PAGE 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- -------------------
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, FL. 32202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (904) 359-3100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which each
Title of each class class is registered
- ---------------------------------- -------------------------------------
Hocking Valley Railroad Company
First Consolidated Mortgage 4-1/2%
Bonds, due July 1, 1999 New York Stock Exchange
Louisville and Nashville Railroad
Company First and Refunding Mortgage
3-3/8% Bonds, Series F, due April 1, 2003 New York Stock Exchange
Louisville and Nashville Railroad
Company First and Refunding Mortgage
2-7/8% Bonds, Series G, due April 1, 2003 New York Stock Exchange
Monon Railroad 6% Income Debentures,
due January 1, 2007 New York Stock Exchange
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J (1) (a) AND
(b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE
FORMAT.
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PAGE 2
Securities Registered Pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value of the voting stock at March 8,
1996, was $-0-, excluding the voting stock held by the parent of the registrant.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date. The registrant has 9,061,038
shares of common stock, par value $20.00, outstanding at March 8, 1996.
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PAGE 3
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
1995 FORM 10-K ANNUAL REPORT
Table of Contents
Item No. Page
- -------- ----
PART I
1. Business 4
2. Properties 4
3. Legal Proceedings 5
4. Submission of Matters to a Vote of Security Holders 5
PART II
5. Market for Registrant's Common Stock and Related
Stockholder Matters 5
6. Selected Financial Data 5
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
8. Financial Statements and Supplementary Data 6
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 6
PART III
10. Directors, Executive Officers, Promoters
and Control Persons of the Registrant 6
11. Executive Compensation 6
12. Security Ownership of Certain Beneficial
Owners and Management 6
13. Certain Relationships and Related Transactions 6
PART IV
14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 6
Signatures 8
Index to Financial Statements 9
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PAGE 4
PART I
Items 1. & 2. Business and Properties.
General
-------
CSX Transportation, Inc. (CSXT) is engaged principally in the business
of railroad transportation and operates a system comprising 18,645 miles of
first main line track in 20 states principally east of the Mississippi River
(exclusive of New England), southern Ontario and the District of Columbia,
employing an average of 29,537 employees. It conducts railroad operations in
its own name and through railroad subsidiaries.
CSXT is a wholly-owned subsidiary of CSX Corporation (CSX). CSX is a
publicly-owned Virginia corporation with headquarters at One James Center, 901
East Cary Street, Richmond, Virginia, 23219-4031. CSX also controls other
transportation businesses which include Sea-Land Service Inc., an ocean
container-shipping company, CSX Intermodal Inc., an intermodal and trucking
company, American Commercial Lines Inc., an inland barging and other
marine-related activities business, and Customized Transportation Inc., a
contract logistics service supplier. CSX also has interests in real estate,
resorts and resort management.
For information concerning business conducted by CSXT during 1995, see
"Management's Narrative Analysis and Results of Operations" on pages 32 through
37.
Roadway
-------
On December 29, 1995, CSXT's consolidated system consisted of 31,961
miles of track as follows:
Track
Miles
-----
First Main 18,645
Second Main 2,925
Passing, Crossovers
and Turnouts 2,413
Way and Yard Switching 7,978
------
Total 31,961
======
Included above are 865 miles of leased track, 2,848 miles of track
under trackage rights agreements with other railroads and 184 miles of track
under operating contracts.
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PAGE 5
Equipment
---------
On December 29, 1995, CSXT and subsidiaries owned or leased the
following:
Owned Leased Total
----- ------ ------
Locomotives
Freight 1,826 612 2,438
Switching 190 15 205
Auxiliary Units 162 --- 162
------- ------- -------
Total 2,178 627 2,805
======= ======= =======
Freight Cars
Open Top Hoppers 15,139 11,189 26,328
Gondolas 9,663 14,797 24,460
Covered Hoppers 11,297 7,462 18,759
Box Cars 9,087 5,818 14,905
Flat Cars 694 11,755 12,449
Other 1,858 1,459 3,317
------- ------- -------
Total 47,738 52,480 100,218
======= ======= =======
Item 3. Legal Proceedings.
A number of legal actions, other than the environmental matters
described below, are pending against CSXT in which claims are made in
substantial amounts. While the ultimate results of such actions 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.
CSXT has been identified, together with other parties, as a
potentially responsible party in a number of governmental investigations and
actions relating to environmentally impaired sites. Such sites frequently
involve other waste generators and disposal companies to whom costs associated
with site investigation and cleanup may be allocated or from whom such costs may
be recovered.
Due to the number of parties involved at many of these sites, the wide
range of costs of the possible remediation alternatives, changing cleanup
technology, the length of time over which these matters develop and evolving
governmental standards, it is not always possible to estimate precisely the
company's liability for the costs associated with the assessment and remediation
of contaminated sites.
CSXT maintained reserves for 108 environmental sites at year-end 1995.
CSXT reviews its environmental reserves at least quarterly to determine whether
additional provisions are necessary. Based on current information, CSXT
believes its reserves are adequate to meet remedial actions and to comply with
present laws and regulations. Although CSXT's financial results could be
significantly affected in any quarterly reporting period in which CSXT incurred
substantial remedial expenses at a number of these and other sites, CSXT
believes the ultimate liability for these matters will not materially affect its
overall financial position, results of operations and cash flows.
- 5 -
PAGE 6
Item 4. Submission of Matters to a Vote of Security Holders.
Information omitted in accordance with General Instruction J(2)(c).
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.
There is no market for CSXT's common stock as CSXT is a wholly-
owned subsidiary of CSX. During the years 1995, 1994 and 1993, CSXT paid
dividends on its common stock aggregating $158 million, $28 million and $28
million, respectively.
Item 6. Selected Financial Data.
Information omitted in accordance with General Instruction J(2)(a).
However, included as part of "Management's Narrative Analysis and
Results of Operations" on page 32 is various selected financial and statistical
information.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Information omitted in accordance with General Instruction J(2)(a).
However, in compliance with said Instruction, see "Management's
Narrative Analysis and Results of Operations" on pages 32 through 37.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements of CSXT and notes thereto
required in response to this item are included herein (refer to Index to
Financial Statements on page 9).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons
of the Registrant.
Information omitted in accordance with General Instruction J(2)(c).
Item 11. Executive Compensation.
Information omitted in accordance with General Instruction J(2)(c).
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PAGE 7
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information omitted in accordance with General Instruction J(2)(c).
Item 13. Certain Relationships and Related Transactions.
Information omitted in accordance with General Instruction J(2)(c).
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial Statements.
See Index to Financial Statements on page 9.
2. Financial Statement Schedules.
All schedules are omitted because of the absence of the
conditions under which they are required or because the
required information is set forth in the financial statements
or related notes thereto.
3. Exhibits.
(3.1) Articles of Incorporation, as Amended and Restated
effective August 7, 1995.
(3.2) By-laws of the Registrant as amended to
February 21, 1995.
(b) Reports on Form 8-K.
None.
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PAGE 8
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 8th day of
March, 1996.
CSX TRANSPORTATION, INC.
/s/ GREGORY R. WEBER
------------------------------
Gregory R. Weber
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signatures Title
- ----------------------- -------------------------------------
/s/ John W. Snow Chairman of the Board and Director
- -----------------
John W. Snow*
/s/ Alvin R. Carpenter President and Chief Executive Officer
- ----------------------- (Principal Executive Officer) and
Alvin R. Carpenter* Director
/s/ Gerald L. Nichols Executive Vice-President and Chief
- ---------------------- Operating Officer and Director
Gerald L. Nichols*
/s/ Mark G. Aron Director
- -----------------
Mark G. Aron*
/s/ Paul R. Goodwin Director
- --------------------
Paul R. Goodwin*
/s/ Michael J. Ward Senior Vice President-Finance
- -------------------- (Principal Finance Officer)
Michael J. Ward*
/s/ PATRICIA J. AFTOORA
- -----------------------
*Patricia J. Aftoora
(Attorney-in-Fact)
March 8, 1996
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PAGE 9
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements
Page
----
Report of Independent Auditors 10
CSX Transportation, Inc. and Subsidiaries:
Consolidated Financial Statements and Notes to Consolidated
Financial Statements Submitted Herewith:
Consolidated Statement of Earnings -
Fiscal Years Ended December 29, 1995,
December 30, 1994 and December 31, 1993 11
Consolidated Statement of Cash Flows -
Fiscal Years Ended December 29, 1995,
December 30, 1994 and December 31, 1993 12
Consolidated Statement of Financial Position -
December 29, 1995 and December 30, 1994 14
Consolidated Statement of Retained Earnings
Fiscal Years Ended December 29, 1995,
December 30, 1994 and December 31, 1993 15
Notes to Consolidated Financial Statements 16
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PAGE 10
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
-------------------------------------------------
To the Shareholder and Board of Directors
of CSX Transportation, Inc.
We have audited the accompanying consolidated statement of financial
position of CSX Transportation, Inc. and subsidiaries as of December 29, 1995
and December 30, 1994, and the related consolidated statements of earnings, cash
flows and retained earnings for each of the three years in the period ended
December 29, 1995. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above (appearing on pages 11-31) present fairly, in all material respects, the
consolidated financial position of CSX Transportation, Inc. and subsidiaries at
December 29, 1995 and December 30, 1994, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 29, 1995, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
---------------------
Ernst & Young LLP
Richmond, Virginia
January 31, 1996
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PAGE 11
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Millions of Dollars)
Fiscal Years Ended
--------------------------------
Dec. 29, Dec. 30, Dec. 31,
1995 1994 1993
------- ------- -------
OPERATING REVENUE
Merchandise $ 3,158 $ 3,048 $ 2,909
Coal 1,523 1,465 1,363
Other 138 112 108
------- ------- -------
Transportation 4,819 4,625 4,380
Non-Transportation 68 78 64
------- ------- -------
Total 4,887 4,703 4,444
------- ------- -------
OPERATING EXPENSE
Labor and Fringe Benefits 1,855 1,856 1,809
Materials, Supplies and Other 1,076 1,022 1,011
Equipment Rent 391 392 387
Depreciation 385 371 371
Fuel 255 251 253
Restructuring Charge 196 --- ---
------- ------- -------
Transportation 4,158 3,892 3,831
Non-Transportation 25 31 22
------- ------- -------
Total 4,183 3,923 3,853
------- ------- -------
OPERATING INCOME 704 780 591
Other Income (Expense) (6) 49 11
Interest Expense 46 45 60
------- ------- -------
EARNINGS BEFORE INCOME TAXES 652 784 542
Income Tax Expense 244 289 234
------- ------- -------
NET EARNINGS $ 408 $ 495 $ 308
======= ======= =======
See accompanying Notes to Consolidated Financial Statements.
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PAGE 12
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of Dollars)
Fiscal Years Ended
---------------------------
Dec. 29, Dec. 30, Dec. 31,
1995 1994 1993
-------- -------- -------
OPERATING ACTIVITIES
Net Earnings $ 408 $ 495 $ 308
Adjustments to Reconcile Net Earnings
to Cash Provided
Depreciation 386 371 371
Deferred Income Taxes 52 171 183
Restructuring Charge Provision 196 --- ---
Productivity/Restructuring Charge Payments (105) (129) (245)
Proceeds from Real Estate Sales 24 42 28
(Gain) Loss on Investment Transactions --- 26 (26)
Gain on Sale of South Florida Track --- (91) (20)
Gain from Disposition of Properties (20) (38) (25)
Other Operating Activities 37 40 12
Changes in Operating Assets and Liabilities
Accounts Receivable 42 (27) 27
Sale of Accounts Receivable-Net 25 20 6
Materials and Supplies 1 (1) (4)
Other Current Assets (8) 32 22
Accounts Payable and Other Current
Liabilities 29 (15) (7)
------- ------- -------
Net Cash Provided by Operating Activities 1,067 896 630
------- ------- -------
INVESTING ACTIVITIES
Property Additions (765) (676) (569)
Proceeds from Property Dispositions 76 18 36
Affiliated Company Activity (37) (37) ---
Proceeds/(Loss) from Investment Transactions --- (26) 26
Proceeds from Sale of South Florida Track --- 130 26
Other Investing Activities (1) (9) 3
------- ------- -------
Net Cash Used by Investing Activities (727) (600) (478)
------- ------- -------
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PAGE 13
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS, CONTINUED
(Millions of Dollars)
Fiscal Years Ended
---------------------------
Dec. 29, Dec. 30, Dec. 31,
1995 1994 1993
-------- -------- -------
FINANCING ACTIVITIES
Long-Term Debt Issued 121 92 80
Long-Term Debt Repaid (114) (93) (160)
Cash Dividends Paid (158) (28) (28)
Parent Company Advances Repaid --- (86) (18)
Other Financing Activities (8) (1) (2)
------- ------- -------
Cash Used by Financing Activities (159) (116) (128)
------- ------- -------
Increase in Cash and Cash Equivalents 181 180 24
CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents at Beginning of Year 452 272 248
------- ------- -------
Cash and Cash Equivalents at End of Year $ 633 $ 452 $ 272
======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION
Interest Paid - Net of Amounts Capitalized $ 50 $ 53 $ 74
======= ======= =======
Income Taxes Paid $ 227 $ 192 $ 80
======= ======= =======
See accompanying Notes to Consolidated Financial Statements.
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PAGE 14
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Millions of Dollars)
Dec. 29, Dec. 30,
1995 1994
-------- --------
ASSETS
Current Assets
Cash and Cash Equivalents $ 633 $ 452
Accounts and Notes Receivable 66 93
Materials and Supplies 116 117
Deferred Income Taxes 201 241
Other Current Assets 15 57
------- -------
Total Current Assets 1,031 960
Properties-Net 9,189 8,897
Affiliates and Other Companies 226 189
Other Long-Term Assets 183 195
------- -------
Total Assets $10,629 $10,241
======= =======
LIABILITIES
Current Liabilities
Accounts Payable $ 558 $ 504
Labor and Fringe Benefits Payable 377 356
Casualty, Environmental and Other Reserves 194 167
Current Maturities of Long-Term Debt 74 89
Due to Parent Company 24 23
Other Current Liabilities 6 132
------- -------
Total Current Liabilities 1,233 1,271
Casualty, Environmental and Other Reserves 683 726
Long-Term Debt 613 591
Deferred Income Taxes 2,265 2,246
Other Long-Term Liabilities 787 755
------- -------
Total Liabilities 5,581 5,589
------- -------
SHAREHOLDER'S EQUITY
Common Stock, $20 Par Value;
Authorized 10,000,000 Shares;
Issued and Outstanding 9,061,038 Shares 181 181
Other Capital 1,193 1,047
Retained Earnings 3,674 3,424
------- -------
Total Shareholder's Equity 5,048 4,652
------- -------
Total Liabilities and Shareholder's Equity $10,629 $10,241
======= =======
See accompanying Notes to Consolidated Financial Statements.
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PAGE 15
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(Millions of Dollars)
Dec. 29, Dec. 30, Dec. 31,
1995 1994 1993
------ ------ ------
Beginning Balance $3,424 $2,957 $2,675
Net Earnings 408 495 308
Dividends - Common (158) (28) (28)
Minimum Pension Liability Adjustments
and Other --- --- 2
------ ------ ------
Ending Balance $3,674 $3,424 $2,957
====== ====== ======
See accompanying Notes to Consolidated Financial Statements.
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PAGE 16
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES.
Nature of Operations
CSX Transportation, Inc. (CSXT) is a rail freight transportation
company operating a system composed of 18,645 route miles of track in 20 states
in the eastern, midwestern, and southern portions of the United States and in
Ontario, Canada. Coal, bulk products, and manufactured products each contribute
approximately one-third of the company's transportation revenue. Coal shipments
primarily supply domestic utility and export markets. Shipments of bulk
products include chemicals, minerals, agricultural products, and phosphates and
fertilizer, and supply domestic and export markets. Shipments of manufactured
products include automobiles, forest products, metals, and food and consumer
products, and also supply domestic and export markets.
Principles of Consolidation
The Consolidated Financial Statements include CSXT and its majority-
owned subsidiaries. All significant intercompany accounts and transactions have
been eliminated. Investments in companies that are not majority-owned are
carried at either cost or equity, depending on the extent of control. CSXT is a
wholly-owned subsidiary of CSX Corporation (CSX).
Fiscal Year
Effective January 1, 1994, the company changed its fiscal reporting
period from a calendar year to a fiscal year ending on the last Friday in
December. The financial statements presented are for the fiscal periods ended
December 29, 1995, December 30, 1994 and December 31, 1993. Each fiscal year
consists of four 13-week quarters.
Cash and Cash Equivalents
Cash and cash equivalents primarily represent amounts due from CSX for
CSXT's participation in the CSX cash management plan and are net of outstanding
checks which are funded daily as presented for payment.
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 December 29, 1995 and December 30, 1994, accounts
receivable sold under this agreement totaled $603 million and $579 million,
respectively. In addition, CSXT has a revolving agreement with a financial
institution to sell with recourse on a monthly basis an undivided percentage
ownership interest in all miscellaneous accounts receivable. At December 29,
1995 and December 30, 1994, accounts receivable sold under this agreement
totaled $46 million. The sales of receivables have been reflected as reductions
of "Accounts and Notes Receivable" in the Consolidated Statement of Financial
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PAGE 17
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES, Continued
Position. The discounts on the sales of the receivables and related servicing
costs were $54 million in 1995, $45 million in 1994 and $44 million in 1993.
Materials and Supplies
Materials and supplies consist primarily of fuel and items for
maintenance of property and equipment, and are carried at average cost.
Properties
Main line track is depreciated on a group basis using a unit-of-
production method. All other property and equipment is depreciated on a
straight-line basis over estimated useful lives of seven to 42 years.
Regulations established by the former Interstate Commerce Commission
and currently monitored by the Surface Transportation Board of the U.S.
Department of Transportation (DOT) require periodic formal studies of ultimate
service lives for all railroad assets. Resulting service life estimates are
subject to review and approval by the DOT. Significant premature retirements
for all properties, which would include major casualty losses, abandonments,
sales and obsolescence of assets, are recorded as gains or losses at the time of
their occurrence. Expenditures which significantly increase asset values or
extend useful lives are capitalized. Repair and maintenance expenditures are
charged to operating expense when the work is performed. All properties are
stated at cost.
When it is indicated that assets have a fair value below book value,
they are evaluated for sale or other disposition and any necessary write-down is
reflected. The recoverability of the book value of property and equipment is
based upon potential cash flows or other estimates of fair value for the
property.
Revenue Recognition
Transportation revenue is recognized proportionately as shipments move
from origin to destination.
Environmental Costs
Environmental costs that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to remediating an existing
condition caused by past operations, and which do not contribute to current or
future revenue generation, are expensed. Liabilities are recorded when 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.
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PAGE 18
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES, Continued
Derivative Financial Instruments
CSX may use derivative financial instruments from time to time in the
management of its interest, foreign currency and commodity exposure on behalf of
CSXT and other CSX subsidiaries. Such derivative financial instruments are
accounted for on an accrual basis, and income and expense are recorded in the
same category as that of the underlying asset or liability. Gains and losses
related to hedges of existing assets or liabilities are deferred and recognized
over the expected remaining life of the related asset or liability. Gains and
losses related to hedges of anticipated transactions are also deferred and
recognized in income in the same period as the hedged transaction. CSX had no
significant derivative financial instruments outstanding at December 29, 1995.
Common Stock and Other Capital
There have been no changes in common stock during the last three
years. During 1995, CSX Corporation contributed to the company $146 million in
capital stock of CSX Realty, Inc. and related subsidiaries.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates in
reporting the amounts of certain revenues and expenses for each fiscal year and
certain assets and liabilities at the end of each fiscal year. Actual results
may differ from those estimates.
Prior-Year Data
Certain prior-year data have been reclassified to conform to the 1995
presentation.
Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" and Statement No. 123 "Accounting for Stock-Based Compensation",
which the company will adopt in 1996. Statement No. 121 establishes standards
for identifying and recording impairments in the carrying value of long-lived
assets. Statement No. 123 provides an alternative for income statement
recognition of costs associated with stock-based employee compensation plans and
requires expanded disclosures with respect to such plans. The Company is
currently evaluating both pronouncements and does not expect a material impact
on its financial statements from the adoption of either pronouncement.
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PAGE 19
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 2. RESTRUCTURING CHARGE.
In the second quarter of 1995, the Company recorded a $196 million
pretax restructuring charge to recognize the costs associated with a contractual
agreement with AT&T Solutions (AT&T) to replace, manage and technologically
enhance its existing private telecommunications network. The charge reduced
1995 net earnings by $121 million. The initiative resulted in a $163 million
write-down of assets rendered technologically obsolete and will further result
in separation and labor protection payments totaling $33 million to affected
employees.
Under the agreement, AT&T supplies and manages new technology, thereby
rendering CSXT's existing telecommunications assets commercially obsolete. CSXT
is obligated to pay minimum charges of approximately $330 million in equal
annual amounts over the next ten years.
The commercially obsolete assets represent CSXT's internal companywide
telecommunications network including the existing microwave and fiber optic
communications systems. AT&T provides wireless communications technology over
its existing network to replace the CSXT system. After the phase-in of this
technology, AT&T will retain ownership of the equipment and will grant CSXT
access to the equipment and the network.
The commercially obsolete assets have no alternative use and their net
realizable value as a companywide telecommunications network is not significant.
As a result of the agreement with AT&T, the net book value of the assets being
replaced was reduced by $163 million.
A summary of the restructuring charge and related activity through
December 29, 1995 is as follows:
Separation
and Labor
Obsolete Protection
Assets Costs Total
-------- ----------- -----
Restructuring Charge $163 $33 $196
Amounts Utilized through
December 29, 1995 163 1 164
---- --- ----
Remaining Reserve as of
December 29, 1995 $--- $32 $ 32
==== === ====
The total provision for separation and labor protection payments
relates to approximately 275 affected employees and was based on existing
collective bargaining agreements with members of clerical, electrical, and
signal crafts. The company expects the affected employees to be impacted within
four to five years. Through December 29, 1995, 29 employee separations have
been finalized.
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PAGE 20
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 3. SUPPLEMENTAL STATEMENT OF EARNINGS FINANCIAL DATA.
1995 1994 1993
------ ------ ------
Selling, General and Administrative Expense $846 $849 $802
==== ==== ====
NOTE 4. OTHER INCOME (EXPENSE)
1995 1994 1993
---- ---- ----
Interest Income - Other $ 17 $ 20 $ 16
Interest Income - CSX Cash Management Plan 34 13 12
Gain (Loss) on Investment Transactions --- (26) 26
Gain on South Florida Track Sale (a) --- 91 20
Fees Related to Accounts Receivable Sold (54) (45) (44)
Miscellaneous (3) (4) (19)
---- ---- ----
Total $ (6) $ 49 $ 11
==== ==== ====
(a) In May 1988, CSXT sold approximately 80 miles of track and right
of way in Broward, Dade and Palm Beach counties to the state of Florida for $264
million subject to annual appropriations which were accounted for on an
installment basis. In December 1994, the state of Florida elected to satisfy
its remaining unfunded obligation issued in 1988 to consummate the purchase of
track and right of way. The transaction resulted in cash proceeds of $102
million and a pretax gain of $69 million. The scheduled payment resulted in a
$22 million gain in 1994.
NOTE 5. INCOME TAXES.
Income tax expense information is as follows:
1995 1994 1993
------- ------- -------
Current
Federal $169 $106 $ 47
State and Foreign 23 12 4
---- ---- ----
Total Current 192 118 51
---- ---- ----
Deferred
Federal 55 164 166
State (3) 7 17
---- ---- ----
Total Deferred 52 171 183
---- ---- ----
Total Expense $244 $289 $234
==== ==== ====
- 20 -
PAGE 21
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 5. INCOME TAXES, Continued
Income tax expense reconciled to the tax computed at statutory rates
is as follows:
1995 1994 1993
----------- ----------- -----------
Tax at Statutory Rates $228 35% $274 35% $190 35%
State Income Taxes 13 2 13 2 13 2
Prior Years' Income Taxes --- -- --- -- (15) (3)
Other(a) 3 -- 2 -- 46 9
---- -- ---- -- ---- --
Total Expense $244 37% $289 37% $234 43%
==== == ==== == ==== ==
(a) CSXT revised its annual effective tax rate in 1993 to reflect the
change in the federal statutory rate from 34 to 35 percent. The
effect of this change was to increase income tax expense by $46
million related to applying the newly enacted statutory income tax
rate to deferred tax balances as of January 1, 1993.
The significant components of deferred tax assets and liabilities
include:
Dec. 29, Dec. 30,
1995 1994
------ ------
Deferred Tax Assets
Productivity/Restructuring Charges $ 220 $ 227
Employee Benefit Plans 209 151
Alternative Minimum Tax Credits 93 166
Other 274 268
------ ------
Total 796 812
------ ------
Deferred Tax Liabilities
Accelerated Depreciation 2,684 2,600
Other 176 217
------ ------
Total 2,860 2,817
------ ------
Net Deferred Tax Liabilities $2,064 $2,005
====== ======
CSXT and its subsidiaries are included in the consolidated federal
income tax return filed by CSX. The consolidated federal income tax expense or
benefit is allocated to CSXT and its subsidiaries as though CSXT had filed a
separate consolidated return.
Examinations of the federal income tax returns of CSX and its
principal subsidiaries have been completed through 1987. Returns for 1988-1990
- 21 -
PAGE 22
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 5. INCOME TAXES, Continued
are currently under examination and a final report and assessment is expected in
1996. Management believes adequate provision has been made for any adjustments
that might be assessed.
NOTE 6. RELATED PARTIES.
Cash and cash equivalents at December 29, 1995 and December 30, 1994,
includes $677 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.
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 payments under the loan are due
semi-annually, with the entire principal amount due on January 1, 2001.
Interest income related to the CTI loan was $2 million in 1995 and in 1994.
During 1992, CSXT entered into an agreement with CTRC to sell, on a
revolving basis, without recourse, all existing accounts receivable to CTRC. In
1993, this agreement was amended to sell only freight accounts receivable to
CTRC. As of December 29, 1995 and December 30, 1994, CSXT had sold $603 million
and $579 million, respectively, of accounts receivable to CTRC.
During 1994, CSXT repaid the remaining formal long-term borrowings
from CSX outstanding at December 31, 1993. No long-term borrowings from CSX
were outstanding during 1995. Interest expense on borrowings from CSX was $3
million and $9 million in 1994 and 1993, respectively.
During 1989, CSXT's pension plan for salaried employees was merged
with the CSX Corporation Plan, and all assets of CSXT's plan were transferred to
the CSX merged plan. Since the plans were merged, CSX has allocated to CSXT a
portion of the net pension expense for the CSX Corporation Plan based on CSXT's
relative level of participation in the merged plan which considers the assets
and personnel previously in the CSXT plan. The allocated expense from the CSX
Corporation Plan amounted to $26 million in 1995, $42 million in 1994 and $32
million in 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., and the reimbursement, under an operating agreement, from
CSX Intermodal, Inc. (CSXI), for costs incurred by CSXT related to intermodal
operations. The management service fee charged by CSX represents compensation
for certain corporate services provided to CSXT. These services include
development of corporate policy and long-range strategic plans, allocation of
capital, placement of debt, maintenance of employee benefit plans, internal
- 22 -
PAGE 23
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 6. RELATED PARTIES, Continued
audit and tax administration. The data processing related charges are
compensation to CSX Technology, Inc. for the development, implementation and
maintenance of computer systems, software and associated documentation for the
day to day operations of CSXT. CSX Technology and CSXI are wholly-owned
subsidiaries of CSX. Materials, Supplies and Other expense includes net expense
of $195 million, $192 million and $214 million in 1995, 1994 and 1993,
respectively, relating to the above arrangements.
During 1991, CSXT entered into an operating lease agreement with CSXI
for 3,400 rebuilt coal gondola cars. The cars, which were previously owned and
rebuilt by CSXT, were sold to CSXI for $117 million which resulted in no gain.
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 in 1992. These locomotives
are being leased by CSXT through May 2008. The minimum lease payments for the
locomotives and coal gondola cars discussed above are approximately $18 million
annually. These lease payments are included in the minimum lease payments as
discussed in Note 12.
During 1988, CSXT participated with Sea-Land Service, Inc. (Sea-Land),
a wholly-owned subsidiary of CSX, in four sale-leaseback arrangements. Under
these arrangements, Sea-Land sold equipment to a third party and CSXT leased the
equipment and assigned the lease to Sea-Land. Sea-Land is obligated for all
lease payments and other associated equipment expenses. If Sea-Land defaults on
its obligations, CSXT would assume the asset lease rights and obligations of
$147 million at December 29, 1995, under the arrangements.
- 23 -
PAGE 24
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 7. PROPERTIES.
December 29, 1995
-------------------------------------------
Accumulated
Cost Depreciation Net
-------------------------------------------
Transportation
Road $ 9,157 $2,620 $6,537
Equipment 3,829 1,417 2,412
------- ------ ------
12,986 4,037 8,949
Non Transportation 246 6 240
------- ------ ------
Total $13,232 $4,043 $9,189
======= ====== ======
December 30, 1994
-------------------------------------------
Accumulated
Cost Depreciation Net
-------------------------------------------
Transportation
Road $ 9,196 $2,609 $6,587
Equipment 3,726 1,501 2,225
------- ------ ------
12,922 4,110 8,812
Non Transportation 89 4 85
------- ------ ------
Total $13,011 $4,114 $8,897
======= ====== ======
- 24 -
PAGE 25 CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 8. CASUALTY, ENVIRONMENTAL AND OTHER RESERVES.
Activity relating to casualty, environmental and other reserves is as
follows: Casualty(a) Environmental Separation (a)
Reserves(b) Reserves(a) Liabilities(c) Total
----------- ------------- -------------- -----
Balance Dec. 31, 1992 $ 369 $ 77 $ 917 $1,363
Charged to Expense
and Other Additions 189 63 --- 252
Payments and Other
Reductions (179) (9) (295)(d) (483)
----- ----- ----- ------
Balance Dec. 31, 1993 379 131 622 1,132
Charged to Expense
and Other Additions 164 32 --- 196
Payments and Other
Reductions (184) (23) (228)(d) (435)
----- ----- ----- ------
Balance Dec. 30, 1994 359 140 394 893
Charged to Expense
and Other Additions 179 22 33 234
Payments and Other
Reductions (174) (25) (51) (250)
----- ----- ----- ------
Balance Dec. 29, 1995 $ 364 $ 137 $ 376 $ 877
===== ===== ===== ======
(a) Balances include current portion of casualty and environmental reserves and
separation liabilities, respectively, of $147 million, $20 million and $27
million at December 29, 1995, $133 million, $20 million and $14 million at
December 30, 1994 and $137 million, $1 million and $26 million at December
31, 1993.
(b) Casualty reserves are estimated based upon the first reporting of an
accident or personal injury to an employee. Liabilities for accidents are
based upon field reports and liabilities for personal injuries are based
upon the type and severity of the injury and the use of current trends and
historical data.
(c) Separation liabilities include $344 million at December 29, 1995, $376
million at December 30, 1994 and $604 million at December 31, 1993 related
to productivity charges recorded in 1991 and 1992 to provide for the
estimated costs of implementing workforce reductions, improvements in
productivity and other cost reductions. The remaining liabilities are
expected to be paid out over the next 25 years.
(d) Includes the transfer of $156 million in 1994 to a separation-related
pension obligation and the reallocation of $95 million in 1993 to other
negotiated settlements contemplated by the 1991 productivity charge. The
transfer for 1994 represents the future cost of a pension obligation for
certain train crew employees arising from the 1992 buyout of trip-based
compensation and was provided for in the 1992 productivity charge. The
1993 reallocation adjusted for an overaccrual of separation liabilities and
an underaccrual of amounts recorded for other negotiated settlements.
- 25 -
PAGE 26
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 9. LONG-TERM DEBT.
Average
Type and Interest Rates Dec. 29, Dec. 30,
Maturity Dates at Dec. 29, 1995 1995 1994
- ----------------- ---------------- -------- --------
Equipment Obligations
(1996-2009) 8% $ 427 $ 381
Mortgage Bonds
(1998-2003) 4% 76 78
Other Obligations
(1996-2021) 6% 184 221
------ ------
Total 7% 687 680
Less Debt Due Within One Year 74 89
------ ------
Total Long-Term Debt $ 613 $ 591
====== ======
CSXT has long-term debt maturities for 1996 through 2000 aggregating
$74 million, $55 million, $52 million, $68 million and $46 million,
respectively.
Substantially all of the properties and certain other assets of CSXT
and its subsidiaries are pledged as security for various long-term debt issues.
NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS.
Fair values of the company's financial instruments are estimated by
reference to quoted prices from market sources and financial institutions, as
well as other valuation techniques. Long-term debt is the only financial
instrument of the company with a fair value significantly different from its
carrying amount. At December 29, 1995, the fair value of long-term debt,
including current maturities, was $720 million, compared with a carrying amount
of $687 million. At December 30, 1994, the fair value of long-term debt,
including current maturities, was $680 million, compared with a carrying amount
of $650 million. The fair values of long-term debt have been estimated using
discounted cash flow analyses based upon the company's current incremental
borrowing rates for similar types of financing arrangements.
NOTE 11. EMPLOYEE BENEFIT PLANS.
Pension Plans
CSX and its subsidiaries, including CSXT, sponsor defined benefit
pension plans principally for salaried employees. The plans provide eligible
employees with retirement benefits based principally on years of service and
compensation rates near retirement. Annual contributions to the plans are
sufficient to meet the minimum funding standards set forth in the Employee
Retirement Income Security Act of 1974, as amended. See Note 6 for the
allocated pension expense from the CSX Corporation Plan.
- 26 -
PAGE 27
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 11. EMPLOYEE BENEFIT PLANS, Continued
Savings Plans
CSXT maintains savings plans for virtually all full-time salaried
employees and certain employees covered by collective bargaining agreements of
CSXT and subsidiary companies. Eligible employees may contribute from 1% to 15%
of their annual compensation in 1% multiples to these plans. CSXT matches
eligible employees' contributions in an amount equal to the lesser of 50% of
each participating employee's contribution or 3% of their annual compensation.
In addition, CSXT contributes fixed amounts for participating employees covered
by certain collective bargaining agreements. Expense for these plans was $22
million for each of the years 1995, 1994 and 1993.
Other Post-Retirement Benefit Plans
In addition to the CSX defined benefit pension plans, CSXT
participates with CSX and other affiliates in two defined benefit post-
retirement plans which cover most full-time salaried employees. One plan
provides medical benefits and the other provides life insurance benefits. The
post-retirement medical plan is contributory, with retiree contributions
adjusted annually, and contains other cost-sharing features such as deductibles
and coinsurance. The net benefit obligation for the medical plan anticipates
future cost-sharing changes consistent with the company's expressed intent to
increase retiree contribution rates annually in line with expected medical cost
inflation rates. The life insurance plan is non-contributory.
The company's current policy is to fund the cost of the post-
retirement medical and life insurance benefits on a pay-as-you-go basis, as in
prior years. The amounts recorded for the plans in CSXT's statement of
financial position are as follows:
Medical Plan Life Insurance Plan
---------------- -------------------
Dec. 29, Dec. 30, Dec. 29, Dec. 30,
1995 1994 1995 1994
------- ------- ------- -------
Accumulated Post-Retirement
Benefit Obligation:
Retirees $155 $144 $63 $61
Fully Eligible Active Participants 13 12 2 2
Other Active Participants 20 18 1 1
---- ---- --- ---
Accumulated Post-Retirement
Benefit Obligation 188 174 66 64
Unrecognized Prior Service Cost 9 13 3 4
Unrecognized Net Loss (32) (22) (8) (5)
---- ---- --- ---
Net Post-Retirement Benefit Obligation $165 $165 $61 $63
==== ==== === ===
- 27 -
PAGE 28
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 11. EMPLOYEE BENEFIT PLANS, Continued
Other Post-Retirement Benefit Plans, Continued
Net periodic post-retirement benefit expense for 1995, 1994 and 1993
was $22 million, $21 million and $16 million, respectively. The net post-
retirement benefit obligation was determined using the assumption that the
health care cost trend rate for medical plans was 10.5% for 1995-1996,
decreasing gradually to 5.5% by 2005 and remaining at that level thereafter. A
1% increase in the assumed health care cost trend rate would increase the
accumulated post-retirement benefit obligation for medical plans as of December
29, 1995 by $16 million and net post-retirement benefit expense for 1995 by $2
million. The discount rate used in determining the accumulated post-retirement
benefit obligation was 7.50% for 1995, 8.25% for 1994, and 7.25% for 1993.
Other Plans
Under collective bargaining agreements, the company participates in a
number of union-sponsored, multi-employer benefit plans. Payments to these
plans are made as part of aggregate assessments generally based on number of
employees covered, hours worked, tonnage moved or a combination thereof. The
administrators of the multi-employer plans generally allocate funds received
from participating companies to various health and welfare benefit plans and
pension plans. Current information regarding such allocations has not been
provided by the administrators. Total contributions of $148 million, $125
million and $139 million were made to these plans in 1995, 1994 and 1993,
respectively.
Certain officers and key employees of CSXT participate in stock
purchase, performance and award plans of CSX. CSXT is allocated its share of
any cost to participate in these plans.
NOTE 12. SUMMARY OF COMMITMENTS AND CONTINGENCIES.
Lease Commitments
CSXT leases equipment under agreements with terms up to 20 years.
Non-cancelable, long-term leases generally include provisions for maintenance,
and options to purchase at fair value and to extend the terms. At December 29,
1995, minimum equipment rentals under non-cancelable operating leases totaled
approximately $176 million for 1996, $178 million for 1997, $179 million for
1998, $164 million for 1999, $147 million for 2000 and $1.3 billion thereafter.
Rent expense on equipment operating leases, including net daily rental
charges on railroad operating equipment of $218 million, $220 million and $214
million in 1995, 1994 and 1993, respectively, amounted to $390 million in 1995,
$392 million in 1994 and $387 million in 1993.
Purchase Commitment
CSXT entered into an agreement during 1993 to purchase 300
locomotives. This large single order covers normal locomotive replacement needs
- 28 -
PAGE 29
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 12. SUMMARY OF COMMITMENTS AND CONTINGENCIES, Continued
for 1994 through 1997 and introduces alternating current traction technology to
the locomotive fleet. CSXT has taken delivery of 50 direct current and 118
alternating current locomotives through December 29, 1995. The remaining 132
alternating current units will be delivered in 1996 and 1997.
Other Commitments
During 1995, CSXT entered into an agreement with AT&T to supply and
manage its telecommunications needs through May 2005. The agreement requires
minimum payments totaling approximately $330 million in equal annual amounts
over the ten-year period.
Contingent Liabilities and Long-Term Operating Agreements
CSXT and its subsidiaries are contingently liable individually and
jointly with others principally as guarantors of long-term debt and obligations
principally related to leased properties, joint ventures and joint facilities.
These contingent obligations amounted to approximately $171 million at December
29, 1995.
CSXT has various long-term railroad operating agreements that allow
for exclusive operating rights over various railroad lines. Under these
agreements, CSXT is obligated to pay usage fees of approximately $10 million
annually. The terms of these agreements range from 30 to 40 years.
CSXT is a party to various proceedings involving private parties and
regulatory agencies related to environmental issues. CSXT has been identified
as a potentially responsible party (PRP) in a number of investigations and
actions. CSXT has identified approximately 108 environmentally impaired sites
that are or may be subject to remedial action under the Federal Superfund
Statute ("Superfund") or corresponding state statutes. Many of these
proceedings are based on allegations that CSXT, or its railroad predecessors,
sent hazardous substances to the facilities in question for disposal. Such
proceedings arising under Superfund or corresponding state statutes typically
involve numerous other waste generators and disposal companies and seek to
allocate or recover costs associated with site investigation and cleanup, which
could be substantial.
The assessment of the required response and remedial costs associated
with most sites is extremely complex. Cost estimates are based on information
available for each site, financial viability of other PRPs, where available, and
existing technology, laws and regulations. CSXT's best estimates of the
allocation method and percentage of liability when other PRPs are involved are
based on assessments by consultants, agreements among PRPs, or determinations by
the U.S. Environmental Protection Agency or other regulatory agencies.
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
- 29 -
PAGE 30
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 12. SUMMARY OF COMMITMENTS AND CONTINGENCIES, Continued
alleged connection to the location (e.g., generator, owner or operator), the
extent of CSXT's alleged connection (e.g., volume of waste sent to the location
and other relevant factors), the accuracy and strength of evidence connecting
CSXT to the location, and the number, connection and financial position of other
named and unnamed PRPs at the location. The ultimate liability for remediation
is difficult to determine with certainty because of the number of and
creditworthiness of PRPs involved. Through the assessment process, CSXT
monitors the creditworthiness of such PRPs in determining ultimate liability.
Based upon such reviews and updates of the sites with which it is
involved, CSXT has recorded, and reviews at least quarterly for adequacy,
reserves to cover estimated contingent future environmental costs with respect
to such sites. The recorded liabilities for estimated future environmental
costs at December 29, 1995 and December 30, 1994 were $137 million and $140
million, respectively. These recorded liabilities include amounts representing
CSXT's estimate of unasserted claims, which CSXT believes to be immaterial. The
liability has been accrued for future costs for all sites where the company's
obligation is probable and where such costs can be reasonably estimated. The
liability includes future costs for remediation and restoration of sites as well
as any significant ongoing monitoring costs, but excludes any anticipated
insurance recoveries. The majority of the December 29, 1995 environmental
liability is expected to be paid out over the next five to seven years, funded
by cash generated from operations.
The company does not currently possess sufficient information to
reasonably estimate the amounts of additional liabilities, if any, on some sites
until completion of future environmental studies. In addition, latent
conditions at any given location could result in exposure, the amount and
materiality of which cannot presently be reliably estimated. Based upon
information currently available, however, the company believes that its
environmental reserves are adequate to accomplish remedial actions to comply
with present laws and regulations, and that the ultimate liability for these
matters will not materially affect its overall results of operations and
financial condition.
Legal Proceedings
A number of legal actions, other than environmental, are pending
against 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.
- 30 -
PAGE 31
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars)
NOTE 13. QUARTERLY DATA (Unaudited).
1995
-----------------------------------------
1st 2nd(a) 3rd 4th
------ ------ ------ ------
Operating Revenue $1,202 $1,224 $1,204 $1,257
Operating Income 198 28 224 254
Net Earnings 114 9 138 147
1994
-----------------------------------------
1st 2nd 3rd 4th(b)
------ ------ ------ ------
Operating Revenue $1,127 $1,190 $1,173 $1,213
Operating Income 135 230 184 231
Net Earnings 73 136 105 181
(a) The company recorded a $196 million pretax restructuring charge in the
second quarter of 1995 to recognize the costs associated with a
contractual agreement with AT&T to replace, manage and technologically
enhance its existing private telecommunications network. The charge
included a $163 million write-down of technologically obsolete
telecommunications assets and provisions for employee separations.
The restructuring charge reduced net earnings by $121 million.
(b) In December 1994, the state of Florida elected to satisfy its
remaining unfunded obligation issued in 1988 to consummate the
purchase of 80 miles of track and right of way. The transaction
resulted in cash proceeds of $102 million, an accelerated pretax gain
of $69 million, and increased net earnings by $42 million.
- 31 -
PAGE 32
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
MANAGEMENT'S NARRATIVE ANALYSIS AND RESULTS OF OPERATIONS
(Millions of Dollars)
The following information should be read in conjunction with all other
items in this report including "Business", "Properties" and "Financial
Statements and Supplementary Data."
Selected Financial & Statistical Information
--------------------------------------------
1995(a) 1994(b) 1993 1992(c) 1991(d,e)
------- ------ ----- ----- -----
Selected Earnings Data:
Operating Revenue $ 4,887 $4,703 $4,444 $4,508 $4,424
Operating Expense 3,987 3,923 3,853 3,822 3,886
Productivity/Restructuring Charge 196 --- --- 664 647
------- ------ ------ ------ ------
Operating Income (Loss) 704 780 591 22 (109)
Other Income (6) 49 11 1 20
Interest Expense 46 45 60 73 87
Income Tax Expense (Benefit)
Productivity/Restructuring Charge (75) --- --- (237) (238)
Other 319 289 234 204 167
Cumulative Effect of Change
in Accounting --- --- --- --- (159)
------- ------ ------ ------ ------
Net Earnings (Loss) $ 408 $ 495 $ 308 $ (17) $ (264)
======= ====== ====== ====== ======
Selected Cash Flow Data:
Cash Provided by Operating
Activities $ 1,067 $ 896 $ 630 $ 725 $ 525
Cash Used by Investing
Activities $ (727) $ (600) $ (478) $ (506) $ (395)
Cash Used by Financing
Activities $ (159) $ (116) $ (128) $ (258) $ (86)
Selected Financial Position Data:
Cash and Cash Equivalents $ 633 $ 452 $ 272 $ 248 $ 287
Working Capital (Deficit) $ (202) $ (311) $ (606) $ (931) $ (773)
Total Assets $10,629 $10,241 $9,653 $9,475 $9,629
Long-Term Debt $ 613 $ 591 $ 593 $ 646 $ 639
Due to Parent Company:
Long-Term Advances $ --- $ --- $ 69 $ 86 $ 178
Shareholder's Equity $ 5,048 $ 4,652 $4,185 $3,903 $3,992
(a) Includes impact of $196 million pretax restructuring charge, $121
million after tax.
(b) Includes an accelerated pretax gain of $69 million from the payment by
the state of Florida of its remaining unfunded obligation issued in
1988 to purchase 80 miles of track and right of way.
(c) Includes impact of $664 million pretax productivity charge, $427
million after tax.
(d) Includes impact of $647 million pretax productivity charge, $409
million after tax.
- 32 -
PAGE 33
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
MANAGEMENT'S NARRATIVE ANALYSIS AND RESULTS OF OPERATIONS
(e) Net earnings for 1991 were decreased by $159 million by the cumulative
effect of the change in accounting related to the adoption of SFAS No.
106.
Results of Operations
---------------------
CSXT achieved an all-time record year for operating income, excluding
the impact of a $196 million second-quarter restructuring charge to recognize
the write-down of obsolete assets and other costs associated with a contractual
agreement with AT&T to replace, manage and technologically enhance its existing
private telecommunications network. Exclusive of the restructuring charge,
CSXT's operating income in 1995 totaled $900 million, 15% above 1994's
comparable $780 million and 52% above 1993's $591 million. The results reflect
higher volumes in virtually all merchandise and commodity groups, selected rate
increases and continued success in controlling costs.
Strong volumes and improved pricing produced transportation operating
revenue of $4.8 billion, a 4% increase over 1994 and a 10% increase over 1993.
CSXT COMMODITIES BY CARLOADS AND REVENUE
Market
Share (a) Carloads Revenue
(Percent) (Thousands) (Millions of Dollars)
--------- -------------------- ----------------------
1995 1995 1994 1993 1995 1994 1993
---- ----- ----- ----- ----- ------ ------
Automotive 28% 357 354 326 $ 503 $ 493 $ 461
Chemicals 40% 406 386 371 700 685 652
Minerals 38% 414 419 374 375 365 332
Food and Consumer 34% 179 176 166 207 204 196
Agricultural Products 29% 280 263 284 336 318 327
Metals 29% 301 292 258 291 285 243
Forest Products 34% 456 442 435 464 444 442
Phosphates and Fertilizer 79% 512 470 423 282 254 256
Coal 41% 1,678 1,678 1,566 1,523 1,465 1,363
----- ----- ----- ------ ------ ------
Total 4,583 4,480 4,203 4,681 4,513 4,272
===== ===== =====
Other Revenue 138 112 108
------ ------ ------
Total Transportation Operating Revenue $4,819 $4,625 $4,380
====== ====== ======
(a) Market share is defined as percent of major Eastern railroads'
carloads handled by CSXT.
- 33 -
PAGE 34
Shipments of coal, CSXT's major commodity, remained strong in 1995.
Largely due to a strong export market, coal tonnage increased to 158.5 million
tons vs. 153.7 million tons in 1994 and 144.1 million tons in 1993.
Total merchandise traffic rose to 2.9 million carloads, 4% over 1994
and 10% over 1993.
Chemical traffic rose 5% over a strong 1994 and 9% over 1993. The 1995
increase was largely driven by strong demand for textile chemicals and raw
materials used to produce plastic soft drink bottles.
Record corn and soybean harvests and strong domestic feed grain demand
brought 6% increases in carloads and revenues for agricultural products over
1994's results. The increased volume is largely due to growing worldwide demand
for grain, as developing countries improve their standards of living. Compared
with 1993, carloads in 1995 remained level while revenue increased 3%.
Strong foreign demand for phosphates and fertilizer and an increase in
CSXT's market share in Florida's Bone Valley led to a 9% increase in carloads
and an 11% increase in revenue over 1994. The 1995 carloads increased 21% over
1993, while revenue increased 10% over that year.
On the expense side, CSXT continued to tightly control costs.
Excluding the second-quarter charge, transportation operating expense rose only
2% over 1994 and 3% over 1993. These results reflect a broad organizational
commitment to controlling costs, as well as the continued success of the
company's Performance Improvement Teams (PITs). PITs eliminated more than $350
million in expenses from 1993 through 1995, while revenues increased by over
$430 million. In 1996, CSXT is targeting an additional $100 million in cost
reductions through PIT initiatives.
RESTRUCTURING CHARGE
--------------------
(Millions of Dollars)
1995
----
Provision:
Write-down of Obsolete Assets $163
Separation and Labor Protection Costs 33
----
Total Provision 196
----
Payments and Other Reductions:
Write-down of Obsolete Assets 163
Separation and Labor Protection Costs 1
----
Balance December 29, 1995 $ 32
====
CSXT has been moving to two-member crews on through trains. At
year-end 1995, the average crew size was 2.4 members, including yard and local
crews. CSXT is working to achieve an average crew size of 2.25 members in the
next few years. In 1993, the crew size average was 2.7.
- 34 -
PAGE 35
Labor and fringe benefits expense remained level with 1994 at $1.86
billion, vs. $1.80 billion in 1993. The company is engaged in national labor
negotiations that may result in competitive increases in labor and fringe
benefits in 1996.
CSXT ended the year with its best-ever employee safety performance, a
28% improvement over 1994, reducing its injury incident frequency to 1.7 per 100
full-time employees (200,000 man hours). The company experienced a 13% reduction
in train accidents. Five years ago, the injury incident frequency was 5.0 and
accidents were 66% more common. In addition to making the work environment
safer, the results of this effort include reducing unnecessary expense.
Over the past several years, CSXT has achieved one of the best
employee safety improvement performances among Class I railroads. To reward
employee contribution to this achievement, the company initiated a "Take Stock
in Safety" program, which awards CSX common stock to employees for team
performance that achieves a 1.5 or lower injury frequency. Of 39 teams
representing transportation, mechanical and engineering departments, 46%
qualified for the "Take Stock in Safety" award.
CSXT's property additions for 1995 increased to $765 million from
1994's $676 million and 1993's $569 million. Efforts to constrain capital
expenditures will continue in 1996. Improvements in service and asset
utilization will enable the company, in effect, to create additional capacity
without increasing capital investment significantly. Also in 1996, CSXT will
take delivery of 77 new fuel-efficient 4,400 horsepower AC locomotives, each of
which replaces an average of two older units. As of year-end 1995, there were
118 AC units in service in CSXT's fleet of approximately 2,700 locomotives.
Property Additions
---------------------
(Millions of Dollars)
Property Additions 1995 1994 1993
- ------------------ ---- ---- ----
Merchandise Cars $121 $105 $ 68
Coal Cars 128 4 5
---- ---- ----
Total Freight Cars 249 109 73
---- ---- ----
Locomotives 159 131 120
Roadway 332 404 323
Other Equipment and Properties 25 32 53
---- ---- ----
Total Property Additions $765 $676 $569
==== ==== ====
CSXT expects 1996 to be another year of earnings growth, with moderate
volume and revenue increases across most lines of business. The company will
continue to focus on its key strategic efforts, which include improving safety,
lowering costs and increasing asset utilization. CSXT will also expand the scope
of more recent initiatives for improving service reliability through process
re-engineering. With moderate economic growth projected, CSXT will build on
competitive advantages it has attained through market-share gains and improved
fundamentals.
- 35 -
PAGE 36
Financial Condition
Liquidity and Capital Resources
-------------------------------
Cash provided by operating activities totaled $1.1 billion, an
increase of $171 million from 1994 and an increase of $437 million from 1993.
Cash provided by operating activities included payments for productivity and
restructuring charges of $105 million, $129 million and $245 million for 1995,
1994 and 1993, respectively. Excluding the effect of the productivity and
restructuring charge payments, cash provided by operating activities would have
been $1,172 million in 1995, $1,025 million in 1994 and $875 million in 1993.
Cash used by investing activities was $727 million which was $127
million higher than the $600 million used in 1994 and $249 million higher than
the $478 million used in 1993. Property additions of $765 million in 1995
increased $89 million from $676 million in 1994, and $196 million from $569
million in 1993. The company's program to cover locomotive replacement needs
accounts for a significant portion of property additions. In 1995, CSXT took
delivery of 88 alternating current locomotives. In 1994, CSXT took delivery of
30 alternating current locomotives and 50 direct current locomotives.
Cash used by financing activities increased to $159 million in 1995
from $116 million in 1994 and increased $31 million from $128 million in 1993.
The 1995 increase in cash used was primarily the result of an increase in
dividends paid to CSX.
Cash and cash equivalents increased $181 million during 1995 to a
level of $633 million versus $452 million at the end of 1994 and increased $361
million over the 1993 level of $272 million.
Working capital increased by $109 million to a year-end deficit of
$202 million in 1995, compared to $311 million in 1994 and $606 million in 1993.
A working capital deficit is not unusual for CSXT and does not indicate a lack
of liquidity. CSXT maintains adequate current assets to satisfy current
liabilities when they are due and has sufficient financial resource capacity,
primarily from access to advances from CSX, to manage its day-to-day cash
requirements.
Environmental concerns have drawn considerable attention. CSXT, like
many American companies today, faces the challenge of dealing with this issue
and is addressing its environmental responsibilities and managing the related
expenditures. Environmental management is an important part of CSXT's strategic
planning, which includes promotion of policies and procedures that emphasize
environmental awareness throughout the company.
- 36 -
PAGE 37
The following financial ratios are measures of the condition of CSXT
and its subsidiaries as of the respective fiscal year ends:
1995 1994 1993
---- ---- ----
Current Ratio .8 .7 .5
Debt-to-Total Capitalization Ratio 10.8% 11.3% 13.7%
Return on Assets 3.8% 4.9% 3.2%
Return on Equity 8.1% 10.6% 7.4%
Ratio of Earnings to Fixed Charges 6.1X 7.1X 4.8x
Excluding the impact of the 1995 restructuring charge, the 1995
measures would have been as follows:
1995
----
Current Ratio .8
Debt-to-Total Capitalization Ratio 10.8%
Return on Assets 5.0%
Return on Equity 10.5%
Ratio of Earnings to Fixed Charges 7.7X
- 37 -
PAGE 1
CSX TRANSPORTATION, INC.
INDEX TO EXHIBITS
Description Value
- ----------- -----
Articles of Incorporation EX-3.1
Bylaws EX-3.2
Financial Data Schedule EX-27
- 1 -
PAGE 1
Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CSX TRANSPORTATION, INC.
Article I
NAME
The name of the Corporation (hereinafter referred to as the
"Corporation") is "CSX Transportation, Inc."
Article II
PURPOSE
The purposes for which the Corporation is organized are to conduct
the business of a railroad anywhere in the United States of America and
elsewhere; to engage generally in the business of transportation as a common
carrier of passengers, mail, express and all kinds of classifications of
freight, petroleum, natural gas, and all other things of every kind and
nature, by means of railroad, motor vehicle, ship, airship, pipelines,
conveyors, and other means of transportation or facilities of any and all
kinds with any and all types of motive power, on, under or above land, water,
or air, anywhere in the United States of America and elsewhere. The
Corporation shall have all the powers conferred by the laws of Virginia.
Article III
AUTHORIZED STOCK
3.1 Number and Designation. The Corporation shall have
authority to issue ten million (10,000,000) shares of Common Stock, par value
$20.00 per share.
3.2 Preemptive Rights. No holder of capital stock of the
Corporation of any class shall have any preemptive right to subscribe to or
purchase (i) any shares of capital stock of this Corporation, (ii) any
securities convertible into such shares or (iii) any options, warrants or
rights to purchase such shares or securities convertible into any such shares.
3.3 Voting Rights. The holders of Common Stock shall have
unlimited voting rights and are entitled to receive the net assets of the
Corporation upon the liquidation, dissolution or winding up of the affairs of
the Corporation.
- 1 -
PAGE 2
Article IV
NUMBER OF DIRECTORS
The number of directors shall be fixed by the By-Laws or, in the
absence of a By-law fixing the number, the number shall be three.
Article V
LIMIT ON LIABILITY AND INDEMNIFICATION
5.1 Definitions. For purposes of this Article the following
definitions shall apply:
(a) "Corporation" means this Corporation, including The
Chesapeake and Ohio Railway Company and any other predecessor entity or other
legal entity;
(b) "expenses" include counsel fees, expert witness fees,
and costs of investigation, litigation and appeal, as well as any amounts
expended in asserting a claim for indemnification;
(c) "liability" means the obligation to pay a judgment,
settlement, penalty, fine, or other such obligation, including, without
limitation, any excise tax assessed with respect to an employee benefit plan;
(d) "legal entity" means a corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise;
(e) "predecessor entity" means a legal entity the
existence of which ceased upon its acquisition by the Corporation in a merger
or otherwise; and
(f) "proceeding" means any threatened, pending, or
completed action, suit, proceeding or appeal whether civil, criminal,
administrative or investigative and whether formal or informal.
5.2 Limit on Liability. In every instance permitted by the
Virginia Stock Corporation Act, as it exists on the date hereof or may
hereafter be amended, the liability of a director or officer of the
Corporation to the Corporation or its shareholders arising out of a single
transaction, occurrence or course of conduct shall be limited to one dollar.
5.3 Indemnification of Directors and Officers. The Corporation
shall indemnify any individual who is, was or is threatened to be made a party
to a proceeding (including a proceeding by or in the right of the Corporation)
because such individual is or was a director or officer of the Corporation, or
because such individual is or was serving the Corporation or any other legal
entity in any capacity at the request of the Corporation, against all
liabilities and reasonable expenses incurred in the proceeding except such
liabilities and expenses as are incurred because of such individual's willful
misconduct or knowing violation of the criminal law. Service as a director or
- 2 -
PAGE 3
officer of a legal entity controlled by the Corporation shall be deemed
service at the request of the Corporation. The determination that
indemnification under this Section 5.3 is permissible and the evaluation as to
the reasonableness of expenses in a specific case shall be made, in the case
of a director, as provided by law, and in the case of an officer, as provided
in Section 5.4 of this Article; provided, however, that
if a majority of the directors of the Corporation has changed after the date
after the date of the alleged conduct giving rise to a claim for
indemnification, such determination and evaluation shall, at the option of the
person claiming indemnification, be made by special legal counsel agreed upon
by the Board of Directors and such person. Unless a determination has been
made that indemnification is not permissible, the Corporation shall make
advances and reimbursements for expenses incurred by a director or officer in
a proceeding upon receipt of an undertaking from such director or officer to
repay the same if it is ultimately determined that such director or officer is
not entitled to indemnification. Such undertaking shall be an unlimited,
unsecured general obligation of the director or officer and shall be accepted
without reference to such director's or officer's ability to make repayment.
The termination of a proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent shall not of itself create a
presumption that a director or officer acted in such a manner as to make such
director or officer ineligible for indemnification. The Corporation is
authorized to contract in advance to indemnify and make advances and
reimbursements for expenses to any of its directors or officers to the same
extent provided in this Section 5.3.
5.4 Indemnification of Others. The Corporation may, to a lesser
extent or to the same extent that it is required to provide indemnification
and make advances and reimbursements for expenses to its directors and
officers pursuant to Section 5.3 of this Article, provide indemnification and
make advances and reimbursements for expenses to its employees and agents, the
directors, officers, employees and agents of its subsidiaries and predecessor
entities, and any person serving any other legal entity in any capacity at the
request of the Corporation, and may contract in advance to do so. The
determination that indemnification under this Section 5.4 is permissible, the
authorization of such indemnification and the evaluation as to the
reasonableness of expenses in a specific case shall be made as authorized from
time to time by general or specific action of the Board of Directors, which
action may be taken before or after a claim for indemnification is made, or as
otherwise provided by law. No person's rights under Section 5.3 of this
Article shall be limited by the provisions of this Section 5.4.
5.5 Miscellaneous. The rights of each person entitled to
indemnification under this Article shall inure to the benefit of such person's
heirs, executors and administrators. Special legal counsel selected to make
determinations under this Article may be counsel for the Corporation.
Indemnification pursuant to this Article shall not be exclusive of any other
right of indemnification to which any person may be entitled, including
indemnification pursuant to a valid contract, indemnification by legal
entities other than the Corporation and indemnification under policies of
insurance purchased and maintained by the Corporation or others. However, no
person shall be entitled to indemnification by the Corporation to the extent
- 3 -
PAGE 4
such person is indemnified by another, including an insurer. The Corporation
is authorized to purchase and maintain insurance against any liability it may
have under this Article or to protect any of the persons named above against
any liability arising from their service to the Corporation or any other legal
entity at the request of the Corporation regardless of the Corporation's power
to indemnify against such liability. The provisions of this Article shall not
be deemed to preclude the Corporation from entering into contracts otherwise
permitted by law with any individuals or legal entities, including those named
above. If any provision of this Article or its application to any person or
circumstances is held invalid by a court of competent jurisdiction, the
invalidity shall not affect other provisions or applications of this Article,
and to this end the provisions of this Article are severable.
5.6 Application; Amendments. The provisions of this Article
shall be applicable from and after its adoption even though some or all of the
underlying conduct or events relating to a proceeding may have occurred before
its adoption. No amendment, modification or repeal of this Article shall
diminish the rights provided hereunder to any person arising from conduct or
events occurring before the adoption of such amendment, modification or
repeal.
Article VI
VOTE TO AMEND OR RESTATE
As to each voting group entitled to vote on an amendment or
restatement of these Articles of Incorporation the vote required for approval
shall be (i) the vote required by the terms of these Articles of
Incorporation, as amended or as restated from time to time, if such terms
specifically require the approval of more than a majority of the votes
entitled to be cast thereon by such voting group; or (ii) if clause (i) of
this Article is not applicable, a majority of the votes entitled to be cast
thereon.
- 4 -
PAGE 1
Exhibit 3.2
BY-LAWS
OF
CSX TRANSPORTATION, INC.
(As Amended to February 21, 1995)
ARTICLE I.
Stockholders' Meetings.
SECTION 1. Annual meeting. The annual meeting of stockholders of the Company
shall be held on the second Tuesday in March, either within or without the
State of Virginia.
SECTION 2. Special Meetings. Special meetings of the stockholders of the
Company may be held at such places within or without that State as provided in
the notice of the meeting, and may be called by the Chairman or a majority of
all of the Directors.
SECTION 3. Actions without meeting. Any action which may be taken at a
meeting of the shareholders may be taken without a meeting, if a consent or
consents in writing, setting forth the action so taken, shall be signed by all
of the shareholders who would be entitled to vote at a meeting for such
purpose and shall be filed with the Secretary.
ARTICLE II.
Board of Directors.
SECTION 1. Number, term and election. The Board of Directors shall be
elected at the annual meeting of the stockholders or at any special meeting
held in lieu thereof. The number of Directors shall be six. This number may
be increased or decreased at any time by amendment of these by-laws, but shall
always be a number of not less than three. No person shall be eligible for
election as a Director, nor shall any Director be eligible for re-election, if
he shall have attained the age of 70 years at the time of such election.
Directors shall hold office until removed or until the next annual meeting of
the stockholders is held and their successors are elected.
SECTION 2. Quorum. A majority of the Directors shall constitute a quorum.
Less than a quorum may adjourn the meeting to a fixed time and place, no
further notice of any adjourned meeting being required.
SECTION 3. Removal and vacancies. The stockholders at any meeting, by a vote
of the holders of a majority of all the shares of Capital Stock at the time
outstanding and having voting power, may remove any Director and fill any
vacancy. Vacancies arising among the Directors, including a vacancy resulting
from an increase by the Board of Directors in the number of directors, so long
as the increase so created is not more than two, may be filled by the
remaining Directors, though less than a quorum of the Board, unless sooner
filled by the stockholders.
- 1 -
PAGE 2
SECTION 4. Meetings and notices. Meetings of the Board may be called to meet
at any time and place by the Secretary or an Assistant Secretary by direction
of the Chairman of the Board, or a President, or at the request of any three
members of the Board. Notice of any meeting may be given orally or by mailing
or delivering such notice to each Director at his residence or business
address or by telephone or telegraphing it to him. Any such notice shall
state the time and place of the meeting. Meetings may be held without notice
if all of the Directors are present or those not present waive notice before
or after the meeting.
Any action which may be taken at a meeting of the Board may be
taken without a meeting, if a consent or consents in writing setting forth the
action so taken shall be signed by all of the Directors and shall be filed
with the Secretary.
Any action required to be taken at a meeting of the Board may be
taken by means of a conference telephone or similar communications equipment
whereby all persons participating in the meeting can hear each other, and
participation by such means shall constitute presence in person at such
meeting. When such meeting is conducted, a written record shall be made of
the action taken at such meeting.
ARTICLE III.
Officers.
At the first meeting of the Board of Directors held after the
annual meeting of the stockholders, the Board of Directors shall elect
officers of the Company as follows: A Chairman of the Board, a President, one
or more Vice-Presidents, a Secretary and a Treasurer.
All officers elected by the Board of Directors shall, unless
removed by the Board of Directors as hereinafter set forth, hold office until
the first meeting of the Board of Directors after the next annual meeting of
the stockholders and until their successors are elected.
The Board of Directors may elect a Vice-Chairman of the Board from
among the members thereof.
A President may appoint such additional officers and subordinate
officials as he may deem necessary for the efficient conduct of the affairs of
the Company.
The powers, duties, and responsibilities of officers, employees,
and agents of the Company not prescribed in these by-laws shall be established
from time to time by the Board of Directors or by a President.
Any officer shall be subject to removal at any time if elected by
the Board of Directors, by the affirmative vote of a majority of all of the
members of the Board of Directors, or, if appointed by a President, by that
President.
- 2 -
PAGE 3
ARTICLE IV.
Chairman of the Board.
The Chairman of the Board of Directors shall be elected from among
the Directors. He shall preside at all meetings of the Board of Directors.
He shall, from time to time, secure information concerning all affairs of the
Company and shall communicate same to the Board. He shall also, from time to
time, communicate to the officers such action of the Board as may in his
judgment affect the performance of their official duties.
ARTICLE V.
President.
The President, or if there be more than one, then each of them,
shall, subject to the direction and control of the Board of Directors and the
Chairman, participate in the supervision of the policies and operations of the
Company and shall be the chief administrative officer or officers of the
Company. In general, each President shall perform all duties incident to the
office of President, and such other duties as from time to time may be
prescribed by the Board of Directors or the Chairman. In the absence of the
Chairman, a President, as designated by the Chairman or the Board of
Directors, shall preside at meetings of stockholders and of the Board of
Directors.
ARTICLE VI.
Secretary.
SECTION 1. The Secretary shall attend all meetings of the stockholders and
the Board of Directors and record their proceedings, unless a temporary
secretary be appointed. He shall give due notice as required of all meetings
of the stockholders and Directors. He shall keep or cause to be kept at a
place or places required by law a record of the stockholders of the Company,
giving the names and addresses of all stockholders and the number, class, and
series of the shares held by each. He shall be custodian of the seal of the
Company, and of all records, contracts, leases, and other papers and documents
of the Company, unless otherwise directed by the Board of Directors, and shall
perform such other duties as may be assigned to him by the Board of Directors
or the Chairman of the Board or a President.
SECTION 2. In case of the Secretary's absence or incapacity, the Chairman
shall designate an appropriate officer to perform the duties of the Secretary.
- 3 -
PAGE 4
ARTICLE VII.
Treasurer
SECTION 1. The Treasurer shall receive, keep and disburse all moneys
belonging or coming to the Company, shall keep regular, true and full accounts
of all receipts and disbursements and make detailed reports of the same to the
Board of Directors whenever required. He shall also perform such other duties
in connection with the administration of the financial affairs of the Company
as the Board of Directors, or a President, shall assign to him.
SECTION 2. In case of the Treasurer's absence or incapacity, the Chairman
shall designate an appropriate officer to perform the duties of the Treasurer.
ARTICLE VIII.
Compensation.
The Board of Directors or a committee thereof shall fix salaries
above a level established from time to time by the Board of Directors and
shall determine and fix other compensation for officers and employees of the
Company and shall implement, monitor, and review the employee compensation and
employee benefit plans of the Company. No member of the Board of Directors or
such committee shall vote on any matter involving the amount of his own
compensation. The salaries of officers and employees below the level
established by the Board of Directors shall be fixed by the President.
ARTICLE IX.
Depositaries.
The money of the Company shall be kept in such bank or banks as
the Board of Directors shall from time to time direct or approve. All checks
and other instruments for the disbursement of funds shall be executed manually
or by facsimile by such officers or agents of the Company as may be authorized
by the Board of Directors.
ARTICLE X.
Seal.
The seal of the Company, of which there may be any number of
counterparts, shall be circular in the form and shall bear the words, "CSX
Transportation, Inc. 1944".
ARTICLE XI.
Fiscal Year.
The fiscal year of the Company shall begin immediately after
midnight of the last Friday in December and shall end at midnight on the last
Friday of December of each calendar year.
- 4 -
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<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-29-1995
<PERIOD-END> DEC-29-1995
<CASH> 633
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<RECEIVABLES> 66
<ALLOWANCES> 0
<INVENTORY> 116
<CURRENT-ASSETS> 1,031
<PP&E> 13,232
<DEPRECIATION> 4,043
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0
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<OTHER-SE> 4,867
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