FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 27, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-8022
CSX CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 62-1051971
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 East Cary Street, Richmond, Virginia 23219-4031
(Address of principal executive offices) (Zip Code)
(804) 782-1400
(Registrant's telephone number, including area code)
No Change
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of June 27, 1997: 217,841,407 shares.
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CSX CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 27, 1997
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1:
Financial Statements
1. Consolidated Statement of Earnings-
Quarters Ended June 27, 1997 and June 28, 1996 3
2. Consolidated Statement of Cash Flows-
Six Months Ended June 27, 1997 and June 28, 1996 4
3. Consolidated Statement of Financial Position-
At June 27, 1997 and December 27, 1996 5
Notes to Consolidated Financial Statements 6
Item 2:
Management's Discussion and Analysis of Results of
Operations and Financial Condition 12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 20
Signature 20
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CSX CORPORATION AND SUBSIDIARIES
Consolidated Statement of Earnings
(Millions of Dollars, Except Per Share Amounts)
(Unaudited)
Quarters Ended Six Months Ended
-------------------- --------------------
June 27, June 28, June 27, June 28,
1997 1996 1997 1996
--------- --------- --------- ---------
Operating Revenue $ 2,678 $ 2,672 $ 5,245 $ 5,186
Operating Expense 2,245 2,264 4,488 4,482
------- -------- ------- --------
Operating Income 433 408 757 704
Other Income (Expense) 18 23 11 11
Interest Expense 111 71 195 131
------- -------- ------- --------
Earnings before Income Taxes 340 360 573 584
Income Tax Expense 113 126 195 204
------- -------- ------- --------
Net Earnings $ 227 $ 234 $ 378 $ 380
======= ======== ======= ========
Earnings Per Share $ 1.04 $ 1.11 $ 1.74 $ 1.80
======= ======== ======= ========
Average Common Shares Outstanding
(Thousands) 217,684 211,678 217,456 211,321
======= ======== ======= ========
Common Shares Outstanding
(Thousands) 217,841 211,812 217,841 211,812
======= ======== ======= ========
Cash Dividends Paid Per Common
Share $ .26 $ .26 $ .52 $ .52
======= ======== ======= ========
See accompanying Notes to Consolidated Financial Statements.
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CSX CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Millions of Dollars)
(Unaudited)
Six Months Ended
---------------------
June 27, June 28,
1997 1996
--------- --------
OPERATING ACTIVITIES
Net Earnings $ 378 $ 380
Adjustments to Reconcile Net Earnings
to Net Cash Provided
Depreciation and Amortization 337 312
Deferred Income Taxes 53 37
Productivity/Restructuring Charge Payments (23) (49)
Other Operating Activities (45) --
Changes in Operating Assets and Liabilities
Accounts Receivable (53) (92)
Other Current Assets (27) (48)
Accounts Payable (41) (9)
Other Current Liabilities 42 (65)
------- -------
Net Cash Provided by Operating
Activities 621 466
------- -------
INVESTING ACTIVITIES
Property Additions (411) (594)
Proceeds from Property Dispositions 23 41
Investment in Conrail (2,120) --
Short-Term Investments - Net (210) (45)
Purchases of Long-Term Marketable Securities (33) (10)
Proceeds from Sales of Long-Term Marketable
Securities 24 106
Other Investing Activities (30) (16)
------- -------
Net Cash Used by Investing Activities (2,757) (518)
------- -------
FINANCING ACTIVITIES
Short-Term Debt - Net (322) 34
Long-Term Debt Issued 2,454 117
Long-Term Debt Repaid (69) (159)
Cash Dividends Paid (113) (110)
Other Financing Activities -- 20
------- -------
Net Cash Provided (Used) by Financing
Activities 1,950 (98)
------- -------
Net Decrease in Cash and Cash Equivalents (186) (150)
CASH, CASH EQUIVALENTS AND SHORT-
TERM INVESTMENTS
Cash and Cash Equivalents at Beginning of
Period 368 320
------- -------
Cash and Cash Equivalents at End of Period 182 170
Short-Term Investments at End of Period 524 380
------- -------
Cash, Cash Equivalents and Short-Term
Investments at End of Period $ 706 $ 550
======= =======
See accompanying Notes to Consolidated Financial Statements.
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CSX CORPORATION AND SUBSIDIARIES
Consolidated Statement of Financial Position
(Millions of Dollars)
(Unaudited)
June 27, December 27,
1997 1996
--------- --------
ASSETS
Current Assets
Cash, Cash Equivalents and Short-Term
Investments $ 706 $ 682
Accounts Receivable 917 894
Materials and Supplies 237 229
Deferred Income Taxes 145 139
Other Current Assets 148 128
------- -------
Total Current Assets 2,153 2,072
Properties-Net 11,998 11,906
Investment in Conrail 4,188 1,965
Affiliates and Other Companies 380 345
Other Long-Term Assets 750 677
------- -------
Total Assets $19,469 $16,965
======= =======
LIABILITIES
Current Liabilities
Accounts Payable $ 1,093 $ 1,189
Labor and Fringe Benefits Payable 471 499
Casualty, Environmental and Other Reserves 298 306
Current Maturities of Long-Term Debt 143 101
Short-Term Debt 13 335
Other Current Liabilities 412 327
------- -------
Total Current Liabilities 2,430 2,757
Casualty, Environmental and Other Reserves 711 715
Long-Term Debt 6,753 4,331
Deferred Income Taxes 2,779 2,720
Other Long-Term Liabilities 1,486 1,447
------- -------
Total Liabilities 14,159 11,970
------- -------
SHAREHOLDERS' EQUITY
Common Stock, $1 Par Value 218 217
Other Capital 1,482 1,433
Retained Earnings 3,717 3,452
Minimum Pension Liability (107) (107)
------- -------
Total Shareholders' Equity 5,310 4,995
------- -------
Total Liabilities and Shareholders'
Equity $19,469 $16,965
======= =======
See accompanying Notes to Consolidated Financial Statements.
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CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 1. BASIS OF PRESENTATION
In the opinion of management, the accompanying consolidated financial
statements contain all adjustments necessary to present fairly the company's
financial position at June 27, 1997 and December 27, 1996, the results of its
operations for the quarters and six months ended June 27, 1997 and June 28,
1996, and its cash flows for the six months ended June 27, 1997 and June 28,
1996, such adjustments being of a normal recurring nature.
Earnings per share are based on the weighted average of common shares
outstanding for the quarters ended June 27, 1997 and June 28, 1996. Dilution for
these periods, which could result if all outstanding common stock equivalents
were exercised, is not significant.
While the company believes that the disclosures presented are adequate to
make the information not misleading, it is suggested that these financial
statements be read in conjunction with the financial statements and the notes
included in the company's latest Annual Report and Form 10-K.
NOTE 2. FISCAL REPORTING PERIODS
The company's fiscal year is composed of 52 weeks ending on the last
Friday in December. The financial statements presented are for the 13-week
quarters and 26-week periods ended June 27, 1997 and June 28, 1996, and the
fiscal year ended December 27, 1996.
NOTE 3. ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) has issued several
accounting pronouncements which the company will be required to adopt in future
fiscal reporting periods.
FASB Statement No. 128 "Earnings per Share" establishes new guidelines for
the calculation of and disclosures regarding earnings per share. The company
will adopt the provisions of Statement No. 128 during the fourth quarter of 1997
and at that time will be required to present basic and diluted earnings per
share and to restate all prior periods. There will be no impact on the
calculation of basic earnings per share for the quarters ended June 27, 1997 and
June 28, 1996. Diluted earnings per share is not expected to differ materially
from basic earnings per share.
The company will adopt FASB Statement No. 129 "Disclosure of Information
About Capital Structure" during the fourth quarter of 1997. The company does not
expect that adoption of the disclosure requirements of this pronouncement will
have a material impact on its financial statements.
FASB Statement No. 130 "Reporting Comprehensive Income," which the company
will adopt during the first quarter of 1998, establishes standards for reporting
and display of comprehensive income and its components in financial statements.
Comprehensive income generally represents all changes in shareholders' equity
except those resulting from investments by or distributions to shareholders.
With the exception of net earnings, such changes are generally not significant
to the company; and the adoption of Statement No. 130, including the required
comparative presentation for prior periods, is not expected to have a material
impact on its financial statements.
FASB Statement No. 131 "Disclosures about Segments of an Enterprise and
Related Information" requires that a publicly-held company report financial and
descriptive information about its operating segments in financial statements
issued to shareholders for interim and annual periods. The Statement also
requires additional disclosures with respect to products and services,
geographic areas of operation, and major customers. The company operates
diversified freight transportation businesses and has historically provided
detailed operating segment and other information in its communications to
shareholders; however, such information has not typically been presented in the
consolidated financial statements and related notes. The company expects to
adopt Statement No. 131 in the first quarter of 1998.
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CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 4. JOINT ACQUISITION OF CONRAIL INC.
During the quarter ended June 27, 1997, the company and Norfolk Southern
Corporation (Norfolk Southern) completed the acquisition of Conrail Inc.
(Conrail) through a jointly owned entity pursuant to their agreement dated April
8, 1997. Completion of the acquisition was achieved through a joint tender offer
and subsequent merger in which all outstanding Conrail shares not already owned
by the company and Norfolk Southern were acquired for cash, or were converted
into the right to receive cash, of $115 per share. Under the agreement, the
company contributed approximately $4.1 billion, in the form of cash and Conrail
shares previously acquired, for a 42 percent investment in Conrail. Norfolk
Southern contributed approximately $5.7 billion, also in the form of cash and
Conrail shares previously acquired, for a 58 percent investment in Conrail. The
Conrail shares acquired by the company and Norfolk Southern have been placed in
a voting trust pending approval of the transaction by the Surface Transportation
Board (STB).
To obtain funds for its cash obligations under the joint tender offer and
the subsequent merger, the company issued $2.5 billion principal amount of fixed
rate debentures through a private offering in May 1997. The debentures were
issued in multiple tranches with maturities ranging from 2002 to 2032 and
interest rates ranging from 6.95% to 8.30%. The company expects to complete an
offer in 1997 to exchange the outstanding debentures for new freely tradeable
debentures with substantially identical terms.
In June 1997, the company and Norfolk Southern completed supplemental
agreements governing the legal structure of the division and operations of the
Conrail rail system subsequent to STB approval. The terms of these agreements,
the operating plans of the respective companies, and the benefits expected to
result from combining the respective rail systems are incorporated in a joint
railroad control application which was filed with the STB on June 23, 1997. The
STB has announced a 350-day review period for the application. A favorable
decision by the STB would permit the company and Norfolk Southern to exercise
control over Conrail by mid-1998.
Upon completion of the joint tender offer and subsequent merger, the
company's ownership interest in Conrail increased from approximately 19.9% to
42%, requiring a change from the cost method to the equity method of accounting
for the investment. The change in accounting method included adjustments
retroactive to the date of the company's initial investment in Conrail in
November 1996. The net amount of these retroactive adjustments applicable to
fiscal year 1996 was not material. Under the equity method, inclusive of such
adjustments, the company recognized $52 million in income from its proportionate
share of Conrail's net earnings during the investment period, $17 million in
expense for amortization of its purchase price in excess of its proportionate
share of Conrail's net book value, and a reversal of $16 million in dividends
received and previously reported as income under the cost method.
Summary financial information for Conrail for its fiscal periods ended
June 30, 1997 and 1996, and at December 31, 1996, is as follows:
Quarters Ended Six Months Ended
June 30, June 30,
-------------------- ----------------------
1997 1996 1997 1996
-------- --------- ---------- ---------
Income Statement Information:
Revenues $ 937 $ 949 $ 1,843 $ 1,838
Income (Loss) from Operations (231) 54 (115) 123
Net Income (Loss) (274) 26 (213) 57
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CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
As Of
------------------------------
June 30, December 31,
1997 1996
------------ ---------------
Balance Sheet Information:
Current Assets $ 1,137 $ 1,117
Property and Equipment and Other Assets 7,401 7,285
Total Assets 8,538 8,402
Current Liabilities 1,211 1,092
Long-Term Debt 1,879 1,876
Total Liabilities 5,594 5,295
Stockholders' Equity 2,944 3,107
Conrail's operating results for the quarter ended June 30, 1997 included certain
acquisition-related charges that the acquiring companies are required to record
as liabilities established in connection with a purchase business combination
under generally accepted accounting principles. These charges reflect
obligations for separation-related compensation to certain Conrail executives
and include vesting of benefits under certain stock compensation plans and the
termination of Conrail's Employee Stock Ownership Plan. The charges, which
totaled $363 million on an after-tax basis, were excluded from the net earnings
of Conrail in determining the proportionate share of such earnings recorded by
the company. Excluding these separation-related charges, Conrail's net earnings
totaled $89 million and $150 million for the quarter and six months ended June
30, 1997, respectively. Conrail incurred other one-time acquisition-related
expenses of $28 million and $42 million for the quarter and six months ended
June 30, 1997, respectively. These expenses were included in the net earnings of
Conrail in determining the proportionate share of such earnings recorded by the
company.
The company is amortizing the difference between its purchase price for
the investment in Conrail and its proportionate share of Conrail's net assets. A
substantial portion of the excess purchase price is expected to be allocated to
reflect the fair value of Conrail's property and equipment. The company has
based its provision for amortization of the excess purchase price on preliminary
estimates of the fair values of such property and equipment and estimates of
their remaining useful lives, as well as estimates of the fair values of other
assets and liabilities of Conrail.
The combined effect of equity earnings, excess purchase price
amortization, reversal of dividend income, net interest on debt issued to
acquire the investment, and other expenses related to the transaction reduced
the company's net earnings by $18 million, 9 cents per share, and $34 million,
16 cents per share, for the quarter and six months ended June 27, 1997,
respectively. The company's method of accounting for the Conrail investment may
change upon exercise of control over Conrail by it and Norfolk Southern after a
favorable STB decision.
NOTE 5. 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. At June 27, 1997 and December 27, 1996, the Certificates were
collateralized by $253 million and $248 million, respectively, of accounts
receivable held in the master trust.
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
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CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
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 June 27, 1997 and December 27,
1996, accounts receivable have been reduced by $372 million, representing
Certificates and accounts receivable sold. The net losses associated with sales
of Certificates and receivables were $8 million and $15 million for the quarter
and six months ended June 27, 1997, respectively, and $8 million and $15 million
for the quarter and six months ended June 28, 1996, respectively.
The company adopted FASB Statement No. 125 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" during the
first quarter of 1997. Adoption of the pronouncement, which established new
guidelines for accounting and disclosure related to transfers of trade accounts
receivable and other financial assets, did not have a material impact on the
company's financial statements.
NOTE 6. OPERATING EXPENSE
Quarters Ended Six Months Ended
---------------------- ----------------------
June 27, June 28, June 27, June 28,
1997 1996 1997 1996
--------- --------- --------- ---------
Labor and Fringe Benefits $ 802 $ 797 $ 1,597 $ 1,591
Materials, Supplies and Other 619 632 1,233 1,250
Building and Equipment Rent 275 287 559 576
Inland Transportation 258 252 495 481
Depreciation 157 154 313 307
Fuel 134 142 291 277
------- ------- -------- -------
Total $ 2,245 $ 2,264 $ 4,488 $ 4,482
======= ======= ======== =======
NOTE 7. OTHER INCOME (EXPENSE)
Quarters Ended Six Months Ended
----------------- -----------------
June 27, June 28, June 27, June 28,
1997 1996 1997 1996
------- ------- ------- -------
Interest Income $ 18 $ 12 $ 30 $ 24
Income from Real Estate and Resort
Operations(1) 10 31 3 23
Net Losses from Accounts Receivable (8) (8) (15) (15)
Sold
Minority Interest (10) (10) (20) (18)
Income from Investment in Conrail-Net 13 -- 18 --
Equity Earnings of Other Affiliates 2 -- 3 2
Miscellaneous (7) (2) (8) (5)
------ ------ ------ ------
Total $ 18 $ 23 $ 11 $ 11
====== ====== ====== ======
(1) Gross revenue from real estate and resort operations was $45 million and
$62 million for the quarter and six months ended June 27, 1997, respectively,
and $66 million and $79 million for the quarter and six months ended June 28,
1996, respectively.
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CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 8. COMMITMENTS AND CONTINGENCIES
Although the company obtains substantial amounts of commercial insurance
for potential losses for third-party liability and property damage, reasonable
levels of risk are retained on a self-insurance basis. A portion of the
insurance coverage, $25 million limit above $100 million per occurrence from
rail and certain other operations, is provided by a company partially owned by
CSX.
The company has been advised that activities of a former subsidiary that
administered student loans are under review. The subsidiary was sold in 1992.
The review is to determine whether, and to what extent, damages should be
asserted against the company for government insurance payments made on
uncollected loans as a result of alleged processing deficiencies or errors
before the sale. The company believes it has no material liability for any claim
that might be asserted, but the final outcome of the review and the amount of
potential damages are not yet reasonably estimable. Based upon information
currently available to the company, it is believed any adverse outcome will not
be material to the company's results of operations or financial position.
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) at approximately 114 environmentally
impaired sites that are or may be subject to remedial action under the Federal
Superfund statute (Superfund) or similar state statutes. A number 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 similar state statutes can 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.
CSXT is involved in a number of administrative and judicial proceedings
and other clean-up efforts at approximately 276 sites, including the sites
addressed under the Federal Superfund statute or similar state statutes, where
it is participating in the study and/or clean-up of alleged environmental
contamination. 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.
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 can be
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 June 27, 1997, and December 27, 1996, were $112 million and $117 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
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CSX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All Tables in Millions of Dollars, Except Per Share Amounts)
June 27, 1997 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.
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 resolution of these matters will have a material adverse
effect on the consolidated financial position, results of operations and cash
flows of the company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
The company reported net earnings for the quarter ended June 27, 1997 of
$227 million, $1.04 per share, versus net earnings of $234 million, $1.11 per
share for the same period in 1996. The 1997 results reflect increased costs
associated with the company's investment in Conrail and its equity in Conrail's
earnings. Excluding the Conrail impact, earnings for the quarter would have been
$245 million, $1.13 per share.
Operating income was $433 million, versus $408 million for the 1996 second
quarter, largely due to the success of the company's ongoing cost-control
efforts. Operating revenue of $2.7 billion remained level with the 1996 period.
Rail Unit Results
The company's rail unit produced operating income of $340 million, 9
percent higher than the 1996 second quarter results. The unit achieved an
operating ratio of 72.9 percent, compared to 75.1 percent in the 1996 second
quarter. Revenue totaled $1.25 billion, level with the 1996 period, while
operating expense decreased 3 percent, to $913 million.
Coal carloads and tonnage each decreased 3 percent, reflecting lower
consumption of coal during the relatively mild winter months, compared to 1996's
harsh winter. Total merchandise carloads rose 4 percent, led by chemicals,
metals, and food and consumer products. Total merchandise revenue rose 3
percent.
RAIL OPERATING INCOME
(Millions of Dollars)
-----------------------------------------------------------
Quarters Ended Six Months Ended
-------------------- --------------------
June 27, June 28, Percent June 27, June 28, Percent
1997 1996 Change 1997 1996 Change
--------- -------- ------- --------- -------- -------
Operating Revenue
Merchandise $ 841 $ 813 3 % $ 1,667 $ 1,602 4 %
Coal 382 404 (5)% 771 774 -- %
Other 30 38 (21)% 62 74 (16)%
-------- ------- -------- -------
Total 1,253 1,255 -- % 2,500 2,450 2 %
Operating Expense 913 943 (3)% 1,878 1,902 (1)%
-------- ------- -------- -------
Operating Income $ 340 $ 312 9 % $ 622 $ 548 14%
======== ======= ======== =======
Operating Ratio 72.9% 75.1% 75.1% 77.6%
======== ======= ======== =======
Container-Shipping Unit Results
The container-shipping unit produced solid results in an environment
presently dominated by overcapacity and corresponding rate pressures. Operating
income totaled $80 million, compared with $81 million in the 1996 second
quarter. The results were driven by a total volume increase of 8 percent,
combined with stringent cost control.
Continued strength in global trade resulted in volume increases of 14
percent in the Atlantic trade lane, 23 percent in the Americas trade lane, and
21 percent in the Asia/Middle East/Europe (AME) trade lane. The Pacific trade
lane experienced a 2 percent decline in volume. Operating revenue of $1.0
billion was $9 million lower than in the prior year quarter, reflecting the
significant
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, CONTINUED
RESULTS OF OPERATIONS, Continued
rate pressures. Despite the increase in volume, operating expense decreased $8
million from the prior year quarter to $931 million, reflecting the cost control
efforts.
Other Unit Results
The company's barge unit continued to experience the effects of flooding
earlier in the year, as well as rate pressures. Operating income totaled $17
million, compared with $28 million in last year's second quarter. Grain rates
were temporarily weakened by lower export demand for U.S. grain due to a larger
global supply of grain. Operating revenue totaled $152 million for the quarter,
a 4 percent decline from the 1996 second quarter. Operating expense rose 4
percent to $135 million, largely due to the adverse weather conditions.
The company's intermodal unit continued to benefit from last year's
network redesign. Operating income for the second quarter rose to $10 million,
from $6 million in the prior year quarter. While operating revenue of $164
million was 4 percent lower than in 1996, operating expense of $154 million for
the quarter was down 7 percent from the prior year.
The contract logistics unit continued its rapid growth, with operating
revenue increasing to $104 million, 31 percent higher than the prior year
quarter, and operating income increasing to $6 million, 38 percent higher than
the prior year quarter.
FINANCIAL CONDITION
Cash, cash equivalents and short-term investments totaled $706 million at
June 27, 1997, an increase of $24 million since December 27, 1996. Exclusive of
activities related to the company's investment in Conrail, the primary source of
cash and cash equivalents was normal transportation operations, and the primary
uses of cash were property additions and dividend payments.
During the second quarter the company received approximately $2.48 billion
of proceeds, net of discounts to initial purchasers, from multiple tranches of
fixed-rate debentures issued principally to finance its obligations under the
joint tender offer for Conrail and the subsequent merger. The debentures have
maturities ranging from 2002 to 2032 and interest rates ranging from 6.95% to
8.30%. As of June 27, 1997, the portion of the debt proceeds not required for
the settlement of Conrail shares was used to purchase short-term investments and
reduce existing levels of short-term debt. During the six months ended June 27,
1997, the company used $210 million of cash to increase short-term investments
and $322 million of cash to reduce short-term debt.
The company's working capital deficit at June 27, 1997 was $277 million, a
$408 million decrease during the first six months of the year. A working capital
deficit is not unusual for the company and does not indicate a lack of
liquidity. The company continues to maintain adequate current assets to satisfy
current liabilities when they are due and has sufficient liquidity and financial
resources to manage its day-to-day cash needs. The significant improvement in
deficit working capital occurred principally in the second quarter and is
attributable to the temporary use of debt proceeds to purchase short-term
investments and reduce short-term debt, as discussed above.
- 13 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, CONTINUED
FINANCIAL DATA
(Millions of Dollars)
------------------------
June 27, December 27,
1997 1996
----------- ------------
Cash, Cash Equivalents and
Short-Term Investments $ 706 $ 682
Commercial Paper Outstanding -
Short-Term $ 13 $ 335
Commercial Paper Outstanding -
Long-Term $ 2,300 $ 2,300
Working Capital (Deficit) $ (277) $ (685)
Current Ratio 0.9 0.8
Debt Ratio 56% 46%
Ratio of Earnings to Fixed Charges 3.0x 4.0x
OUTLOOK
Each of the company's transportation units anticipates overall favorable
performance over the remainder of 1997, compared to 1996. The company expects
modest economic growth and robust demand for transportation services. CSX also
plans to remain focused on customer service, safety and cost control throughout
its units in order to enhance core earning power and increase shareholder
returns.
Following on its strong first half results, the railroad expects to
continue on that same positive trend throughout the rest of the year. Revenue is
expected to improve in 1997 propelled by strength in merchandise traffic.
The container-shipping company anticipates increased volume and permanent
cost reductions to mitigate the difficult rate environment. Improving the mix of
higher margin freight will remain an ongoing priority.
The barge line will be affected by the lower grain rates weakened by lower
export demand for U.S. grain due to a larger global supply of grain. The
intermodal unit forecasts overall improvement compared to prior year levels
attributable to its network redesign implemented in 1996. The contract logistics
company expects its growth to continue throughout the year, based upon increased
demand for its services.
JOINT CSX/NORFOLK SOUTHERN ACQUISITION OF CONRAIL
CSX/Norfolk Southern Agreement
On April 8, 1997, the company and Norfolk Southern entered into an
agreement providing for their joint acquisition of Conrail and the division of
its routes and other assets. Conrail is a holding company of which the principal
subsidiary is Consolidated Rail Corporation, a Class I freight railroad that
operates approximately 10,500 route miles in the Northeast and Midwest of the
United States and the Province of Quebec, Canada, and which possesses superior
access to certain major northeast markets, including the New York and Boston
metropolitan areas. Norfolk Southern owns an eastern Class I freight railroad,
Norfolk Southern Railway Company.
- 14 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, CONTINUED
Under the CSX/Norfolk Southern agreement, the company and Norfolk Southern
acquired all outstanding shares of Conrail not already owned by them for cash,
or for the right to receive cash, of $115 per share through a jointly-owned
acquisition entity during the second quarter of 1997. The company and Norfolk
Southern each possess 50% of the voting and management rights of the acquisition
entity, and non-voting equity is apportioned between the parties to achieve
overall economic allocations of 42% for CSX and 58% for Norfolk Southern.
Following approval by the STB as described below, Conrail's assets will be
segregated within Conrail, and the company and Norfolk Southern will each
benefit from the operation of a specified portion of the Conrail routes and
other assets through the use of various operating arrangements, and certain
Conrail assets will be operated for the joint benefit of the company and Norfolk
Southern.
Acquisition of most of the Conrail shares was effected under a tender
offer, initiated by the company in December 1996 and amended in April 1997 to
include Norfolk Southern as a co-bidder (the joint tender offer), which closed
in May 1997. Shortly thereafter, Conrail was merged with a wholly-owned
subsidiary of the acquisition entity and all remaining Conrail shares not
tendered were converted into the right to receive $115 in cash per share. The
aggregate cost of the joint tender offer, the merger and the shares of Conrail
already acquired by the company and Norfolk Southern was approximately $9.8
billion. Pursuant to the CSX/Norfolk Southern agreement, the company has paid
42%, or approximately $4.1 billion, and Norfolk Southern has paid 58%, or
approximately $5.7 billion, of such cost. These totals include approximately $2
billion spent by the company and $1 billion spent by Norfolk Southern to acquire
approximately 30%, in the aggregate, of Conrail's shares prior to the joint
tender offer. Including its capitalized transaction costs, the company's
aggregate purchase price was approximately $4.2 billion.
Conrail shares purchased in the joint tender offer and merger, together
with all Conrail shares previously purchased by the company and Norfolk
Southern, have been deposited into a voting trust pending STB approval of the
joint acquisition, control and division of Conrail by the company and Norfolk
Southern. Furthermore, by entering into the CSX/Norfolk Southern agreement, the
company is obligated under Pennsylvania antitakeover laws to purchase any
Conrail shares "put" to the company in accordance with the procedures of such
laws for at least $115 per share in cash.
Joint CSX/Norfolk Southern STB Application
The exercise of control over Conrail by the company and Norfolk Southern
remains subject to a number of conditions and approvals, including approval by
the STB, which has the authority to modify contract terms and impose additional
conditions, including with respect to divestitures, grants of trackage rights
and other terms of continuing operations. On June 23, 1997, the company and
Norfolk Southern filed a joint application with the STB for control and division
of Conrail and for various other matters required to be approved by the STB. The
joint STB application addresses traffic flows, operations and related matters;
outlines the capital investments each company plans to make in new connections
and facilities and to increase capacity on critical routes; and details
operating savings and other public benefits resulting from the transaction. The
application also contains certain historical and pro forma financial information
required by the STB. The STB has issued a scheduling order that provides for
issuance of a final STB decision no later than June 8, 1998. No assurance can be
given with respect to the receipt of STB approval or the modifications or
conditions that may be imposed in connection therewith. A favorable decision by
the STB would permit the company and Norfolk Southern to exercise control over
Conrail by mid-1998. The joint STB application is a public document, available
for review in its entirety at the office of the STB, located at 1925 K Street,
NW, Washington, D.C. 20423-0001.
Proposed Division of Conrail Routes
Until the date the company and Norfolk Southern are permitted by the STB
to assume control over Conrail (the Control Date), Conrail will continue to be
managed by its current Board of
- 15 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, CONTINUED
Directors and management. After the Control Date, Conrail will segregate its
assets primarily into two groups to facilitate their separate operation pursuant
to leasing, operating, partnership and other similar arrangements. The remaining
assets and liabilities of Conrail, including joint facilities, will be shared by
the company and Norfolk Southern according to their respective 42% and 58%
economic allocations. In arriving at the proposed division of Conrail and these
percentages, the acquiring companies negotiated with a view toward producing the
best fits with their existing systems and optimizing service to their respective
customers.
The acquisition by the company of the Conrail shares and the right to use
the assets allocated to or shared by the company pursuant to the CSX/Norfolk
Southern agreement and the liabilities allocated to or shared by it pursuant to
that agreement are hereinafter referred to as the "Transaction." Many of the
terms of the Transaction are detailed in further definitive agreements which
were entered into by the company, Norfolk Southern, Conrail, and certain
affiliates of the respective companies prior to filing of the STB application.
In addition to the joint STB application, further information regarding
the Transaction is contained in the following documents: (1) the company's
Tender Offer Statement on Schedule 14D-1, together with exhibits thereto,
initially filed with the Securities and Exchange Commission (the Commission) on
December 6, 1996, as amended; (2) the company's Form 8-K filed with the
Commission on June 4, 1997 to report completion of the joint tender offer and
subsequent merger, to report the amendment and restatement of its credit
agreement with bank lenders, and to present certain historical financial
statements and pro forma financial statements giving effect to the Transaction;
(3) the company's Form S-4, not yet effective, filed with the Commission on June
5, 1997 relating to an offer to exchange $2.5 billion in privately-placed
debentures for newly-issued publicly tradeable debentures having substantially
identical terms; and (4) the company's Form 8-K filed with the Commission on
July 8, 1997 to report the filing of the STB application and provide as an
exhibit the definitive Transaction Agreement entered into by the company,
Norfolk Southern, Conrail, and certain affiliates of the respective companies.
Financing Arrangements
The company's total cash obligation to complete the purchase of Conrail
shares under the Transaction was approximately $4.2 billion. The company
originally arranged a $4.8 billion bank credit facility in November 1996 to
provide financing for the Conrail acquisition and to meet general working
capital needs. The facility was amended in May 1997 and the lenders' commitments
were reduced to $2.5 billion, reflecting the issuance of the debentures which
provided a portion of the company's financing for the Transaction. Currently,
the facility is used as support for commercial paper issuance.
The $2.5 billion principal amount of debentures, issued through a
multi-tranche private offering in May 1997, have maturities ranging from 2002 to
2032 and interest rates ranging from 6.95% to 8.30%. As noted above, the company
expects to complete an exchange of the outstanding debentures for newly-issued
freely tradeable debentures with substantially identical terms during 1997.
The company expects its long-term debt levels (including the company's
portion of Conrail debt) to peak in 1998 at approximately $6.8 billion, with
related interest charges (including interest payments on the company's portion
of Conrail debt) to peak at approximately $520 million. Payments to Conrail
under operating or similar arrangements and through capital contributions to the
jointly-owned acquisition entity will be sufficient to pay obligations on
Conrail's outstanding debt instruments in accordance with their terms. The
agreement between the company and Norfolk Southern provides that such debt will
be shared ratably according to their respective 42% and 58% percentages.
- 16 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, CONTINUED
Broadest Geographic Network in Eastern United States
The Transaction will significantly enhance the company's position as a
leading global transportation company. The company will remain the largest
railroad in the eastern United States and become the third largest railroad in
the nation, measured in terms of route miles and ton-miles. The company, as a
result of the Transaction, will be adding approximately 3,500 route miles, or
19%, to its rail network, and sharing with Norfolk Southern approximately 1,200
additional route miles. The company will have approximately 22,000 route miles
in 22 states, the District of Columbia, and the Provinces of Ontario and Quebec,
Canada, and will provide direct access to virtually every major metropolitan
area east of the Mississippi River and to eleven of the largest east coast and
gulf ports.
Enhanced Operating Efficiencies and Revenue Growth
Management expects the integration of Conrail operations resulting from
the Transaction to add approximately $1.7 billion, or 16%, to the company's
annual revenue beginning in the first twelve months following operational
consolidation. Management believes that the Transaction will also result in
growth of the company's rail revenue base through expansion of single-line
service and the company's ability to compete more effectively on certain routes
along which large quantities of goods are now transported by truck. Single-line
service is preferred by shippers over joint-line service because of lower
transaction costs, reduced delays, less damage from interchange operations and
single-carrier accountability. The addition of Conrail lines to the company's
rail network also is expected to improve operational efficiency through better
asset utilization. Optimization of train sizes, increased length of haul,
improved backhauls, shorter routes to many destinations and fewer empty
movements are all expected to produce cost reductions for the combined rail
network. Other significant savings are expected to be achieved through the
realization of economies of scale, rationalization of administrative and other
overhead expenses and consolidation of duplicative facilities.
Financial Effects
The company expects that the benefits from the Transaction will begin to
build from the Control Date and should be largely realized within a three-year
period thereafter. Therefore, for the purposes of the following discussion, Year
1, Year 2 and Year 3 correspond to the three consecutive 12-month periods
following the Control Date. Based on joint efforts of the company and Conrail to
identify potential cost savings, management currently estimates that the
Transaction will lead to quantifiable pretax benefits from increased traffic and
cost efficiencies (excluding certain one-time expenses associated with system
integration) of approximately $178 million, $305 million and $410 million
annually in Years 1, 2 and 3, respectively, compared to the separate operation
of the company and its share of Conrail. The benefits include estimated
incremental operating income of $58 million, $108 million and $146 million
expected through increased traffic in Years 1, 2 and 3, respectively. The
remaining pretax benefits will be in the form of operating cost savings, with
$120 million, $197 million and $264 million (exclusive of the one-time
integration costs) expected to be realized in Years 1, 2 and 3, respectively.
Management estimates that the company will, in Years 1, 2 and 3, incur one-time
transitional capital expenditures in connection with the integration of
operations. Those expenditures are expected to be $322 million in Year 1, $114
million in Year 2, and $52 million in Year 3.
The benefits outlined above are addressed in more detail in the joint STB
application and were developed and refined through the efforts of various
integration project teams. These teams, with assistance from Conrail personnel
and various outside consultants, completed revised estimates of integration
benefits in mid-June 1997 in conjunction with the development of a formal
operating plan included in the STB application. The revised estimates reflect a
more detailed review and understanding of Conrail's system, the markets it
serves, and the opportunities created by the combination with the company's rail
system. The revised estimates reflect benefits which are increased from the
company's earlier estimates.
- 17 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, CONTINUED
Including transaction costs, the overall purchase price paid by the
company exceeded the historical book value of its proportionate share of
Conrail's net assets by approximately $2.9 billion. A substantial portion of the
excess purchase price is expected to be allocated to reflect the fair value of
Conrail's property and equipment. The company has based its provision for
amortization of the excess purchase price on preliminary estimates of the fair
values of such property and equipment and estimates of their remaining useful
lives, as well as estimates of the fair values of other assets and liabilities
of Conrail.
Because of the time required to obtain necessary regulatory and other
approvals, the company does not expected integrated operations to have a
significant effect on operating and financial results prior to late fiscal 1998
or fiscal 1999. The primary impact of the proposed Transaction on net earnings
prior to the integration of operations will be the after-tax effect of the
company's share of Conrail's net earnings, reported under the equity method of
accounting, less amortization of the excess purchase price and interest on debt
incurred to acquire the Conrail investment. Net cash flow prior to operational
integration is expected to be reduced by interest payments on the acquisition
debt. At June 27, 1997, the average interest rate on debt incurred to acquire
Conrail shares was approximately 6.8%. The degree of negative impact on net
earnings and net cash flow during the second half of 1997 and the first half of
1998 will depend primarily on the net earnings reported by Conrail and the
average interest rate and timing of interest payments on the related debt.
-----------------------------------------------------------------------
THE ABOVE ESTIMATES AND FORECASTS ARE BASED UPON NUMEROUS ESTIMATES AND
ASSUMPTIONS ABOUT COMPLEX ECONOMIC AND OPERATING FACTORS WITH RESPECT TO
INDUSTRY PERFORMANCE, GENERAL BUSINESS AND ECONOMIC CONDITIONS AND OTHER MATTERS
THAT CANNOT BE PREDICTED ACCURATELY AND THAT ARE SUBJECT TO CONTINGENCIES OVER
WHICH THE COMPANY HAS NO CONTROL. SUCH FORWARD LOOKING STATEMENTS INVOLVE KNOWN
AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER IMPORTANT FACTORS THAT COULD CAUSE
THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO DIFFER
MATERIALLY FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR
IMPLIED BY SUCH FORWARD LOOKING STATEMENTS. CERTAIN OF THOSE RISKS,
UNCERTAINTIES AND OTHER IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY INCLUDE: (A) FUTURE ECONOMIC CONDITIONS IN THE MARKETS IN
WHICH THE COMPANY AND CONRAIL OPERATE; (B) FINANCIAL MARKET CONDITIONS; (C)
INFLATION RATES; (D) CHANGING COMPETITION; (E) CHANGES IN THE ECONOMIC
REGULATORY CLIMATE IN THE UNITED STATES RAILROAD INDUSTRY; (F) THE ABILITY TO
ELIMINATE DUPLICATIVE ADMINISTRATIVE FUNCTIONS; AND (G) ADVERSE CHANGES IN
APPLICABLE LAWS, REGULATIONS OR RULES GOVERNING ENVIRONMENTAL, TAX OR ACCOUNTING
MATTERS. THESE FORWARD LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS
FILING. THE COMPANY DISCLAIMS ANY OBLIGATION OR UNDERTAKING TO DISSEMINATE ANY
UPDATES OR REVISIONS TO ANY FORWARD LOOKING STATEMENT CONTAINED HEREIN TO
REFLECT ANY CHANGE IN THE COMPANY'S EXPECTATIONS WITH REGARD THERETO OR ANY
CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS
BASED.
- 18 -
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) Annual meeting held April 17, 1997.
(b) Not applicable.
(c) There were 217,525,493 shares of CSX common stock outstanding as of
February 17, 1997, the record date for the 1997 annual meeting of
shareholders. A total of 179,486,024 shares were voted. All of
management's nominees for directors of the corporation were elected
with the following vote:
Votes Broker
Nominee Votes For Withheld Non-Votes
------- --------- -------- ---------
Elizabeth E. Bailey 176,691,031 2,794,993 -
Robert L. Burrus, Jr. 176,648,282 2,837,742 -
Bruce C. Gottwald 176,725,968 2,760,056 -
John R. Hall 176,675,620 2,810,404 -
Robert D. Kunisch 176,734,728 2,751,296 -
Hugh L. McColl, Jr. 176,659,273 2,826,751 -
James W. McGlothlin 176,732,181 2,753,843 -
Southwood J. Morcott 176,708,647 2,777,377 -
Charles E. Rice 176,713,121 2,772,903 -
William C. Richardson 176,693,013 2,793,011 -
Frank S. Royal 176,630,996 2,855,028 -
John W. Snow 176,485,819 3,000,205 -
The appointment of Ernst & Young LLP as independent auditors to
audit and report on CSX's financial statements for the year 1997 was
ratified by the shareholders with the following vote:
Votes Broker
Votes For Against Abstentions Non-Votes
----------- --------- ----------- ---------
176,617,520 1,840,660 1,027,836 -
The adoption of the Amended and Restated CSX Corporation Stock Plan
for Directors was ratified by the shareholders with the following
vote:
Votes Broker
Votes For Against Abstentions Non-Votes
----------- ---------- ----------- ---------
165,961,158 11,094,678 2,430,188 -
The shareholder proposal regarding the Shareholder Rights Plan was
approved by the shareholders with the following vote:
Votes Broker
Votes For Against Abstentions Non-Votes
----------- ---------- ----------- ----------
105,940,831 53,252,750 4,769,176 15,523,267
(d) Not applicable.
- 19 -
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
1. (27) Financial Data Schedule
(b) Reports on Form 8-K
1. A report was filed on June 4, 1997, reporting Item 5, Other
Events - (1) Completion of the joint CSX Corporation/Norfolk
Southern Corporation tender offer for remaining outstanding shares
of Conrail Inc.; (2) the subsequent merger of Conrail and the
conversion of Conrail shares not tendered into rights to receive
cash; and (3) the amendment and restatement of the company's credit
agreement with bank lenders; plus Item 7, Financial Information and
Exhibits - (1) Amended and Restated Credit Agreement; (2) awareness
letter and consents of independent accountants; (3) the joint press
releases by the company and Norfolk Southern; (4) audited
consolidated financial statements of Conrail for the year ended
December 31, 1996; (5) unaudited condensed consolidated financial
statements of Conrail for the quarter ended March 31, 1997; and (5)
pro forma condensed consolidated financial statements of the company
as of and for the fiscal quarter ended March 28, 1997 and the fiscal
year ended December 27, 1996, adjusted to reflect its acquisition of
an interest in Conrail.
2. A report was filed on July 8, 1997, reporting Item 5, Other
Events - the filing of formal application with the Surface
Transportation Board for control of Conrail by the company and
Norfolk Southern; plus Item 7, Financial Statements and Exhibits -
(1) Transaction Agreement, dated June 10, 1997, among the company,
Norfolk Southern, Conrail, and certain affiliates of each, providing
definitive terms of the arrangements between the parties subsequent
to the date the company and Norfolk Southern are permitted to
exercise control over Conrail; and (2) a joint press release by the
company and Norfolk Southern.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CSX CORPORATION
(Registrant)
By: /s/JAMES L. ROSS
----------------
James L. Ross
Vice President and Controller
(Principal Accounting Officer)
Dated: July 25, 1997
- 20 -
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0
0
<COMMON> 218
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