equity $13,420 $13,049 $12,798
======= ======= =======
See accompanying Notes to Consolidated Financial Statements.
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PAGE 42
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES.
Principles of Consolidation
The Consolidated Financial Statements reflect the results of
operations, cash flows and financial position of CSX and its majority-owned
subsidiaries as a single entity. All significant intercompany accounts and
transactions have been eliminated.
Investments in companies that are not majority-owned are carried at
either cost or equity, depending on the extent of control.
Cash, Cash Equivalents and Short-Term Investments
Cash in excess of current operating requirements is invested in
various short-term instruments carried at cost that approximates market value.
Those short-term investments having a maturity of three months or less at the
date of acquisition are classified as cash equivalents. Cash and cash
equivalents are net of outstanding checks that are funded daily as presented
for payment from cash receipts and maturing short-term investments.
Accounts Receivable
In October 1993, a special purpose subsidiary of the company filed a
registration statement with the Securities and Exchange Commission covering
$250 million of Trade Receivable Participation Certificates ("Certificates")
evidencing undivided interests in a trade accounts receivable master trust.
The master trust assets include an ownership interest in a revolving portfolio
of rail freight accounts receivable.
Subsequently, the company issued $200 million of Certificates, at
5.05%, due September 1998. The Certificates are collateralized by $234
million of accounts receivable held in the master trust. The proceeds from
the issuance of the Certificates were used to reduce the amount of accounts
receivable sold under a previous agreement.
In addition, the company has a five-year revolving agreement with a
financial institution to sell with recourse on a monthly basis, an undivided
percentage ownership interest in designated pools of accounts receivable up to
a maximum of $200 million. CSX has retained the collection responsibility
with respect to accounts receivable held in trust or sold. Previous revolving
agreements allowed for the sale of up to $500 million of accounts receivable.
At December 31, 1993, 1992 and 1991, accounts receivable have been reduced by
$380 million, $400 million and $425 million, respectively, representing
Certificates and receivables sold.
The company maintains an allowance for doubtful accounts based upon
the expected collectibility of accounts receivable, including receivables
collateralizing Certificates and receivables sold. Allowances for doubtful
accounts of $87 million, $96 million and $89 million have been applied as a
reduction of accounts receivable at December 31, 1993, 1992 and 1991,
respectively.
- 42 -
PAGE 43
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES, Continued
Materials and Supplies
Materials and supplies are carried at average cost.
Properties
Properties are carried principally at cost. Provisions for
depreciation of rail property and equipment are based on estimated useful
service lives of seven to 42 years, computed primarily on the straight-line
composite method. Under this method, ordinary gains and losses on dispositions
are recorded to accumulated depreciation. Provisions for depreciation of
non-rail property and equipment are based on estimated useful service lives of
three to 45 years, computed on the straight-line unit basis method, and gains
and losses on dispositions are recorded in earnings as incurred.
Post-Retirement Benefits Other Than Pensions
The company has adopted SFAS No. 106, "Employers' Accounting for
Post-retirement Benefits Other than Pensions." Under the accrual method
specified by SFAS No. 106, the total future cost of providing other
post-retirement employment benefits is estimated and recognized as expense
over the employees' requisite service period.
Fair Values of Financial Instruments
The following methods and assumptions were used by the company in
estimating fair values for financial instruments as required by SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments," which the company
adopted effective January 1, 1992:
Current Assets and Current Liabilities
The carrying amounts reported in the statement of financial position
for current assets and current liabilities qualifying as financial instruments
approximate their fair values.
Long-Term and Short-Term Debt
The carrying amounts of the company's borrowings under its short-term
debt arrangements approximate their fair values. The fair values of the
company's long-term debt have been based upon market quotations for similar
debt instruments or estimated using discounted cash flow analyses based upon
the company's current incremental borrowing rates for similar types of
borrowing arrangements.
The company's remaining financial instruments at December 31, 1993
and 1992 are not significant.
- 43 -
PAGE 44
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES, Continued
Environmental Costs
Environmental costs that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to remediating an
existing condition caused by past operations, and which do not contribute to
current or future revenue generation, are expensed. Liabilities are recorded
when CSX's responsibility for environmental remedial efforts is deemed
probable, and the costs can be reasonably estimated. Generally, the timing of
these accruals coincides with the completion of a feasibility study or the
company's commitment to a formal plan of action. The recorded liabilities for
estimated future environmental costs at December 31, 1993, 1992 and 1991, were
$131 million, $77 million and $81 million, respectively.
Earnings Per Share
Earnings per share are based on the weighted average of common shares
outstanding. Dilution, which could result if all outstanding common stock
equivalents were exercised, is not significant.
Prior-Year Data
Certain prior-year data have been reclassified to conform to the 1993
presentation.
NOTE 2. PRODUCTIVITY AND RESTRUCTURING CHARGES.
1993 Restructuring Charge
The company recorded a $93 million pretax charge in the first quarter
of 1993 to recognize the estimated costs of restructuring certain operations
and functions at its container-shipping unit. The restructuring charge
reduced net earnings for 1993 by $61 million, 59 cents per share. As of
December 31, 1993, payments totaling $34 million have been recorded as a
reduction of the liability for the restructuring charge.
1992/1991 Productivity Charges
In the fourth quarter of 1991, the company recorded a charge to
provide for the estimated costs of implementing work force reductions,
improvements in productivity and other cost reductions at its major
transportation units. The charge amounted to $755 million on a pretax basis
and reduced 1991 net earnings by $490 million, $4.88 per share. In the second
quarter of 1992, the company recorded a charge principally to recognize the
estimated additional costs of buying out certain trip-based compensation
elements paid to train crews. The additional pretax charge amounted to $699
million and reduced net earnings for 1992 by $450 million, $4.38 per share. Of
the combined charges, $1.3 billion was provided for employee
- 44 -
PAGE 45
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 2. PRODUCTIVITY AND RESTRUCTURING CHARGES, Continued
separations and associated liabilities and $151 million related to various
costs and claims expected to result from consolidation of terminal operations,
litigation and other negotiated settlements.
The $1.3 billion portion of the combined charges attributable to CSX
Transportation Inc. (CSXT), the company's rail unit, includes $1.2 billion for
reductions from three to two person train crews and for buying out
productivity funds and short-crew allowances. CSXT has reached labor
agreements across virtually all of its rail system allowing it to operate
trains with two-member crews. The estimated cost based on the ratified labor
agreements with the United Transportation Union members is approximately 93%
of the amount initially provided.
As of December 31, 1993, payments totaling $640 million have been
recorded as a reduction of the aggregate liabilities for the productivity
charges. The remaining liability consists of $607 million for employee
separations and associated costs and $187 million for claims, litigation and
other negotiated settlements.
The $84 million combined 1992 and 1991 pre-tax productivity charges
at the container-shipping unit included a provision of $40 million for the
planned separation of employees, and $44 million for the consolidation and
realignment of various divisions and terminal operations, a change in revenue
and expense recognition methodology and other negotiated settlements.
NOTE 3. OPERATING EXPENSE.
1993 1992 1991
------- ------- -------
Labor and Fringe Benefits $ 3,055 $ 2,986 $ 3,001
Materials, Supplies and Other 1,963 1,974 1,968
Building and Equipment Rent 1,101 1,080 1,079
Inland Transportation 721 678 697
Depreciation 572 527 502
Fuel 413 424 444
Taxes Other Than Income and Payroll Taxes 109 100 91
Productivity/Restructuring Charge 93 699 755
------- ------- -------
Total $ 8,027 $ 8,468 $ 8,537
======= ======= =======
Maintenance and Repair Expense
Included in Above Items $ 1,188 $ 1,205 $ 1,224
======= ======= =======
Selling, General and Administrative Expense
Included in Above Items $ 1,202 $ 1,134 $ 1,148
======= ======= =======
- 45 -
PAGE 46
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 4. OTHER INCOME.
1993 1992 1991
---- ---- ----
Interest Income $ 52 $ 43 $ 72
Net Gain on Investment Transactions (a) --- --- 49
Gain on Sale of RF&P Corporation Stock (b) --- --- 31
Installment Gain on South Florida Track Sale 20 7 7
Discount on Sale of Accounts Receivable (15) (17) (32)
Minority Interest in Earnings
of Subsidiaries (14) (15) (25)
Equity Earnings of Other Affiliates (7) 2 6
Miscellaneous (18) (17) (14)
----- ----- -----
Total $ 18 $ 3 $ 94
===== ===== =====
(a) In 1991, the company consummated the sale of one-third of its
interest in Sea-Land Orient Terminals Ltd., to Ready City Ltd. (a
Hong Kong-based consortium). The sale proceeds amounted to $97
million and resulted in a pretax gain of $65 million, $35 million
after tax, or 35 cents per share. The company also recorded a pretax
charge of $16 million, $11 million after tax, or 11 cents per share,
related to the establishment of valuation reserves for several
investments in "non-core business" affiliates.
(b) In a series of transactions consummated in 1991, the company
exchanged its 6.8 million shares of RF&P Corporation (RF&P) stock for
the rail assets of RF&P and $106 million in cash. These transactions
resulted in a pretax gain of $31 million, before associated minority
interest expense of $5 million, $8 million after tax, or 8 cents per
share.
NOTE 5. INCOME TAXES.
Effective January 1, 1993, the company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." SFAS
No. 109 superseded SFAS No. 96, "Accounting for Income Taxes," which the
company adopted effective January 1, 1987. SFAS No. 109 requires that
deferred income tax assets and liabilities be classified as current or non-
current based upon the classification of the related asset or liability for
financial reporting. Net earnings for 1993 were not impacted by the adoption
of SFAS No. 109. As permitted under the new rules, prior-year financial
statements have not been restated.
- 46 -
PAGE 47
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 5. INCOME TAXES, Continued
Earnings from domestic and foreign operations and related income tax
expense are as follows:
1993 1992 1991
----- ----- -----
Earnings (Loss) Before Income
Taxes:
- Domestic $ 570 $ (67) $(239)
- Foreign 63 60 126
----- ----- -----
Total $ 633 $ (7) $(113)
===== ===== =====
Income Tax Expense (Benefit):
Current - Federal $ 71 $ 27 $ 102
- Foreign 18 15 11
- State 4 3 15
----- ----- -----
Total Current 93 45 128
----- ----- -----
Deferred - Federal 160 (72) (142)
- Foreign 1 2 2
- State 20 (2) (25)
----- ----- -----
Total Deferred 181 (72) (165)
----- ----- -----
Total Expense (Benefit) $ 274 $ (27) $ (37)
===== ===== =====
Income tax expense reconciled to the tax computed at statutory rates
is as follows:
1993 1992 1991
---- ---- ---- ---- ---- ----
Tax at Statutory Rates $222 35% $ (2) (34)% $(38) (34)%
State Income Taxes 16 2 1 (a) (7) (6)
Minority Interest --- --- --- --- 6 5
Increase in Statutory Rate(b) 51 8 --- --- --- ---
Prior Years' Income Taxes (15) (2) (14) (a) (1) (1)
Other Items --- --- (12) (a) 3 3
---- ---- ---- ---- ---- ----
Total Expense (Benefit) $274 43% $(27) (a)% $(37) (33)%
==== ==== ==== ==== ==== ====
(a) Percentage is not meaningful.
(b) The company revised its annual effective tax rate in 1993 to reflect the
change in the federal statutory rate from 34 to 35 percent. The effect
of this change was to increase income tax expense by $51 million related
to applying the newly enacted statutory income tax rate to deferred tax
balances as of January 1, 1993.
- 47 -
PAGE 48
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 5. INCOME TAXES, Continued
The significant components of deferred tax assets and liabilities
after considering the adoption of SFAS No. 109 include:
December 31, January 1,
1993 1993
------ ------
Deferred Tax Assets
Productivity/Restructuring Charge $ 299 $ 375
Employee Benefit Plans 351 282
Deferred Gains and Related Rents 162 159
Other 312 283
------ ------
Total 1,124 1,099
------ ------
Deferred Tax Liabilities
Accelerated Depreciation 2,979 2,799
Other 378 382
------ ------
Total 3,357 3,181
------ ------
Net Deferred Tax Liabilities $2,233 $2,082
====== ======
At December 31, 1991, the net deferred income tax liability was $2.2
billion. The significant components were a net liability for accelerated
depreciation of $2.7 billion, and net benefits for productivity/restructuring
charges of $318 million, employee benefit plans of $176 million and deferred
gains and related rents of $103 million.
In addition to the annual provision for deferred income tax expense,
the change in the year-end net deferred income tax liability balances included
the income tax benefit for the minimum pension liability adjustments in 1993
and 1992 and, in 1991, the income tax benefit related to the cumulative effect
of the change in accounting and the effect of the RF&P transactions.
The company has not recorded domestic deferred or additional foreign
income taxes applicable to undistributed earnings of foreign subsidiaries that
are reinvested. Such earnings amounted to $213 million, $188 million and $169
million at December 31, 1993, 1992 and 1991, respectively. These amounts
could become taxable upon their remittance as dividends or upon the sale or
liquidation of these foreign subsidiaries. It is not practical to determine
the amount of net additional income tax that would be payable if such earnings
were repatriated.
Income tax payments during 1993, 1992 and 1991 totaled $92 million,
$71 million and $57 million, respectively.
The company files a consolidated federal income tax return, which
includes its principal domestic subsidiaries. Examinations of the federal
- 48 -
PAGE 49
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 5. INCOME TAXES, Continued
income tax returns of CSX have been completed through 1987. Returns for 1988-
1990 are currently under examination. Management believes adequate provision
has been made for any adjustments that might be assessed.
NOTE 6. CHANGES IN SHAREHOLDERS' EQUITY.
Common Shares Minimum
Outstanding Common Other Retained Pension
(Thousands) Stock Capital Earnings Liability
------------- ------ ------- -------- ---------
Balance December 31, 1990 98,540 $ 99 $1,160 $2,282 $ ---
Net Loss --- --- --- (272) ---
Dividends - Common --- --- --- (144) ---
Common Stock -
Stock Purchase
and Loan Plan
Stock Issued - Net 2,007 2 96 --- ---
Purchase Loans - Net --- --- (93) --- ---
Other Stock Issued - Net 1,815 1 54 --- ---
Minimum Pension Liability --- --- --- --- (3)
------- ---- ------ ------ -----
Balance December 31, 1991 102,362 102 1,217 1,866 (3)
Net Earnings --- --- --- 20 ---
Dividends - Common --- --- --- (157) ---
Common Stock -
Stock Purchase
and Loan Plan
Stock Issued - Net 103 --- 8 --- ---
Purchase Loans - Net --- --- (3) --- ---
Other Stock Issued - Net 1,011 1 28 --- ---
Minimum Pension Liability --- --- --- --- (104)
------- ---- ------ ------ -----
Balance December 31, 1992 103,476 103 1,250 1,729 (107)
Net Earnings --- --- --- 359 ---
Dividends - Common --- --- --- (164) ---
Common Stock -
Stock Purchase
and Loan Plan
Stock Canceled (82) --- (4) --- ---
Purchase Loans - Net --- --- 19 --- ---
Other Stock Issued - Net 749 1 42 --- ---
Minimum Pension Liability --- --- --- --- (51)
Other --- --- --- 3 ---
------- ---- ------ ------ -----
Balance December 31, 1993 104,143 $104 $1,307 $1,927 $(158)
======= ==== ====== ====== =====
- 49 -
PAGE 50
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 7. PROPERTIES.
Balance Balance
at Beginning Retirements Other at End
of Year Additions and Sales Changes of Year
------------ --------- ----------- ------- -------
1993
Property:
Transportation $15,312 $ 747 $(622) $ 13 $15,450
Non-Transportation 390 21 (8) -- 403
------- ------ ----- ----- -------
Total $15,702 $ 768 $(630) $ 13 $15,853
======= ====== ===== ===== =======
Accumulated Depreciation:
Transportation $ 4,973 $ 560 $(564) $ (8) $ 4,961
Non-Transportation 93 12 (2) 1 104
------- ------ ----- ----- -------
Total $ 5,066 $ 572 $(566) $ (7) $ 5,065
======= ====== ===== ===== =======
Properties - December 31, 1993 $10,788
=======
Balance Balance
at Beginning Retirements Other at End
of Year Additions and Sales Changes of Year
------------ --------- ----------- ------- -------
1992
Property:
Transportation $14,783 $1,016 $(504) $ 17 $15,312
Non-Transportation 393 25 (25) (3) 390
------- ------ ----- ----- -------
Total $15,176 $1,041 $(529) $ 14 $15,702
======= ====== ===== ===== =======
Accumulated Depreciation:
Transportation $ 4,916 $ 513 $(447) $ (9) $ 4,973
Non-Transportation 83 14 (6) 2 93
------- ------ ----- ----- -------
Total $ 4,999 $ 527 $(453) $ (7) $ 5,066
======= ====== ===== ===== =======
Properties - December 31, 1992 $10,636
=======
- 50 -
PAGE 51
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 7. PROPERTIES, Continued
Balance Balance
at Beginning Retirements Other at End
of Year Additions and Sales Changes of Year
------------ --------- ----------- ------- -------
1991
Property:
Transportation $14,490 $ 832 $(416) $(123) $14,783
Non-Transportation 437 32 (33) (43) 393
------- ------ ----- ----- -------
Total $14,927 $ 864 $(449) $(166) $15,176
======= ====== ===== ===== =======
Accumulated Depreciation:
Transportation $ 4,866 $ 481 $(353) $ (78) $ 4,916
Non-Transportation 70 20 (5) (2) 83
------- ------ ----- ----- -------
Total $ 4,936 $ 501 $(358) $ (80) $ 4,999
======= ====== ===== ===== =======
Properties - December 31, 1991 $10,177
=======
NOTE 8. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES.
December 31,
1993 1992 1991
------ ------ ------
Trade Accounts Payable $ 917 $ 901 $ 926
Labor and Fringe Benefits(a) 523 727 668
Income Taxes and Other 332 278 329
Casualty Reserves 193 160 156
------ ------ ------
Total $1,965 $2,066 $2,079
====== ====== ======
(a) Labor and Fringe Benefits includes separation liabilities of $46
million for 1993, $238 million for 1992 and $170 million for 1991.
- 51 -
PAGE 52
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 9. CASUALTY AND OTHER RESERVES, SEPARATION LIABILITIES AND DEFERRED
GAINS.
Long-term liabilities and deferred gains totaled $2.49 billion, $2.47
billion and $2.1 billion in 1993, 1992 and 1991, respectively, and included
casualty reserves; deferred gains; pension and other post-retirement
obligations; productivity/restructuring charge liabilities; and other
liabilities.
Activity related to casualty and other reserves, separation
liabilities and deferred gains is as follows:
Deferred Gains (c)
---------------------------
Casualty
and Other Separation Sale-Leaseback Installment
Reserves(a) Liabilities(a) Transactions Sale
----------- -------------- --------------- -----------
Balance 12/31/90 $ 430 $ 154 $ 370 $ 136
Charged to Expense
and Other Additions 309 634 --- ---
Payments and Other
Reductions (250) (87) (23) (7)
----- ------ ----- -----
Balance 12/31/91 489 701 347 129
Charged to Expense
and Other Additions 355 653 --- ---
Payments and Other
Reductions (336) (423)(b) (23) (7)
----- ------ ----- -----
Balance 12/31/92 508 931 324 122
Charged to Expense
and Other Additions 331 32 --- ---
Payments and Other
Reductions (275) (321)(b) (24) (20)
----- ------ ----- -----
Balance 12/31/93 $ 564 $ 642 $ 300 $ 102
===== ====== ===== =====
(a) Balances include current portion of casualty and other reserves and
separation liabilities, respectively, of $186 million and $170
million at December 31, 1991; $190 million and $238 million at
December 31, 1992; and $223 million and $46 million at December 31,
1993.
(b) Includes reallocation of $95 million in 1993 and $62 million in 1992
to litigation claims and other negotiated settlements.
(c) Deferred gains on sale-leaseback transactions and the installment
sale are being amortized over periods ranging from 2 to 22 years.
- 52 -
PAGE 53
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 10. DEBT AND CREDIT AGREEMENTS.
Type Average
(Maturity Dates) Interest Rates 1993 1992 1991
- ---------------- -------------- ------ ------ ------
Notes Payable
(1994-2021) 9% $1,162 $1,242 $1,179
Debentures
(1999-2022) 9% 945 945 600
Equipment Obligations
(1994-2016) 9% 644 672 578
Commercial Paper 3% 300 300 300
Mortgage Bonds
(1995-2003) 3% 84 137 200
Other Obligations
(1994-2011) 8% 144 149 177
------ ------ ------
Total 8% 3,279 3,445 3,034
Less Debt Due
Within One Year 146 200 230
------ ------ ------
Total Long-Term Debt $3,133 $3,245 $2,804
====== ====== ======
The estimated fair value of long-term debt at December 31, 1993 and
1992, is as follows:
Fair Value of Total Debt
1993 1992
-------------------------
Notes Payable $1,284 $1,254
Debentures 1,063 1,003
Equipment Obligations 711 721
Commercial Paper 300 300
Mortgage Bonds 69 160
Other Obligations 158 149
------ ------
Total $3,585 $3,587
====== ======
In March 1993, the company issued $74 million of Series A Equipment
Trust Certificates. The certificates will mature in 15 annual installments
from 1994 through 2008.
In May 1992, CSX issued $200 million of 8 5/8% debentures due 2022
under a June 1991 shelf registration to provide for the issuance of up to $250
million of debt securities. In September 1992, the company filed a shelf
registration with the Securities and Exchange Commission to provide for the
issuance, from time to time, of up to $450 million of senior debt securities,
warrants to purchase debt securities or currency warrants. As of December 31,
1993, CSX had issued $250 million of debt under this registration, including
$100 million, 7% notes due 2002 and $150 million, 8.10% debentures due 2022.
- 53 -
PAGE 54
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 10. DEBT AND CREDIT AGREEMENTS, Continued
The proceeds from the issuance of long-term debt securities in 1992 were
primarily used for the purchase of the assets of the Valley Line companies,
costs for implementation of work force reductions and costs related to
productivity improvements.
During 1991, CSX issued the remaining $188 million of debt under a
$750 million shelf registration filed in July 1990. The initial debt issuance
of $562 million under this registration took place in 1990. The entire $188
million issued during 1991 was in the form of Medium-Term notes with
maturities from 1992 to 2021. Proceeds from these debt issues were utilized
for the repayment of commercial paper and general corporate purposes.
The company maintains revolving credit agreements with domestic and
foreign banks (aggregating $880 million) under which there were no borrowings
as of December 31, 1993. Substantially all of these agreements have underlying
debt maturities greater than 12 months. These agreements support $464 million
of privately placed commercial paper outstanding at December 31, 1993, of
which $300 million has been classified as long-term debt based upon the
company's ability and intention to maintain this debt outstanding for at least
one year.
Excluding long-term commercial paper, the company has long-term debt
maturities during the next five years aggregating $146 million in 1994, $316
million in 1995, $521 million in 1996, $114 million in 1997 and $152 million
in 1998. Substantially all of the company's rail unit properties are pledged
as security for various rail-related, long-term debt issues.
Commercial paper classified as short-term debt was $164 million at
December 31, 1993, $4 million at December 31, 1992, and $158 million at
December 31, 1991. The average interest rate for the short-term commercial
paper outstanding at year-end was 3% for 1993, 4% for 1992 and 5% for 1991.
The average amount of short-term commercial paper outstanding (average monthly
interest rate) during 1993, 1992 and 1991 was $172 million (3%), $60 million
(4%), and $114 million (6%), respectively. The maximum amount of short-term
commercial paper outstanding was $391 million for 1993, $201 million for 1992
and $383 million for 1991.
Interest payments, net of amounts capitalized, totaled $304 million,
$279 million and $305 million, respectively, for 1993, 1992 and 1991.
- 54 -
PAGE 55
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 11. PREFERRED STOCK.
The company has total authorized preferred stock of 25 million
shares, of which 250,000 shares of Series A have been reserved for issuance,
and 3 million shares of Series B have been reserved for issuance under the
Shareholder Rights Plan. No shares have been issued as of December 31, 1993.
All preferred shares rank senior to common shares both as to
dividends and liquidation preference.
NOTE 12. COMMON STOCK.
The company has a single class of common stock, $1 par value, of
which 300 million shares are authorized. Each share is entitled to one vote in
all matters requiring a vote. The most recent quarterly dividend, paid in
December 1993, was 44 cents per share. For the years ended December 31, 1993,
1992 and 1991, respectively, dividends were paid at the rate of $1.58, $1.52
and $1.43 per share.
Stock Purchase and Loan Plan
The 1991 Stock Purchase and Loan Plan provided for the issuance of
grants to 165 eligible officers and key employees at December 31, 1993. The
plan allowed for the purchase of common stock and related rights and also
entitled those employees to obtain loans with respect to those shares of
common stock. In July 1991, 2,200,000 shares of common stock and related
rights were reserved for issuance under this Plan. Shares were granted in 1991
and 1992 at market price on date of grant. The shares were purchased with a 5%
down payment in the form of cash or recourse loans. The remaining 95% of the
purchase price was in the form of non-recourse loans secured by the shares
issued. The loans bear interest at rates set on the award date and are due on
July 31, 1996. The Plan is intended to further the long-term stability and
financial success of the company by providing a method for eligible employees
to significantly increase their ownership of common stock.
- 55 -
PAGE 56
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 12. COMMON STOCK, Continued
Stock Purchase and Loan Plan, Continued
Transactions involving the 1991 Stock Purchase and Loan Plan are
summarized as follows:
Shares Average
(000's) Price
------- -------
Outstanding at 1/1/91 --- $ ---
Granted 2,023 $48.33
Canceled (16) $48.33
----- ------
Outstanding at 12/31/91 2,007 $48.33
Granted 213 $64.33
Canceled (110) $48.33
----- ------
Outstanding at 12/31/92 2,110 $49.76
Granted --- $ ---
Canceled (82) $48.72
----- ------
Outstanding at 12/31/93 2,028 $40.43
===== ======
1993 1992 1991
---- ---- ----
5% Down Payment Loans Outstanding $ 5 $ 5 $ 5
95% Purchase Loans Outstanding $ 77 $100 $ 92
Average Interest Rate 7.72% 7.72% 7.87%
Compensation Expense for the Year $ 48 $ 22 $ 4
Stock Purchase and Dividend Reinvestment Plans
The 1991 Employees Stock Purchase and Dividend Reinvestment Plan
provides a method and incentive for eligible employees to purchase shares of
common stock at market value by payroll deductions. Officers and key employees
who qualify for the 1991 Stock Purchase and Loan Plan are not eligible to
participate in this Plan. To encourage ownership of the company's stock,
employees receive a 17.65% matching payment on their contributions in the form
of additional stock purchased by the company. Each matching payment of stock
is subject to a two-year holding period. Sale of stock prior to the completion
of the holding period will result in forfeiture of the matching stock purchase
and dividends thereon. At December 31, 1993, 439,483 shares of common stock
were reserved for issuance under this Plan.
Under the terms of the company's Dividend Reinvestment and Stock
Purchase Plans adopted in 1981, all employees and shareholders may purchase
CSX common stock at the average of daily high and low sale prices for the five
trading days ending on the day of purchase. To encourage ownership of the
company's stock, employees receive a 5% discount on all purchases under this
program. At December 31, 1993, there were 3,077,810 shares reserved for
issuance under these plans.
- 56 -
PAGE 57
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 12. COMMON STOCK, Continued
Shareholder Rights Plan
In June 1988, the board of directors of the company adopted a
Shareholder Rights Plan and declared a dividend of one preferred share
purchase right ("right") for each outstanding share of CSX common stock held
as of June 8, 1988. The Shareholder Rights Plan was amended in 1990. Each
right entitles shareholders of record to purchase from the company, until the
earlier of June 8, 1998, or the redemption of the rights, one one-hundredth of
a share of Series B preferred stock at an exercise price of $100, subject to
certain adjustments or, under certain circumstances, to obtain additional
shares of common stock of the company in exchange for the rights. The rights
will not be exercisable or transferable apart from the CSX common stock until
the earlier of (1) 10 days following the public announcement that a person or
affiliated group has acquired or obtained the right to acquire 20% or more of
CSX's common stock, or (2) 10 days following the commencement or announcement
of an intention to make a tender offer or exchange offer, the consummation of
which would result in the ownership by a person or group of 20% or more of the
company's outstanding common stock. The board of directors may redeem the
rights at a price of one cent per right at any time prior to the acquisition
by a person of 20% or more of the outstanding CSX common stock.
Long-Term Performance Stock Plan
The CSX Corporation Long-Term Performance Stock Plan, which
superseded the 1980 and 1981 stock option plans, provides for awards to a
group of 337 officers and employees. The awards are based on increases in the
current market value of CSX common stock over the market value at date of
grant or the financial performance of CSX, or both.
At December 31, 1993, a total of 6,303,981 shares were reserved for
issuance, of which 1,200,578 were available for new grants (2,495,289 at
December 31, 1992). The remaining shares are assigned to outstanding stock
options, Stock Appreciation Rights (SARs) and Performance Share Awards (PSAs).
Transactions involving stock options and SARs are summarized as follows:
Options SARs
-------------------- -------------------
Shares Average Units Average
(000s) Price (000s) Price
------ ------- ----- -------
Outstanding at 1/1/93 3,385 $44.22 340 $31.52
Granted 1,117 $73.38 --- $ ---
Canceled or Expired (136) $49.70 (2) $29.96
Exercised (671) $40.05 (54) $31.22
----- ------ ----- ------
Outstanding at 12/31/93 3,695 $53.59 284 $31.58
===== ====== ===== ======
Exercisable at 12/31/93 2,612 $45.38 284 $31.58
===== ====== ===== ======
Exercised in 1992 1,002 $33.18 77 $31.13
===== ====== ===== ======
Exercised in 1991 1,754 $32.27 745 $33.04
===== ====== ===== ======
- 57 -
PAGE 58
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 12. COMMON STOCK, Continued
Long-Term Performance Stock Plan, Continued
The value of PSAs is contingent on achievement of performance goals
and completion of certain continuing employment requirements over a three-year
period. Each PSA earned will equal the fair market value of one share of CSX
common stock on the date of payment. At December 31, 1993, 1,125,015 shares
were reserved for outstanding PSAs.
Stock Award Plan
In 1990, the company implemented a Stock Award Plan whereby all
officers and employees of the company are eligible to receive shares of CSX
common stock as an incentive award. All awards of common stock shall be issued
based on terms and conditions approved by the Compensation and Pension
Committee of the company's board of directors. At December 31, 1993, 1,000,000
shares have been reserved for issuance and no common stock awards have been
granted under the provisions of this Plan.
Directors' Stock Plan
In 1992, the board of directors of the company adopted a stock plan
for directors which changes the manner in which fees and retainers are paid. A
minimum of 40% of the retainer fees must be paid in common stock of the
company. In addition to the basic level of payment in stock, each director may
elect to receive the remaining 60% of his or her retainer and fees in the form
of common stock of the company. The Plan permits each director to elect to
transfer stock into a trust that will hold the shares until the participant's
death, disability, retirement as a director, or other cessation of services as
a director, or change in control of the company. In May 1992, 500,000 shares
of common stock were reserved for issuance under this plan and at December 31,
1993, 494,196 shares of common stock remained reserved.
- 58 -
PAGE 59
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 13. EMPLOYEE BENEFIT PLANS.
Pension Plans
CSX and its subsidiaries have defined benefit pension plans,
principally for salaried personnel. The plans provide for eligible employees
to receive benefits based principally on years of service with the company and
compensation rates near retirement. Contributions to the plans are made on the
basis of not less than the minimum funding standards set forth in the Employee
Retirement Income Security Act of 1974, as amended. Plan assets consist
primarily of common stocks, corporate bonds and cash and cash equivalents.
Pension costs for these plans include the following components:
1993 1992 1991
----- ----- -----
Service Cost $ 28 $ 24 $ 18
Interest Cost on Projected Benefit Obligation 88 86 87
Actual Return on Plan Assets (95) (24) (122)
Net Amortization and Deferral 26 (70) 46
Foreign Pension Plans 4 4 4
----- ----- -----
Net Pension Expense $ 51 $ 20 $ 33
===== ===== =====
The funded status of the plans and the amounts reflected in the
accompanying statement of financial position at year-end are as follows:
1993
-------------------
Assets Benefits
Exceed Exceed
Benefits Assets
Assets and Obligations - -------- --------
Vested Benefits $ 20 $1,048
Non-Vested Benefits 1 44
------ ------
Accumulated Benefit Obligation 21 1,092
Effect of Anticipated Future
Salary Increases 1 166
------ ------
Projected Benefit Obligation 22 1,258
Fair Value of Plan Assets 33 862
------ ------
Funded Status 11 (396)
Unrecognized Initial Net Obligation (Asset) (4) 28
Unrecognized Prior Service Cost 1 10
Unrecognized Net Loss 6 398
Recognition of Minimum Liability --- (287)
------ ------
Net Pension Asset (Obligation) $ 14 $ (247)
====== ======
- 59 -
PAGE 60
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 13. EMPLOYEE BENEFIT PLANS, Continued
Pension Plans, Continued
1992
-------------------
Assets Benefits
Exceed Exceed
Benefits Assets
Assets and Obligations - -------- --------
Vested Benefits $ 17 $ 911
Non-Vested Benefits 1 37
------ ------
Accumulated Benefit Obligation 18 948
Effect of Anticipated Future
Salary Increases 1 124
------ ------
Projected Benefit Obligation 19 1,072
Fair Value of Plan Assets 30 793
------ ------
Funded Status 11 (279)
Unrecognized Initial Net Obligation (Asset) (4) 32
Unrecognized Prior Service Cost 1 11
Unrecognized Net Loss 5 287
Recognition of Minimum Liability --- (229)
------ ------
Net Pension Asset (Obligation) $ 13 $ (178)
====== ======
1991
-------------------
Assets Benefits
Exceed Exceed
Benefits Assets
Assets and Obligations - -------- --------
Vested Benefits $ 769 $ 73
Non-Vested Benefits 23 2
------ ------
Accumulated Benefit Obligation 792 75
Effect of Anticipated Future
Salary Increases 94 7
------ ------
Projected Benefit Obligation 886 82
Fair Value of Plan Assets 826 19
------ ------
Funded Status (60) (63)
Unrecognized Initial Net Obligation (Asset) 22 11
Unrecognized Prior Service Cost 7 5
Unrecognized Net Loss 101 19
Recognition of Minimum Liability --- (28)
------ ------
Net Pension Asset (Obligation) $ 70 $ (56)
====== ======
- 60 -
PAGE 61
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 13. EMPLOYEE BENEFIT PLANS, Continued
Pension Plans, Continued
The projected benefit obligations were determined using assumed
discount rates of 7.25% for 1993, 8.25% for 1992 and 9% for 1991; and an
estimated long-term salary increase rate of 5% for 1993 and 1992 and 5.5% for
1991. Net pension cost was determined using expected long-term rates of return
on assets of 9.75% for 1993, 10.5% for 1992 and 11.5% for 1991. The effect of
lowering the assumed discount rate for 1993 and 1992 changed the relative
funded status of a major plan and resulted in the recognition of an aggregate
additional minimum pension liability totaling $287 million at the end of 1993.
Savings Plans
The company has established savings plans for virtually all full-time
salaried employees and certain employees covered by collective bargaining
agreements of CSX and subsidiary companies. CSX matches 50% of each salaried
employee's contribution, which is limited to 6% of the employee's earnings.
CSX contributes fixed amounts for each participating employee covered by a
collective bargaining agreement. Expense for these plans for 1993, 1992 and
1991 was $32 million, $29 million and $28 million, respectively.
Other Post-Retirement Benefit Plans
In addition to the company's defined benefit pension plans, CSX has
three defined benefit post-retirement plans covering most full-time salaried
employees. Two plans provide medical benefits and another plan provides life
insurance benefits. The post-retirement health care plans are contributory,
with retiree contributions adjusted annually, and contain other cost-sharing
features such as deductibles and coinsurance. The accounting for the health
care plans anticipate future cost-sharing changes to the written plans that
are consistent with the company's expressed intent to increase the retiree
contribution rate annually for the expected medical inflation rate for that
year. The life insurance plan is non-contributory.
Effective January 1, 1991, the company adopted SFAS No. 106,
"Employers' Accounting for Post-Retirement Benefits Other Than Pensions." Net
earnings for 1991 were decreased by $196 million (net of related income tax
benefit of $116 million), $1.95 per share, by the cumulative effect of the
change in accounting for post-retirement benefits related to years prior to
1991, which were not restated.
- 61 -
PAGE 62
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 13. EMPLOYEE BENEFIT PLANS, Continued
Other Post-retirement Benefit Plans, Continued
The company's current policy is to fund the cost of the
post-retirement health care and life insurance benefits on a pay-as-you-go
basis, as in prior years. The amounts recognized for the combined plans in the
company's statement of financial position at December 31, 1993, 1992 and 1991
are as follows:
1993
--------------------
Life
Medical Insurance
Plans Plan
---- ----
Accumulated Post-Retirement
Benefit Obligation:
Retirees $181 $73
Fully Eligible Active Participants 27 3
Other Active Participants 42 3
---- ---
Accumulated Post-Retirement
Benefit Obligation 250 79
Unrecognized Prior Service Cost 29 7
Unrecognized Net Loss (50) (14)
---- ---
Net Post-Retirement
Benefit Obligation $229 $72
==== ===
1992
--------------------
Life
Medical Insurance
Plans Plan
---- ----
Accumulated Post-Retirement
Benefit Obligation:
Retirees $149 $65
Fully Eligible Active Participants 24 3
Other Active Participants 32 2
---- ---
Accumulated Post-Retirement
Benefit Obligation 205 70
Unrecognized Prior Service Cost 36 7
Unrecognized Net Loss (13) (4)
---- ---
Net Post-Retirement
Benefit Obligation $228 $73
==== ===
- 62 -
PAGE 63
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 13. EMPLOYEE BENEFIT PLANS, Continued
Other Post-retirement Benefit Plans, Continued
1991
--------------------
Life
Medical Insurance
Plans Plan
---- ----
Accumulated Post-Retirement
Benefit Obligation:
Retirees $169 $63
Fully Eligible Active Participants 33 5
Other Active Participants 42 6
---- ---
Accumulated Post-Retirement
Benefit Obligation 244 74
Unrecognized Prior Service Cost --- --
Unrecognized Net Loss --- --
---- ---
Net Post-Retirement Benefit Obligation $244 $74
==== ===
Net periodic post-retirement benefit expense for 1993, 1992 and
1991 is as follows:
1993
--------------------
Life
Medical Insurance
Plans Plan
---- ----
Service Cost $ 7 $ 1
Interest Cost 16 6
Amortization of Prior Service Cost (6) (1)
---- ----
Net Periodic Post-Retirement
Benefit Expense $17 $ 6
==== ====
1992
--------------------
Life
Medical Insurance
Plans Plan
---- ----
Service Cost $ 8 $ 1
Interest Cost 18 6
Amortization of Prior Service Cost (4) --
---- ----
Net Periodic Post-Retirement
Benefit Expense $22 $ 7
==== ====
- 63 -
PAGE 64
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 13. EMPLOYEE BENEFIT PLANS, Continued
Other Post-retirement Benefit Plans, Continued
1991
--------------------
Life
Medical Insurance
Plans Plan
---- ----
Service Cost $ 9 $ 2
Interest Cost 20 6
Amortization of Prior Service Cost -- --
---- ----
Net Periodic Post-retirement Benefit Expense $29 $ 8
==== ====
The weighted-average annual assumed rate of increase in the per
capita cost of covered benefits (i.e., health care cost trend rate) for the
medical plans is 11.5% for 1993-1994 and is assumed to decrease gradually to
5.5% by 2005 and remain at that level thereafter. The health care cost trend
rate assumption has a significant effect on the amounts reported. For example,
increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated post-retirement benefit obligation
for the medical plans as of December 31, 1993, by 9%, and the aggregate of the
service and interest cost components of net periodic post-retirement benefit
expense for 1993 by $3 million.
The weighted-average discount rate used in determining the
accumulated post-retirement benefit obligation was 7.25%, 8.25% and 9% at
December 31, 1993, 1992 and 1991, respectively. The effect of lowering the
assumed discount rate for 1993 increased significantly the accumulated post-
retirement benefit obligation.
Post-employment Benefits
Effective January 1, 1994, the company will adopt SFAS No. 112
"Employers' Accounting for Post-employment Benefits." This statement requires
that certain benefits provided to former or inactive employees, after
employment but before retirement, such as workers' compensation and disability
benefits, be accrued if attributable to employees' service already rendered.
The financial impact of adopting SFAS No. 112 is not expected to be
significant.
Other Plans
Under collective bargaining agreements, the company participates in a
number of union-sponsored, multi-employer benefit plans. Payments to these
plans are made as part of aggregate assessments generally based on number of
employees covered, hours worked, tonnage moved or a combination thereof. The
administrators of the multi-employer plans generally allocate funds received
from participating companies to various health and welfare benefit plans and
pension plans. Current information regarding such allocations has not been
provided by the administrators. Total contributions of $211 million, $194
million and $220 million, respectively, were made to these plans in 1993, 1992
and 1991.
- 64 -
PAGE 65
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 14. SUMMARY OF COMMITMENTS AND CONTINGENCIES
Lease Commitments
CSX leases equipment under agreements with terms up to 22 years.
Non-cancelable, long-term leases generally include options to purchase at fair
value and to extend the terms. At December 31, 1993, minimum building and
equipment rentals under non-cancelable operating leases totaled approximately
$454 million for 1994, $379 million for 1995, $328 million for 1996, $326
million for 1997, $306 million for 1998 and $2.8 billion thereafter.
Rent expense on operating leases, including net daily rental charges
on railroad operating equipment of $247 million, $205 million and $183 million
in 1993, 1992 and 1991, respectively, amounted to $1.1 billion in 1993, 1992
and 1991. Deferred gains arising from sale-leaseback transactions are being
amortized from 2 to 22 years and have reduced rent expense by $24 million in
1993, 1992 and 1991, respectively.
Futures and Options Contracts
The company purchases futures and options contracts to hedge against
fluctuations in fuel oil prices and interest rates. Gains and losses on
contracts to hedge fuel oil commitments and interest rates are deferred and
amortized as a part of the commitment transaction.
The counterparties to certain futures and options contracts consist
of a large number of major financial institutions. The company continually
monitors its positions and the credit ratings of its counterparties and limits
the amount of agreements or contracts it enters into with any one party. While
the company may be exposed to credit losses in the event of non-performance by
counterparties, it does not currently anticipate such losses.
Purchase Commitment
CSX Transportation Inc. ("CSXT") entered into an agreement to
purchase 300 locomotives from GE Transportation Systems, a unit of General
Electric Co. This large single order will cover CSXT's normal locomotive
replacement needs over the next four years. This purchase agreement will
introduce alternating current traction technology to CSXT's locomotive fleet.
CSXT will take delivery of 50 direct current and 30 alternating current
locomotives in 1994, and the remaining 220 alternating current units will be
delivered during 1995-1997.
Contingent Liabilities
The company and its subsidiaries are contingently liable individually
and jointly with others as guarantors of long-term debt and obligations
principally relating to leased equipment, joint ventures and joint facilities.
These contingent obligations amounted to approximately $85 million at December
31, 1993.
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 portion
of the insurance coverage, up to $250 million from rail operations and up to
$175 million from certain other operations, is provided by insurance companies
- 65 -
PAGE 66 CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 14. SUMMARY OF COMMITMENTS AND CONTINGENCIES, Continued
owned or partially owned by CSX.
CSXT is a party to various proceedings brought both by private
parties and regulatory agencies related to environmental issues. CSXT has
been identified as a potentially responsible party in a number of governmental
investigations and actions relating to environmentally impaired sites that are
or may be subject to remedial action under the Federal Superfund Statute
("Superfund") or corresponding state statutes. The majority of these
proceedings are based on allegations that CSXT, or its railroad predecessors,
sent hazardous substances to the facilities in question for disposal. Such
proceedings arising under Superfund typically involve numerous other waste
generators and disposal companies and seek to allocate or recover costs
associated with site investigation and cleanup, which could be substantial.
The assessment of the required response and remedial costs associated
with these sites is extremely complex. Among the variables that management
must assess are imprecise and changing remedial cost estimates and continually
evolving governmental standards.
CSXT frequently reviews its role, if any, with respect to each such
location, giving consideration to the nature of CSXT's alleged connection to
the location (e.g., generator, owner or operator), the extent of CSXT's
alleged connection (e.g., volume of waste sent to the location and other
relevant factors), the accuracy and strength of evidence connecting CSXT to
the location, and the number, connection and financial position of other named
and unnamed potentially responsible parties at the location. Further, CSXT
periodically reviews its exposure in all non-Superfund environmental
proceedings with which it is involved.
Based upon such reviews and updates of the sites with which it is
involved, CSXT has recorded, and periodically reviews for adequacy, reserves
to cover estimated contingent future environmental costs with respect to such
sites. Liabilities are recorded for environmental matters in accordance with
the company's accounting policy described in Note 1. The company does not
currently possess sufficient information to reasonably estimate the amounts of
additional liabilities, if any, on some sites until completion of future
environmental studies. Such additional liabilities could be significant to
future consolidated results of operations and cash flows. Based upon
information currently available, however, the company believes that its
environmental reserves are adequate to accomplish remedial actions to comply
with present laws and regulations.
Legal Proceedings
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.
- 66 -
PAGE 67
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 14. SUMMARY OF COMMITMENTS AND CONTINGENCIES, Continued
Contingent Liabilities, Continued
In December 1993, a Consent Decree was entered in the U. S. District
Court in Jacksonville, Florida to settle claims of Federal Clean Water Act
violations alleged against CSXT. The Consent Decree resolves a civil
enforcement action initiated in June, 1992, by the U.S. Environmental
Protection Agency with respect to alleged violations by CSXT of permit
discharge limitations at five rail yard waste water treatment facilities in
Florida and North Carolina. The settlement called for a civil penalty of $3
million, which has been paid by CSXT, as well as the establishment of an
escrow account in the amount of $4 million to fund certain environmentally
beneficial projects.
NOTE 15. QUARTERLY DATA (Unaudited).
1993
1st(a) 2nd 3rd(b) 4th
------ ------ ------ ------
Operating Revenue $2,123 $2,264 $2,238 $2,315
====== ====== ====== ======
Operating Income $ 63 $ 278 $ 252 $ 320
====== ====== ====== ======
Net Earnings (Loss) $ (9) $ 154 $ 63 $ 151
====== ====== ====== ======
Earnings (Loss) Per Share $ (.09) $ 1.48 $ .61 $ 1.46
====== ====== ====== ======
1992
1st 2nd(c) 3rd 4th(d)
------ ------ ------ ------
Operating Revenue $2,086 $2,189 $2,214 $2,245
====== ====== ====== ======
Operating Income (Loss) $ 157 $ (445) $ 262 $ 292
====== ====== ====== ======
Net Earnings (Loss) $ 62 $ (322) $ 128 $ 152
====== ====== ====== ======
Earnings (Loss) Per Share $ .60 $(3.13) $ 1.25 $ 1.47
====== ====== ====== ======
1991(e)
1st(f) 2nd(g) 3rd 4th(h)
------ ------ ------ ------
Operating Revenue $2,030 $2,125 $2,205 $2,276
====== ====== ====== ======
Operating Income (Loss) $ 145 $ 206 $ 241 $ (493)
====== ====== ====== ======
Earnings (Loss) before Cumulative
Effect of Change in Accounting $ 57 $ 115 $ 108 $ (356)
====== ====== ====== ======
Earnings (Loss) Per Share before
Cumulative Effect of Change
in Accounting $ .58 $ 1.15 $ 1.07 $(3.47)
====== ====== ====== ======
- 67 -
PAGE 68
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 15. QUARTERLY DATA (Unaudited), Continued
(a) The company recorded a $93 million pretax charge in the first quarter
of 1993 to recognize the estimated costs of restructuring certain
operations and functions at its container-shipping unit. The
restructuring charge reduced net earnings by $61 million, 59 cents
per share.
(b) The company revised its estimated annual effective tax rate in the
third quarter of 1993 to reflect the change in the federal statutory
rate from 34 to 35 percent. The effect of this change was to
increase income tax expense for the third quarter of 1993 by $54
million, 52 cents per share. Of this amount, $51 million, 48 cents
per share, related to applying the newly enacted statutory income tax
rate to deferred tax balances as of January 1, 1993.
(c) Includes impact of $699 million additional pretax productivity
charge, $450 million after tax, $4.38 per share, to reflect the
estimated additional costs of implementing work force reductions.
(d) In the fourth quarter of 1992, the company adjusted its estimate of
the annual effective tax rate, which increased fourth-quarter
earnings by $5 million, 5 cents per share.
(e) The sum of 1991 quarterly earnings per share amounts do not equal
annual earnings per share as reported in the Consolidated Statement
of Earnings due to the quarterly per-share effects of certain
significant transactions and the issuance of common stock.
(f) The first-quarter 1991 results exclude the cumulative effect of the
accounting change that decreased net earnings $196 million, $1.95 per
share. The effect of adopting SFAS No. 106 on 1991 operating income
was not significant and was included in the results of the fourth
quarter. The first-, second- and third-quarter 1991 results were not
restated.
(g) Includes $35 million, 35 cents per share, after-tax gain on sale of
Sea-Land Orient Terminals Ltd. and $11 million, 11 cents per share,
after-tax loss on the establishment of investment reserves.
(h) Includes impact of $755 million pretax productivity charge, $490
million after-tax, $4.80 per share. The productivity charge
recognized the estimated costs of implementing work force reductions
and productivity improvements.
- 68 -
PAGE 69
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 16. SUMMARIZED FINANCIAL DATA - SEA-LAND SERVICE INC.
During 1987, Sea-Land Service Inc. (Sea-Land) entered into agreements
to sell and lease back by charter three new U.S. built, U.S. flag, D-7 class
container ships. CSX has guaranteed the obligations of Sea-Land pursuant to
the related charters which, along with the container ships, will serve as
collateral for debt securities registered with the Securities and Exchange
Commission (SEC). In accordance with SEC disclosure requirements, summarized
financial information for Sea-Land and its consolidated subsidiaries is as
follows:
Summary of Operations: 1993 1992 1991
--------------------- -------- -------- -------
Operating Revenue $3,246 $3,148 $3,238
Operating Expense - Public 2,879 2,826 2,882
- Affiliated (a) 202 188 210
Productivity/Restructuring Charge (b) 93 17 67
------ ------ ------
Operating Income $ 72 $ 117 $ 79
====== ====== ======
Earnings before Cumulative
Effect of Change in Accounting $ 12 $ 17 $ 50
Cumulative Effect of Change in
Accounting (c) --- --- (23)
------ ------ ------
Net Earnings $ 12 $ 17 $ 27
====== ====== ======
Summary of Financial Position: 1993 1992 1991
------------------------------ ------ ------ ------
Current Assets - Public $ 515 $ 429 $ 574
- Affiliated (a) $ 24 $ 24 $ 107
Other Assets - Public $1,497 $1,492 $1,402
- Affiliated (a) $ 115 $ 123 $ 5
Current Liabilities - Public $ 574 $ 477 $ 475
- Affiliated (a) $ 149 $ 78 $ 85
Other Liabilities - Public $ 673 $ 722 $ 721
- Affiliated (a) $ 113 $ 141 $ 141
Equity $ 642 $ 650 $ 666
(a) Amounts represent activity with CSX affiliated companies.
- 69 -
PAGE 70
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 16. SUMMARIZED FINANCIAL DATA - SEA-LAND SERVICE INC., Continued
(b) In 1993, a $93 million pretax charge was recorded to recognize the
estimated costs of restructuring certain operations and functions.
In 1992, a pretax charge of $17 million was recorded to recognize a
change in revenue and expense recognition methodology. In 1991, a
pretax charge of $67 million was recorded relating to productivity
improvements.
(c) Amount represents cumulative effect on years prior to 1991 of change
in accounting for post-retirement benefits other than pensions, net
of income tax benefit of $12 million.
SL Alaska Trade Company (SLATCO) is a special purpose, unconsolidated
subsidiary of Sea-Land with assets of $116 million in a trust account securing
$106 million of debt maturing on October 1, 2015. The assets of SLATCO are
not available to creditors of Sea-Land or its subsidiaries, nor are the SLATCO
notes guaranteed by Sea-Land or any of its subsidiaries.
NOTE 17. BUSINESS SEGMENTS.
Operating Revenue Operating Income
Years Ended ------------------------- ------------------------
December 31, 1993 1992 1991 1993 1992 1991
------ ------ ------ ------ ------ ------
Transportation $8,767 $8,550 $8,419 $ 868 $ 225 $ 62
Non-Transportation 173 184 217 45 41 37
------ ------ ------ ------ ------ ------
Total $8,940 $8,734 $8,636 913 266 99
====== ====== ====== ------ ------ ------
Other Income 18 3 94
Interest Expense 298 276 306
------ ------ ------
Earnings (Loss) before Income Taxes $ 633 $ (7) $ (113)
====== ====== ======
Identifiable Assets
---------------------------
At December 31, 1993 1992 1991
------- ------- -------
Transportation $12,511 $12,138 $11,862
Non-Transportation 909 911 936
------- ------- -------
Total $13,420 $13,049 $12,798
======= ======= =======
- 70 -
PAGE 71
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 17. BUSINESS SEGMENTS, Continued
The principal components of the business segments are:
Transportation -
Rail, international container-shipping, intermodal and barge
operations. The container-shipping operation reported revenue of $3.2 billion
for 1993, $3.1 billion for 1992 and $3.2 billion for 1991. Approximate
revenue allocation by port of origin for 1993, 1992 and 1991 was: North
America - 41%; Asia - 33%; Europe - 17%; and Other - 9%.
Non-Transportation -
Real estate sales and rentals, resort management and operations,
integrated computer services and eliminations of intersegment sales and
corporate-related items.
- 71 -
PAGE 72
BOARD OF DIRECTORS
- ------------------
Edward L. Addison (1,4)
President and CEO
The Southern Company, Atlanta, Ga.
Elizabeth E. Bailey (2)
John C. Hower Professor of Public Policy and Management
The Wharton School
University of Pennsylvania, Philadelphia, Pa.
Robert L. Burrus, Jr. (4)
Partner and Chairman
McGuire, Woods, Battle & Boothe
Richmond, Va.
Bruce C. Gottwald (4)
President, CEO and COO
Ethyl Corporation, Richmond, Va.
Clifford M. Kirtland, Jr. (1,2)
Retired Chairman of the Board
Cox Communications Inc., Atlanta, Ga.
Robert D. Kunisch (3)
Chairman, President and CEO
PHH Corporation, Hunt Valley, Md.
Hugh L. McColl, Jr. (2)
Chairman, President and CEO
NationsBank Corp., Charlotte, N.C.
James W. McGlothlin (4)
Chairman and CEO
The United Company, Bristol, Va.
Southwood J. Morcott (3)
Chairman, President and CEO
Dana Corporation, Toledo, Oh.
Charles E. Rice (2)
Chairman and CEO
Barnett Banks Inc., Jacksonville, Fla.
William C. Richardson (3)
President
The Johns Hopkins University
Baltimore, Md.
Frank S. Royal, M.D.
Physician
Richmond, Va.
- 72 -
PAGE 73
BOARD OF DIRECTORS, CONTINUED
- -----------------------------
John W. Snow (1)
Chairman, President and CEO
CSX Corporation, Richmond, Va.
William B. Sturgill (1,3)
President
East Kentucky Investment Company,
Lexington, Ky.
Sir Denis Thatcher, Bt MBE TD
Counsellor to the Board
KEY TO COMMITTEES OF THE BOARD
- ------------------------------
1 - Executive
2 - Audit
3 - Compensation & Pension
4 - Organization & Corporate Responsibility
- 73 -
PAGE 74
CSX CORPORATION OFFICERS
- ------------------------
John W. Snow, 54 *
Chairman, President CEO
elected February 1991
Mark G. Aron, 51 *
Senior Vice President-Law and Public Affairs
elected January 1986
James Ermer, 51 *
Senior Vice President-Finance
elected April 1985
Andrew B. Fogarty, 48 *
Vice President-Executive Department
elected February 1990
Daniel S. Green, 47
Vice President-State Relations
since December 1988
Thomas E. Hoppin, 52
Vice President-Corporate Communications
since July 1986
Richard H. Klem, 49 *
Vice President-Corporate Strategy
elected May 1992
James P. Peter, 42
Vice President-Taxes
since June 1993
Woodruff M. Price, 58
Corporate Vice President-Federal Affairs
since May 1988
Alan A. Rudnick, 46
Vice President-General Counsel and Corporate Secretary
since June 1991
James A. Searle Jr., 47
Vice President-Special Projects
since August 1989
Peter J. Shudtz, 45
General Counsel
since September 1991
William H. Sparrow, 50 *
Vice President and Treasurer
elected October 1985
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PAGE 75
CSX CORPORATION OFFICERS, CONTINUED
- -----------------------------------
Richard H. Steiner, 57
Vice President
since February 1992
Gregory R. Weber, 48 *
Vice President and Controller
elected April 1989
Charles J. O. Wodehouse Jr., 46
Vice President-Audit and Advisory Services
since January 1988
* Executive officers of the corporation
CSX SUBSIDIARY OFFICERS
- -----------------------
CSX Transportation Inc.
Alvin R. (Pete) Carpenter, 52 *
President and CEO
since January 1992
Donald D. Davis, 54 *
Senior Vice President-Employee Relations
since April 1992
Jerry R. Davis, 55 *
Executive Vice President and COO
since January 1992
Paul R. Goodwin, 51 *
Senior Vice President-Finance
since April 1992
Sea-Land Service Inc.
John P. Clancey, 49 *
President and CEO
since August 1991
Robert J. Grassi, 47 *
Senior Vice President-Finance and Planning
since October 1991
Wilford W. Middleton Jr., 55 *
Executive Vice President
since January 1990
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PAGE 76
CSX SUBSIDIARY OFFICERS, CONTINUED
- ----------------------------------
Charles C. Raymond, 50 *
Senior Vice President-Operations
since September 1988
CSX Intermodal Inc.
M. McNeil Porter, 60 *
President and CEO
since September 1987
American Commercial Lines Inc.
Michael C. Hagan, 47 *
President and CEO
since May 1992
Customized Transportation Inc.
William C. Bender, 63
President
since October 1983
The Greenbrier
Ted J. Kleisner, 49
President and Managing Director
since January 1989
Yukon Pacific Corporation
William V. McHugh, 50
President and CEO
since January 1989
All of the executive officers listed on pages 74 through 76 have held
executive positions with CSX or its subsidiaries or predecessors since before
1989 except for: Mr. Fogarty, who was the Governor of Virginia's Chief of
Staff from 1986 to the time he joined CSX in October 1989; Mr. Weber, who was
a senior officer of LIGHTNET from March 1986 until April 1989; and Mr. J.
Davis, who was Executive Vice President of Union Pacific Railroad from 1986 to
the time he joined CSX in March 1990.
- 76 -
PAGE 77
CORPORATE INFORMATION
Headquarters
One James Center
901 East Cary Street
Richmond, VA 23219-4031
(804) 782-1400
Market Information
CSX's common stock is listed on the New York, London and Swiss stock
exchanges and trades with unlisted privileges on the Midwest, Boston,
Cincinnati, Pacific and Philadelphia stock exchanges. The official trading
symbol is "CSX."
Description of Common and Preferred Stock
A total of 300 million shares of common stock is authorized, of which
104,143,450 shares were outstanding as of Dec. 31, 1993. Each share is
entitled to one vote in all matters requiring a vote of shareholders. There
are no pre-emptive rights.
A total of 25 million shares of preferred stock is authorized.
Series A consists of 250,000 shares of $7.00 Cumulative Convertible Preferred
Stock. All outstanding shares of Series A Preferred Stock were redeemed as of
July 31, 1992.
Series B consists of 3 million shares of Junior Participating
Preferred Stock, none of which has been issued. These shares will become
issuable only and when the rights distributed to holders of common stock under
the Preferred Share Rights Plan adopted by CSX on June 8, 1988, become
exercisable.
Common Stock Shares Outstanding, Number of Registered Shareholders
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
Number of Shareholders: 59,714 62,820 66,032 66,658 70,318
====== ====== ====== ====== ======
Shares Outstanding as of Jan. 31, 1994: 104,194,525
Common Stock Shareholders as of Jan. 31, 1994: 59,522
- 77 -
PAGE 78
Common Stock Price Range and Dividends Per Share
Year 1993
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High $79.75 $78.13 $80.25 $88.13
Low $67.13 $66.38 $67.88 $74.88
Dividends Per Share $.38 $.38 $.38 $.44
Year 1992
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High $62.00 $67.50 $67.75 $73.63
Low $54.88 $55.50 $56.63 $54.50
Dividends Per Share $.38 $.38 $.38 $.38
Year 1991
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High $39.00 $47.88 $52.63 $58.00
Low $29.75 $36.50 $44.25 $47.75
Dividends Per Share $.35 $.35 $.35 $.38
Year 1990
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High $38.13 $36.00 $36.88 $31.88
Low $31.25 $31.38 $26.00 $26.13
Dividends Per Share $.35 $.35 $.35 $.35
Year 1989
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High $33.63 $35.13 $38.63 $37.50
Low $29.88 $29.75 $32.00 $31.00
Dividends Per Share $.31 $.31 $.31 $.35
- 78 -
PAGE 79
Preferred Stock Price Range and Dividends Per Share
Year 1992**
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High * $380.25 ** **
Low * $380.25 ** **
Dividends Per Share $1.75 $1.75 ** **
Year 1991
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High $173.00 * * *
Low $173.00 * * *
Dividends Per Share $1.75 $1.75 $1.75 $1.75
Year 1990
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High * * $174.00 $173.00
Low * * $174.00 $173.00
Dividends Per Share $1.75 $1.75 $1.75 $1.75
Year 1989
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High $196.50 * $218.00 $222.00
Low $196.00 * $208.00 $222.00
Dividends Per Share $1.75 $1.75 $1.75 $1.75
* No shares traded during the quarter.
** Series A Preferred Stock was redeemed as of July 31, 1992.
- 79 -
PAGE 80
SHAREHOLDER INFORMATION
Shareholder Services
Shareholders with questions about their accounts should write to the
transfer agent at the address below or call (800) 521-5571. Illinois residents
should call (312) 461-6827.
General questions about CSX or information contained in company
publications should be directed to corporate communications at the address or
telephone number shown below.
Security analysts, portfolio managers or other investment community
representatives should contact investor relations at the address or telephone
number shown below.
Transfer Agent, Registrar and Dividend Disbursing Agent
Harris Trust Company
P.O. Box A3309
Chicago, IL 60690
(800) 521-5571
(312) 461-5545, in Illinois
Shareholder Relations
Anne B. Taylor
Administrator-Shareholder Services
CSX Corporation
P.O. Box 85629
Richmond, VA 23285-5629
(804) 782-1465
Corporate Communications
Suzanne S. Walston
Manager-Corporate Communications
CSX Corporation
P.O. Box 85629
Richmond, VA 23285-5629
(804) 782-1406
Investor Relations
Renee D. Weaver
Director-Financial Planning
CSX Corporation
P.O. Box 85629
Richmond, VA 23285-5629
(804) 782-1553
- 80 -
PAGE 81
SHAREHOLDER INFORMATION, Continued
Stock Held in Brokerage Accounts
When a broker holds your stock, it is usually registered in the
broker's name, or "street name." We do not know the identity of individual
shareholders who hold stock in this manner. We know only that a broker holds a
certain number of shares that may be for any number of customers. If your
stock is in a street-name account, you are not eligible to participate in the
company's Dividend Reinvestment Plan. Also, you will receive your dividend
payments, annual reports and proxy materials through your broker. You should
notify your broker, not Harris Trust, if you wish to eliminate unwanted,
duplicate mailings and improve the timeliness on the delivery of these
materials and your dividend payments.
Lost or Stolen Stock Certificates
If your stock certificates are lost, stolen or in some way destroyed,
you should notify Harris Trust in writing immediately.
Multiple Dividend Checks and Duplicate Mailings
Some shareholders hold their stock on CSX records in similar but
different names (e.g., John A. Smith and J.A. Smith). When this occurs, we are
required to create separate accounts for each name. Although the mailing
addresses are the same, we are required to mail separate dividend checks to
each account. Duplicate mailings of annual reports can be eliminated if you
send the labels or copies of the labels from a CSX mailing to Harris Trust.
You should mark the labels to indicate names to be kept on the mailing list
and names to be deleted. However, this action will affect mailings of
financial materials only. Dividend checks and proxy materials will continue to
be sent to each account.
Consolidating Accounts
If you want to consolidate separate accounts into one account, you
should contact Harris Trust for the necessary forms and instructions. When
accounts are consolidated, it may be necessary to reissue the stock
certificates.
Dividends
CSX pays quarterly dividends on its common stock on or about the 15th
of March, June, September and December, when declared by the board of
directors, to shareholders of record approximately three weeks earlier.
Replacing Dividend Checks
If you do not receive your dividend check within 10 business days
after the payment date or if your check is lost or destroyed, you should
notify Harris Trust so payment on the check can be stopped and a replacement
issued.
- 81 -
PAGE 82
SHAREHOLDER INFORMATION, Continued
Dividend Reinvestment
CSX provides dividend reinvestment and stock purchase plans for
shareholders of record and employees as a convenient method of acquiring
additional CSX shares by reinvestment of dividends or by optional cash
payments, or both.
The Shareholders Dividend Reinvestment Plan permits automatic
reinvestment of common stock dividends without payment of any brokerage
commission or service charge. In fact, under the plan, you may elect to
continue receiving dividend payments while making cash payments of up to
$1,500 per month for investment in additional CSX shares without any fee.
For a prospectus or other information on the plan, write or call the
Harris Trust Dividend Reinvestment Department at the address or telephone
number shown on page 80.
Proxy and Financial Supplement to the Annual Report
Proxy materials are forwarded to shareholders in mid-March, and
shareholders are urged to vote, sign and return their Proxy promptly.
Copies of the Financial Supplement to the Annual Report will be
available to shareholders at the annual meeting, or may be reserved by
contacting Renee D. Weaver at the address shown on page 80.
- 82 -
PAGE 83
CSX CORPORATION FORM 10-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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, on the 4th day of
March 1994.
CSX CORPORATION
By: /s/ GREGORY R. WEBER
-----------------------------
Gregory R. Weber
Vice President and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Title
---------- -----
John W. Snow Chairman of the Board, President,
Chief Executive Officer and Director
(Principal Executive Officer)(a)
James Ermer Senior Vice President-Finance
(Principal Financial Officer)(a)
Edward L. Addison Director(a)
Elizabeth E. Bailey Director(a)
Robert L. Burrus Jr. Director(a)
Bruce C. Gottwald Director(a)
Clifford M. Kirtland Jr. Director(a)
Robert D. Kunisch Director(a)
Hugh L. McColl Jr. Director
James W. McGlothlin Director(a)
Southwood J. Morcott Director(a)
Charles E. Rice Director(a)
William C. Richardson Director(a)
Frank S. Royal Director(a)
William B. Sturgill Director(a)
(a) /s/ PETER J. SHUDTZ
---------------------------------
Peter J. Shudtz, Attorney-in-Fact
March 4, 1994
- 83 -
PAGE 84
CSX CORPORATION
Statement of Differences
1. The pages in the electronic filing do not correspond to the pages in
the printed document because there is more material on each page of
the printed document. There are, therefore, fewer printed pages.
The printed Annual Report and Form 10-K also contains numerous
charts, graphs and pictures not incorporated into the electronic Form
10-K.
2. Page references in the electronic Form 10-K refer to pages in the
electronic filing, while page references in the printed document
refer to pages in that document. The information on page 29 of the
printed document, i.e. the 10-K cover sheet and index, has been
repositioned on pages 1 and 2 of the electronic document with the
page references changed as discussed above.
- 84 -