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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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
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 ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. (X)
On January 26, 1996, the aggregate market value of the Registrant's voting
stock held by nonaffiliates (using the New York Stock Exchange closing price)
was $8.8 billion.
On January 26, 1996, there were 210,529,205 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Proxy Statement for the annual meeting of security holders on April 25,
1996, 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
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PART I
1. Business 4-5, 15-30 and Note 15 to
Consolidated Financial
Statements
2. Properties 15-30 and Notes 1, 6
and 8 to Consolidated
Financial Statements
3. Legal Proceedings Note 13 to Consolidated
Financial Statements
4. Not Applicable
PART II
5. Market for the Registrant's
Common Equity and Related
Stockholder Matters 66-70
6. Selected Financial Data 4-5
7. Management's Discussion and 15-30
Analysis of Financial Condition
and Results of Operations
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 61-65
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
Dec. 29, 1995, Dec. 30, 1994 and
Dec. 31, 1993 31
Consolidated Statement of
Cash Flows for the Years Ended
Dec. 29, 1995, Dec. 30, 1994 and
Dec. 31, 1993 32-33
Consolidated Statement of
Financial Position at
Dec. 29, 1995, Dec. 30, 1994 and
Dec. 31, 1993 34
Notes to Consolidated Financial
Statements for the Years Ended
Dec. 29, 1995, Dec. 30, 1994 and
Dec. 31, 1993 36-59
Report of Independent Auditors 60
Index to Exhibits E-1
b. Reports on Form 8-K
None.
(a) Items Number 11, 12 and 13 will be incorporated by reference from the
registrant's 1996 Proxy Statement pursuant to instructions G(1) and
G(3) of the General Instructions to Form 10-K.
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CSX CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Millions of Dollars, Except Per Share Amounts)
1995(a) 1994(b) 1993(c) 1992 1991(d)
------- ------- ------- ------- -------
SUMMARY OF OPERATIONS
Operating Revenue $10,504 $ 9,608 $ 8,940 $ 8,734 $ 8,636
------- ------- ------- ------- -------
Operating Expense 9,075 8,376 7,934 7,769 7,782
Productivity/Restructuring
Charge (e) 257 --- 93 699 755
------- ------- ------- ------- -------
Total Operating Expense 9,332 8,376 8,027 8,468 8,537
------- ------- ------- ------- -------
Operating Income $ 1,172 $ 1,232 $ 913 $ 266 $ 99
------- ------- ------- ------- -------
Net Earnings (Loss) $ 618 $ 652 $ 359 $ 20 $ (76)
======= ======= ======= ======= =======
PER COMMON SHARE(f)
Net Earnings (Loss) $ 2.94 $ 3.12 $ 1.73 $ .10 $ (.38)
======= ======= ======= ======= =======
Cash Dividends $ .92 $ .88 $ .79 $ .76 $ .72
======= ======= ======= ======= =======
Market Price - High $ 46.13 $ 46.19 $ 44.06 $ 36.81 $ 29.00
- Low $ 34.63 $ 31.56 $ 33.19 $ 27.25 $ 14.88
======= ======= ======= ======= =======
PERCENTAGE CHANGE FROM
PRIOR YEAR
Operating Revenue 9.3% 7.5% 2.4% 1.1% 5.3%
======= ======= ======= ======= =======
Operating Expense 11.4% 4.3% (5.2)% (.8)% 15.5%
======= ======= ======= ======= =======
Operating Expense,
excluding Productivity/
Restructuring Charge 8.3% 5.6% 2.1% (.2)% 6.1%
======= ======= ======= ======= =======
Cash Dividends Per Common
Share 4.5% 11.4% 3.9% 6.3% 2.1%
======= ======= ======= ======= =======
SUMMARY OF FINANCIAL POSITION
Cash, Cash Equivalents and
Short-Term Investments $ 660 $ 535 $ 499 $ 530 $ 465
======= ======= ======= ======= =======
Working Capital (Deficit) $(1,056) $ (840) $ (704) $ (859) $ (942)
======= ======= ======= ======= =======
Total Assets $14,282 $13,724 $13,420 $13,049 $12,798
======= ======= ======= ======= =======
Long-Term Debt $ 2,222 $ 2,618 $ 3,133 $ 3,245 $ 2,804
======= ======= ======= ======= =======
Shareholders' Equity $ 4,242 $ 3,731 $ 3,180 $ 2,975 $ 3,182
======= ======= ======= ======= =======
Book Value Per Common
Share(f) $ 20.15 $ 17.81 $ 15.27 $ 14.37 $ 15.54
======= ======= ======= ======= =======
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CSX CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS, CONTINUED
1995(a) 1994(b) 1993(c) 1992 1991(d)
------- ------- ------- ------- -------
EMPLOYEE COUNT(g)
Rail 29,537 29,729 30,461 30,916 33,239
Other 18,428 17,974 17,847 16,681 16,644
------- ------- ------- ------- -------
Total 47,965 47,703 48,308 47,597 49,883
======= ======= ======= ======= =======
See accompanying Notes to Consolidated Financial Statements.
(a) In 1995, the company recognized a net investment gain of $77 million, $51
million after tax, 24 cents per share, on the issuance of an equity
interest in a Sea-Land terminal and related operations in Asia and the
write-down of various investments.
(b) In 1994, the state of Florida elected to satisfy its remaining unfunded
obligation issued in 1988 to consummate the purchase of 80 miles of track
and right of way. The transaction resulted in an accelerated pretax gain
of $69 million and increased net earnings by $42 million, 20 cents per
share.
(c) 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, 26 cents per share. Of this amount, $51 million, 24
cents per share, related to applying the newly enacted statutory income
tax rate to deferred tax balances as of January 1, 1993.
(d) In 1991, the company consummated the sale of a one-third interest in a
Sea-Land terminal in Asia, the sale of the stock of RF&P Corporation and
other investment transactions. These items resulted in a pretax gain of
$80 million and increased net earnings by $32 million, 16 cents per
share.
(e) In 1995, the company recorded a $257 million pretax charge to recognize
the estimated costs of initiatives to revise, restructure and consolidate
specific operations and administrative functions at its rail and
container-shipping units. The restructuring charge reduced net earnings
by $160 million, 76 cents per share. 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, 30 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, $2.19 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, $2.44 per
share.
(f) Amounts per common share for all periods presented have been restated to
reflect the 2-for-1 common stock split distributed to shareholders in
December 1995.
(g) Employee counts based on annual averages.
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CHAIRMAN'S MESSAGE
CSX created $2.5 billion in shareholder value in 1995. More
importantly, the company continued to achieve strong earnings growth and to
create substantial value for the future. Our core transportation units are
aggressive competitors, committed to continuous performance improvement. The
markets we serve are growing, and our future has never looked brighter.
Despite the impressive performance record we achieved in recent years, we have
the capacity and capability to do even better.
To Our Shareholders:
CSX had another outstanding year in 1995. We turned in strong
financial results, strengthened the core earning power of the company and
created superior value for our shareholders.
Despite only moderate economic growth in the United States and
abroad, we built upon our record 1994 performance. Operating revenue rose 9
percent, surpassing $10 billion for the first time. Excluding a second-quarter
restructuring charge, operating income also set a record, up 16 percent from
the previous year.
The $257 million pretax charge primarily covered the cost of
enhancing our railroad's communications network, consolidating operations at
our container-shipping unit's new headquarters and reflagging five vessels.
These initiatives are sound investments that will yield greater efficiencies.
CSX earned $618 million, or $2.94 per share, in 1995, compared with
$652 million, or $3.12 per share, the previous year, including the 1995 charge
and one-time gains recorded both years. Without these unusual items, earnings
per share were $3.46, up 18 percent from 1994's record level. All per-share
figures reflect 1995's 2-for-1 stock split.
Creating Superior Value
We are proud of these strong financial results and what they say
about the progress taking place throughout CSX. At each of our core
transportation units, we are reducing costs, improving safety and productivity
and raising customer service to new levels. In the process, we are creating
significant value for the long term by building stronger, better managed, more
competitive and more profitable organizations.
The stock market recognized the value we created in 1995, as CSX
stock generated a total return of 34 percent during the year, including
dividends. More important, however, are the expectations we built for further
progress in 1996 and beyond.
I noted in last year's report that the market value of CSX stock had
doubled during the first half of this decade, and that we intended to match or
exceed that performance between 1995 and the end of the decade. Our
performance in 1995 puts us on course to meet, if not exceed, that target.
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Pro Forma Net Earnings
------------------------------------------------
(Millions of Dollars, Except Per Share Amounts*)
1995 1994 1993
----------- ----------- -----------
Per Per Per
Description (All After Tax) Amt. Share Amt. Share Amt. Share
--------------------------- ---- ----- ---- ----- ---- -----
Net Earnings as Reported $618 $2.94 $652 $3.12 $359 $1.73
Net Gains From Investment
Transactions (51) (.24) (42) (.20) --- ---
Statutory Tax Rate Adjustment --- --- --- --- 51 .24
Restructuring Charges 160 .76 --- --- 61 .30
---- ----- ---- ----- ---- -----
Pro Forma Total $727 $3.46 $610 $2.92 $471 $2.27
==== ===== ==== ===== ==== =====
* All per-share amounts reflect stock split.
Outstanding Rail Results
Our railroad, CSX Transportation Inc. (CSXT), turned in a tremendous
performance for the year. Excluding its second-quarter charge, CSXT generated
record operating income in excess of $1 billion, while achieving its best
operating ratio and safety performance ever. These results reflect the
discipline and continued success of the railroad's Performance Improvement
Teams, which have taken $500 million out of CSXT's cost base since 1992.
Additional reductions of more than $100 million are targeted for 1996.
CSXT's management team has committed itself to being a
high-performance organization, dedicated to the highest standards of
operational excellence. In simple terms, that means providing the safest and
most reliable rail transportation possible. The company has implemented a
strategy to take operational excellence from vision to reality, and we're
already seeing great results.
Two areas of primary focus for our railroad in 1996 will be service
reliability and asset utilization - both critical and interrelated drivers of
growth, customer satisfaction and profitability.
During 1995, CSXT put in place an integrated service planning process
and redesigned operations to improve service reliability. The railroad also
began restructuring its operating divisions into service lanes to link field
operations with centralized, cross-functional teams responsible for such
activities as crew calling, customer service and dispatching. Combining the
focus and flexibility of local teams with the efficiencies of centralized
support functions will allow CSXT to raise service reliability and asset
utilization to new heights in 1996.
CSXT has made dramatic improvements in asset utilization in recent
years. For example, the railroad handled 14 percent more loads with its own
car fleet in 1995 than it did in 1993, even though it reduced the size of the
fleet by 8 percent during the same period. While that's dramatic improvement,
we're still getting as little as one paid load per month on some types of
equipment. We can and will do better, working closely with our customers and
other railroads.
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Car utilization alone has untapped potential that will mean millions
of dollars in additional savings and earnings for CSXT in the years ahead. In
fact, each one-day reduction in the average car cycle (the time it takes a
rail car to pick up a load, deliver it and return to pick up another load)
enables CSXT to handle 83,000 additional loads a year with its overall car
fleet - without investing a single dollar in additional equipment.
In addition to increasing productivity and lowering costs, better
utilization of physical assets translates directly into enhanced customer
service and, thus, greater demand for that service. While working hard to
improve the quality and reliability of its product, CSXT also will strive
during 1996 to reap the full value of its service.
After years of steady progress cutting costs and improving
productivity - an effort that certainly will continue - CSXT is committed to
improving its top line, both by attracting new business and by implementing
selective rate increases that more accurately reflect the true value of its
service. We expect CSXT's rates will trend upward in 1996 and beyond, as the
railroad begins to reverse price erosion that has caused the rail industry's
inflation-adjusted rates to decline 39 percent over the past 10 years.
Historic Year for Sea-Land
In many ways, 1995 was a momentous year for our container-shipping
and logistics unit, Sea-Land Service Inc. (Sea-Land). Not counting its $61
million portion of the second-quarter restructuring charge, Sea-Land generated
record operating income of $238 million. The company moved 1.4 million
container loads, a 12 percent increase over the prior year's level, and
increased rates by 2 percent on average.
In May, Sea-Land and Maersk Line agreed to share vessels and
terminals around the globe, thus leveraging the resources of two of the
largest and most respected container-shipping companies in the world. When
fully implemented in 1997, the operating alliance will solidify Sea-Land's
position as the leading provider of containerized transportation and logistics
services. It also will produce significant operating income beginning in 1997
and will allow Sea-Land to offer its customers faster transit times, better
flexibility and more direct ports of call.
Sea-Land successfully implemented its global integration program
during the first half of the year, relocating corporate and divisional
headquarters to Charlotte, N.C. The consolidation improved coordination and
communication, both within the organization and with customers and suppliers,
and is expected to generate annual savings of more than $14 million.
During the year, the company also made important progress in reducing
its vessel operating costs by reflagging five U.S.-flag vessels to the
registry of the Marshall Islands, while continuing to support ongoing efforts
to reform U.S. maritime policy. The reflagging will produce annual operating
savings of $3 million per ship.
Sea-Land's ongoing commitment to reduce its cost base through process
redesign produced more than $120 million in cost savings in 1995, bringing the
four-year total to more than $500 million. Performance Improvement Teams have
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targeted another $130 million in expense reductions in 1996, in such areas as
terminal efficiency, inland transportation and vessel operating costs.
We believe the progress Sea-Land made and the initiatives it
implemented in 1995 leave the company well prepared for the changes the
container-shipping industry faces in the near future. Though the exact course
is uncertain, the U.S. maritime industry almost certainly will undergo some
degree of deregulation, possibly beginning this year. We believe this will
produce significant long-term benefits for carriers and shippers alike.
Furthermore, Sea-Land is fully able to compete successfully in deregulated
markets; in fact, nearly two-thirds of the company's operations would not be
affected by U.S. deregulation.
Difficult Year for Intermodal
For the intermodal industry and for CSX Intermodal Inc. (CSXI), 1995
was a difficult and disappointing year. Overcapacity in the trucking industry
led to intense competition and a decline in CSXI's trailer volumes. This was
only partially offset by strength in both international and transcontinental
domestic container traffic. Though overall traffic was flat compared with the
previous year, fixed rail costs in CSXI's principal trailer lanes and higher
equipment expenses resulted in reduced profits. Operating income fell from $61
million in 1994 to $30 million in 1995.
CSXI responded aggressively to market conditions by implementing
cost-cutting initiatives and service enhancements. The company cut total
employment by 16 percent and reduced its trailer fleet by 40 percent. In early
1996, CSXI announced it was consolidating staffs and more closely aligning its
operations with those of CSXT and Sea-Land in order to maximize its potential
in what we view as an important growth market. We are confident that these and
other initiatives will bring about strong improvement in CSXI's 1996 earnings.
Terrific Barge Results
Our barge company, American Commercial Lines Inc. (ACL), capitalized
on excellent market conditions in 1995, as strong global demand for grain
boosted revenue. The company took full advantage of favorable rates by
repositioning assets to capture higher-margin traffic along the inland
waterways.
ACL's operating income soared to $106 million, an increase of 68
percent over 1994's level. In addition to the favorable market conditions,
this new level of performance reflects the re-engineering and organizational
improvements the company has undergone in recent years.
The company also set the stage for further earnings growth by
agreeing to acquire the marine assets of Conti-Carriers & Terminals Inc. The
transaction, which was completed in January 1996, increased ACL's fleet by 400
barges and eight towboats. The company also expanded its presence in South
America, where it is the largest provider of barge services, by initiating
operations on the Parana River.
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Looking to the Future
In 1996, each of our core transportation units intends to improve
upon last year's financial performance, while continuing to build the
foundation for further progress in the years ahead. CSX is well-positioned to
produce significantly higher earnings in 1996 and the foreseeable future. We
recognize the need to run our businesses at peak performance while building
for the future. Thus, we are focused both on the present requirements of our
businesses and on building for even better performance in the years ahead.
While continuing to improve the productivity of our physical assets,
we are committed to enhancing our "people power" by focusing on the
professional development of our employees and by sharing intellectual capital
among our transportation businesses. This is crucial to developing and
maximizing our capabilities and taking utmost advantage of emerging
transportation opportunities.
Our customers are discovering logistics management is a strategic
platform that offers tremendous potential for reducing costs and creating
competitive advantages. As global companies strive to reduce inventories,
source globally and focus on core competencies, they increasingly are looking
to innovative logistics providers who can manage their entire supply chain -
from inbound raw materials and supplies to finished products. We believe CSX
is uniquely positioned to provide an array of value-added solutions for our
customers' increasingly complex and sophisticated distribution requirements.
We are proud of the reputations our transportation units have built
as leaders and innovators, and of the recognition CSX has achieved as a
premier provider of transportation services on a global scale. We have the
most comprehensive collection of transportation assets, systems and expertise
anywhere. Furthermore, we have the vision, the means and the will to create
superior value for our customers, our employees and our shareholders. And we
intend to make the most of it.
Special Thanks
In closing, I want to pay tribute to Sir Denis Thatcher, who has
retired after seven years of exemplary service to CSX as Counsellor to the
Board of Directors. Sir Denis brought to the board a unique perspective on the
growing complexities of the business world, and his contributions helped guide
CSX in its development as a global transportation company. We will miss his
astute observations and wise counsel.
Finally, I want to extend my special thanks to the nearly 48,000 CSX
employees whose hard work and dedication made possible our outstanding
performance in 1995. I know we can continue to count on their support as we
strive to make CSX the finest transportation company in the world.
Sincerely,
/s/ JOHN W. SNOW
- ----------------
John W. Snow
Chairman and Chief Executive Officer
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PUBLIC POLICY STATEMENT
Change was the hallmark of 1995 legislative sessions in Washington
and statehouses across the nation. The promise of the 1994 elections began to
be fulfilled, resulting in decisions more favorable to business, job creation
and future economic growth than at any time in recent memory. On the other
hand, much remains to be done.
The close of the year brought one historic change. The Interstate
Commerce Commission, which regulated much of the nation's commerce for more
than a century, was abolished. A new Surface Transportation Board, which will
have certain authority to regulate railroads, was established as an
independent entity at the U.S. Department of Transportation. The archaic laws
placing restraints on intermodal transportation were abolished. Meanwhile,
Congress agreed to take up maritime reform, which is critical to maintaining a
U.S.-flag fleet, but did not complete that legislation. Tort reforms were
adopted in some states, but sadly, no real progress was made to modernize the
Federal Employees Liability Act (FELA), which governs rail worker accidents
and creates real barriers to improving safety.
Maritime Issues
In 1996, Congress is expected to take up proposals to phase out the
Federal Maritime Commission and the deregulate the maritime industry. The
current regulatory system impedes the use of contracts and global arrangements
between carriers and their customers.
CSX took the lead in the debate on deregulation last year, and
continues to support a staged reduction in maritime regulation that will avoid
placing American-liner carriers at a competitive disadvantage or compromising
vital national interests.
There may be a push to repeal the "Jones Act", the law covering
America's coastal and domestic waterborne commerce in 1996. We believe such
efforts would be misguided and will once again fail. The Jones Act carriers,
who only operate within the United States, should not be made to compete with
foreign carriers who choose not to comply with our basic wage, safety and
health laws, especially since foreign countries exclude U.S. carriers from
their own domestic trades.
CSX also continues to strongly advocate maritime reform that provides
for reasonable payments to help offset the higher costs of operating under the
U.S. flag. In the absence of such support, U.S. carriers must be allowed to
reflag vessels, while making them available for defense purposes in time of
national emergency. Without such change, the United States will soon be
without an adequate U.S.-flag fleet to serve our country in emergencies.
Railroad Issues
Consistent with the move toward less government, legislation was put
forward in 1995 to scale back federal subsidies for Amtrak. Final
consideration of the legislation should take place in 1996. CSX supports
efforts to assist Amtrak in restructuring its operations and routes. We seek
fair treatment to protect freight carriers form liability arising from
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passenger operations and to compensate freight carriers fully for the use of
their systems.
We also support the concept of public commuter rail service where it
is properly funded, well planned and does not hurt our efforts to improve rail
freight service. However, forcing a combination of today's rail freight
demands with those of urban areas is a compromise for both sets of needs that
inevitably leads to dissatisfied customers. Ultimately, more commuters would
return to already congested highways to face more large trucks hauling
freight. CSX believes that the best option is to develop separate commuter
systems where feasible along existing rail rights of way. Clearly, such an
approach offers a "win-win" opportunity for the public authorities, commuters
and freight customers.
Although some progress was made in 1995 to reform regulation dealing
with rail safety, we hope this year will bring fundamental change. CSX is an
industry leader in train accident and personal injury prevention and we are
committed to being the safest railroad in the nation. We believe rail
management, working together with railroad employees, knows the best way to
further improve safety. Too much of today's regulation is based on rules that
constrict the introduction of new approaches to improving rail safety
performance. More broadly defined, performance-based approaches will foster a
more creative and efficient system of regulation.
CSX sets aggressive safety improvement targets each year and meets or
exceeds those targets. Our goal is to eliminate accidents and injuries. In
the unfortunate event an accident occurs, our priority is discovering the
cause of the accident and assisting the accident victim. Unfortunately,
certain aspects of our court system today work contrary to this philosophy,
resembling a lottery that benefits neither workers nor the company, but only a
small number of lawyers. Over the years, we have seen some reform in the
courts at the state level, and we will push for further reforms in 1996. We
also will continue efforts to reform FELA, as it impedes our efforts to
improve the work place.
Another target for 1996 will be our program to work closely with the
states in our territory to improve rail-highway grade crossing safety. We
must close redundant crossings and continue public education efforts about
safety and rail-highway grade crossings.
The structure of the railroad industry continues to change. One
large merger of western carriers has been approved and another is proposed.
Whether there will be other mergers is unclear. CSX fully intends to protect
its interests in this changing environment.
Public Policy Outlook
CSX will continue to advocate less government involvement in the
lives of all Americans. Businesses like ours face fierce competition every
day at home and around the world. The discipline of the marketplace demands
the improvement of our services and lower costs.
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PAGE 13
CSX CORPORATION AND SUBSIDIARIES
FINANCIAL POLICY
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. Actual results may differ materially from those objectives. Factors
that might negatively affect future performance include: general economic
downturns, which may limit demand and pricing; labor matters, which may impact
costs or service; adverse weather conditions, which may impact operating
expense; and changes in regulatory environmental policy, which may impact the
costs and feasibility of certain operations and commodity shipments.
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. 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
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 work to manage its business operations in
a manner consistent with meeting this objective, including monitoring its debt
levels and the amount of fixed charges it incurs.
Financial instruments: From time to time the company may employ
financial instruments as part of its risk management program. The objective
would be to manage specific risks and exposures and not to actively trade
financial instruments for profit or loss.
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PAGE 14
A Message to Shareholders on CSX's Financial Principles, Continued
Dividends: The cash dividend is reviewed regularly in the context of
inflation and competitive dividend yields. The dividend may be increased
periodically if cash flow projections and reinvestment opportunities show the
higher payout level will best benefit shareholders.
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 maintain internal controls 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. Controls include accounting tests,
written policies and procedures and a code of corporate conduct routinely
communicated to all employees. An internal audit staff monitors 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 LLP,
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 60.
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PAGE 15
ANALYSIS OF OPERATIONS
CSX Corporation focuses on increasing economic value and generating
higher returns to shareholders. CSX defines economic value as earning a return
on invested capital greater than our cost of capital, and generating free cash
flow and operating income that exceed annual targets. In providing the various
services described below, each business unit shares these important goals.
CSX Transportation Inc. (CSXT) provides rail freight transportation
and distribution services over 18,645 route miles in 20 states in the East,
Midwest and South; and in Ontario, Canada. CSXT accounted for 46% of CSX's
1995 total operating revenue and 74% of operating income. These percentages
and those of CSX's other units exclude the effect on income of a
second-quarter restructuring charge recorded at CSXT and Sea-Land.
Sea-Land Service Inc. (Sea-Land) is a worldwide leader in
container-shipping transportation and logistics services. The carrier operates
28 preferential and exclusive marine terminal facilities across its global
network. In addition, Sea-Land operates a fleet of 105 container ships and
approximately 200,000 containers in U.S. and foreign trade and serves 120
ports throughout the world. Sea-Land accounted for 38% of total operating
revenue and 17% of operating income.
American Commercial Lines Inc. (ACL) is the nation's leader in barge
transportation, operating 116 towboats and more than 3,200 barges on U.S. and
South American waterways. ACL contributed 5% of total operating revenue and 7%
of operating income.
CSX Intermodal Inc. (CSXI) provides transcontinental intermodal
transportation services and operates a network of dedicated intermodal
facilities across North America. CSXI contributed 9% of total operating
revenue and 2% of operating income.
Customized Transportation Inc. (CTI) is a provider of contract
logistics services, including distribution, warehousing, processing and
assembly and just-in-time delivery. In 1995, CTI provided 2% of total
operating revenue and 1% of total operating income.
Non-Transportation: Resort holdings include the Mobil Five-Star and
AAA Five-Diamond rated hotel, 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. CSX
holds a majority interest in Yukon Pacific Corporation, which is promoting
construction of the Trans-Alaska Gas System to transport Alaska's North Slope
natural gas to Valdez for export to Asian markets.
1995 Overview
CSX achieved strong results in 1995. Several factors combined to
produce a significant increase in cash provided by operating activities and
stock value. A 9% increase in operating revenue contributed to the company's
three-year annual revenue growth rate of 7%. In 1995, CSX also continued its
stringent control over operating expense, resulting in an annual growth rate
of only 6% over the last three years, excluding restructuring charges. Capital
- 15 -
PAGE 16
invested for the replacement of existing operating assets was lower than
depreciation expense. In addition, investments for incremental-return-
producing projects had rates of return well above the company's cost of
capital.
As a result of the company's outstanding performance in recent years
and continued strong prospects, the board of directors approved an 18%
increase in the quarterly dividend and a 2-for-1 stock split in the fourth
quarter. All per-share amounts in the following text have been adjusted to
reflect the stock split.
Discussion of Earnings
Net earnings in 1995 totaled $618 million, $2.94 per share, compared
with $652 million, $3.12 per share, in 1994, and $359 million, $1.73 per
share, in 1993.
The 1995 net earnings include the effect of a second-quarter
restructuring charge to recognize CSXT's write-down of obsolete
telecommunications assets and employee separations. The charge also includes
Sea-Land's reflagging of five vessels and the consolidation of its corporate
and divisional headquarters in Charlotte, N.C. The results also include a
fourth-quarter gain from the issuance of an equity interest in a Sea-Land
terminal and related operations in Asia. Earnings for 1994 included the
accelerated recognition of the remaining gain on a 1988 sale of track in south
Florida. The 1993 results included the effect of a restructuring charge to
recognize the expense associated with reorganizing and downsizing Sea-Land's
European and North American operations. Also in 1993, CSX recognized
additional income tax expense related to applying the newly enacted statutory
income tax rate to deferred tax balances as of January 1, 1993.
RESTRUCTURING CHARGES
---------------------
(Millions of Dollars)
-------------------
1995 1993
---- ----
Provision:
Write-Down of Obsolete Assets $ 163 $---
Separation & Labor Protection Costs 80 32
Lease & Facility Exit Costs 14 61
----- ----
Total Provision $ 257 $ 93
----- ----
Cumulative Payments and Other Reductions:
Write-Down of Obsolete Assets $(163) $---
Separation & Labor Protection Costs (20) (32)
Lease & Facility Exit Costs (5) (60)
----- ----
Balance December 29, 1995 $ 69 $ 1
===== ====
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PAGE 17
Consolidated operating revenue increased $896 million, 9% higher than
in 1994. Sea-Land contributed $516 million of the additional revenue,
resulting from higher volumes in its major trade lanes and moderate rate
increases. CSXT generated $194 million of the revenue increase, due to
improved pricing and merchandise traffic mix. ACL produced $105 million in
additional revenue, capitalizing on strong international demand for U.S.
grain.
In 1994, operating revenue increased $668 million from 1993.
Sea-Land's revenue increased $246 million, driven by higher volumes that were
partly offset by a slight decrease in rates. Rail operating revenue grew $245
million from a rebound in export coal tonnage and exceptional merchandise
traffic. CSX's intermodal unit increased operating revenue by $109 million in
1994 because of a sharp increase in domestic loads, as well as increased
volumes from international traffic.
Consolidated operating expense in 1995 increased $956 million,
primarily due to higher volumes and the $257 million pretax restructuring
charge incurred by CSXT and Sea-Land. All CSX units contributed to the
company's efforts to control costs through performance improvement
initiatives. The 1994 operating expense rose $349 million over 1993's level,
which included a $93 million pretax restructuring charge for Sea-Land.
Consolidated operating income for both 1995 and 1994 was $1.2
billion, compared with $913 million in 1993. Absent restructuring charges in
1995 and 1993, operating income would have been $1.4 billion, $1.2 billion and
$1 billion in 1995, 1994 and 1993, respectively.
Other income totaled $72 million, compared with $55 million in 1994
and $18 million in 1993. Other income for 1995 included a $77 million pretax
net investment gain, primarily from the issuance of a 10% equity interest in a
Sea-Land terminal facility and related operations in Asia. In 1994, other
income included the $69 million accelerated pretax gain on the sale of track
in south Florida. The company will continue to examine such opportunities
where they are consistent with overall operating and capital objectives.
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PAGE 18
CSX CORPORATION AND SUBSIDIARIES
--------------------------------
(All Tables in Millions of Dollars)
Table 1. TRANSPORTATION OPERATING RESULTS
1995
----
Container Elim./
Total Rail Shipping Intermodal Barge Other
------ ------ --------- ---------- ------ -----
Operating Revenue $10,317 $4,819 $4,008 $ 926 $ 554 $ 10
------- ------ ------ ----- ----- -----
Operating Expense
Labor & Fringe 3,135 1,847 934 85 122 147
Materials, Supplies &
Other (a) 2,634 941 1,166 122 232 173
Building & Equipment
Rent 1,135 373 636 72 20 34
Inland Transportation 970 --- 730 602 --- (362)
Depreciation 589 367 139 14 32 37
Fuel 474 227 165 1 42 39
Restructuring Charge 257 196 61 --- --- ---
------- ------ ------ ----- ----- -----
Total Expense 9,194 3,951 3,831 896 448 68
------- ------ ------ ----- ----- -----
Operating Income (Loss) $ 1,123 $ 868 $ 177 $ 30 $ 106 $ (58)
======= ====== ====== ===== ===== =====
Operating Income (Loss)(b) $ 1,380 $1,064 $ 238 $ 30 $ 106 $ (58)
======= ====== ====== ===== ===== =====
Operating Ratio(b) 77.9% 94.1% 96.8% 80.9%
====== ====== ===== =====
Average Employment 29,537 9,168 1,434 2,914
====== ====== ===== =====
Property Additions &
Present Value of New
Operating Leases $ 1,160 $ 773 $ 275 $ 57 $ 36 $ 19
======= ====== ====== ===== ===== =====
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PAGE 19
1994
----
Container Elim./
Total Rail Shipping Intermodal Barge Other
------ ------ --------- ---------- ------ -----
Operating Revenue $9,410 $4,625 $3,492 $ 902 $ 449 $ (58)
------ ------ ------ ----- ----- -----
Operating Expense
Labor & Fringe 3,006 1,828 859 89 104 126
Materials, Supplies &
Other (a) 2,314 918 919 120 191 166
Building & Equipment
Rent 1,088 374 600 67 19 28
Inland Transportation 839 --- 676 553 --- (390)
Depreciation 564 352 132 11 32 37
Fuel 421 224 119 1 40 37
------ ------ ------ ----- ----- -----
Total Expense 8,232 3,696 3,305 841 386 4
------ ------ ------ ----- ----- -----
Operating Income (Loss) $1,178 $ 929 $ 187 $ 61 $ 63 $ (62)
====== ====== ====== ===== ===== =====
Operating Income (Loss)(b) $1,178 $ 929 $ 187 $ 61 $ 63 $ (62)
====== ====== ====== ===== ===== =====
Operating Ratio(b) 79.9% 94.6% 93.2% 86.0%
====== ====== ===== =====
Average Employment 29,729 9,437 1,626 2,644
====== ====== ===== =====
Property Additions &
Present Value of New
Operating Leases $ 958 $ 675 $ 199 $ 50 $ 15 $ 19
====== ====== ====== ===== ===== =====
- 19 -
PAGE 20
1993
----
Container Elim./
Total Rail Shipping Intermodal Barge Other
------ ------ --------- ---------- ------ -----
Operating Revenue $8,767 $4,380 $3,246 $ 793 $ 417 $ (69)
------ ------ ------ ----- ----- -----
Operating Expense
Labor & Fringe 2,922 1,797 822 81 107 115
Materials, Supplies &
Other (a) 2,158 891 828 108 175 156
Building & Equipment
Rent 1,034 369 559 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 Expense 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 30,461 9,440 1,510 2,747
====== ====== ===== =====
Property Additions &
Present Value of New
Operating Leases $ 818 $ 576 $ 172 $ 50 $ 13 $ 7
====== ====== ====== ===== ===== =====
(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. This amount was
$65 million, $64 million and $64 million in 1995, 1994 and 1993,
respectively, and the corresponding charge is included in
Eliminations/Other.
(b) Excludes restructuring charges.
Discussion of Cash Flows
Cash provided by operating activities totaled $1.6 billion in 1995,
compared with $1.3 billion in 1994 and $962 million in 1993. Together with
proceeds from disposition of properties, the cash provided by operating
activities was adequate to fund property additions and cash dividends in 1995,
1994 and 1993.
- 20 -
PAGE 21
Payments provided for in the 1995 restructuring charge covered the
separations of approximately 500 employees during the year. Future payments,
totaling $69 million, will cover the remaining 300 separations and
facility-related exit costs. Most of these payments will be completed by 1999.
The savings associated with these payments will begin to occur during the
first half of 1996. The 1995 restructuring charge also included the
recognition of $168 million in non-cash costs, consisting of the write-down of
obsolete telecommunications assets and lease exit costs.
Payments related to the 1991/1992 productivity charges, which
provided for two-member crew agreements on through trains, affected cash
provided by operations during the past three years. These agreements, which
were successfully negotiated by the end of 1993, provided for the buyout of
excess positions, a productivity fund and short-crew allowances. The company
has paid $853 million related to these productivity charges to date. The rail
unit is realizing the efficiencies and savings anticipated from the reduction
of train-crew sizes. Payments also were made in conjunction with the
container-shipping unit's European and North American restructurings, as
well as other rail unit separation programs.
Consistent with its original estimates, CSX expects a significant
decrease in the level of future annual cash payments for these productivity
and restructuring costs. In management's opinion, existing reserves are
adequate for those projected payments.
Capital commitments totaled $1.2 billion in 1995, compared with $991
million in 1994 and $876 million in 1993. The increase in 1995's capital is
primarily due to the purchase of five Champion Class vessels, three of which
were delivered in 1995, and the replacement or addition of 6,000 freight cars.
These totals include committed capital in the form of new and renewed
equipment and facility leases. The present value of future payments on these
leases totaled $57 million in 1995, $116 million in 1994 and $108 million in
1993. CSX continued to place a high priority on extracting maximum value from
assets by improving asset utilization and enhancing productivity through
Performance Improvement Team initiatives. Going forward, capital commitments
as a percentage of cash generated from operations is expected to decrease.
Cash dividends per common share rose to 92 cents, compared with 88
cents in 1994 and 79 cents in 1993. The annualized dividend rate increased 18%
from 1994.
In 1996, the company expects to continue generating significant cash
flow from transportation operations to fund working capital, dividend
payments, capital expenditures and debt obligations. CSX also plans to
generate cash from the lease or disposition of rights of way, real estate or
other assets no longer needed in its core businesses. The company expects to
have access to financial markets, if necessary, to fund operations, working
capital or other cash requirements.
Discussion of Financial Position
Cash, cash equivalents and short-term investments totaled $660
million at December 29, 1995. This compares with $535 million at year-end
1994.
- 21 -
PAGE 22
The working capital deficit increased $216 million during 1995,
primarily due to higher current maturities of long-term debt. The company had
year-end working capital deficits of $1.06 billion in 1995 and $840 million in
1994.
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.
Long-term debt decreased approximately $400 million from 1994 to $2.2
billion at December 29, 1995, due to a higher level of scheduled maturities
and use of the company's increased cash flow to reduce outstanding debt.
The 1995 ratio of debt-to-total capitalization dropped to 34% from
41% in 1994. Excess cash provided by operations and property dispositions
generated the cash available to reduce the outstanding long-term debt. CSX
expects to continue reducing long-term debt over the next two to three years.
Other Matters
Environmental management is an important part of CSX's business
planning. CSX focuses on finding the most efficient, cost-effective solutions
for dealing responsibly with waste materials generated from past and present
business operations. The solutions range from simple recycling to
sophisticated remediation.
The company is a party to numerous regulatory proceedings and private
actions. These arise from laws governing the remediation of contaminated
property, such as the federal Superfund statute, hazardous waste and
underground storage tank laws, and similar state and local statutes.
The rail unit has been identified, together with other parties, as a
potentially responsible party in a number of governmental investigations and
actions relating to environmentally impaired sites. Such sites frequently
involve other waste generators and disposal companies to whom costs associated
with site investigation and cleanup may be allocated or from whom such costs
may be recovered.
The wide range of costs of the possible remediation alternatives,
changing cleanup technology, the length of time over which these matters
develop and evolving governmental standards make it impossible to estimate
precisely the company's potential liability for the costs associated with the
assessment and remediation of contaminated sites.
At year-end 1995, the rail unit had identified and maintained
reserves for approximately 108 sites, at which the company is or may be liable
for remediation costs associated with alleged contamination or for violation
of environmental requirements. The company reviews at least quarterly its
environmental reserves to determine whether additional provisions are
necessary. Based on current information, the company believes its reserves are
adequate to meet remedial actions and to comply with present laws and
regulations. Although CSX's financial results could be significantly affected
in any quarterly reporting period in which the company incurred substantial
- 22 -
PAGE 23
remedial expenses at a number of these and other sites, CSX believes the
ultimate liability for these matters will not materially affect its overall
results of operations and financial condition.
Total expenditures associated with protecting the environment and
remedial environmental cleanup and monitoring efforts amounted to $43 million
in 1995. This compares with $39 million in 1994 and $42 million in 1993.
During 1996, the company expects to incur remedial environmental expenditures
in the range of $40 to $50 million.
CSX employs risk management strategies to address business and
financial market risks, but there are no significant hedging or derivative
financial instruments used in its risk management program. The company may
alter this position in response to evolving business and market conditions.
The company periodically assesses the interest rate sensitivity of
its portfolio of investments and borrowings, and may use financial instruments
to manage the net interest exposure.
Similarly, CSX monitors fuel oil prices for volatility and
fluctuations in the value of the U.S. dollar in foreign exchange markets.
While the company is not currently hedging these risks with financial
instruments, on occasion it may do so. CSX's objective in employing such
strategies would be to manage operating risks and exposures, not to actively
trade financial instruments.
Rail Results
CSXT achieved an all-time record year for operating income, excluding
its restructuring charge. Rail operating income increased 15% from 1994 and
43% from 1993, excluding the charge in 1995. The results reflect higher
volumes in virtually all merchandise and commodity groups, selected rate
increases and continued success in controlling costs.
Strong volumes and improved pricing produced operating revenue of
$4.8 billion, a 4% increase over 1994 and a 10% increase over 1993.
Shipments of coal, CSXT's major commodity, remained strong in 1995.
Largely due to a strong export market, coal tonnage increased to 158.5 million
tons vs. 153.7 million tons in 1994 and 144.1 million tons in 1993.
Total merchandise traffic rose to 2.9 million carloads, 4% over 1994
and 10% over 1993.
Chemical traffic rose 5% over a strong 1994 and 9% over 1993. The
1995 increase was largely driven by strong demand for textile chemicals and
raw materials used to produce plastic soft drink bottles.
Record corn and soybean harvests and strong domestic feed grain
demand brought 6% increases in carloads and revenues for agricultural products
over 1994's results. The increased volume is largely due to growing worldwide
demand for grain, as developing countries improve their standards of living.
Compared with 1993, carloads in 1995 remained level while revenue increased
3%.
- 23 -
PAGE 24
Strong foreign demand for phosphates and fertilizer and an increase
in CSXT's market share in Florida's Bone Valley led to a 9% increase in
carloads and an 11% increase in revenue over 1994. The 1995 carloads increased
21% over 1993, while revenue increased 10% over that year.
On the expense side, CSXT continued to tightly control costs.
Excluding the second-quarter charge, rail operating expense rose only 2% over
1994 and 3% over 1993. The railroad drove down its operating ratio (the ratio
of operating expense to operating revenue) from 79.9% to 77.9%, reflecting a
broad organizational commitment and the continued success of its Performance
Improvement Teams (PITs). PITs eliminated more than $350 million in expenses
from 1993 through 1995, while revenues increased by over $430 million. In
1996, the railroad is targeting an additional $100 million in cost reductions
through PIT initiatives.
The railroad has been moving to two-member crews on through trains.
At year-end 1995, the average crew size was 2.4 members, including yard and
local crews. CSXT is working to achieve an average crew size of 2.25 members
in the next few years. In 1993, the crew size average was 2.7.
Labor and fringe benefits expense increased just 1% to $1.85 billion,
vs. $1.83 billion in 1994 and $1.80 billion in 1993. The company is engaged in
national labor negotiations that may result in competitive increases in labor
and fringe benefits in 1996.
CSXT ended the year with its best-ever employee safety performance, a
28% improvement over 1994, reducing its injury incident frequency to 1.7 per
100 full-time employees (200,000 man hours). The rail unit experienced a 13%
reduction in train accidents. Five years ago, the injury incident frequency
was 5.0 and accidents were 66% more common. In addition to making the work
environment safer, the results of this effort include reducing unnecessary
expense.
Over the past several years, CSXT has achieved one of the best
employee safety improvement performances among Class I railroads. To reward
employee contribution to this achievement, the railroad initiated a "Take
Stock in Safety" program, which awards CSX common stock to employees for team
performance that achieves a 1.5 or lower injury frequency. Of 39 teams
representing transportation, mechanical and engineering departments, 46%
qualified for the "Take Stock in Safety" award.
Rail capital additions for 1995 increased to $773 million from 1994's
$675 million and 1993's $576 million. CSXT's efforts to constrain capital
expenditures will continue in 1996. Improvements in service and asset
utilization will enable the railroad, in effect, to create additional capacity
without increasing capital investment significantly. Also in 1996, CSXT will
take delivery of 77 new fuel-efficient 4,400 horsepower AC locomotives, each
of which replaces an average of two older units. As of year-end 1995, there
were 118 AC units in service in CSXT's fleet of approximately 2,700
locomotives.
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PAGE 25
Table 2. RAIL COMMODITIES BY CARLOAD
Market
Share Carloads Revenue
(Percent) (Thousands) (Millions of Dollars)
--------- -------------------- ----------------------
1995 1995 1994 1993 1995 1994 1993
---- ----- ----- ----- ----- ------ ------
Automobiles 28% 357 354 326 $ 503 $ 493 $ 461
Chemicals 40% 406 386 371 700 685 652
Minerals 38% 414 419 374 375 365 332
Food & Consumer 34% 179 176 166 207 204 196
Agricultural Products 29% 280 263 284 336 318 327
Metals 29% 301 292 258 291 285 243
Forest Products 34% 456 442 435 464 444 442
Phosphates & Fertilizer 79% 512 470 423 282 254 256
Coal 41% 1,678 1,678 1,566 1,523 1,465 1,363
----- ----- ----- ------ ------ ------
Total 4,583 4,480 4,203 4,681 4,513 4,272
===== ===== ===== ------ ------ ------
Other Revenue 138 112 108
------ ------ ------
Total Operating Revenue $4,819 $4,625 $4,380
====== ====== ======
Market share is defined as percent of major Eastern railroads'
carloads handled by CSX.
CSXT expects 1996 to be another year of earnings growth, with
moderate volume and revenue increases across most lines of business. The
railroad will continue to focus on its key strategic efforts, which include
improving safety, lowering costs and increasing asset utilization. CSXT also
will expand the scope of more recent initiatives for improving service
reliability through process re-engineering. With moderate economic growth
projected, CSXT will build on competitive advantages it has attained through
market-share gains and improved fundamentals.
Rail Assets
(Owned or leased units as of December 29, 1995)
-----------------------------------------------
Freight Cars
Box Cars 14,905
Open-Top Hoppers 26,328
Covered Hoppers 18,759
Gondolas 24,460
Other Cars 15,766
-------
Total 100,218
=======
Locomotives 2,697
Track
Route Miles 18,645
Track Miles 31,961
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PAGE 26
Container-shipping Results
Sea-Land has been capitalizing on increasing global demand for
containerized cargoes in most major trade lanes to produce double-digit
increases in container loads and operating revenue, along with selected rate
increases.
Sea-Land generated $238 million of operating income in 1995,
excluding its portion of the second-quarter restructuring charge, vs. $187
million in 1994 and $193 million in 1993, excluding a restructuring charge
taken in that year.
Total operating revenue rose to $4 billion, a 15% increase over
1994's revenue and 23% higher than in 1993.
Volume increased to 1.4 million loads, 12% over 1994's level. The
weak U.S. dollar fueled strong demand for U.S. exports to European and Asian
markets. The company also benefited from an improving northern European
economy and aid agency cargo to the former Soviet Union, as well as modest
growth in military cargo.
The average revenue per container increased 2%, reflecting a more
favorable supply/demand situation. Better cargo mix and a general rate
increase in the first quarter generated increased revenue in the fast-growing
Europe-to-Asia trade. Rate increases were implemented in most Pacific trade
lanes; however, market pressures led to some erosion in rates late in the year
that continues into 1996.
Sea-Land's operating expense rose to $3.8 billion, excluding the
restructuring charge, from $3.3 billion in 1994 and $3 billion in 1993,
excluding that year's charge. The higher operating expense was attributable to
the increased volumes and a surge in the world price of bunker fuel.
In 1995, Sea-Land initiated a number of actions to lower expense. The
Maritime Administration (MARAD) approved reflagging of five U.S.-flag vessels
to the registry of the Marshall Islands. The reflagging and the consolidation
of divisional and corporate headquarters in Charlotte, N.C., are expected to
reduce annual operating costs by $25 to $30 million.
In 1995, Sea-Land and Maersk Line, two of the world's leading
container-shipping companies, announced the formation of a global alliance
covering vessels and terminals. The alliance will allow Sea-Land to offer
shippers faster transit times, greater flexibility and more direct ports of
call. However, it is not expected to have a substantial impact on operating
income for 1996, as early savings will be offset by transition costs.
Sea-Land eliminated operating expenses of more than $120 million in
1995 through its productivity improvement initiatives covering terminal and
vessel operations, as well as inland transportation. The unit expects to
achieve additional productivity improvements in 1996.
Capital additions for 1995 totaled $275 million, including $269
million in expenditures and $6 million in present value of operating leases.
The total compares with $199 million in 1994 and $172 million in 1993.
- 26 -
PAGE 27
Sea-Land contracted in 1994 for five new Champion Class vessels,
three of which were received in the fourth quarter of 1995. The other two
vessels will be put into service in the first quarter of 1996, replacing
chartered space at significant cost savings. Sea-Land also invested to upgrade
its container fleet and to enhance terminal facilities.
The carrier's 1996 capital expenditures are expected to total $295
million. This amount will include final payment for the Champion Class
vessels, as well as allocations for terminal upgrades and technological
advances. Pursuant to the formation of the Sea-Land and Maersk global
alliance, orders were placed for four new container ships. These vessels will
enable Sea-Land to eliminate 11 vessels operating in both line-haul and feeder
service.
In 1996, global economic expansion is expected to continue. This
positive outlook is tempered somewhat, however, by some near-term concerns,
including possible deregulation, intensifying rate competition in major trade
lanes, and possible near-term overcapacity. Deregulation in the United States
is expected to affect roughly a third of Sea-Land's current business relating
to U.S.-to-foreign trade. Sea-Land views deregulation as an opportunity to
serve its customers better and to provide a more responsive business
environment.
Container-shipping Assets
(Owned or leased units as of December 29, 1995)
-----------------------------------------------
Containers
40- and 20-foot Dry Vans 166,148
45-foot Dry Vans 10,166
Refrigeration Vans 18,452
Other Specialized Equipment 5,198
-------
Total 199,964
=======
Container Ships 105
Terminals
Exclusive-Use 14
Preferential Berthing Rights 14
Capacity will increase in 1996, with carriers taking delivery of new
vessels; however, over the long term, demand in global trade should more than
absorb capacity increases.
In 1996, Sea-Land will focus on the highest-return markets and
increased margins. Proposed maritime reform legislation pending in the U.S.
Congress is expected to help lower vessel costs. Capital investments will be
oriented toward improving operating efficiency and further strengthening
Sea-Land's infrastructure for competitive advantage.
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PAGE 28
Barge Results
American Commercial Lines Inc. (ACL) achieved record operating income
of $106 million in 1995, 68% higher than the previous year and 136% above
1993. Surging demand for transportation of grain, one of the barge carrier's
key commodities, and other bulk commodities, coupled with a favorable rate
environment, were major drivers. In 1993, operations and harvests were
adversely affected by flooding along the upper Mississippi River and its
tributaries.
Total operating revenue at ACL increased 23% to $554 million,
compared with $449 million in 1994 and $417 million in 1993. Barge ton miles
totaled 52 billion, an increase of 1 billion ton miles over 1994 and 7 billion
ton miles more than 1993.
Demand for non-grain commodities, such as import steel and raw
materials for steel mini-mills, remained strong. Coal tonnage and revenue
decreased slightly during the year as the company shifted use of the equipment
into growing, higher-margin markets. Revenue from terminal operations and
Jeffboat, ACL's marine construction division, increased $31 million from 1994
primarily due to the completion of four towboats, one gaming vessel and 55
hopper barges.
Operating expense increased 16% to $448 million, driven by additional
volumes and construction activity at Jeffboat. Repair and fuel costs reflected
increasing the speed of the fleet to move more grain.
Performance Improvement Team initiatives generated nearly $2 million
in savings at ACL in 1995. Similar savings are targeted for 1996. Overhead and
administrative costs have been well controlled during this period of
substantial growth.
Barge Assets
(Owned or leased units as of December 29, 1995)
-----------------------------------------------
Towboats 116
Barges
Covered/Open-Top Hoppers 2,994
Tankers 234
-----
Total 3,228
=====
Marine Services
River Terminals 11
Fleet Operations 15
Shipyards 2
Capital additions at ACL in 1995 totaled $36 million, compared with
$15 million in 1994 and $13 million in 1993. Spending in 1995 included $5
million for two used towboats and $4 million for 20 hopper barges. ACL's
capital expenditures are expected to increase in 1996 as the company renews a
covered hopper construction program and absorbs the acquisition of the marine
assets of Conti-Carriers & Terminals Inc. (CCTI).
- 28 -
PAGE 29
The CCTI acquisition, which was completed in January 1996, increased
ACL's fleet size by 400 barges, or 12%, and eight towboats. The larger fleet
size will allow ACL to increase its movement of grain and other bulk
commodities.
ACL's outlook for 1996 is highly positive. Grain farmers planted 20
million additional acres which, weather permitting, could produce a record
harvest. ACL also expects moderate growth in export coal to meet continued
demand overseas. In South America, aggressive development of the river systems
provides additional opportunities for ACL to expand its operations on the
Paraguai and Parana Rivers and elsewhere.
Intermodal Results
Severe competition from the trucking industry resulted in lower
operating income at CSX Intermodal (CSXI). Operating income declined to $30
million in 1995 from $61 million in 1994. Revenue increased to $926 million
vs. 1994's $902 million, while volume was 1.3 million trailers and containers,
level with 1994. In 1993, operating revenue and income were $793 million and
$53 million, respectively.
An overcapacity of trucks, resulting from a slowing domestic economy
and instability in the Mexican market, brought lower truck pricing. This
contributed to a 7% reduction in CSXI's domestic trailer business, which was
offset by an increase of 3% in international traffic and 13% in
transcontinental domestic container business. Fixed rail costs in CSXI's
principal trailer lanes and higher equipment expenses also adversely affected
operating income. Operating expense for the year totaled $896 million,
compared with $841 million in 1994 and $740 million in 1993.
Intermodal Assets
(Owned or leased units as of December 29, 1995)
-----------------------------------------------
Equipment
Domestic Containers 3,564
Rail Trailers 5,616
Facilities
CSX Intermodal Terminals 33
Motor Carrier Operations Terminals 28
CSX Services Facilities 18
CSXI responded decisively to these business conditions by instituting
a number of cost-cutting and service enhancement initiatives. Employee
headcount was reduced 16% and preparations were made for consolidating
headquarters offices in Jacksonville, Fla., in 1996. Forty percent of the
trailer fleet was sold or returned from lease. These and other initiatives
will result in a significant reduction in CSXI's cost base, while
strengthening the unit's competitiveness.
Capital expenditures totaled $57 million in 1995 vs. $50 million in
both 1994 and 1993, as CSXI continued to enhance its terminal infrastructure
and equipment base.
- 29 -
PAGE 30
In 1996, CSXI will focus on service improvements and cost-cutting
initiatives. CSXI also expects demand for its trailer business to rebound and
its international and transcontinental businesses to continue to grow.
CTI Results
Customized Transportation Inc. (CTI) increased revenue and operating
income during 1995. Revenue surged to $240 million, 32% over 1994's level,
while operating income increased to $12 million, 20% above 1994. Both figures
are new highs.
CTI continues to diversify its customer base, with growth in
automotive customers and an increased portfolio of non-automotive clients. By
providing an array of services across the supply chain, CTI has been able to
improve its position with current customers and develop business in new
industries. CTI has also expanded into Brazil, Argentina and Europe.
CTI's high growth rate is expected to continue.
Consolidated Outlook
CSX enters 1996 confident it can build upon its performance in recent
years and sustain its record of continuous improvement. The economic outlook
for the year presents a mixed picture. U.S. inflation rates are expected to
remain low. Transportation growth should outpace growth of the U.S. economy.
Rail equipment supply remains tight, and barge demand remains strong.
Continued expansion of global trade boosts Sea-Land's outlook, although some
concerns remain about capacity in the Pacific trade and the intermodal sector.
CSX units are committed to exceeding their goals and delivering more
shareholder value. Strong emphasis will be placed on cost control, more
efficient asset utilization, revenue enhancements and improving margins. A
positive view of 1996 is supported by the growth of global trade, the alliance
between Sea-Land and Maersk and possible maritime reform, service improvements
and stronger pricing at CSXT, continued strong demand for barge services and
talented management.
The capabilities and dedication of CSX's 48,000 employees will
produce further efficiencies, new business and innovative solutions to our
customers' increasingly complex transportation and logistics needs.
- 30 -
PAGE 31
CSX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Millions of Dollars, Except Per Share Amounts)
Fiscal Years Ended
---------------------------------
Dec. 29, Dec. 30, Dec. 31,
1995 1994 1993
------ ------ ------
OPERATING REVENUE
Transportation $10,317 $9,410 $8,767
Non-Transportation 187 198 173
------- ------ ------
Total 10,504 9,608 8,940
------- ------ ------
OPERATING EXPENSE
Transportation 8,937 8,232 7,806
Non-Transportation 138 144 128
Restructuring Charge 257 --- 93
------- ------ ------
Total 9,332 8,376 8,027
------- ------ ------
Operating Income 1,172 1,232 913
Other Income 72 55 18
Interest Expense 270 281 298
------- ------ ------
EARNINGS
Earnings Before Income Taxes 974 1,006 633
Income Tax Expense 356 354 274
------- ------ ------
Net Earnings $ 618 $ 652 $ 359
======= ====== ======
PER COMMON SHARE
Earnings Per Share $ 2.94 $ 3.12 $ 1.73
======= ======= =======
Average Common Shares
Outstanding (Thousands) 210,270 209,303 207,830
======= ======= =======
Cash Dividends Paid Per Common Share $ .92 $ .88 $ .79
======= ======= =======
See accompanying Notes to Consolidated Financial Statements.
- 31 -
PAGE 32
CSX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of Dollars)
Fiscal Years Ended
---------------------------
Dec. 29, Dec. 30, Dec. 31,
1995 1994 1993
------- ------- -------
OPERATING ACTIVITIES
Net Earnings $ 618 $ 652 $ 359
Adjustments to Reconcile Net Earnings to
Net Cash Provided
Depreciation 600 577 572
Deferred Income Taxes (26) 176 181
Restructuring Charge Provision 257 --- 93
Productivity/Restructuring Charge Payments (155) (159) (293)
Other Operating Activities 10 56 35
Changes in Operating Assets and
Liabilities
Accounts Receivable (82) (60) (15)
Other Current Assets (22) 20 (7)
Accounts Payable 170 9 4
Other Current Liabilities 197 55 33
----- ----- ------
Net Cash Provided by Operating Activities 1,567 1,326 962
----- ----- ------
INVESTING ACTIVITIES
Property Additions (1,156) (875) (768)
Proceeds from Property Dispositions 97 170 85
Proceeds from Sales of Long-Term
Marketable Securities 97 54 22
Purchases of Long-Term Marketable Securities (114) (66) (137)
Other Investing Activities 22 (144) (72)
----- ----- ------
Net Cash Used by Investing Activities (1,054) (861) (870)
----- ----- ------
- 32 -
PAGE 33
CSX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS, CONTINUED
(Millions of Dollars)
Fiscal Years Ended
---------------------------
Dec. 29, Dec. 30, Dec. 31,
1995 1994 1993
------- ------- -------
FINANCING ACTIVITIES
Short-Term Debt - Net (53) 37 150
Long-Term Debt Issued 121 92 81
Long-Term Debt Repaid (343) (447) (249)
Cash Dividends Paid (194) (184) (164)
Other Financing Activities 11 4 14
----- ----- -------
Net Cash Used by Financing Activities (458) (498) (168)
----- ----- -------
Net Increase (Decrease) in Cash and
Cash Equivalents 55 (33) (76)
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash and Cash Equivalents at Beginning of Year 265 298 374
----- ----- -------
Cash and Cash Equivalents at End of Year 320 265 298
Short-Term Investments at End of Year 340 270 201
----- ----- -------
Cash, Cash Equivalents and Short-Term
Investments at End of Year $ 660 $ 535 $ 499
===== ===== =======
SUPPLEMENTAL CASH FLOW INFORMATION
Interest Paid - Net of Amounts Capitalized $ 275 $ 306 $ 304
===== ===== =======
Income Taxes Paid $ 253 $ 175 $ 92
===== ===== =======
See accompanying Notes to Consolidated Financial Statements.
- 33 -
PAGE 34
CSX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Millions of Dollars)
Dec. 29, Dec. 30,
1995 1994
------- -------
ASSETS
Current Assets
Cash, Cash Equivalents and Short-Term Investments $ 660 $ 535
Accounts Receivable 832 706
Materials and Supplies 220 211
Deferred Income Taxes 148 151
Other Current Assets 75 62
------- -------
Total Current Assets 1,935 1,665
Properties-Net 11,297 11,044
Affiliates and Other Companies 312 302
Other Long-Term Assets 738 713
------- -------
Total Assets $14,282 $13,724
======= =======
LIABILITIES
Current Liabilities
Accounts Payable $ 1,121 $ 926
Labor and Fringe Benefits Payable 526 490
Casualty, Environmental and Other Reserves 298 276
Current Maturities of Long-Term Debt 486 312
Short-Term Debt 148 201
Other Current Liabilities 412 300
------- -------
Total Current Liabilities 2,991 2,505
Casualty, Environmental and Other Reserves 813 837
Long-Term Debt 2,222 2,618
Deferred Income Taxes 2,560 2,570
Other Long-Term Liabilities 1,454 1,463
------- -------
Total Liabilities 10,040 9,993
------- -------
SHAREHOLDERS' EQUITY
Common Stock, $1 Par Value 210 105
Other Capital 1,319 1,368
Retained Earnings 2,822 2,391
Minimum Pension Liability (109) (133)
------- -------
Total Shareholders' Equity 4,242 3,731
------- -------
Total Liabilities and Shareholders' Equity $14,282 $13,724
======= =======
See accompanying Notes to Consolidated Financial Statements.
- 34 -
PAGE 35
CSX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Millions of Dollars, Except Shares)
Common Shares Minimum
Outstanding Common Other Retained Pension
(Thousands) Stock Capital Earnings Liability Total
------------- ------ ------- -------- --------- -----
Balance Dec. 31, 1992 103,476 $103 $1,250 $1,729 $(107) $2,975
Net Earnings --- --- --- 359 --- 359
Dividends - Common --- --- --- (164) --- (164)
Common Stock -
Stock Purchase
and Loan Plan
Stock Canceled (82) --- (4) --- --- (4)
Purchase Loans - Net --- --- 19 --- --- 19
Other Stock Issued - Net 749 1 42 --- --- 43
Minimum Pension Liability --- --- --- --- (51) (51)
Other - Net --- --- --- 3 --- 3
------- ---- ------ ------ ----- ------
Balance Dec. 31, 1993 104,143 104 1,307 1,927 (158) 3,180
Net Earnings --- --- --- 652 --- 652
Dividends - Common --- --- --- (184) --- (184)
Common Stock -
Stock Purchase
and Loan Plan
Stock Canceled (68) --- (4) --- --- (4)
Purchase Loans - Net --- --- 9 --- --- 9
Other Stock Issued - Net 647 1 56 --- --- 57
Minimum Pension Liability --- --- --- --- 25 25
Other - Net --- --- --- (4) --- (4)
------- ---- ------ ------ ----- ------
Balance Dec. 30, 1994 104,722 105 1,368 2,391 (133) 3,731
Net Earnings --- --- --- 618 --- 618
Dividends - Common --- --- --- (194) --- (194)
Common Stock -
Stock Purchase
and Loan Plan
Stock Canceled (155) (1) (11) --- --- (12)
Purchase Loans - Net --- --- 12 --- --- 12
Other Stock Issued - Net 716 1 55 --- --- 56
Minimum Pension Liability --- --- --- --- 24 24
Two-for-One Stock Split 105,212 105 (105) --- --- ---
Other - Net --- --- --- 7 --- 7
------- ---- ------ ------ ----- ------
Balance Dec. 29, 1995 210,495 $210 $1,319 $2,822 $(109) $4,242
======= ==== ====== ====== ===== ======
See accompanying Notes to Consolidated Financial Statements.
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PAGE 36
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES.
Nature of Operations
CSX Corporation (CSX) is a global freight transportation company with
principal business units providing rail, container-shipping and barging
services. Other transportation units offer intermodal, logistics management,
warehousing, distribution, and inland marine construction and repair services.
Rail transportation services are provided principally throughout the eastern
United States and account for nearly one-half of the company's operating
revenue, with coal, bulk products, and manufactured products each contributing
a relatively equal share of rail revenue. Coal shipments primarily supply
domestic utility and export markets. Container-shipping services are provided
in the United States and more than 80 countries and territories throughout the
world and account for more than one-third of the company's operating revenue.
Barging, intermodal, logistics management, warehousing, distribution, and
marine construction and repair services are provided principally within the
United States and together account for the remaining transportation operating
revenue. Non-transportation revenues are primarily from resort and real
estate operations.
Common Stock Split
On October 11, 1995, the company's board of directors declared a 2-
for-1 common stock split distributed on December 21, 1995, to shareholders of
record at the close of business on December 4, 1995. In the accompanying
Consolidated Statement of Earnings and Notes to the Consolidated Financial
Statements, all references to shares of common stock and per share amounts
have been restated to reflect the stock split. In addition, an amount equal
to the one dollar par value of the shares outstanding on the date of record
has been transferred from other capital to common stock.
Principles of Consolidation
The Consolidated Financial Statements include CSX and its
majority-owned subsidiaries. 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.
Fiscal Year
Effective January 1, 1994, the company changed its fiscal reporting
period from a calendar year to a fiscal year ending on the last Friday in
December. The financial statements presented are for the fiscal periods ended
December 29, 1995, December 30, 1994, and December 31, 1993. Each fiscal year
consists of four 13-week quarters.
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.
- 36 -
PAGE 37
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
Cash, Cash Equivalents and Short-Term Investments, Continued
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 from cash
receipts and maturing short-term investments.
Accounts Receivable
The company has sold, directly and through Trade Receivables
Participation Certificates (Certificates), ownership interests in designated
pools of accounts receivable originated by CSX Transportation Inc. (CSXT), its
rail unit.
During 1993, $200 million of Certificates were issued at 5.05%, due
September 1998. The Certificates represent undivided interests in a master
trust holding an ownership interest in a revolving pool of rail freight
accounts receivable. The proceeds from the issuance of the Certificates were
used to reduce the amount of accounts receivable sold under a previous
agreement. At December 29, 1995, the Certificates were collateralized by $240
million of accounts receivable held in the master trust. The company has the
ability to issue $50 million in additional Certificates through September 1998
at prevailing market terms.
In addition, the company has a revolving agreement with a financial
institution to sell with recourse on a monthly basis an undivided percentage
ownership interest in designated pools of freight and other accounts
receivable. The agreement provides for the sale of up to $200 million in
accounts receivable and expires in September 1998.
The company has retained the responsibility for servicing and
collecting accounts receivable held in trust or sold. At December 29, 1995,
and December 30, 1994, accounts receivable have been reduced by $372 million,
representing Certificates and accounts receivable sold. The net costs
associated with sales of Certificates and receivables were $32 million, $29
million and $15 million in 1995, 1994 and 1993, respectively.
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 $79 million and $84 million have been applied as a reduction of
accounts receivable at December 29, 1995, and December 30, 1994, respectively.
Materials and Supplies
Materials and supplies consist primarily of fuel and items for
maintenance of property and equipment, and are carried at average cost.
- 37 -
PAGE 38
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
Properties
Main line track on the rail system is depreciated on a group basis
using a unit-of-production method. All other property and equipment is
depreciated on a straight-line basis over estimated useful lives of three to
42 years.
Regulations established by the former Interstate Commerce Commission
and currently monitored by the Surface Transportation Board of the U.S.
Department of Transportation (DOT) require periodic formal studies of ultimate
service lives for all railroad assets. Resulting service life estimates are
subject to review and approval by the DOT. Significant premature retirements
for all properties, which would include major casualty losses, abandonments,
sales and obsolescence of assets, are recorded as gains or losses at the time
of their occurrence. Expenditures that significantly increase asset values or
extend useful lives are capitalized. Repair and maintenance expenditures are
charged to operating expense when the work is performed. All properties are
stated at cost.
When it is indicated that assets have a fair value below book value,
they are evaluated for sale or other disposition and any necessary write-down
is reflected. The recoverability of the book value of property and equipment
is based upon potential cash flows or other estimates of fair value for the
property.
Revenue Recognition
Transportation revenue is recognized proportionately as shipments
move from origin to destination.
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.
Derivative Financial Instruments
Derivative financial instruments may be used from time to time by the
company in the management of its interest, foreign currency and commodity
exposures, and are accounted for on an accrual basis. Income and expense are
recorded in the same category as that of the underlying asset or liability.
Gains and losses related to hedges of existing assets or liabilities are
deferred and recognized over the expected remaining life of the related asset
- 38 -
PAGE 39
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
Derivative Financial Instruments, Continued
or liability. Gains and losses related to hedges of anticipated transactions
are also deferred and recognized in income in the same period as the hedged
transaction. There were no significant derivative financial instruments
outstanding at December 29, 1995.
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. Weighted average shares and
earnings per share for all periods presented have been restated to reflect the
2-for-1 common stock split distributed to shareholders in December 1995.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates in
reporting the amounts of certain revenues and expenses for each fiscal year
and certain assets and liabilities at the end of each fiscal year. Actual
results may differ from those estimates.
Prior-Year Data
Certain prior-year data have been reclassified to conform to the 1995
presentation.
Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of" and Statement No. 123 "Accounting for Stock-Based
Compensation", which the company will adopt in 1996. Statement No. 121
establishes standards for identifying and recording impairments in the
carrying value of long-lived assets. Statement No. 123 provides an
alternative for income statement recognition of costs associated with stock-
based employee compensation plans and requires expanded disclosures with
respect to such plans. The company is currently evaluating both
pronouncements and does not expect a material impact on its financial
statements from the adoption of either pronouncement.
- 39 -
PAGE 40
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 2. RESTRUCTURING CHARGES.
1995 Restructuring Charge
In the second quarter of 1995, the company recorded a $257 million
pretax restructuring charge to recognize the estimated costs of specific
initiatives at CSXT and at Sea-Land Service Inc. (Sea-Land), its container-
shipping unit. The charge reduced 1995 net earnings by $160 million, 76 cents
per share.
CSXT recorded its $196 million portion of the pretax restructuring
charge to recognize the costs associated with a contractual agreement with
AT&T Solutions (AT&T) to replace, manage and technologically enhance its
existing private telecommunications network. The initiative resulted in a
$163 million write-down of assets rendered technologically obsolete and will
further result in separation and labor protection payments totaling $33
million to affected employees.
Under the agreement, AT&T supplies and manages new technology,
thereby rendering CSXT's existing telecommunications assets commercially
obsolete. CSXT is obligated to pay minimum charges of approximately $330
million in equal annual amounts over the next 10 years.
The commercially obsolete assets represent CSXT's internal
companywide telecommunications network including the existing microwave and
fiber optic communications systems. AT&T provides wireless communications
technology over its existing network to replace the CSXT system. After the
phase-in of this technology, AT&T will retain ownership of the equipment and
will grant CSXT access to the equipment and the network.
The commercially obsolete assets have no alternative use and their
net realizable value as a companywide telecommunications network is not
significant. As a result of the agreement with AT&T, the net book value of
the assets being replaced was reduced by $163 million.
The restructuring initiatives at Sea-Land represented $61 million of
the total charge and included its global integration program and the
reflagging of five U.S.-flag vessels to the registry of the Marshall Islands
in accordance with approval from the Maritime Administration. Sea-Land's
global integration program resulted in the consolidation of worldwide senior
management functions, the relocation of the corporate headquarters to
Charlotte, N.C., and the integration of information technologies. The vessel
reflagging initiative primarily involves crew separations on the five vessels.
- 40 -
PAGE 41
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 2. RESTRUCTURING CHARGES, Continued
A summary of the restructuring charge and related activity through
December 29, 1995, is as follows:
Separation Lease and
and Labor Facility
Obsolete Protection Exit
Assets Costs Costs Total
-------- ---------- --------- -----
Restructuring Charge:
CSXT Telecommunications $ 163 $ 33 $ --- $ 196
Sea-Land Global Integration --- 19 12 31
Sea-Land Vessel Reflagging --- 28 2 30
----- ----- ----- -----
Total 163 80 14 257
Amounts Utilized through
December 29, 1995 163 20 5 188
----- ----- ----- -----
Remaining Reserve as of
December 29, 1995 $ --- $ 60 $ 9 $ 69
===== ===== ===== =====
The total provision for separation and labor protection payments
relates to approximately 800 affected employees and was based on existing
collective bargaining agreements with members of clerical, electrical, and
signal crafts and seafarer trades. The company expects 90% of the affected
employees to be impacted within one year and the remaining 10% to be impacted
within four to five years. Through December 29, 1995, approximately 500
employee separations have been finalized.
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 Sea-Land. The charge provided for separations affecting
approximately 450 employees and for various exit and settlement costs, and
reduced net earnings by $61 million, 30 cents per share. At December 29,
1995, the restructuring initiatives have been completed and substantially all
costs have been paid.
- 41 -
PAGE 42
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 3. OPERATING EXPENSE.
1995 1994 1993
------- ------- -------
Labor and Fringe Benefits $ 3,264 $ 3,154 $ 3,055
Materials, Supplies and Other 2,599 2,249 2,086
Building and Equipment Rent 1,168 1,136 1,087
Inland Transportation 970 839 721
Depreciation 600 577 572
Fuel 474 421 413
Restructuring Charge 257 --- 93
------- ------- -------
Total $ 9,332 $ 8,376 $ 8,027
======= ======= =======
Selling, General and Administrative Expense
Included in Above Items $ 1,383 $ 1,299 $ 1,202
======= ======= =======
NOTE 4. OTHER INCOME.
1995 1994 1993
---- ---- ----
Interest Income $ 62 $ 57 $ 52
Net Gain on Investment Transactions (a) 77 --- ---
Gain on South Florida Track Sale (b) --- 91 20
Net Costs for Accounts Receivable Sold (32) (29) (15)
Minority Interest (32) (21) (14)
Loss on Redemption of Debt --- (13) ---
Equity Earnings of Other Affiliates (3) (10) (7)
Miscellaneous --- (20) (18)
----- ----- -----
Total $ 72 $ 55 $ 18
===== ===== =====
(a) In December 1995, the company recognized a net investment gain of $77
million on the issuance of an equity interest in a Sea-Land terminal
and related operations in Asia and the write-down of various
investments. The equity interest portion of the transaction resulted
in proceeds of $105 million and a pretax gain of $93 million, $61
million after-tax, 29 cents per share. Sea-Land's interest in the
terminal operations was reduced from approximately 67% to 57%.
(b) In December 1994, the state of Florida elected to satisfy its
remaining unfunded obligation issued in 1988 to consummate the
purchase of 80 miles of track and right of way. The transaction
resulted in cash proceeds of $102 million and an accelerated pretax
gain of $69 million, $42 million after-tax, 20 cents per share. The
scheduled payment resulted in a $22 million gain in 1994.
- 42 -
PAGE 43
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 5. INCOME TAXES.
Earnings from domestic and foreign operations and related income tax
expense are as follows:
1995 1994 1993
----- ----- -----
Earnings Before Income Taxes:
- Domestic $ 765 $ 893 $ 570
- Foreign 209 113 63
------ ------ -----
Total $ 974 $1,006 $ 633
====== ====== =====
Income Tax Expense (Benefit):
Current - Federal $ 337 $ 144 $ 71
- Foreign 26 20 18
- State 19 14 4
------ ----- -----
Total Current 382 178 93
------ ----- -----
Deferred - Federal (26) 165 160
- Foreign --- 2 1
- State --- 9 20
------ ----- -----
Total Deferred (26) 176 181
------ ----- -----
Total Expense $ 356 $ 354 $ 274
====== ===== =====
Income tax expense reconciled to the tax computed at statutory rates
is as follows:
1995 1994 1993
---- ---- ---- ---- ---- ----
Tax at Statutory Rates $341 35% $352 35% $222 35%
State Income Taxes 12 1 15 1 16 2
Prior Years' Income Taxes --- --- (10) (1) (15) (2)
Other Items(a) 3 1 (3) --- 51 8
---- ---- ---- ---- ---- ----
Total Expense $356 37% $354 35% $274 43%
==== ==== ==== ==== ==== ====
(a) 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.
- 43 -
PAGE 44
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
include:
Dec. 29, Dec. 30,
1995 1994
-------- -------
Deferred Tax Assets:
Productivity/Restructuring Charges $ 240 $ 246
Employee Benefit Plans 417 336
Deferred Gains and Related Rents 166 166
Other 300 330
------ ------
Total 1,123 1,078
------ ------
Deferred Tax Liabilities:
Accelerated Depreciation 3,104 3,045
Other 431 452
------ ------
Total 3,535 3,497
------ ------
Net Deferred Tax Liabilities $2,412 $2,419
====== ======
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 effect of the changes in the minimum pension liability in 1995
and 1994.
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 $314 million and $257 million at
December 29, 1995, and December 30, 1994, respectively. These amounts may
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 may be payable if such earnings
were repatriated.
The company files a consolidated federal income tax return, which
includes its principal domestic subsidiaries. Examinations of the federal
income tax returns of CSX have been completed through 1987. Returns for 1988-
1990 are currently under examination and a final report and assessment is
expected in 1996. Management believes adequate provision has been made for
any adjustments that might be assessed.
- 44 -
PAGE 45
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 6. PROPERTIES.
Dec. 29, 1995
-------------------------------------------
Accumulated
Cost Depreciation Net
-------------------------------------------
Transportation $16,264 $5,269 $10,995
Non-Transportation 409 107 302
------- ------ -------
Total $16,673 $5,376 $11,297
======= ====== =======
Dec. 30, 1994
-------------------------------------------
Accumulated
Cost Depreciation Net
-------------------------------------------
Transportation $15,884 $5,161 $10,723
Non-Transportation 431 110 321
------- ------ -------
Total $16,315 $5,271 $11,044
======= ====== =======
NOTE 7. CASUALTY, ENVIRONMENTAL AND OTHER RESERVES.
Activity related to casualty, environmental and other reserves is as
follows:
Casualty(a) Environmental Separation (a) Other
Reserves(b) Reserves(a) Liabilities(c) Reserves(a) Total
----------- ------------- -------------- ----------- -----
Balance Dec. 31, 1992 $ 493 $ 77 $ 931 $ 18 $1,519
Charged to Expense
and Other Additions 333 63 32 62 490
Payments and Other
Reductions (276) (9) (321)(d) (26) (632)
----- ----- ----- ----- ------
Balance Dec. 31, 1993 550 131 642 54 1,377
Charged to Expense
and Other Additions 240 32 --- 7 279
Payments and Other
Reductions (251) (23) (248)(d) (21) (543)
----- ----- ----- ----- ------
Balance Dec. 30, 1994 539 140 394 40 1,113
Charged to Expense
and Other Additions 237 22 80 42 381
Payments and Other
Reductions (244) (25) (70) (44) (383)
----- ----- ----- ----- ------
Balance Dec. 29, 1995 $ 532 $ 137 $ 404 $ 38 $1,111
===== ===== ===== ===== ======
- 45 -
PAGE 46 CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 7. CASUALTY, ENVIRONMENTAL AND OTHER RESERVES, Continued
(a) Balances include current portions of casualty, environmental, separation
and other reserves, respectively, of $231 million, $20 million, $37
million and $10 million at December 29, 1995, and $215 million, $20
million, $22 million and $19 million at December 30, 1994, and $223
million, $1 million, $44 million and $38 million at December 31, 1993.
(b) Casualty reserves are estimated based upon the first reporting of an
accident or personal injury to an employee. Liabilities for accidents
are based upon field reports and liabilities for personal injuries are
based upon the type and severity of the injury and the use of current
trends and historical data.
(c) Separation liabilities include $344 million at December 29, 1995, $376
million at December 30, 1994, and $607 million at December 31, 1993,
related to productivity charges recorded in 1991 and 1992 to provide for
the estimated costs of implementing workforce reductions, improvements in
productivity and other cost reductions at the company's major
transportation units. The remaining liabilities are expected to be paid
out over the next 25 years.
(d) Includes the transfer of $156 million in 1994 to a separation-related
pension obligation and the reallocation of $95 million in 1993 to other
negotiated settlements contemplated by the 1991 productivity charge. The
transfer for 1994 represents the future cost of pensions for certain
train crew employees impacted by the buyout of trip-based compensation
and was provided for in the 1992 productivity charge. The 1993
reallocation adjusted for an overaccrual of separation liabilities and an
underaccrual of amounts recorded for other negotiated settlements.
NOTE 8. DEBT AND CREDIT AGREEMENTS.
Average
Type and Interest Rates Dec. 29, Dec. 30,
Maturity Dates at Dec. 29, 1995 1995 1994
- -------------- ---------------- ------ ------
Notes Payable
(1996-2021) 8% $ 895 $1,122
Debentures
(1997-2022) 9% 649 649
Equipment Obligations
(1996-2010) 8% 606 570
Commercial Paper 6% 300 300
Mortgage Bonds
(1998-2003) 4% 76 78
Other Obligations
(1996-2011) 7% 182 211
------ ------
Total 8% 2,708 2,930
Less Debt Due Within One Year 486 312
------ ------
Total Long-Term Debt $2,222 $2,618
====== ======
- 46 -
PAGE 47
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 8. DEBT AND CREDIT AGREEMENTS, Continued
In June 1991, the company filed a shelf registration with the
Securities and Exchange Commission to provide for the issuance of up to $250
million in debt securities. In September 1992, the company filed a shelf
registration to provide for the issuance of up to $450 million in senior debt
securities, warrants to purchase debt securities or currency warrants. As of
December 29, 1995, $50 million and $200 million of debt is available for
issuance under the 1991 and 1992 shelf registrations, respectively.
During 1994, the company redeemed $300 million of 9.5%, 11.625% and
11.875% Sinking Fund Debentures. The redemption premium, unamortized debt
discount and issuance costs totaling $18 million were charged to expense.
The company maintains revolving credit agreements with domestic and
foreign banks aggregating $880 million under which there were no borrowings as
of December 29, 1995. Substantially all of these agreements have underlying
debt maturities greater than 12 months. These agreements support $448 million
of privately placed commercial paper outstanding at December 29, 1995, 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.
Commercial paper classified as short-term debt was $148 million at
December 29, 1995 and $201 million at December 30, 1994. The weighted average
interest rate for the short-term commercial paper outstanding at year-end was
6% for 1995 and 1994.
Excluding long-term commercial paper, the company has long-term debt
maturities for 1996 through 2000 aggregating $486 million, $85 million, $124
million, $81 million and $313 million, respectively. Substantially all of the
company's rail unit properties are pledged as security for various
rail-related, long-term debt issues.
NOTE 9. COMMON AND PREFERRED 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. In December 1995, shareholders received one
additional share of common stock for each share held, pursuant to a 2-for-1
stock split approved by the board of directors. At December 29, 1995, common
shares issued and outstanding totaled 210,494,658.
The company also 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 discussed below. All preferred shares rank senior to
common shares both as to dividends and liquidation preference. No preferred
shares were outstanding at December 29, 1995.
- 47 -
PAGE 48
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 9. COMMON AND PREFERRED STOCK, Continued
Pursuant to a Shareholder Rights Plan adopted by the board of
directors in 1988 and amended in 1990, each outstanding share of common stock
also evidences one preferred share purchase right ("right"). 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 in exchange for the rights. The rights are not
exercisable or transferable apart from the related common shares until the
earlier of 10 days following the public announcement that a person or
affiliated group has acquired or obtained the right to acquire 20% or more of
the company's outstanding common stock, or 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 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 or group of 20% or more of the outstanding common
stock.
NOTE 10. STOCK PLANS.
The company maintains several stock plans designed to encourage
ownership of its stock and provide incentives for employees to contribute to
its success.
Stock Purchase and Loan Plan
The 1991 Stock Purchase and Loan Plan provided for the purchase of
common stock and related rights by eligible officers and key employees of the
company and entitled them to obtain loans with respect to the shares
purchased. 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. At December 29,
1995, there were 135 participants in the Plan.
Shares were issued in 1991 and 1992 at the market price on date of
issue. Participants purchased the shares 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 issue date and are due on July 31, 1996. All
loans were subject to certain adjustments after a vesting period if the market
price of CSX common stock equaled or exceeded certain thresholds for a period
of 10 consecutive business days. Those thresholds were met in prior years
and, as of December 29, 1995, all interest (less dividends applied to accrued
interest) and 25% of each participant's loan balance has been forgiven.
- 48 -
PAGE 49
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 10. STOCK PLANS, Continued
Transactions involving the 1991 Stock Purchase and Loan Plan are
summarized as follows:
Shares Average
(000's) Price (a)
------- -------
Outstanding at December 31, 1993 4,056 $20.22
Canceled and Withdrawn (187) $20.09
----- ------
Outstanding at December 30, 1994 3,869 $18.67
Canceled and Withdrawn (446) $19.25
----- ------
Outstanding at December 29, 1995 3,423 $18.64
===== ======
1995 1994 1993
---- ---- ----
5% Down Payment Loans Outstanding $ 4 $ 4 $ 5
95% Purchase Loans Outstanding $ 60 $ 68 $ 77
Average Interest Rate 7.75% 7.75% 7.75%
Compensation Expense for the Year $ 26 $ 4 $ 48
(a) Represents average cost to participants, net of cumulative note
forgiveness.
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
the company's common stock at market value by payroll deductions. To
encourage stock ownership, 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. Sales
of stock prior to the completion of the holding period result in forfeiture of
the matching stock purchase. Officers and key employees who qualify for the
1991 Stock Purchase and Loan Plan are not eligible to participate in this
Plan. At December 29, 1995, there were 687,936 shares of common stock
available for issuance under this Plan.
The company also maintains the Employees Stock Purchase and Dividend
Reinvestment Plan and the Shareholders Dividend Reinvestment Plan, adopted in
1981, under which 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 stock ownership, employees receive
a 5% discount on all purchases under this program. At December 29, 1995, there
were 5,514,930 shares reserved for issuance under these Plans.
- 49 -
PAGE 50
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 10. STOCK PLANS, Continued
1987 Long-Term Performance Stock Plan
The CSX Corporation 1987 Long-Term Performance Stock Plan provides
for awards in the form of stock options, Stock Appreciation Rights (SARs) and
Performance Share Awards (PSAs) to eligible officers and employees. The
awards are based on increases in the market value of CSX common stock over the
market value at date of grant or the financial performance of CSX, or both.
At December 29, 1995, there were 454 participants in the Plan.
During 1994, 10 million additional shares of common stock were
reserved for issuance under this Plan. At December 29, 1995, a total of
20,504,484 shares were reserved for issuance, of which 7,503,922 were
available for new grants (9,588,996 at December 30, 1994). The remaining
shares are assigned to outstanding stock options, SARs and PSAs.
Transactions involving stock options and SARs are summarized as
follows:
Options SARs
-------------------- -------------------
Shares Average Units Average
(000s) Price (000s) Price
------ ------- ----- -------
Outstanding at Dec. 30, 1994 10,206 $30.97 505 $15.82
Granted 2,165 $40.25 --- ---
Canceled or Expired (57) $38.95 --- ---
Exercised (433) $27.18 --- ---
------ ------ ----- ------
Outstanding at Dec. 29, 1995 11,881 $32.76 505 $15.82
====== ====== ===== ======
Exercisable at Dec. 29, 1995 8,017 $28.79 505 $15.82
====== ====== ===== ======
Exercised in 1994 328 $24.92 56 $15.63
====== ====== ===== ======
Exercised in 1993 1,342 $20.03 108 $15.61
====== ====== ===== ======
The value of PSAs is contingent on the 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 29, 1995, there
were 614,800 shares reserved for outstanding PSAs.
Stock Award Plan
Under the 1990 Stock Award Plan, 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 are issued based on terms and conditions
approved by the Compensation Committee of the company's board of directors. At
December 29, 1995, there were 1,901,436 shares reserved for issuance under
this Plan, of which 802,440 were available for new grants.
- 50 -
PAGE 51
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 10. STOCK PLANS, Continued
Stock Plan for Directors
The Stock Plan for Directors, approved by the shareholders in 1992,
governs in part the manner in which directors' 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 up to 100% of the remaining 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, other cessation of services as a
director, or change in control of the company. At December 29, 1995, there
were 968,704 shares of common stock reserved for issuance under this Plan.
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS.
Fair values of the company's financial instruments are estimated by
reference to quoted prices from market sources and financial institutions, as
well as other valuation techniques. Long-term debt is the only financial
instrument of the company with a fair value significantly different from its
carrying amount. At December 29, 1995, the fair value of long-term debt,
including current maturities, was $2.94 billion, compared with a carrying
amount of $2.71 billion. At December 30, 1994, the fair value of long-term
debt, including current maturities, was $2.91 billion, compared with a
carrying amount of $2.93 billion. The fair values of long-term debt have been
estimated using discounted cash flow analyses based upon the company's current
incremental borrowing rates for similar types of financing arrangements.
The company had no significant hedging or derivative financial
instruments employed at December 29, 1995, or December 30, 1994.
NOTE 12. EMPLOYEE BENEFIT PLANS.
Pension Plans
The company sponsors defined benefit pension plans, principally for
salaried personnel. The plans provide eligible employees with retirement
benefits based principally on years of service and compensation rates near
retirement. Annual contributions to the plans are sufficient to meet the
minimum funding standards set forth in the Employee Retirement Income Security
Act of 1974, as amended. Plan assets consist primarily of common stocks,
- 51 -
PAGE 52
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 12. EMPLOYEE BENEFIT PLANS, Continued
corporate bonds and cash and cash equivalents. Pension costs for these plans
include the following components:
1995 1994 1993
----- ----- -----
Service Cost $ 28 $ 36 $ 28
Interest Cost on Projected Benefit Obligation 91 89 88
Actual Return on Plan Assets (190) (10) (95)
Net Amortization and Deferral 117 (45) 26
Foreign Plans 4 4 4
----- ----- -----
Pension Expense $ 50 $ 74 $ 51
===== ===== =====
The funded status of the plans and the amounts reflected in the
accompanying statement of financial position at year-end are:
Assets Benefits
Exceed Benefits Exceed Assets
----------------- -----------------
Dec. 29, Dec. 30, Dec. 29, Dec. 30,
1995 1994 1995 1994
Assets and Obligations: ----------------- -----------------
Vested Benefits $ 24 $ 19 $1,086 $ 994
Non-Vested Benefits 1 1 69 58
----- ----- ------ ------
Accumulated Benefit Obligation 25 20 1,155 1,052
Effect of Anticipated Future
Salary Increases 1 1 122 125
----- ----- ------ ------
Projected Benefit Obligation 26 21 1,277 1,177
Fair Value of Plan Assets 39 33 957 822
----- ----- ------ ------
Funded Status 13 12 (320) (355)
Unrecognized Initial Net
Obligation (Asset) (3) (3) 25 31
Unrecognized Prior Service Cost 2 1 11 15
Unrecognized Net Loss 4 6 276 316
Recognition of Minimum Liability --- --- (200) (252)
----- ----- ------ ------
Net Pension Asset (Obligation) $ 16 $ 16 $ (208) $ (245)
===== ===== ====== ======
The following actuarial assumptions were used in determining net
pension expense and projected benefit obligations:
1995 1994 1993
------ ------ ------
Discount Rate 7.50% 8.25% 7.25%
Estimated Long-Term Rate of Salary Increases 5.00% 5.00% 5.00%
Expected Long-Term Rate of Return on Assets 9.75% 8.75% 9.75%
- 52 -
PAGE 53 CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 12. EMPLOYEE BENEFIT PLANS, Continued
The aggregate minimum pension liability was reduced by $52 million in
1995, primarily due to the increase in fair value of plan assets.
Savings Plans
The company maintains savings plans for virtually all full-time
salaried employees and certain employees covered by collective bargaining
agreements. Eligible employees may contribute from 1% to 15% of their annual
compensation in 1% multiples to these plans. The company matches eligible
employees' contributions in an amount equal to the lesser of 50% of each
participating employee's contributions or 3% of their annual compensation. In
addition, the company contributes fixed amounts for participating employees
covered by certain collective bargaining agreements. Expense associated with
these plans was $29 million, $31 million and $32 million for 1995, 1994 and
1993, respectively.
Other Post-Retirement Benefit Plans
In addition to the defined benefit pension plans, the company
sponsors three plans that provide medical and life insurance benefits to most
full-time salaried employees upon their retirement. The post-retirement
medical plans are contributory, with retiree contributions adjusted annually,
and contain other cost-sharing features such as deductibles and coinsurance.
The net benefit obligation for medical plans anticipates future cost-sharing
changes consistent with the company's expressed intent to increase retiree
contribution rates annually in line with expected medical cost inflation
rates. The life insurance plan is non-contributory.
The company's current policy is to fund the cost of the
post-retirement medical and life insurance benefits on a pay-as-you-go basis,
as in prior years. The amounts recorded for the combined plans in the
company's statement of financial position at December 29, 1995, and December
30, 1994, are as follows:
Medical Life Insurance
----------------- -----------------
Dec. 29, Dec. 30, Dec. 29, Dec. 30,
1995 1994 1995 1994
----------------- -----------------
Accumulated Post-Retirement
Benefit Obligation:
Retirees $188 $172 $69 $66
Fully Eligible Active Participants 30 26 3 3
Other Active Participants 45 39 3 3
---- ---- --- ---
Accumulated Post-Retirement
Benefit Obligation 263 237 75 72
Unrecognized Prior Service Cost 17 23 5 6
Unrecognized Net Loss (41) (25) (11) (7)
---- ---- --- ---
Net Post-Retirement Benefit Obligation $239 $235 $69 $71
==== ==== === ===
- 53 -
PAGE 54
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 12. EMPLOYEE BENEFIT PLANS, Continued
Net expense for post-retirement benefits was $27 million, $29
million and $23 million for 1995, 1994 and 1993, respectively. The net post-
retirement benefit obligation was determined using the assumption that the
health care cost trend rate for medical plans was 10.5% for 1995-1996,
decreasing gradually to 5.5% by 2005 and remaining at that level thereafter.
A 1% increase in the assumed health care cost trend rate would increase the
accumulated post-retirement benefit obligation for medical plans as of
December 29, 1995, by $23 million and net post-retirement benefit expense for
1995 by $3 million. The discount rate used in determining the accumulated
post-retirement benefit obligation was 7.50% for 1995, 8.25% for 1994, and
7.25% for 1993.
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 $239 million, $209
million and $211 million, respectively, were made to these plans in 1995, 1994
and 1993.
NOTE 13. COMMITMENTS AND CONTINGENCIES.
Lease Commitments
The company leases equipment under agreements with terms up to 21
years. Non-cancelable, long-term leases generally include options to purchase
at fair value and to extend the terms. At December 29, 1995, minimum building
and equipment rentals under non-cancelable operating leases totaled
approximately $399 million for 1996, $377 million for 1997, $351 million for
1998, $308 million for 1999, $272 million for 2000 and $2.4 billion
thereafter.
Rent expense on operating leases, including net daily rental charges
on railroad operating equipment of $257 million, $258 million and $247 million
in 1995, 1994 and 1993, respectively, amounted to $1.2 billion in 1995, and
$1.1 billion in 1994 and 1993.
Purchase Commitments
CSXT entered into an agreement during 1993 to purchase 300
locomotives. This large single order covers normal locomotive replacement
needs for 1994 through 1997 and introduces alternating current traction
technology to the locomotive fleet. CSXT has taken delivery of 50 direct
current and 118 alternating current locomotives through December 29, 1995. The
remaining 132 alternating current units will be delivered in 1996 and 1997.
- 54 -
PAGE 55
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 13. COMMITMENTS AND CONTINGENCIES, Continued
During 1994 and 1995, Sea-Land entered into agreements for the
construction of nine high-performance, fuel-efficient container vessels.
Estimated capital expenditures for these vessels total $518 million, of which
$188 million has been expended through December 29, 1995, with the remaining
$330 million expected to be incurred over the next two years. Three of the
vessels were delivered in 1995.
Other Commitments
During 1995, CSXT entered into an agreement with AT&T to supply and
manage its telecommunications needs through May 2005. The agreement requires
minimum payments totaling approximately $330 million in equal annual amounts
over the ten-year period.
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 $86 million at December
29, 1995.
Although the company obtains substantial amounts of commercial
insurance for potential losses for third-party liability and property damage,
reasonable levels of risk are retained on a self-insurance basis. A
substantial portion of the insurance coverage, up to $100 million per
occurrence from rail and certain other operations, is provided by companies
owned or partially owned by CSX.
CSXT is a party to various proceedings involving private parties and
regulatory agencies related to environmental issues. CSXT has been identified
as a potentially responsible party (PRP) in a number of investigations and
actions. CSXT has identified approximately 108 environmentally impaired sites
that are or may be subject to remedial action under the Federal Superfund
statute (Superfund) or corresponding state statutes. Many 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 or corresponding state statutes typically
involve numerous other waste generators and disposal companies and seek to
allocate or recover costs associated with site investigation and cleanup,
which could be substantial.
The assessment of the required response and remedial costs associated
with most sites is extremely complex. Cost estimates are based on information
available for each site, financial viability of other PRPs, where available,
and existing technology, laws and regulations. CSXT's best estimates of the
allocation method and percentage of liability when other PRPs are involved are
based on assessments by consultants, agreements among PRPs, or determinations
by the U.S. Environmental Protection Agency or other regulatory agencies.
- 55 -
PAGE 56
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 13. COMMITMENTS AND CONTINGENCIES, Continued
At least once each quarter, CSXT 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 PRPs at the location. The ultimate
liability for remediation is difficult to determine with certainty because of
the number and creditworthiness of PRPs involved. Through the assessment
process, CSXT monitors the creditworthiness of such PRPs in determining
ultimate liability.
Based upon such reviews and updates of the sites with which it is
involved, CSXT has recorded, and reviews at least quarterly for adequacy,
reserves to cover estimated contingent future environmental costs with respect
to such sites. The recorded liabilities for estimated future environmental
costs at December 29, 1995, and December 30, 1994, were $137 million and $140
million, respectively. These recorded liabilities include amounts
representing CSXT's estimate of unasserted claims, which CSXT believes to be
immaterial. The liability has been accrued for future costs for all sites
where the company's obligation is probable and where such costs can be
reasonably estimated. The liability includes future costs for remediation and
restoration of sites as well as any significant ongoing monitoring costs, but
excludes any anticipated insurance recoveries. The majority of the December
29, 1995, environmental liability is expected to be paid out over the next
five to seven years, funded by cash generated from operations.
The company does not currently possess sufficient information to
reasonably estimate the amounts of additional liabilities, if any, on some
sites until completion of future environmental studies. In addition, latent
conditions at any given location could result in exposure, the amount and
materiality of which cannot presently be reliably estimated. Based upon
information currently available, however, the company believes that its
environmental reserves are adequate to accomplish remedial actions to comply
with present laws and regulations, and that the ultimate liability for these
matters will not materially affect its overall results of operations and
financial condition.
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.
- 56 -
PAGE 57
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 14. SUMMARIZED FINANCIAL DATA - SEA-LAND SERVICE INC.
During 1987, 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, 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: 1995 1994 1993
--------------------- -------- -------- -------
Operating Revenue $4,008 $3,492 $3,246
Operating Expense - Public 3,563 3,101 2,972
- Affiliated (a) 299 235 202
------ ------ ------
Operating Income $ 146 $ 156 $ 72
====== ====== ======
Net Earnings $ 86 $ 73 $ 12
====== ====== ======
Dec. 29, Dec. 30,
Summary of Financial Position: 1995 1994
------------------------------ -------- --------
Current Assets - Public $ 713 $ 584
- Affiliated (a) 2 16
Other Assets - Public 1,674 1,527
- Affiliated (a) --- 101
Current Liabilities - Public 684 515
- Affiliated (a) 48 266
Other Liabilities - Public 718 671
- Affiliated (a) 200 75
Equity 739 701
(a) Amounts represent activity with CSX affiliated companies.
SL Alaska Trade Company (SLATCO) is a special purpose, unconsolidated
subsidiary of Sea-Land with assets of $117 million in a trust account securing
$106 million of debt maturing on October 1, 2005. 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.
- 57 -
PAGE 58
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 15. BUSINESS SEGMENTS.
Operating Revenue Operating Income
-------------------------- -------------------------
Fiscal Years Ended Fiscal Years Ended
-------------------------- --------------------------
Dec. 29, Dec. 30, Dec. 31, Dec. 29, Dec. 30, Dec. 31,
1995 1994 1993 1995 1994 1993
------ ------ ------ ------ ------ ------
Transportation $10,317 $9,410 $8,767 $1,123 $1,178 $ 868
Non-Transportation 187 198 173 49 54 45
------- ------ ------ ------ ------ ------
Total $10,504 $9,608 $8,940 1,172 1,232 913
======= ====== ====== ------ ------ ------
Other Income 72 55 18
Interest Expense 270 281 298
------ ------ ------
Earnings Before Income Taxes $ 974 $1,006 $ 633
====== ====== ======
Identifiable Assets
-------------------
Dec. 29, Dec. 30,
1995 1994
------- -------
Transportation $13,489 $12,974
Non-Transportation 793 750
------- -------
Total $14,282 $13,724
======= =======
The principal components of the business segments are:
Transportation -
Rail, international container-shipping, barge, intermodal, logistics
management, warehousing, and distribution operations. The container-shipping
operation reported revenue of $4.0 billion for 1995, $3.5 billion for 1994 and
$3.2 billion for 1993. Approximate revenue allocation by port of origin for
1995, 1994 and 1993 was: North America - 42%; Asia - 33%; Europe - 17%; and
Other - 8%.
Non-Transportation -
Real estate sales and rentals, resort management and operations,
integrated computer services and eliminations of intersegment sales and
corporate-related items.
- 58 -
PAGE 59
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 16. QUARTERLY DATA (Unaudited).
1995
1st 2nd(b) 3rd 4th(c)
------ ------ ------ ------
Operating Revenue $2,468 $2,600 $2,665 $2,771
====== ====== ====== ======
Operating Income $ 271 $ 95 $ 382 $ 424
====== ====== ====== ======
Net Earnings $ 121 $ 19 $ 202 $ 276
====== ====== ====== ======
Earnings Per Share(a) $ .58 $ .09 $ .96 $ 1.31
====== ====== ====== ======
1994
1st 2nd 3rd 4th(d)
------ ------ ------ ------
Operating Revenue $2,227 $2,371 $2,470 $2,540
====== ====== ====== ======
Operating Income $ 186 $ 304 $ 350 $ 392
====== ====== ====== ======
Net Earnings $ 74 $ 162 $ 177 $ 239
====== ====== ====== ======
Earnings Per Share(a) $ .36 $ .77 $ .84 $ 1.15
====== ====== ====== ======
(a) Earnings per share amounts for all periods presented have been
restated to reflect the 2-for-1 stock split distributed to
shareholders in December 1995.
(b) The company recorded a $257 million pretax restructuring charge in
the second quarter of 1995 to recognize the estimated costs of
initiatives at its rail and container-shipping units to revise,
restructure and consolidate specific operations and administrative
functions. The charge included a write-down of technologically
obsolete telecommunications assets and provisions for employee
separations and exit obligations. The restructuring charge reduced
net earnings by $160 million, 76 cents per share.
(c) In December 1995, the company recognized a net investment gain of $77
million on the issuance of an equity interest in a Sea-Land terminal
and related operations in Asia and the write-down of various
investments. The equity interest portion of the transaction resulted
in proceeds of $105 million, a pretax gain of $93 million, and
increased net earnings by $61 million, 29 cents per share.
(d) In December 1994, the state of Florida elected to satisfy its
remaining unfunded obligation issued in 1988 to consummate the
purchase of 80 miles of track and right of way. The transaction
resulted in cash proceeds of $102 million, an accelerated pretax gain
of $69 million, and increased net earnings by $42 million, 20 cents
per share.
- 59 -
PAGE 60
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of CSX Corporation
We have audited the accompanying consolidated statements of financial
position of CSX Corporation and subsidiaries as of December 29, 1995 and
December 30, 1994, and the related consolidated statements of earnings, cash
flows and changes in shareholders' equity for each of the three fiscal years
in the period ended December 29, 1995. These financial statements are the
responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements 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 31-59) present fairly, in all material respects, the
consolidated financial position of CSX Corporation and subsidiaries at
December 29, 1995 and December 30, 1994, and the consolidated results of their
operations and their cash flows for each of the three fiscal years in the
period ended December 29, 1995, in conformity with generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
---------------------
Ernst & Young LLP
Richmond, Virginia
January 31, 1996
- 60 -
PAGE 61
BOARD OF DIRECTORS
- ------------------
Edward L. Addison (3,5)
Retired Chairman and CEO
The Southern Company, Pensacola Beach, Fla.
Elizabeth E. Bailey (2,4)
John C. Hower Professor of Public Policy and Management
The Wharton School
University of Pennsylvania, Philadelphia, Pa.
Robert L. Burrus, Jr. (4,5)
Partner and Chairman
McGuire, Woods, Battle & Boothe
Richmond, Va.
Bruce C. Gottwald (4,5)
Chairman and CEO
Ethyl Corporation, Richmond, Va.
John R. Hall (2)
Chairman and CEO
Ashland Inc., Ashland, Ky.
Robert D. Kunisch (1,3)
Chairman, President and CEO
PHH Corporation, Hunt Valley, Md.
Hugh L. McColl, Jr. (2,4)
Chairman and CEO
NationsBank Corp., Charlotte, N.C.
James W. McGlothlin (1,5)
Chairman and CEO
The United Company, Bristol, Va.
Southwood J. Morcott (1,2,4)
Chairman and CEO
Dana Corporation, Toledo, Oh.
Charles E. Rice (1,2,3)
Chairman and CEO
Barnett Banks Inc., Jacksonville, Fla.
William C. Richardson (3)
President and CEO
W.K. Kellogg Foundation
Battle Creek, Mich.
Frank S. Royal, M.D. (3)
Physician and Health Care Authority
Richmond, Va.
- 61 -
PAGE 62
BOARD OF DIRECTORS, CONTINUED
- -----------------------------
John W. Snow (1)
Chairman, President and CEO
CSX Corporation, Richmond, Va.
Sir Denis Thatcher, Bt MBE TD
Counsellor to the Board
London, England
KEY TO COMMITTEES OF THE BOARD
- ------------------------------
1 - Executive
2 - Audit
3 - Compensation
4 - Pension
5 - Organization & Corporate Responsibility
- 62 -
PAGE 63
CSX CORPORATE OFFICERS
- ----------------------
CSX Corporation
One James Center
901 East Cary Street
Richmond, VA 23219-4031
(804) 782-1400 - http://www.csx.com
John W. Snow, 56 *
Chairman, President and CEO, elected February 1991
Mark G. Aron, 53 *
Executive Vice President-Law and Public Affairs,
elected April 1995
James Ermer, 53 *
Executive Vice President-Corporate Planning & Development,
elected April 1995
Paul R. Goodwin, 53 *
Executive Vice President-Finance and Chief Financial Officer,
elected April 1995
Sally B. Basso, 38
Vice President-Compensation and Benefits, elected April 1995
Andrew B. Fogarty, 50
Vice President-Audit and Advisory Services, elected March 1995
Thomas E. Hoppin, 54
Vice President-Corporate Communications, elected July 1986
Richard H. Klem, 51 *
Vice President-Corporate Strategy, elected May 1992
Jesse R. Mohorovic, 53 *
Vice President-Executive Department, elected February 1995
James P. Peter, 44
Vice President-Taxes, elected June 1993
Woodruff M. Price, 60
Vice President-Federal Affairs, elected May 1988
Alan A. Rudnick, 48
Vice President-General Counsel and Corporate Secretary,
elected June 1991
Micheal J. Ruehling, 48
Vice President-State Relations, elected January 1995
James A. Searle Jr., 49
Vice President-Administration, elected August 1989
- 63 -
PAGE 64
CSX CORPORATE OFFICERS, CONTINUED
- ---------------------------------
Peter J. Shudtz, 47
General Counsel, elected September 1991
William H. Sparrow, 52 *
Vice President-Financial Planning, elected February 1996
Gregory R. Weber, 50 *
Vice President, Controller and Treasurer, elected April 1989
CSX UNIT OFFICERS
- -----------------
CSX Transportation Inc.
500 Water Street
Jacksonville, FL 32202
(904) 359-3100 - http://www.csxt.com
Alvin R. (Pete) Carpenter, 54 *
President and CEO, since January 1992
Gerald L. Nichols, 60 *
Executive Vice President and COO, since February 1995
Donald D. Davis, 56 *
Senior Vice President-Employee Relations, since April 1992
Michael J. Ward, 45 *
Senior Vice President-Finance, since April 1995
Sea-Land Service Inc.
6000 Carnegie Blvd.
Charlotte, NC 28209
(704) 571-2000 - http://www.sealand.com
John P. Clancey, 51 *
President and CEO, since August 1991
Wilford W. Middleton Jr., 57 *
Executive Vice President, since January 1990
Robert J. Grassi, 49 *
Senior Vice President-Finance and Planning, since October 1991
Charles G. Raymond, 52 *
Senior Vice President-Operations, since September 1988
- 64 -
PAGE 65
CSX UNIT OFFICERS, CONTINUED
- ----------------------------
CSX Intermodal Inc.
301 West Bay Street
Jacksonville, FL 32202
(904) 359-4855 - http://www.csxi.com
M. McNeil Porter, 62 *
Chairman, since January 1996
Ronald T. Sorrow, 49 *
President and CEO, since January 1996
American Commercial Lines Inc.
1701 E. Market Street
Jeffersonville, IN 47130
(812) 288-0100 - http://www.aclines.com
Michael C. Hagan, 49 *
President and CEO, since May 1992
Customized Transportation Inc.
10407 Centurion Parkway, N., Ste. 400
Jacksonville, FL 32256
(904) 928-1400 - http://www.csx.com/docs/cti.html
David G. Kulik, 47
President and CEO, since December 1994
The Greenbrier
White Sulphur Springs, WV 24986
(304) 536-1110 - http://www.greenbrier.com
Ted J. Kleisner, 51
President and Managing Director, since January 1989
Yukon Pacific Corporation
1049 W. 5th Avenue
Anchorage, AK 99501
(907) 265-3100 - http://www.ypc.com
Jeff B. Lowenfels, 47
President and CEO, since February 1995
* Executive officers of the corporation
- 65 -
PAGE 66
CORPORATE INFORMATION
Headquarters
One James Center
901 East Cary Street
Richmond, VA 23219-4031
(804) 782-1400
Internet Address: http://www.csx.com
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
210,494,658 shares were outstanding as of December 29, 1995. 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 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 if 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
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
Number of shareholders: 55,528 57,355 59,714 62,820 66,032
====== ====== ====== ====== ======
Shares Outstanding as of January 26, 1996: 210,529,205
Common Stock Shareholders as of January 26, 1996: 55,503
- 66 -
PAGE 67
Common Stock Price Range and Dividends Per Share
Year 1995
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High $39.88 $41.00 $44.63 $46.13
Low $34.69 $36.00 $37.44 $39.06
Dividends Per Share $.22 $.22 $.22 $.26
Year 1994
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High $46.19 $41.63 $39.56 $37.25
Low $39.94 $35.50 $33.00 $31.56
Dividends Per Share $.22 $.22 $.22 $.22
Year 1993
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High $39.98 $39.06 $40.13 $44.06
Low $33.56 $33.19 $33.94 $37.44
Dividends Per Share $.19 $.19 $.19 $.22
Year 1992
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High $31.00 $33.75 $33.88 $36.81
Low $27.44 $27.75 $28.31 $27.25
Dividends Per Share $.19 $.19 $.19 $.19
Year 1991
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High $19.50 $23.94 $26.31 $29.00
Low $14.88 $18.25 $22.13 $23.88
Dividends Per Share $.18 $.18 $.18 $.19
(All data restated to reflect the 2-for-1 stock split distributed to
shareholders in December 1995.)
- 67 -
PAGE 68
SHAREHOLDER INFORMATION
Shareholder Services
Shareholders with questions about their accounts should contact the
transfer agent at the address or telephone number shown below.
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 A3504
Chicago, IL 60690
(800) 521-5571
(312) 461-4061, 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
Katherine E. Wilson
Director-Financial Analysis
CSX Corporation
P.O. Box 85629
Richmond, VA 23285-5629
(804) 782-1553
- 68 -
PAGE 69
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. CSX
now offers direct deposit of dividends to shareholders who request it. If you
are interested, please contact Harris Trust at the address or telephone number
shown above.
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.
- 69 -
PAGE 70
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 68.
- 70 -
PAGE 71 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 1st day of
March 1996.
CSX CORPORATION
By: /s/ GREGORY R. WEBER
----------------------------------------
Gregory R. Weber
Vice President, Controller and Treasurer
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)
Paul R. Goodwin Executive 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)
John R. Hall Director(a)
Robert D. Kunisch Director(a)
Hugh L. McColl Jr. Director(a)
James W. McGlothlin Director(a)
Southwood J. Morcott Director(a)
Charles E. Rice Director(a)
William C. Richardson Director(a)
Frank S. Royal, M.D. Director(a)
(a) /s/ PETER J. SHUDTZ
---------------------------------
Peter J. Shudtz, Attorney-in-Fact
March 1, 1996
- 71 -
PAGE 72
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 pages 36 and 37
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.
- 72 -
PAGE 1
CSX CORPORATION
INDEX TO EXHIBITS
Description Value
- ----------- -----
Articles of Incorporation, incorporated by reference
(filed with Commission as an Exhibit under Form SE dated
February 20, 1991) EX-3.1
Bylaws EX-3.2
CSX Stock Plan for Directors, incorporated by reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 3, 1995) EX-10.1
Special Retirement Plan for CSX Directors, incorporated by
by reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 3, 1995) EX-10.2
Corporate Director Deferred Compensation Plan, incorporated
by reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 3, 1995) EX-10.3
CSX Directors' Charitable Gift Plan, incorporated by
reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 4, 1994) EX-10.4
CSX Directors' Matching Gift Program, incorporated by
reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 4, 1994) EX-10.5
Form of Agreement with J.W. Snow, A.R. Carpenter,
J.P. Clancey, P.R. Goodwin and G.L. Nichols, incorporated
by reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 3, 1995) EX-10.6
Form of Retention Agreement with A.R. Carpenter and
J.P. Clancey, incorporated by reference (a)
(filed with Commission as an Exhibit under Form SE dated
February 26, 1992) EX-10.7
Agreement with J.W. Snow, incorporated by reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 4, 1994) EX-10.8
Loan Agreement with A.R. Carpenter (a) EX-10.9
- E-1 -
PAGE 2
CSX CORPORATION
INDEX TO EXHIBITS
Description Value
- ----------- -----
1991 Stock Purchase and Loan Plan, incorporated by
reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 3, 1995) EX-10.10
1987 Long-Term Performance Stock Plan, incorporated by
reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 3, 1995) EX-10.11
1985 Deferred Compensation Program for Executives
of CSX Corporation and Affiliated Companies, incorporated
by reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 3, 1995) EX-10.12
Supplementary Savings Plan and Incentive Award
Deferral Plan for Eligible Executives of CSX
Corporation and Affiliated Companies, incorporated by
reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 3, 1995) EX-10.13
Special Retirement Plan of CSX Corporation
and Affiliated Companies, incorporated by reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 3, 1995) EX-10.14
Supplemental Retirement Plan of CSX Corporation
and Affiliated Companies, incorporated by reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 3, 1995) EX-10.15
1994 Senior Management Incentive Compensation Plan,
incorporated by reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 3, 1995) EX-10.16
Subsidiaries of the Registrant EX-21
Consent of Independent Auditors EX-23
Financial Data Schedule - Schedule II EX-27
(a) Management Contract or Compensatory Plan or Arrangement.
(b) No other schedules are required to be filed.
- E-2 -
PAGE 1
Exhibit 3.2
BY-LAWS
OF
CSX CORPORATION
(Amended as of April 25, 1995)
____________________
ARTICLE I.
Stockholders' Meetings.
SECTION 1. Annual Meeting. The annual meeting of the stockholders of
the Corporation shall be held on such date in March, April, May or June as the
Board of Directors may designate, either within or without the State of
Virginia.
SECTION 2. Special Meetings. Special meetings of the stockholders
may be called from time to time by the Board of Directors or the Chief
Executive Officer of the Corporation. Special meetings shall be held solely
for the purposes specified in the notice of meeting.
SECTION 3. Time and Place. The time and place of each meeting of the
stockholders shall be stated in the notice of the meeting.
SECTION 4. Quorum. The holders of a majority of the outstanding
shares of Capital Stock entitled to vote shall constitute a quorum at any
meeting of the stockholders. Less than a quorum may adjourn the meeting to a
fixed time and place, no further notice of any adjourned meeting being
required. Each stockholder shall be entitled to one vote in person or by
proxy for each share entitled to vote then outstanding and registered in his
name on the books of the Corporation.
SECTION 5. Notice of Meeting and Record Date. Notice shall be
delivered by the Corporation not less than ten (10) days nor more than sixty
(60) days before the date of the meeting, either personally or by mail, to
each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States
mail with postage thereon prepaid, addressed to the stockholder at his address
as it appears on the stock transfer books of the Corporation. Such further
notice shall be given as may be required by law. Notice of meetings may be
waived in accordance with law. Any previously scheduled meeting of the
stockholders may be postponed, by resolution of the Board of Directors at any
time prior to the time previously scheduled for such meeting of stockholders.
The Board of Directors may fix in advance a date to determine shareholders
entitled to notice or to vote at any meeting of shareholders, to receive any
dividend, or for any purpose, such date to be not more than 70 days before the
meeting or action requiring a determination of shareholders.
SECTION 6. Conduct of Meeting. The Chairman of the Board shall
preside over all meetings of the stockholders and prescribe rules of procedure
therefor. If he is not present, or if there is none in office, the President
- 1 -
PAGE 2
shall preside. If the Chairman of the Board and the President are not
present, a Vice President shall preside, or, if none be present, a Chairman
shall be elected by the meeting. The Secretary of the Corporation shall act
as Secretary of the meeting, if he is present. If he is not present, the
Chairman shall appoint a Secretary of the meeting. The Chairman of the
meeting shall appoint one or more inspectors of election who shall determine
the qualification of voters, the validity of proxies, and the results of
ballots. The Chairman of the meeting or a majority of the shares so
represented may adjourn the meeting from time to time, whether or not there is
a quorum, and may determine the date, time and place that a meeting so
adjourned is to reconvene. The Chairman of the meeting shall determine the
time reasonably allotted to each speaker at the meeting.
SECTION 7. Notice of Stockholder Business. At an annual meeting of
the stockholders, only such business shall be conducted as shall have been
brought before the meeting (a) by or at the direction of the Board of
Directors or (b) by any stockholder of the Corporation who complies with the
notice procedures set forth in this Section 7. For business to be properly
brought before an annual meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice must be delivered to or mailed and
received at the principal executive offices of the Corporation, not less than
30 days nor more than 60 days prior to the meeting; provided, however, that in
the event that less than 40 days' notice or prior public disclosure of the
date of the meeting is given or made to the stockholders, notice by the
stockholder to be timely must be received not later than the close of business
on the 10th day following the day on which such notice of the date of the
annual meeting was mailed or such public disclosure was made. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (a) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (b) the name and address, as
they appear on the Corporation's books, of the stockholder proposing such
business, (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder and (d) any material interest of the
stockholder in such business. Notwithstanding anything in the By-laws to the
contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this Section 7. The Chairman of
an annual meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting and in
accordance with the provisions of this Section 7, and if he should so
determine, he shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted.
- 2 -
PAGE 3
ARTICLE II.
Board of Directors.
SECTION 1. Number, term and election. The Board of Directors shall
be elected at the annual meeting of the stockholders or at any special meeting
held in lieu thereof. The number of Directors shall be thirteen. This number
may be increased or decreased at any time by amendment of these By-laws, but
shall always be a number of not less than four. No person shall be eligible
for election as a Director, nor shall any Director be eligible for reelection,
if he shall have attained the age of 70 years at the time of such election,
except that the Board, in its sole discretion, may waive such ineligibility
for a period not to exceed one year. Inside Directors, including Chief
Executive Officers, shall retire from the Board immediately upon leaving
active service, or age 65, whichever is first. Further, only CSX senior
corporate officers shall be eligible for election as Director. Outside
Directors shall hold office until removed or until the next annual meeting of
the stockholders is held and their successors are elected.
SECTION 2. Notice of Stockholder Nominees. Only persons who are
nominated in accordance with the procedures set forth in the By-laws shall be
eligible for election as Directors. Nominations of persons for election to
the Board of Directors of the Corporation may be made at a meeting of
stockholders (a) by or at the direction of the Board of Directors or (b) by
any stockholder of the Corporation entitled to vote for the election of
Directors at the meeting who complies with the notice procedures set forth in
this Section 2. Nominations by stockholders shall be made pursuant to timely
notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 30 days nor more
than 60 days prior to the meeting; provided, however, that in the event that
less than 40 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the 10th
day following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made. Such stockholder's notice shall
set forth (a) as to each person whom the stockholder proposes to nominate for
election or reelection as a Director, all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
Directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a Director if elected); and (b) as to the stockholder giving the
notice (i) the name and address, as they appear on the Corporation's books, of
such stockholder and (ii) the class and number of shares of the Corporation
which are beneficially owned by such stockholder. At the request of the Board
of Directors any person nominated by the Board of Directors for election as a
Director shall furnish to the Secretary of the Corporation that information
required to be set forth in the stockholder's notice of nomination which
pertains to the nominee. No person shall be eligible for election as Director
of the Corporation unless nominated in accordance with the procedures set
forth in the By-laws. The Chairman of the meeting shall, if the facts
- 3 -
PAGE 4
warrant, determine and declare to the meeting that a nomination was not made
in accordance with the procedures prescribed by the By-laws, and if he should
so determine, he shall so declare to the meeting and the defective nomination
shall be disregarded.
SECTION 3. Quorum. A majority of the Directors shall constitute a
quorum. Less than a quorum may adjourn the meeting to a fixed time and place,
no further notice of any adjourned meeting being required.
SECTION 4. Removal and vacancies. The stockholders at any meeting,
by a vote of the holders of a majority of all the shares of Capital Stock at
the time outstanding and having voting power, may remove any Director and fill
any vacancy. Vacancies arising among the Directors, including a vacancy
resulting from an increase by the Board of Directors in the number of
directors, so long as the increase so created is not more than two, may be
filled by the remaining Directors, though less than a quorum of the Board,
unless sooner filled by the stockholders. Vacancies filled by the Directors
may be subject to such rules, regulations, and criteria as the Board may from
time to time prescribe.
SECTION 5. Meetings and notices. Regular meetings of the Board of
Directors shall be held each month, unless cancelled by the Board of
Directors, at such place and at such time as the the Board of Directors may
from time to time designate. Special meetings of the Board of Directors may
be held at any place and at any time upon the call of the Chairman of the
Board or of any three members of the Board of Directors. Notice of any
meetings shall be given by mailing or delivering such notice to each Director
at his residence or business address or by telephoning or telegraphing it to
him at least twenty-four hours before the meeting. Any such notice shall
state the time and place of the meeting. Meetings may be held without notice
if all of the Directors are present or those not present waive notice before
or after the meeting.
Any action required to be taken at a meeting of the Board may be
taken without a meeting if a consent in writing setting forth the action so to
be taken, shall be signed by all the Directors and filed with the Secretary.
Such consent shall have the same force and effect as a unanimous vote.
Any action required to be taken at a meeting of the Board may be
taken by means of a conference telephone or similar communications equipment
whereby all persons participating in the meeting can hear each other, and
participation by such means shall constitute presence in person at such
meeting. When such meeting is conducted, a written record shall be made of
the action taken at such meeting.
- 4 -
PAGE 5
ARTICLE III.
Executive Committee.
SECTION 1. Number and Chairman. The Board of Directors shall by vote
of a majority of the whole number herein fixed designate an Executive
Committee, consisting of the Chairman of the Board, the President of the
Corporation, the Chairman of each of the Committees of the Board, and, for a
period determined by the Board of Directors not to exceed 12 months from
termination of his or her service as Chairman of a Committee, any current
member of the Board of Directors who had been Chairman of a Committee of the
Board. The Chairman of the Board of Directors shall be the Chairman of the
Committee.
SECTION 2. Authority and quorum. The Committee, when the Board of
Directors is not in session, shall have and may exercise all the authority of
the Board of Directors, except as may be prohibited by Section 13.1-40 of the
Code of Virginia, as it may from time to time be amended. A majority of the
Committee shall constitute a quorum for the transaction of business, and the
affirmative vote of the 2majority of those present shall be necessary for any
action by the Committee. The Committee shall cause to be kept a full and
accurate record of its proceedings at each meeting and report the same at the
next meeting of the Board. In the absence of the Chairman of the Committee, a
temporary chairman shall be designated by the Committee to preside at such
meeting.
SECTION 3. Meetings and notices. Meetings of the Committee may be
called at any time by the Chairman of the Board or any three members of the
Committee and shall be held at such time and place as shall be stated in
the notice of the meeting. Notice of any meeting of the Committee shall be
given by delivering or mailing such notice to each member of his residence or
business address or by telephoning or telegraphing it to him not less than
twenty-four hours before the meeting. Any such notice shall state the time
and place of the meeting. Meetings may be held without notice if all of the
members of the Committee are present or those not present waive notice before
or after the meeting.
Action may be taken by the Executive Committee without a meeting in
the manner provided by Section 4 of Article II.
SECTION 4. Removal. Members of the Committee may be removed as
members thereof and replaced by the affirmative vote of a majority of the
Directors in office at any regular or special meeting of the Board of
Directors.
- 5 -
PAGE 6
ARTICLE IV.
Committees of the Board.
(other than the Executive Committee)
The Board of Directors shall by vote of a majority of the whole
number herein fixed establish an Audit Committee, a Compensation Committee, an
Organization and Corporate Responsibility Committee, and a Pension Committee,
each committee consisting of at least two directors whose designation and
terms of office shall be by resolution of the Board. The Board may also
create from time to time such additional committees as it may deem
appropriate. The committees shall meet and perform such duties and functions
as the Board may prescribe.
ARTICLE V.
Officers.
At the first meeting of the Board of Directors held after the annual
meeting of the stockholders, the Board of Directors shall elect officers of
the Corporation as follows:
A Chairman of the Board, who shall be the
Chief Executive Officer,
A President, who shall be the Chief Operating Officer,
A Vice Chairman,
One or more Vice Presidents, any of whom may be
designated as an Executive Vice President, a
Senior Vice President or a Vice President with
a functional title,
A General Counsel,
A Secretary, and
A Treasurer
All officers elected by the Board of Directors shall, unless removed
by the Board of Directors as hereinafter set forth, hold office until the
first meeting of the Board of Directors after the next annual meeting of the
stockholders and until their successors are elected. Any two or more offices
may be held by the same person, except the offices of President and Secretary.
The Chairman of the Board may appoint such additional subordinate
officers as he may deem necessary for the efficient conduct of the affairs of
the Corporation.
The powers, duties, and responsibilities of officers and employees
of the Corporation not prescribed in these By-laws shall be established from
time to time by the Board of Directors or by the Chairman of the Board.
Any officer shall be subject to removal at any time if elected by the
Board of Directors, by the affirmative vote of a majority of all of the
members of the Board of Directors, or, if appointed by the Chairman of the
Board, by the Chairman of the Board.
- 6 -
PAGE 7
ARTICLE VI.
Chairman of the Board.
The Chairman of the Board of Directors shall be elected from among
the Directors. He shall preside at all meetings of the Board of Directors.
Subject to the direction of the Board of Directors, he shall have general
charge, control, and supervision of all the business and operations of the
Corporation.
The Board of Directors may elect a Vice Chairman of the Board from
among the members thereof. He shall have such powers, duties and
responsibilities as may be assigned to him by the Board of Directors or the
Chairman of the Board.
ARTICLE VII.
President.
The President shall be elected from among the Directors. He shall
have such powers, duties, and responsibilities as may be assigned to him by
the Board of Directors or the Chairman of the Board.
ARTICLE VIII.
Vice Presidents.
The powers, duties, and responsibilities of the Vice Presidents shall
be fixed by the Chairman of the Board with the approval of the Board of
Directors. From time to time, the Board of Directors may assign to a Vice
President the duty of acting for the President in case of his absence or
inability to act.
ARTICLE IX.
General Counsel.
The General Counsel shall have general charge of the legal affairs of
the Corporation, and shall cause to be kept adequate records of all suits or
actions of every nature to which the Corporation may be a party or in which it
has an interest, with sufficient data to show the nature of the case and
proceedings therein. He shall prepare or cause to be prepared legal opinions
on any subject necessary for the affairs of the Corporation, and shall perform
such other duties as the Board of Directors, the Chairman of the Board, or the
Senior Vice President-Corporate Services may designate.
- 7 -
PAGE 8
ARTICLE X.
Secretary.
SECTION 1. The Secretary shall attend all meetings of the
stockholders, the Board of Directors, and the Executive Committee and record
their proceedings, unless a temporary secretary be appointed. He shall give
due notice as required of all meetings of the stockholders, Directors, and
Executive Committee. He shall keep or cause to be kept at a place or places
required by law a record of the stockholders of the Corporation, giving the
names and addresses of all stockholders and the number, class, and series of
the shares held by each. He shall be custodian of the seal of the
Corporation, and of all records, contracts, leases, and other papers and
documents of the Corporation, unless otherwise directed by the Board of
Directors, and shall perform such other duties as may be assigned to him by
the Board of Directors, the Chairman of the Board, or the Senior Vice
President-Corporate Services.
SECTION 2. In case of the Secretary's absence or incapacity, the
Chairman of the Board shall designate an appropriate officer to perform the
duties of the Secretary.
ARTICLE XI.
Treasurer.
SECTION 1. The Treasurer shall receive, keep and disburse all moneys
belonging or coming to the Corporation, shall keep regular, true and full
accounts of all receipts and disbursements and make detailed reports thereof.
He shall also perform such other duties in connection with the administration
of the financial affairs of the Corporation as the Senior Vice
President-Finance shall assign to him.
SECTION 2. In case of the Treasurer's absence or incapacity, the
Senior Vice President-Finance shall designate an appropriate officer to
perform the duties of the Treasurer.
ARTICLE XII.
Compensation.
The compensation of the officers elected by the Board of Directors
shall be fixed by the Board of Directors. The compensation of all other
officers shall be fixed by the Chairman of the Board or the President or heads
of departments subject to the control of the Chairman of the Board.
No salary of more than a maximum level, fixed from time to time by
the Board of Directors, shall be established except with approval of the Board
of Directors.
- 8 -
PAGE 9
ARTICLE XIII.
Depositaries.
The money and negotiable instruments of the Corporation shall be kept
in such bank or banks as the Senior Vice President-Finance or the Vice
President and Treasurer shall from time to time direct or approve. All checks
and other instruments for the disbursement of funds shall be executed manually
or by facsimile by such officers or agents of the Corporation as may be
authorized by the Board of Directors.
ARTICLE XIV.
Seal.
The seal of the Corporation, of which there may be any number of
counterparts, shall be circular in form and shall have inscribed thereon the
name of the Corporation, the year of its organization and the words,
"Corporate Seal Virginia." The Board may also authorize to be used, as the
seal of the Corporation, any facsimile thereof.
ARTICLE XV.
Fiscal Year.
The fiscal year of the Corporation shall begin immediately after
midnight of the last Friday of December, and shall end at midnight on the last
Friday of December of each calendar year.
ARTICLE XVI.
Amendments to By-laws.
These By-laws may be amended or repealed at any regular or special
meeting of the Board of Directors by the vote of a majority of the Directors
present. They may also be repealed or changed, and new By-laws made, by the
stockholders, provided notice of the proposal to take such action shall
have been given in the notice of the meeting. The stockholders may prescribe
that any By-law made by them shall not be altered, amended or repealed by the
Board of Directors.
* * * * * * * * * *
Richmond, VA
April 25, 1995
- 9 -
PAGE 1
Exhibit 10.9
LOAN AGREEMENT FOR TAX WITHHOLDING ON SPECIAL STOCK AWARD
THIS AGREEMENT is made and entered into as of December 4, 1995, by
and between CSX CORPORATION ("CSX"), a Virginia corporation, and ALVIN R.
CARPENTER ("Executive").
FIRST. Pursuant to an agreement dated April 17, 1990 ("1990
Agreement"), between Executive and CSX, Executive was awarded 20,000 shares of
$1 Par Value Common Stock of CSX Corporation ("Stock"), to be issued to
Executive in two Batches, as described in the 1990 Agreement, subject to
certain terms and conditions as to each Batch. On April 17, 1995, all
preconditions to receipt by the Executive of 10,000 shares of Stock
constituting the First Batch were deemed satisfied by CSX. The First Batch
was issued pursuant to a plan that has not been approved by shareholders of
CSX.
SECOND. As a result of certain requirements of Section 16 of the
Securities and Exchange Act of 1934 (" '34 Act") and Section 83(c) of the
Internal Revenue Code ("IRC"), tax valuation and withholding for the First
Batch of the Stock was deferred until October 18, 1995. The issuance of Stock
to Executive is considered compensation pursuant to the IRC and is subject to
withholding taxes.
THIRD. The parties recognized that it is the regular practice of
CSX to permit employees to require CSX to satisfy tax withholding obligations
arising from issuance of stock compensation awards through retention of Stock
equal in value to the amount of taxes to be withheld. The parties understand
CSX can retain Stock for tax withholding purposes only during a period
beginning on the third business day following release to the public by CSX of
quarterly earnings and ending on the twelfth business day following such
release of earnings ("Window Period").
FOURTH. Use of shares of the First Batch for tax withholding may
constitute a sale of Stock by Executive pursuant to Section 16 of the '34 Act,
which sale may be matched against any purchase of Stock, as determined
pursuant to said Section 16, resulting in potential forfeiture of monies by
Executive.
FIFTH. CSX has deemed it in CSX's best interests and in the best
interests of CSX shareholders for executive employees of CSX to increase
levels of personal Stock ownership. In furtherance of this objective, CSX has
offered certain executives the opportunity to receive payments under its
Management Incentive Compensation Plan ("MICP") and Senior Management
Incentive Compensation Plan ("SMICP") in Stock, such payments to be issued
during or about February 1996. Payments in Stock for such purposes will be
pursuant to a plan not approved by shareholders of CSX and may therefore
constitute a purchase of Stock pursuant to Section 16 of the '34 Act.
- 1 -
PAGE 2
ALVIN R. CARPENTER
November 22, 1995
SIXTH. It is the mutual desire of CSX and Executive (a) to
continue to increase Stock owned by Executive, (b) to encourage Executive to
accept compensation, when possible, in Stock, and (c) to avoid any matching of
purchases and sales pursuant to Section 16 of the '34 Act, which matching will
result in forfeiture by Executive of monies or securities.
NOW, THEREFORE, in order for each party to satisfy objectives
recited heretofore in Paragraphs First through Sixth and in consideration of
the parties' undertakings with respect to each other, CSX and Executive do
hereby agree that:
1. As of October 18, 1995, CSX will lend to Executive the sum of
$377,200, to be used to satisfy withholding taxes necessitated by issuance of
the First Batch, such loan to accrue interest at the Applicable Federal Rate
of 5.79% on an annual basis ("Loan").
2. As soon as practicable without forfeiture by Executive of any
Stock, but in no event earlier than six months and one day following
distribution of Stock pursuant to the MICP or SMICP award during or about
February 1996, Executive will (a) sell on the open market such number of
shares from the First Batch as are required to satisfy Executive's obligations
as to principal and interest pursuant to the Loan, or (b) tender to CSX such
shares for satisfaction of obligations pursuant to the Loan. Such sale of
Stock by Executive shall be within a Window Period during which Executive and
CSX agree that sale of Stock is appropriate and in conformity with all federal
securities laws.
3. CSX shall forgive interest on the Loan. Executive understands
that such forgiveness of interest will result in taxable compensation imputed
to Executive. At the end of each affected CSX fiscal year, Executive shall be
compensated for any tax liability incurred as a result of the Loan during such
fiscal year, including payment for taxes resulting from such additional
compensation ("Gross-Up").
4. Executive understands and acknowledges that the pendency and
terms of the Loan must be reported in each CSX Proxy Statement applicable to a
fiscal year or any part of a fiscal year in which the Loan is outstanding,
that income imputed to Executive as a result of the Loan or forgiveness of
interest may be required to be disclosed in each CSX Proxy Statement
applicable to a fiscal year or any part of a fiscal year in which the Loan is
outstanding, and that any sale of Stock to satisfy the Loan must be reported
to the Securities and Exchange Commission.
- 2 -
PAGE 3
ALVIN R. CARPENTER
November 22, 1995
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of December 4, 1995.
RECIPIENT CSX CORPORATION
/s/ A.R. CARPENTER By: /s/ ALAN A. RUDNICK
- ------------------ -------------------
Social Security No.______________ Title: VP-General Counsel
and Corporate Secretary
- 3 -
PAGE 1
Exhibit 21
CSX CORPORATION
SUBSIDIARIES OF THE REGISTRANT
As of December 29, 1995, registrant was the beneficial owner of 100 percent of
the Common Stock of CSX Transportation Inc. (a Virginia corporation).
As of December 29, 1995, registrant was the beneficial owner of 100 percent of
the Common Stock of Sea-Land Service Inc. (a Delaware corporation).
As of December 29, 1995, registrant was the beneficial owner of 100 percent of
the Common Stock of CSX Intermodal Inc. (a Delaware corporation).
As of December 29, 1995, registrant was the beneficial owner of 100 percent of
the Common Stock of American Commercial Lines Inc. (a Delaware corporation).
As of December 29, 1995, the other subsidiaries included in registrant's
consolidated financial statements, and all other subsidiaries considered in
the aggregate as a single subsidiary, did not constitute a significant
subsidiary.
- 1 -
PAGE 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following Registration
Statements of our report dated January 31, 1996, with respect to the
consolidated financial statements of CSX Corporation and subsidiaries included
in its Annual Report (Form 10-K) for the year ended December 29, 1995:
Registration Statement
Number Description
- ---------------------- -------------------------
33-2083 Post-Effective Amendment No. 1
to Form S-3
33-2084 Post-Effective Amendment No. 1
to Form S-3
33-16230 Form S-8
33-25537 Form S-8
33-29136 Form S-8
33-37449 Form S-8
33-41236 Form S-3
33-41498 Form S-8
33-41499 Form S-8
33-41735 Form S-8
33-41736 Form S-8
33-48841 Form S-3
33-49767 Form S-8
33-57029 Form S-8
/s/ ERNST & YOUNG LLP
---------------------
Ernst & Young LLP
Richmond, Virginia
February 26, 1996
- 1 -
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