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 September 26, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-3359
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
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(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 September 26, 1997: 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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<PAGE>
CSX TRANSPORTATION, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 26, 1997
INDEX
Page Number
-----------
PART I. FINANCIAL INFORMATION
Item 1:
Financial Statements
1. Consolidated Statement of Earnings-
Quarters Ended September 26, 1997 and September 27, 1996 3
2. Consolidated Statement of Cash Flows-
Nine Months Ended September 26, 1997 and September 27, 1996 4
3. Consolidated Statement of Financial Position-
At September 26, 1997 and December 27, 1996 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 13
Signature 13
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
Consolidated Statement of Earnings
(Millions of Dollars)
(Unaudited)
Quarters Ended Nine Months Ended
----------------------- ---------------------
Sept. 26, Sept. 27 Sept. 26, Sept. 27,
1997 1996 1997 1996
----------- ----------- ---------------------
OPERATING REVENUE
Merchandise $ 794 $ 772 $ 2,461 $ 2,374
Coal 390 404 1,161 1,178
Other 31 35 93 109
-------- -------- -------- --------
Total 1,215 1,211 3,715 3,661
-------- -------- -------- --------
OPERATING EXPENSE
Labor and Fringe Benefits 480 474 1,430 1,424
Materials, Supplies and Other 239 251 715 759
Equipment Rent 87 89 259 278
Depreciation 108 104 325 308
Fuel 66 69 223 217
-------- -------- -------- --------
Total 980 987 2,952 2,986
-------- -------- -------- --------
OPERATING INCOME 235 224 763 675
Other Income (Expense) 14 5 8 29
Interest Expense 18 16 53 55
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES 231 213 718 649
Income Tax Expense 95 80 280 245
-------- -------- -------- --------
NET EARNINGS $ 136 $ 133 $ 438 $ 404
======== ======== ======== ========
See accompanying Notes to Consolidated Financial Statements.
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Millions of Dollars)
(Unaudited)
Nine Months Ended
------------------------
Sept. 26 Sept. 27,
1997 1996
------------------------
OPERATING ACTIVITIES
Net Earnings $ 438 $ 404
Adjustments to Reconcile Net Earnings
to Net Cash Provided
Depreciation 325 309
Deferred Income Taxes 132 151
Productivity/Restructuring Charge Payments (35) (58)
Other Operating Activities (23) (19)
Changes in Operating Assets and Liabilities
Accounts Receivable (70) (31)
Materials and Supplies (13) 3
Other Current Assets (35) (11)
Accounts Payable 21 (15)
Other Current Liabilities 14 (65)
------- -------
Net Cash Provided by Operating Activities 754 668
------- -------
INVESTING ACTIVITIES
Property Additions (398) (571)
Other Investing Activities 9 97
------- -------
Net Cash Used by Investing Activities (389) (474)
------- -------
FINANCING ACTIVITIES
Long-Term Debt Issued 5 117
Long-Term Debt Repaid (60) (67)
Dividends Paid (104) (471)
Other Financing Activities (3) 61
------- -------
Net Cash Used by Financing Activities (162) ( 360)
------- -------
Net Increase (Decrease) in Cash and
Cash Equivalents 203 ( 166)
CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents at Beginning of Period 207 633
------- -------
Cash and Cash Equivalents at End of Period $ 410 $ 467
======= =======
See accompanying Notes to Consolidated Financial Statements.
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
Consolidated Statement of Financial Position
(Millions of Dollars)
(Unaudited)
Sept. 26, Dec. 27,
1997 1996
-------- --------
ASSETS
Current Assets
Cash and Cash Equivalents $ 410 $ 207
Accounts Receivable 151 62
Materials and Supplies 134 121
Deferred Income Taxes 124 183
Other Current Assets 76 41
-------- --------
Total Current Assets 895 614
Properties-Net 9,810 9,750
Affiliates and Other Companies 180 148
Other Long-Term Assets 300 288
-------- --------
Total Assets $11,185 $10,800
======== ========
LIABILITIES
Current Liabilities
Accounts Payable $ 569 $ 547
Labor and Fringe Benefits Payable 330 353
Casualty, Environmental and Other Reserves 187 199
Current Maturities of Long-Term Debt 72 77
Due to Parent Company 24 25
Due to Affiliate 90 90
Other Current Liabilities 72 37
-------- --------
Total Current Liabilities 1,344 1,328
Casualty, Environmental and Other Reserves 596 597
Long-Term Debt 867 886
Deferred Income Taxes 2,567 2,493
Other Long-Term Liabilities 664 684
-------- --------
Total Liabilities 6,038 5,988
-------- --------
SHAREHOLDER'S EQUITY
Common Stock, $20 Par Value:
Authorized 10,000,000 Shares;
Issued and Outstanding 9,061,038 Shares 181 181
Other Capital 1,263 1,263
Retained Earnings 3,703 3,368
-------- --------
Total Shareholder's Equity 5,147 4,812
-------- --------
Total Liabilities and
Shareholder's Equity $11,185 $10,800
======== ========
See accompanying Notes to Consolidated Financial Statements.
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(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
at September 26, 1997 and December 27, 1996, the results of their operations for
the quarters and nine months ended September 26, 1997 and September 27, 1996,
and their cash flows for the nine months ended September 26, 1997 and September
27, 1996, 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.
NOTE 2. FISCAL REPORTING PERIODS
The company's fiscal year is composed of 52 weeks ending on the last
Friday in December. The financial statements presented are for the 13-week
quarters and 39-week periods ended September 26, 1997 and September 27, 1996,
and the fiscal year ended December 27, 1996.
NOTE 3. ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board has issued Statement No. 130
"Reporting Comprehensive Income," which the company will adopt during the first
quarter of 1998. The Statement establishes standards for reporting and display
of comprehensive income and its components in financial statements.
Comprehensive income generally represents all changes in shareholder's equity
except those resulting from investments by or distributions to shareholders.
With the exception of net earnings, such changes are generally not significant
to the company; and the adoption of Statement No. 130, including the required
comparative presentation for prior periods, is not expected to have a material
impact on its financial statements.
NOTE 4. ACCOUNTS RECEIVABLE
CSXT has an ongoing agreement to sell without recourse, on a revolving
basis each month, an undivided percentage ownership interest in all its rail
freight accounts receivable to CSX Trade Receivables Corporation, a wholly-owned
subsidiary of CSX. Accounts receivable sold under this agreement totaled $608
million at September 26, 1997 and $644 million at December 27, 1996. 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. Accounts receivable sold under this
agreement totaled $46 million at September 26, 1997 and December 27, 1996. The
sales of receivables have been reflected as reductions of "Accounts and Notes
Receivable" in the Consolidated Statement of Financial Position. The net losses
associated with sales of receivables were $13 million and $42 million for the
quarter and nine months ended September 26, 1997, respectively, and $14 million
and $41 million for the quarter and nine months ended September 27, 1996,
respectively.
The company adopted FASB Statement No. 125 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" during the
first quarter of 1997. Adoption of the pronouncement, which established new
guidelines for accounting and disclosure related to transfers of trade accounts
receivable and other financial assets, did not have a material impact on the
company's financial statements.
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All Tables in Millions of Dollars)
NOTE 5. OTHER INCOME (EXPENSE)
Quarters Ended Nine Months Ended
----------------- -----------------
Sept.26, Sept.27, Sept. 26, Sept. 27,
1997 1996 1997 1996
------- ------- ------- -------
Interest Income $ 8 $ 8 $ 21 $ 31
Income from Real Estate Operations(1) 23 8 29 33
Net Losses from Accounts Receivable (13) (14) (42) (41)
Sold
Miscellaneous (4) 3 -- 6
------ ------ ------ ------
Total $ 14 $ 5 $ 8 $ 29
====== ====== ====== ======
(1)Gross revenue from real estate operations was $30 million and $50 million
for the quarter and nine months ended September 26, 1997, respectively, and
$13 million and $52 million for the quarter and nine months ended September
27, 1996, respectively.
NOTE 6. CONRAIL TRANSACTION
During the second quarter of 1997, CSX and Norfolk Southern Corporation
(Norfolk Southern) completed the joint acquisition of Conrail Inc. (Conrail)
pursuant to an agreement between the companies dated April 8, 1997. Under the
agreement, CSX and Norfolk Southern hold investments in Conrail of 42% and 58%,
respectively, through a jointly-owned acquisition entity. The Conrail shares
held by the joint acquisition entity have been placed in a voting trust pending
approval of the transaction by the Surface Transportation Board (STB). In June
1997, supplemental agreements governing the legal structure of the transaction
and operations of the Conrail rail system subsequent to STB approval were
completed. CSXT is a party to certain of those agreements which will generally
become operative at the time CSX and Norfolk Southern are permitted by the STB
to exercise control over Conrail. The terms of these agreements, the operating
plans of the respective companies, and the benefits expected to result from
combining the respective rail systems are incorporated in a joint railroad
control application which was filed with the STB on June 23, 1997. The STB has
announced a 350-day review period for the application. A favorable decision by
the STB would permit CSX and Norfolk Southern to exercise control over Conrail
by mid-1998.
NOTE 7. COMMITMENTS AND CONTINGENCIES
In September 1997, a state court jury in New Orleans, Louisiana returned a
$2.5 billion punitive damages award against CSXT. The award was made in a class
action lawsuit against a group of nine companies based on personal injuries
alleged to have arisen from a 1987 fire. The fire was caused by a leaking
chemical tank car parked on CSXT tracks and resulted in the evacuation of a New
Orleans neighborhood. The facts of the case indicate that the damages awarded
are extremely high, and CSXT has excellent grounds for appeal. CSXT is pursuing
an aggressive strategy on all legal fronts and believes that the punitive
damages award will be set aside or reduced so substantially that it will not
have any material long-term financial impact on CSXT. At this time, it is not
possible to estimate the ultimate impact, if any, from the punitive damages
award, and no charge to earnings has been recorded. In the same case, the court
awarded a group of 20 plaintiffs compensatory damages of approximately $2
million against the defendants, including CSXT, to which the jury assigned 15%
of the responsibility for the incident. CSXT's liability under that compensatory
damages award is not material, and adequate provision was made for the award in
a prior year.
CSXT is a party to various proceedings involving private parties and
regulatory agencies related to environmental issues. CSXT has been identified as
a potentially responsible party (PRP) at approximately 119 environmentally
impaired sites that are or may be subject to remedial action under
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All Tables in Millions of Dollars)
NOTE 7. COMMITMENTS AND CONTINGENCIES, Continued
the Federal Superfund statute (Superfund) or similar state statutes. A number of
these proceedings are based on allegations that CSXT, or its predecessor
railroads, sent hazardous substances to the facilities in question for disposal.
Such proceedings arising under Superfund or similar state statutes can involve
numerous other waste generators and disposal companies and seek to allocate or
recover costs associated with site investigation and cleanup, which could be
substantial.
CSXT is involved in a number of administrative and judicial proceedings
and other cleanup efforts at approximately 262 sites, including sites addressed
under the Federal Superfund statute or similar state statutes, where it is
participating in the study and/or cleanup of alleged environmental
contamination. The assessment of the required response and remedial costs
associated with many sites is extremely complex. Cost estimates are based on
information available for each site, financial viability of other PRPs, where
available, and existing technology, laws and regulations. CSXT's best estimates
of the allocation method and percentage of liability when other PRPs are
involved are based on assessments by consultants, agreements among PRPs, or
determinations by the U.S. Environmental Protection Agency or other regulatory
agencies.
At least once each quarter, CSXT reviews its role, if any, with respect to
each such location, giving consideration to the nature of CSXT's alleged
connection to the location (e.g., generator, owner or operator), the extent of
CSXT's alleged connection (e.g., volume of waste sent to the location and other
relevant factors), the accuracy and strength of evidence connecting CSXT to the
location, and the number, connection and financial position of other named and
unnamed PRPs at the location. The ultimate liability for remediation can be
difficult to determine with certainty because of the number and creditworthiness
of PRPs involved. Through the assessment process, CSXT monitors the
creditworthiness of such PRPs in determining ultimate liability.
Based upon such reviews and updates of the sites with which it is
involved, CSXT has recorded, and reviews at least quarterly for adequacy,
reserves to cover estimated contingent future environmental costs with respect
to such sites. The recorded liabilities for estimated future environmental costs
at September 26, 1997 and December 27, 1996, were $108 million and $117 million,
respectively. These recorded liabilities include amounts representing CSXT's
estimate of unasserted claims, which CSXT believes to be immaterial. The
liability has been accrued for future costs for all sites where the company's
obligation is probable and where such costs can be reasonably estimated. The
liability includes future costs for remediation and restoration of sites as well
as any significant ongoing monitoring costs, but excludes any anticipated
insurance recoveries. The majority of the September 26, 1997 environmental
liability is expected to be paid out over the next five to seven years, funded
by cash generated from operations.
The company does not currently possess sufficient information to
reasonably estimate the amounts of additional liabilities, if any, on some sites
until completion of future environmental studies. In addition, latent conditions
at any given location could result in exposure, the amount and materiality of
which cannot presently be reliably estimated. Based upon information currently
available, however, the company believes that its environmental reserves are
adequate to accomplish remedial actions to comply with present laws and
regulations, and that the ultimate liability for these matters will not
materially affect its overall results of operations and financial condition.
A number of legal actions, other than environmental, are pending against
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.
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CSX TRANSPORTATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited), Continued
(All Tables in Millions of Dollars)
NOTE 8. RELATED PARTIES.
Cash and cash equivalents at September 26, 1997 and December 27, 1996,
includes $428 million and $250 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.
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. (CSX Technology); the reimbursement, under an operating
agreement, from CSX Intermodal, Inc. (CSXI), for costs incurred by CSXT related
to intermodal operations; charges from Total Distribution Services, Inc. (TDSI),
for services provided at automobile ramps; and charges from Bulk Intermodal
Distribution Services, Inc. (BIDS) for services provided at bulk commodity
facilities. The management service fee charges by CSX represents compensation
for certain corporate services provided to CSXT. These services include, but are
not limited to, development of corporate policy and long-range strategic plans,
allocation of capital, placement of debt, maintenance of employee benefit plans,
internal audit and tax administration. The data processing related charges are
compensation to CSX Technology for the development, implementation and
maintenance of computer systems, software and associated documentation for the
day-to-day operations of CSXT. CSX Technology, CSXI, TDSI, and BIDS are
wholly-owned subsidiaries of CSX. Materials, Supplies and Other expense includes
net expense of $74 million and $209 million for the quarter and nine months
ended September 26, 1997 and $74 million and $212 million for the quarter and
nine months ended September 27, 1996, respectively, relating to the above
arrangements.
In March 1996, CSXT entered into a loan agreement with CSX Insurance
Company (CSX Insurance), a wholly-owned subsidiary of CSX, whereby CSXT may
borrow up to $100 million from CSX Insurance. The loan is payable in full on
demand. At September 26, 1997, $90 million was outstanding under the agreement.
Interest on the loan is payable monthly at .25% over the LIBOR rate, and was
5.91% at September 26, 1997. Interest expense incurred for the quarter and nine
months ended September 26, 1997 was $1 million and $4 million, respectively, and
$1 million and $3 million for the quarter and nine months ended September 27,
1996 respectively, relating to this loan agreement.
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ITEM 2. MANAGEMENT'S ANALYSIS AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net earnings for the third quarter of 1997 were $136 million versus $133
million in the prior year period. The company achieved operating income of $235
million, 5 percent above last year's third quarter. Total operating revenue of
$1.2 billion was level with 1996's third quarter. Operating expense for the
quarter decreased 1% to $980 million.
For the first nine months of 1997, net earnings totaled $438 million, up 8
percent from the prior year period. Operating revenue rose 1 percent, while
operating expenses were reduced by 1 percent, resulting in a 13 percent increase
in operating income compared to the 1996 period.
OPERATING INCOME
(Millions of Dollars)
-----------------------------------------------------------
Quarters Ended Nine Months Ended
-------------------- --------------------
Sept. 26, Sept.27, Percent Sept. 26, Sept. 27, Percent
1997 1996 Change 1997 1996 Change
--------- -------- ------- --------- -------- -------
Operating Revenue
Merchandise $ 794 $ 772 3 % $ 2,461 $ 2,374 4%
Coal 390 404 (3)% 1,161 1,178 (1)%
Other 31 35 (11)% 93 109 (15)%
--------- -------- --------- --------
Total 1,215 1,211 -- % 3,715 3,661 1 %
Operating Expense 980 987 (1)% 2,952 2,986 (1)%
--------- -------- --------- --------
Operating Income $ 235 $ 224 5 % $ 763 $ 675 13 %
========= ======== ========= ========
In the third quarter of 1997, total coal volume remained level at 41.3
million tons; however, coal revenue decreased 3 percent, reflecting an 8 percent
decrease in export coal. Total merchandise carloads for the third quarter rose 4
percent over 1996, while revenue rose 3 percent. The food and consumer,
agricultural products and metals commodities each experienced double-digit
percentage gains. Chemicals and minerals rose 5 percent and 6 percent,
respectively. Driving the increases were market-share gains from truckers and
continued modest growth in the U.S. economy.
In the first nine months of 1997, CSXT shipped 123.3 tons of coal, an
increase of 2 percent over the prior year period. Total merchandise traffic was
up 4 percent from 1996, reflecting increases in food and consumer products
(11%); metals (13%); chemicals (6%); and autos and parts (4%).
OUTLOOK
Continuing the trend of the first nine months of the year, CSXT expects to
deliver strong fourth quarter results, including an improved operating ratio.
Strong merchandise traffic is expected to offset continued weakness in export
coal volume. The company will closely monitor the effects of rail operating
problems in the western United States to minimize their effect on its
operations. The company will continue its focus on customer service, safety, and
cost control to enhance core earning power.
OTHER MATTERS
Conrail Transaction
During the second quarter of 1997, CSXT entered into certain agreements
pertaining to the joint acquisition of Conrail by CSX and Norfolk Southern.
Under these agreements and other agreements to be completed or executed prior to
the date that CSX and Norfolk Southern are
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ITEM 2. MANAGEMENT'S ANALYSIS AND RESULTS OF OPERATIONS
permitted by the STB to exercise control over Conrail, appropriate portions of
the Conrail rail system are expected to be integrated with the CSXT system. The
terms of these agreements, the operating plans of the respective companies, and
the benefits expected to result from combining the respective rail systems are
incorporated in a joint railroad control application which was filed with the
STB on June 23, 1997. A decision on the application is expected from the STB on
or before June 8, 1998 and, if favorable, would permit CSX and Norfolk Southern
to exercise control over Conrail by mid-1998. CSXT is activiely planning for the
smooth integration of Conrail operations into the CSXT rail system after STB
approval. Key initiatives involve all facets of combining the two systems,
including safety; customer service; train scheduling, switching, and routing;
equipment utilization and track programs; commuter and passenger rail;
marketing; technology; labor agreements; and administration. Related capital
improvements to certain routes and facilities on the CSXT system have also been
initiated. It is anticipated that operational integration will take place upon
completion of labor agreements with Conrail's contract workforce, currently
expected to be in late 1998 or early 1999. Additional information with respect
to the integration plans is contained in the joint STB application. The
application is a public document, available for review in its entirety at the
office of the STB, located at 1925 K Street, NW, Washington, D.C.
20423-0001.
New Orleans Jury Verdict
In September 1997, a state court jury in New Orleans, Louisiana returned a
$2.5 billion punitive damages award against CSXT. The award was made in a class
action lawsuit against a group of nine companies based on personal injuries
alleged to have arisen from a 1987 fire. The fire was caused by a leaking
chemical tank car parked on CSXT tracks and resulted in the 36-hour evacuation
of a New Orleans neighborhood.
The facts of the case indicate that the damages awarded are extremely high
and CSXT has excellent grounds for appeal. A National Transportation Safety
Board (NTSB) investigation concluded that the probable cause of the incident was
improper installation, maintenance and closing of a gasket at the bottom of the
tank car. CSXT did not manufacture the tank car, did not install the gasket, did
not load the tank car, and did not transport the car. As a common carrier, CSXT
had a legal obligation to accept the car, which had been certified by its owner
as safe for carriage of the chemical and inspected by the rail carrier that left
the car on CSXT's track. The fire started approximately six hours after the car
was placed on CSXT's track, and federal safety laws did not require inspection
by CSXT until 48 hours after placement. Although the NTSB issued recommendations
to other parties involved in the incident to prevent similar occurrences and to
minimize their effects, no such recommendations were made with respect to CSXT.
Many residents were inconvenienced by the evacuation, and some were treated for
exposure to the chemical and the fire, though the size of the class of persons
claiming injury is in dispute. Ultimately, no one suffered serious injury, no
lives were lost, no significant property damage occurred, and no jobs were lost.
CSXT is pursuing an aggressive strategy on all legal fronts and believes
that the punitive damages award will be set aside or reduced so substantially
that it will not have any material long-term financial impact on CSXT. To
protect its right to appeal the verdict, CSXT may be required to provide a
surety bond or other form of security for all or part of the punitive damages
award. Management is taking appropriate steps to arrange such security in the
event it is ultimately required by the court. At this time, it is not possible
to estimate the ultimate impact, if any, from the punitive damages award, and no
charge to earnings has been recorded.
In the same case, the court awarded a group of 20 plaintiffs compensatory
damages of approximately $2 million against the defendants, including CSXT, to
which the jury assigned 15% of the responsibility for the incident. CSXT's
liability under that compensatory damages award is not material, and adequate
provision was made for the award in a prior year.
Federal Railroad Administration/Rail Labor/CSXT Joint Review on Safety
On October 16, 1997, the Federal Railroad Administration (FRA) issued a
report on a joint review on safety on the CSXT rail system. The review was
undertaken as a cooperative effort with
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ITEM 2. MANAGEMENT'S ANALYSIS AND RESULTS OF OPERATIONS
CSXT and rail labor, and was conducted between July and September 1997. CSXT and
its labor representatives, in cooperation with the FRA, are actively addressing
the issues cited in the report and have already initiated numerous actions to
ensure that all issues are fully resolved. CSXT has demonstrated an improving
safety record over time and, in recent years, has been among the safest Class I
freight railroads in the nation. The cooperative effort with rail labor and the
FRA reaffirms the commitment to safety by all parties involved and helps ensure
that safety will remain the top priority as CSXT plans the integration of
Conrail lines into its system.
-------------------------------------
To the extent that these written statements include predictions concerning
future operations and results of operations, such statements are forward-looking
statements that involve risks and uncertainties, and actual results may differ
materially. Factors that could cause actual results to differ materially are
described in the company's Form 10-K for its most recent fiscal year and include
general economic downturns, which may limit demand and pricing; labor matters,
which may impact the costs and feasibility of certain operations; and commodity
concentrations, which may affect traffic levels.
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<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
1. (27) Financial Data Schedule
(b) Reports on Form 8-K
1. A report was filed on September 9, 1997, reporting Item 5,
Other Events - issuance of Press Release by the company on
September 8, 1997 related to New Orleans jury award; and Item
7, Financial Information and Exhibits - Press Release issued by
the company on September 8, 1997.
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.
(Registrant)
By: /s/JAMES L. ROSS
----------------
James L. Ross
(Principal Accounting Officer)
Dated: October 29, 1997
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<INCOME-PRETAX> 718
<INCOME-TAX> 280
<INCOME-CONTINUING> 438
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 438
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
