PAGE 1
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 March 31, 1995
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 April 28, 1995: 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
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
INDEX
PART I. FINANCIAL INFORMATION Page Number
Item 1. Financial Statements
1. Consolidated Statement of Earnings -
Quarters Ended March 31, 1995 and April 1, 1994 3
2. Consolidated Statement of Cash Flows -
Quarters Ended March 31, 1995 and April 1, 1994 4
3. Consolidated Statement of Financial Position -
At March 31, 1995 and December 30, 1994 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
--------------------
March 31, April 1,
1995 1994
------ ------
OPERATING REVENUE
Merchandise $ 799 $ 758
Coal 366 339
Other 29 23
------ ------
Transportation 1,194 1,120
Non-Transportation 8 7
------ ------
Total 1,202 1,127
------ ------
OPERATING EXPENSE
Labor and Fringe Benefits 471 465
Materials, Supplies and Other 262 267
Equipment Rent 104 98
Depreciation 96 93
Fuel 65 63
------ ------
Transportation 998 986
Non-Transportation 6 6
------ ------
Total 1,004 992
------ ------
OPERATING INCOME 198 135
Other Income (Expense) (6) (8)
Interest Expense 10 12
------ ------
EARNINGS BEFORE INCOME TAXES 182 115
Income Tax Expense 68 42
------ ------
NET EARNINGS $ 114 $ 73
====== ======
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
--------------------
March 31, April 1,
1995 1994
------ ------
OPERATING ACTIVITIES
Net Earnings $ 114 $ 73
Adjustments to Reconcile Net Earnings to
Cash Provided
Depreciation 96 93
Deferred Income Taxes 30 28
Productivity/Restructuring Charge Payments (14) (26)
Other Operating Activities (20) 7
Changes in Operating Assets and Liabilities
Accounts Receivable (16) (58)
Materials and Supplies (17) (12)
Other Current Assets (15) (6)
Accounts Payable and Other Current Liabilities (6) (90)
------ ------
Cash Provided by Operating Activities 152 9
------ ------
INVESTING ACTIVITIES
Property Additions (179) (106)
Other Investing Activities 23 (39)
------ ------
Cash Used by Investing Activities (156) (145)
------ ------
FINANCING ACTIVITIES
Long-Term Debt Issued 58 53
Long-Term Debt Repaid (38) (37)
Dividends Paid (8) (7)
Other Financing Activities 1 (8)
------ ------
Cash Provided by Financing Activities 13 1
------ ------
CASH AND CASH EQUIVALENTS
Increase (Decrease) in Cash and Cash Equivalents 9 (135)
Cash and Cash Equivalents at Beginning of Period 452 272
------ ------
Cash and Cash Equivalents at End of Period $ 461 $ 137
====== ======
See accompanying Notes to Consolidated Financial Statements.
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
Consolidated Statement of Financial Position
(Millions of Dollars)
March 31, December 30,
1995 1994
------------ ------------
ASSETS
Current Assets
Cash and Cash Equivalents $ 461 $ 452
Accounts Receivable 109 93
Materials and Supplies 135 117
Deferred Income Taxes 183 241
Other Current Assets 73 57
------- -------
Total Current Assets 961 960
------- -------
Properties and Other Assets
Properties-Net 8,971 8,897
Affiliates and Other Companies 186 189
Other Assets 187 195
------- -------
Total Properties and Other Assets 9,344 9,281
------- -------
Total Assets $10,305 $10,241
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Accounts Payable and Other Current Liabilities $ 1,144 $ 1,159
Current Maturities of Long-Term Debt 78 89
Due to Parent Company 22 23
------- -------
Total Current Liabilities 1,244 1,271
------- -------
Long-Term Debt 622 591
------- -------
Deferred Income Taxes 2,218 2,246
------- -------
Long-Term Liabilities and Deferred Gains 1,464 1,481
------- -------
Shareholder's Equity
Common Stock 181 181
Other Capital 1,047 1,047
Retained Earnings 3,529 3,424
------- -------
Total Shareholder's Equity 4,757 4,652
------- -------
Total Liabilities and Shareholder's Equity $10,305 $10,241
======= =======
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 March 31, 1995, and December 30, 1994, and the results of
operations and cash flows for the quarters ended March 31, 1995, and April 1,
1994, 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 1995
presentation.
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 ended March 31, 1995 and April 1, 1994 and the fiscal year ended
December 30, 1994.
NOTE 3. 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 March 31, 1995, and December 30, 1994,
accounts receivable sold under this agreement totaled $575 million and $579
million, respectively. In addition, CSXT has an agreement to sell with
recourse on a monthly basis, an undivided ownership interest in all
miscellaneous accounts receivable to a financial institution. Accounts
receivable sold under this agreement totaled $46 million at March 31, 1995 and
December 30, 1994.
NOTE 4. OTHER INCOME (EXPENSE).
Quarter Ended
March 31, April 1,
1995 1994
--------- --------
Interest Income $ 10 $ 7
Net Costs for Accounts Receivable Sold (14) (11)
Miscellaneous (2) (4)
------ ------
Total Income (Expense) $ (6) $ (8)
====== ======
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 5. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES.
March 31, December 30,
1995 1994
--------- ------------
Trade Accounts Payable $ 546 $ 511
Labor and Fringe Benefits 338 374
Interest, Taxes and Other 128 141
Casualty Reserves 132 133
------ ------
Total $1,144 $1,159
====== ======
NOTE 6. 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.
The assessment of the required response and remedial costs associated
with these sites is extremely complex. Cost estimates are based on
information available for each site, financial viability of other potentially
responsible parties, and existing technology, laws and regulations.
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. The recorded liabilities for estimated future environmental costs at
March 31, 1995 and December 30, 1994 were $141 million and $140 million,
respectively. 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 for ongoing monitoring costs, but excludes any
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 6. CONTINGENCIES, Continued
anticipated insurance recoveries. The majority of the March 31, 1995
environmental liability is expected to be paid out over the next five 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. 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. The company believes 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 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 7. RELATED PARTIES.
Cash and cash equivalents at March 31, 1995 and December 30, 1994,
includes $475 million and $510 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.
In 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 of 1995 and 1994 was $1 million
and $1 million, respectively.
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
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 7. RELATED PARTIES, Continued
expense of $67 million for the first quarter of 1995 and $64 million for the
first quarter of 1994 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 1995 and 1994, 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 1995 Compared With 1994
- -------------------------------------
Net earnings for the 1995 first quarter were $114 million versus $73
million for last year's first quarter.
Transportation operating income rose $62 million or 46 percent, to
$196 million for the first quarter of 1995, from $134 million in the prior-
year quarter. The results were driven by significant traffic gains in most
commodity groups and the continued success of cost-control and expense-
reduction programs.
TRANSPORTATION OPERATING INCOME
(Millions of Dollars)
------------------------------
Quarter Ended
--------------------
March 31, April 1, Percent
1995 1994 Change
-------- -------- -------
Operating Revenue
Merchandise $ 799 $ 758 5%
Coal 366 339 8%
Other 29 23 26%
------ ------
Total 1,194 1,120 7%
Operating Expense 998 986 1%
------ ------
Operating Income $ 196 $ 134 46%
====== ======
Transportation operating revenue increased 7 percent to $1.2 billion
for the first quarter of 1995. Merchandise traffic grew 8 percent versus
1994's first quarter on the strength of export markets and solid traffic in
the domestic industrial sector. Phosphates and fertilizer carloads rose 20
percent due to increased global demand, while significant gains also were
recorded in the food and consumer, agricultural products, chemicals and metals
commodity groups. Automotive and forest products traffic were nearly flat
when compared with the prior-year quarter.
Export coal volume rose 35 percent to 5.8 million tons as foreign
coal requirements surged during the first quarter of 1995, reflecting
increased economic activity abroad and favorable exchange rates. Strong
growth in industrial and metallurgical coal traffic offset lower utility
demand resulting from mild 1995 winter weather. As a result, domestic tonnage
rose 3 percent to 32.6 million tons, from 31.7 million tons in 1994's first
quarter.
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ITEM 2. MANAGEMENT'S ANALYSIS AND RESULTS OF OPERATIONS, CONTINUED
OUTLOOK
- -------
Entering the second quarter of 1995, CSXT is experiencing solid
demand for export coal shipments as U.S. producers take advantage of increased
economic activity abroad and favorable exchange rates. CSXT merchandise
traffic is expected to increase in the second quarter of 1995 over near-record
1994 levels. The company also plans to continue its intense focus on
productivity improvements and expense control.
CSXT continues to monitor and be actively involved in on-going
industry-wide labor contract negotiations. These negotiations have
traditionally taken place over a number of months and have not resulted in any
extended work stoppages.
OTHER MATTERS
- -------------
CSXT expects its operating results for the second quarter of 1995 to
include a pretax restructuring charge estimated to be between $150 million and
$200 million. The charge will result from a decision by CSXT to obtain state-
of-the-art technology, equipment and telecommunications services from AT&T
Solutions.
A ten year agreement was executed on May 2, 1995, by CSXT and AT&T.
The agreement calls for AT&T to design and manage a new, network-centered
telecommunications system that is expected to greatly enhance CSXT's
operations and customer service. Implementation of the new technology will
result in employee separation costs and the write down of certain
telecommunication assets. This initiative will enable CSXT to leverage
technological enhancements and to reduce operating expense.
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PAGE 12
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 2, 1995 (Principal Accounting Officer)
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