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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 April 1, 1994
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 1-3359
CSX TRANSPORTATION, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-6000720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Water Street, Jacksonville, Florida 32202
(Address of principal executive offices) (Zip Code)
(904) 359-3100
(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 May 3, 1994: 9,061,038 shares
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H (1) (a) AND
(b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE
FORMAT.
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CSX TRANSPORTATION, INC.
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION Page Number
Item 1. Financial Statements
1. Consolidated Statement of Earnings -
Quarters Ended April 1, 1994 and March 31, 1993 3
2. Consolidated Statement of Cash Flows -
Quarters Ended April 1, 1994 and March 31, 1993 4
3. Consolidated Statement of Financial Position -
At April 1, 1994 and December 31, 1993 5
Notes to Consolidated Financial Statements 6
Item 2.
Management's Analysis and Results of Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signature 12
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
Consolidated Statement of Earnings
(Millions of Dollars)
Quarter Ended
--------------------
April 1, March 31,
1994 1993
------ ------
OPERATING REVENUE
Merchandise $ 758 $ 720
Coal 339 340
Other 23 26
------ ------
Transportation 1,120 1,086
Non-Transportation 7 8
------ ------
Total 1,127 1,094
------ ------
OPERATING EXPENSE
Labor and Fringe Benefits 465 458
Materials, Supplies and Other 267 264
Equipment Rent 98 101
Depreciation 93 93
Fuel 63 67
------ ------
Transportation 986 983
Non-Transportation 6 6
------ ------
Total 992 989
------ ------
OPERATING INCOME 135 105
Other Income (Expense) (8) (2)
Interest Expense 12 16
------ ------
EARNINGS BEFORE INCOME TAXES 115 87
Income Tax Expense 42 31
------ ------
NET EARNINGS $ 73 $ 56
====== ======
See accompanying Notes to Consolidated Financial Statements.
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Millions of Dollars)
Quarter Ended
--------------------
April 1, March 31,
1994 1993
----- -----
OPERATING ACTIVITIES
Net Earnings $ 73 $ 56
Adjustments to Reconcile Earnings to
Cash Provided
Depreciation 93 93
Deferred Income Taxes 28 21
Productivity/Restructuring Charge Payments (26) (24)
Other Operating Activities 7 (9)
Changes in Operating Assets and Liabilities
Accounts Receivable (58) 7
Materials and Supplies (12) (12)
Other Current Assets (6) (10)
Accounts Payable and Other Current Liabilities (90) (14)
----- -----
Cash Provided by Operating Activities 9 108
----- -----
INVESTING ACTIVITIES
Property Additions (106) (98)
Other Investing Activities (39) (39)
----- -----
Cash Used by Investing Activities (145) (137)
----- -----
FINANCING ACTIVITIES
Long-Term Debt Issued 53 80
Long-Term Debt Repaid (37) (33)
Dividends Paid (7) (7)
Other Financing Activities (8) (8)
----- -----
Cash Provided (Used) by Financing Activities 1 32
----- -----
CASH AND CASH EQUIVALENTS
Increase (Decrease) in Cash and Cash Equivalents (135) 3
Cash and Cash Equivalents at Beginning of Period 272 248
----- -----
Cash and Cash Equivalents at End of Period $ 137 $ 251
===== =====
See accompanying Notes to Consolidated Financial Statements.
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
Consolidated Statement of Financial Position
(Millions of Dollars)
April 1, December 31,
1994 1993
------------ ------------
ASSETS
Current Assets
Cash and Cash Equivalents $ 137 $ 272
Accounts Receivable 155 98
Materials and Supplies 129 116
Deferred Income Taxes 114 103
Other Current Assets 48 43
------- -------
Total Current Assets 583 632
------- -------
Properties and Other Assets
Properties 12,749 12,704
Less Accumulated Depreciation 4,111 4,073
------- -------
Properties - Net 8,638 8,631
Affiliates and Other Companies 193 155
Other Assets 233 235
------- -------
Total Properties and Other Assets 9,064 9,021
------- -------
Total Assets $ 9,647 $ 9,653
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Accounts Payable and Other Current Liabilities $ 1,022 $ 1,111
Current Maturities of Long-Term Debt 82 87
Due to Parent Company 56 40
------- -------
Total Current Liabilities 1,160 1,238
------- -------
Deferred Income Taxes 1,976 1,937
------- -------
Long-Term Liabilities and Deferred Gains 1,583 1,631
------- -------
Long-Term Debt 615 593
------- -------
Due to Parent Company 62 69
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Shareholder's Equity
Common Stock 181 181
Other Capital 1,047 1,047
Retained Earnings 3,023 2,957
------- -------
Total Shareholder's Equity 4,251 4,185
------- -------
Total Liabilities and Shareholder's Equity $ 9,647 $ 9,653
======= =======
See accompanying Notes to Consolidated Financial Statements.
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars)
NOTE 1. BASIS OF PRESENTATION.
In the opinion of management, the accompanying consolidated financial
statements contain all adjustments necessary to present fairly the financial
position of CSX Transportation, Inc. ("CSXT") and its majority-owned
subsidiaries as of April 1, 1994, and December 31, 1993, and the results of
operations and cash flows for the quarters ended April 1, 1994, and March 31,
1993, such adjustments being of a normal recurring nature. CSXT is a wholly-
owned subsidiary of CSX Corporation ("CSX").
While management 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 CSXT's latest Form 10-K.
Certain prior-year data has been reclassified to conform to the 1994
presentation.
NOTE 2. CHANGE IN FISCAL REPORTING PERIODS.
Effective January 1, 1994, CSXT changed its fiscal reporting periods
from four calendar quarters to four 13-week quarters. Fiscal year 1994 began
on January 1, 1994, and will include 52 weeks. The four 13-week quarters will
end on April 1, July 1, September 30 and December 30, 1994.
NOTE 3. ACCOUNTING CHANGE.
Effective January 1, 1994, the company adopted Statement of Financial
Accounting Standards ("SFAS") No. 112, "Employers' Accounting for
Postemployment Benefits." SFAS No. 112 requires that certain benefits
provided to former or inactive employees, after employment but before
retirement, such as workers' compensation and disability benefits, be accrued
if attributable to employees' service already rendered. The financial
statement impact of adopting SFAS No. 112 was not significant.
NOTE 4. ACCOUNTS RECEIVABLE.
CSXT has an ongoing agreement to sell without recourse, on a
revolving basis each month, an undivided percentage ownership interest in all
freight accounts receivable to CSX Trade Receivables Corporation ("CTRC"), a
wholly-owned subsidiary of CSX. At April 1, 1994, and December 31, 1993,
accounts receivable sold under this agreement totaled $541 million and $556
million, respectively. In addition, CSXT has a five-year revolving agreement
with a financial institution to sell with recourse on a monthly basis, an
undivided ownership interest in all miscellaneous accounts receivable. At
April 1, 1994 and December 31, 1993, accounts receivable sold under this
agreement totaled $47 million and $50 million, respectively. CSXT has
retained the collection and servicing responsibility with respect to all
accounts receivable sold.
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 5. OTHER INCOME (EXPENSE).
Quarter Ended
April 1, March 31,
1994 1993
--------- ----------
Interest Income $ 7 $ 7
Fees Related to Accounts Receivable Sold (11) (8)
Miscellaneous (4) (1)
------ ------
Total Expense $ (8) $ (2)
====== ======
NOTE 6. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES.
April 1, December 31,
1994 1993
--------- ------------
Trade Accounts Payable $ 474 $ 457
Labor and Fringe Benefits (a) 320 337
Interest, Taxes and Other 91 180
Casualty Reserves 137 137
------ ------
Total $1,022 $1,111
====== ======
(a) Labor and Fringe Benefits includes separation liabilities of $46
million at April 1, 1994 and $26 million at December 31, 1993.
NOTE 7. INCOME TAXES.
The effective income tax rate for the first quarter of 1994 reflects
the federal statutory rate of 35 percent. The federal statutory rate for the
first quarter of 1993 was 34 percent.
NOTE 8. CONTINGENCIES.
CSXT is a party to various proceedings brought both by private
parties and regulatory agencies related to environmental issues. CSXT has
been identified as a potentially responsible party in a number of governmental
investigations and actions relating to environmentally impaired sites that are
or may be subject to remedial action under the Federal Superfund Statute
("Superfund") or corresponding state statutes. The majority of these
proceedings are based on allegations that CSXT, or its railroad predecessors,
sent hazardous substances to the facilities in question for disposal. Such
proceedings arising under Superfund typically involve numerous other waste
generators and disposal companies and seek to allocate or recover costs
associated with site investigation and cleanup, which could be substantial.
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 8. CONTINGENCIES, Continued
The assessment of the required response and remedial costs associated
with these sites is extremely complex. Among the variables that management
must assess are imprecise and changing remedial cost estimates and continually
evolving governmental standards.
CSXT frequently reviews its role, if any, with respect to each such
location, giving consideration to the nature of CSXT's alleged connection to
the location (e.g., generator, owner or operator), the extent of CSXT's
alleged connection (e.g., volume of waste sent to the location and other
relevant factors), the accuracy and strength of evidence connecting CSXT to
the location, and the number, connection and financial position of other named
and unnamed potentially responsible parties at the location. Further, CSXT
periodically reviews its exposure in all non-Superfund environmental
proceedings with which it is involved.
Based upon such reviews and updates of the sites with which it is
involved, CSXT has recorded, and periodically reviews for adequacy, reserves
to cover estimated contingent future environmental costs with respect to such
sites. Liabilities are recorded when CSXT'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 CSXT's commitment to a formal plan of
action. CSXT does not currently possess sufficient information to reasonably
estimate the amounts of additional liabilities, if any, on some sites until
completion of future environmental studies. Such additional liabilities could
be significant to future consolidated results of operations and cash flows.
Based upon information currently available, however, CSXT believes that its
environmental reserves are adequate to accomplish remedial actions to comply
with present laws and regulations.
A number of legal actions, other than environmental, are pending
against CSXT in which claims are made in substantial amounts. While the
ultimate results of environmental investigations, lawsuits and claims
involving CSXT 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.
NOTE 9. RELATED PARTIES.
Cash and cash equivalents at April 1, 1994 and December 31, 1993,
includes $160 million and $336 million, respectively, representing amounts due
from CSX for CSXT's participation in the CSX cash management plan. Under this
plan, excess cash is advanced to CSX for investment and CSX makes cash funds
available to its subsidiaries as needed for use in their operations. CSX is
committed to repay all amounts due on demand should circumstances require.
The companies are charged for borrowings or compensated for investments based
on returns earned by the plan portfolio.
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 9. RELATED PARTIES, Continued
Effective January 1, 1994, CSXT entered into a loan agreement with
Customized Transportation, Inc. ("CTI"), a wholly-owned subsidiary of CSX,
whereby CTI borrowed $40 million from CSXT. Interest is due from CTI semi-
annually commencing June 30, 1994, with the entire principal amount due on
January 1, 2001. Interest income for the first quarter 1994 was $1 million.
CSXT has formal long-term borrowings from CSX which mature from 1994
to 2012 and total $79 million at April 1, 1994, and $86 million at December
31, 1993. Interest expense on borrowings from CSX was $2 million for the
first quarter of 1994 and 1993.
Included in Materials, Supplies and Other expense are amounts related
to a management service fee charged by CSX, data processing related charges
from CSX Technology, Inc. ("Technology"), and the reimbursement, under an
operating agreement, from CSX Intermodal, Inc. ("CSXI"), for costs incurred by
CSXT related to intermodal operations. Technology and CSXI are wholly-owned
subsidiaries of CSX. Materials, Supplies and Other expense includes net
expense of $64 million for the first quarter of 1994 and $56 million for the
first quarter of 1993 relating to the above arrangements.
CSXT has an operating lease agreement with CSXI for 3,400 rebuilt
coal gondola cars. The cars were previously owned and rebuilt by CSXT, and
were subsequently sold to CSXI at book value. These cars are presently being
leased by CSXT through March 2006. In addition, CSXT is leasing 65
locomotives from CSXI pursuant to a pre-existing operating lease agreement
acquired by CSXI from a third party. These locomotives are being leased by
CSXT through May 2008. In the first quarter of 1994 and 1993, rent expense
includes $5 million associated with the CSXI lease agreements noted above.
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ITEM 2. MANAGEMENT'S ANALYSIS AND RESULTS OF OPERATIONS
First Quarter 1994 Compared With 1993
- - -------------------------------------
Net earnings for the 1994 first quarter were $73 million versus $56
million for last year's first quarter.
Transportation operating income rose $31 million or 30 percent, to
$134 million for the first quarter of 1994, from $103 million in the prior-
year quarter. The results were driven by a 3 percent increase in revenue,
continued commitment to cost reductions and close attention to safety.
TRANSPORTATION OPERATING INCOME
(Millions of Dollars)
------------------------------
Quarter Ended
--------------------
April 1, March 31, Percent
1994 1993 Change
-------- --------- -------
Operating Revenue
Merchandise $ 758 $ 720 5 %
Coal 339 340 -- %
Other 23 26 (12)%
------ ------
Total 1,120 1,086 3 %
Operating Expense 986 983 -- %
------ ------
Operating Income $ 134 $ 103 30 %
====== ======
Traffic surged late in the first quarter of 1994 as industries began
recovering from the severe winter conditions. For the first quarter of 1994,
a 4 percent increase in traffic boosted transportation operating revenue 3
percent versus the 1993 prior-year quarter. Metals, minerals and automotive
shipments for the first quarter of 1994 jumped 21 percent, 16 percent and 14
percent, respectively, over 1993's first quarter levels, reflecting the
underlying strength of the industrial sector of the U.S. economy.
Coal originations strengthened late in the first quarter of 1994 as
weather conditions improved, reaching a total of 36.1 million tons versus 36.5
million tons in the first quarter of 1993. Shipments to utilities, which are
anticipated to show gains through the rest of the year, edged up 1 percent
from 1993's first quarter, to 24.9 million tons. Export traffic for the first
quarter of 1994 was 4.2 million tons, 1.2 million tons below the prior-year
level. Coal shipments to other users climbed 9 percent to 7 million tons for
the first quarter of 1994 from the 1993 first quarter.
Transportation operating expense was $986 million in the quarter
compared to $983 million in the first quarter of 1993. First quarter 1994
expense included train crew overtime, relief train crews and damage to track
and signal systems directly attributable to the severe weather conditions.
Without these items, first quarter 1994 operating expense would have been
lower than the prior-year amount.
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ITEM 2. MANAGEMENT'S ANALYSIS AND RESULTS OF OPERATIONS, CONTINUED
OUTLOOK
- - -------
During the remainder of 1994, CSXT will continue its ongoing
commitment to improve productivity, lower the cost base and improve its
operating ratio.
CSXT faced severe winter related problems during the early part of
1994, which negatively affected coal loadings and increased operating expense.
However, the company has seen a rebound in coal traffic as customers began
restoring stockpiles following extended United Mine Workers' strikes of 1993
and record low temperatures during the first quarter of 1994. Export coal
tonnage, although depressed due to slow economies abroad, is expected to
exceed 1993 levels. CSXT merchandise traffic, reflecting the underlying
strength of the industrial sector of the U.S. economy, is expected to trend up
with the economy.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
1. None.
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 TRANSPORTATION, INC.
/s/ GREGORY R. WEBER
------------------------
Gregory R. Weber
Dated: May 3, 1994 (Principal Accounting Officer)
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