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CSX 10-Q 2013

Documents found in this filing:

  1. 10-Q
  2. Ex-31
  3. Ex-32
  4. Ex-32
CSX 09.27.2013 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
 
(X)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  
For the quarterly period ended September 27, 2013
 
OR
 
( )
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________ to __________
Commission File Number 1-8022
 
 
 
 
 
 
 
 
 
 
 
CSX CORPORATION
(Exact name of registrant as specified in its charter)
Virginia
 
 
 
 
 
 
 
62-1051971
 
 
(State or other jurisdiction of incorporation or organization)
 
 
 
 
 
 
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
 
 
 
 
 
 
 
 
500 Water Street, 15th Floor, Jacksonville, FL
 
 
 
 
 
32202
 
(904) 359-3200
 
 
(Address of principal executive offices)
 
 
 
 
 
(Zip Code)
 
(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 by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes (X) No ( )
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer", "accelerated filer” and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (check one)
Large Accelerated Filer (X)
 
Accelerated Filer ( )
Non-accelerated Filer ( )
 
Smaller Reporting Company ( )
 
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ( ) No (X)
There were 1,013,674,361 shares of common stock outstanding on September 27, 2013 (the latest practicable date that is closest to the filing date).

1



CSX CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 27, 2013
INDEX

 
 
 
Page
PART I.
FINANCIAL INFORMATION
 
 
Item 1.
 
 
 
 
 
 
Quarters and Nine Months Ended September 27, 2013 and September 28, 2012
 
 
 
 
 
 
Quarters and Nine Months Ended September 27, 2013 and September 28, 2012
 
 
 
 
 
 
At September 27, 2013 (Unaudited) and December 28, 2012
 
 
 
 
 
 
Nine Months Ended September 27, 2013 and September 28, 2012
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
 
 
PART II.
OTHER INFORMATION
 
 
Item 1.
 
 
 
 
 
Item 1A.
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
 
 
Item 5.
 
 
 
 
 
Item 6.
 
 
 
 
 
 
 


2


CSX CORPORATION

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENTS (Unaudited)  
(Dollars in millions, except per share amounts)
 
Third Quarters
 
Nine Months
 
2013
2012
 
2013
2012
 
 
 
 
 
 
Revenue
$
2,999

$
2,894

 
$
9,026

$
8,872

Expense
 
 
 
 
 
Labor and Fringe
791

754

 
2,335

2,268

Materials, Supplies and Other
576

525

 
1,643

1,617

Fuel
407

397

 
1,248

1,251

Depreciation
277

268

 
823

788

Equipment and Other Rents
94

96

 
285

295

Total Expense
2,145

2,040

 
6,334

6,219

 
 
 
 
 
 
Operating Income
854

854

 
2,692

2,653

 
 
 
 
 
 
Interest Expense
(136
)
(138
)
 
(423
)
(421
)
Other Income - Net
5

5

 
11

14

Earnings Before Income Taxes
723

721

 
2,280

2,246

 
 
 
 
 
 
Income Tax Expense
(260
)
(266
)
 
(823
)
(830
)
Net Earnings
$
463

$
455

 
$
1,457

$
1,416

 
 
 
 
 
 
Per Common Share (Note 2)
 
 
 
 
 
Net Earnings Per Share, Basic
$
0.46

$
0.44

 
$
1.43

$
1.36

Net Earnings Per Share, Assuming Dilution
$
0.46

$
0.44

 
$
1.43

$
1.36

 
 
 
 
 
 
 
 
 
 
 
 
Average Shares Outstanding (In millions)
1,017

1,038

 
1,021

1,042

Average Shares Outstanding, Assuming Dilution (In millions)
1,018

1,040

 
1,021

1,044

 
 
 
 
 
 
 
 
 
 
 
 
Cash Dividends Paid Per Common Share
$
0.15

$
0.14

 
$
0.44

$
0.40



CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS (Unaudited)  
(Dollars in millions, except per share amounts)
 
Third Quarters
 
Nine Months
 
2013
2012
 
2013
2012
Total Comprehensive Earnings (Note 10)
$
479

$
471

 
$
1,507

$
1,458


See accompanying notes to consolidated financial statements.





3

CSX CORPORATION
ITEM 1. FINANCIAL STATEMENTS


CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share amounts)
 
(Unaudited)
 
 
September 27,
2013
December 28,
2012
ASSETS
Current Assets:
 
 
Cash and Cash Equivalents
$
591

$
784

Short-term Investments
128

587

Accounts Receivable - Net (Note 1)
981

962

Materials and Supplies
267

274

Deferred Income Taxes
148

119

Other Current Assets
85

75

  Total Current Assets
2,200

2,801

 
 
 
Properties
36,637

35,279

Accumulated Depreciation
(9,691
)
(9,229
)
  Properties - Net
26,946

26,050

 
 
 
Investment in Conrail
715

695

Affiliates and Other Companies
526

511

Other Long-term Assets
556

514

  Total Assets
$
30,943

$
30,571

 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
 
 
Accounts Payable
$
1,078

$
1,014

Labor and Fringe Benefits Payable
511

468

Casualty, Environmental and Other Reserves (Note 4)
149

140

Current Maturities of Long-term Debt (Note 7)
264

780

Income and Other Taxes Payable
138

85

Other Current Liabilities
111

140

  Total Current Liabilities
2,251

2,627

 
 
 
Casualty, Environmental and Other Reserves (Note 4)
284

337

Long-term Debt (Note 7)
8,787

9,052

Deferred Income Taxes
8,387

8,096

Other Long-term Liabilities
1,366

1,457

  Total Liabilities
21,075

21,569

 
 
 
Shareholders' Equity:
 
 
Common Stock $1 Par Value
1,014

1,020

Other Capital
50

28

Retained Earnings
9,670

8,876

Accumulated Other Comprehensive Loss (Note 10)
(886
)
(936
)
Noncontrolling Interest
20

14

Total Shareholders' Equity
9,868

9,002

Total Liabilities and Shareholders' Equity
$
30,943

$
30,571


See accompanying notes to consolidated financial statements.

4

CSX CORPORATION
ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED CASH FLOW STATEMENTS (Unaudited)
(Dollars in millions)
 
Nine Months
 
2013
2012
 
 
 
OPERATING ACTIVITIES
 
 
Net Earnings
$
1,457

$
1,416

Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities:
 
 
Depreciation
823

788

Deferred Income Taxes
229

456

Contributions to Qualified Pension Plans

(275
)
Gain on Property Dispositions
(68
)
(72
)
Other Operating Activities
(53
)
(39
)
Changes in Operating Assets and Liabilities:
 
 
Accounts Receivable
(76
)
12

Other Current Assets
(6
)
(57
)
Accounts Payable
85

48

Income and Other Taxes Payable
66

148

Other Current Liabilities
42

(121
)
Net Cash Provided by Operating Activities
2,499

2,304

 
 
 
INVESTING ACTIVITIES
 
 
Property Additions
(1,687
)
(1,830
)
Purchase of Short-term Investments
(809
)
(78
)
Proceeds from Sales of Short-term Investments
1,307

573

Other Investing Activities
(54
)
10

Net Cash Used in Investing Activities
(1,243
)
(1,325
)
 
 
 
FINANCING ACTIVITIES
 
 
Long-term Debt Issued (Note 7)

300

Long-term Debt Repaid (Note 7)
(779
)
(481
)
Dividends Paid
(448
)
(415
)
Stock Options Exercised (Note 3)
9

11

Shares Repurchased
(224
)
(500
)
Other Financing Activities
(7
)
16

Net Cash Used in Financing Activities
(1,449
)
(1,069
)
 
 
 
Net Decrease in Cash and Cash Equivalents
(193
)
(90
)
 
 
 
CASH AND CASH EQUIVALENTS
 
 
Cash and Cash Equivalents at Beginning of Period
784

783

Cash and Cash Equivalents at End of Period
$
591

$
693

 
 
 

Certain amounts have been reclassified to conform to the current year presentation.
See accompanying notes to consolidated financial statements.


5

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1.
Nature of Operations and Significant Accounting Policies

Background

CSX Corporation (“CSX”), and together with its subsidiaries (the “Company”), based in Jacksonville, Florida, is one of the nation's leading transportation companies. The Company provides rail-based transportation services including traditional rail service and the transport of intermodal containers and trailers.

CSX's principal operating subsidiary, CSX Transportation, Inc. (“CSXT”), provides an important link to the transportation supply chain through its approximately 21,000 route mile rail network, which serves major population centers in 23 states east of the Mississippi River, the District of Columbia and the Canadian provinces of Ontario and Quebec. The Company's intermodal business, also part of CSXT, links customers to railroads via trucks and terminals.

Other entities

In addition to CSXT, the Company’s subsidiaries include CSX Intermodal Terminals, Inc. (“CSX Intermodal Terminals”), Total Distribution Services, Inc. (“TDSI”), Transflo Terminal Services, Inc. (“Transflo”), CSX Technology, Inc. (“CSX Technology”) and other subsidiaries. CSX Intermodal Terminals owns and operates a system of intermodal terminals, predominantly in the eastern United States and also performs drayage services (the pickup and delivery of intermodal shipments) for certain CSXT customers and trucking dispatch operations. TDSI serves the automotive industry with distribution centers and storage locations. Transflo connects non-rail served customers to the many benefits of rail by transferring products from rail to trucks. Today, the biggest Transflo markets are chemicals and agriculture, such as minerals and ethanol. CSX Technology and other subsidiaries provide support services for the Company.
    
CSX’s other holdings include CSX Real Property, Inc., a subsidiary responsible for the Company’s real estate sales, leasing, acquisition and management and development activities. These activities are classified in other income - net because they are not considered to be operating activities by the Company. Results of these activities fluctuate with the timing of non-operating real estate transactions.

Basis of Presentation

In the opinion of management, the accompanying consolidated financial statements contain all normal, recurring adjustments necessary to fairly present the following:
  
Consolidated income statements for the quarters and nine months ended September 27, 2013 and September 28, 2012;
Consolidated comprehensive income statements for the quarters and nine months ended September 27, 2013 and September 28, 2012;
Consolidated balance sheets at September 27, 2013 and December 28, 2012; and
Consolidated cash flow statements for the nine months ended September 27, 2013 and September 28, 2012.


6

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1.
Nature of Operations and Significant Accounting Policies, continued

Pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been omitted from these interim financial statements. CSX suggests that these financial statements be read in conjunction with the audited financial statements and the notes included in CSX's most recent annual report on Form 10-K and any subsequently filed current reports on Form 8-K.

Fiscal Year

CSX follows a 52/53 week fiscal reporting calendar with the last day of each reporting period ending on a Friday:
 
The third fiscal quarters of 2013 and 2012 consisted of 13 weeks ending on September 27, 2013 and September 28, 2012, respectively.
Fiscal year 2013 and 2012 will each consist of 52 weeks ending on December 27, 2013 and December 28, 2012, respectively.
    
Except as otherwise specified, references to “third quarter(s)” or “nine months” indicate CSX's fiscal periods ending September 27, 2013 and September 28, 2012, and references to "year-end" indicate the fiscal year ended December 28, 2012.

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts on uncollectible amounts related to freight receivables, government reimbursement receivables, claims for damages and other various receivables. The allowance is based upon the credit worthiness of customers, historical experience, the age of the receivable and current market and economic conditions. Uncollectible amounts are charged against the allowance account. Allowance for doubtful accounts of $33 million and $36 million is included in the consolidated balance sheets as of the end of third quarter 2013 and December 2012, respectively.

New Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update to the Comprehensive Income Topic in the Accounting Standards Codifications ("ASC"). This update requires separate presentation of the components that are reclassified out of accumulated other comprehensive income either on the face of the financial statements or in the notes to the financial statements. This update also requires companies to disclose the income statement line items impacted by any significant reclassifications, such as the amortization of pension and other post-employment benefits adjustments. These items are required for both interim and annual reporting for public companies and became effective for CSX beginning with the first quarter 2013 Form 10-Q filing.




7

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1. Nature of Operations and Significant Accounting Policies, continued

Other Items

Share Repurchases

In April 2013, the Company announced a new $1 billion share repurchase program, which is expected to be completed by April 2015. Management's assessment of market conditions and pertinent facts guide the timing and volume of all repurchases. During third quarter 2013, CSX repurchased $129 million in shares. In accordance with the Equity Topic in the ASC, the excess of repurchase price over par value is recorded in retained earnings. Generally, retained earnings is only impacted by net earnings and dividends.

Amortization of Gain from Property Disposition

In November 2011, the Company sold an operating rail corridor to the state of Florida for a new commuter rail operation known as SunRail. This agreement obligated the Company to invest a total of $500 million in routine capital expenditures and maintenance related to transportation capacity, facilities or equipment in Florida, including diversion and relocation costs related to this transaction within the eight year period following the transaction. The Company invested $80 million during third quarter 2012, and $142 million and $225 million for nine months 2013 and 2012, respectively. The required investment obligation was fulfilled during the second quarter of 2013.
        
In accordance with the Real Estate Sales Topic in the ASC, this sale of real estate resulted in a deferred gain of $160 million. The deferred gain is primarily recognized into income ratably as the investment obligation is fulfilled. The Company recognized a gain of $30 million in the third quarter of 2012, and $43 million and $69 million for the nine months ended 2013 and 2012, respectively. No gains were recognized in the third quarter of 2013. This gain is included in materials, supplies and other in the consolidated income statements. Going forward, the Company expects no further material gains.

NOTE 2.    Earnings Per Share

The following table sets forth the computation of basic earnings per share and earnings per share, assuming dilution:
 
Third Quarters
 
Nine Months
 
2013
2012
 
2013
2012
Numerator (Dollars in millions):
 
 
 
 
 
Net Earnings
$
463

$
455

 
$
1,457

$
1,416

 
 
 
 
 
 
Denominator (Units in millions):
 
 
 
 
 
Average Common Shares Outstanding
1,017

1,038

 
1,021

1,042

Other Potentially Dilutive Common Shares (a)
1

2

 

2

Average Common Shares Outstanding,
Assuming Dilution
1,018

1,040

 
1,021

1,044

 
 
 
 
 
 
Net Earnings Per Share, Basic
$
0.46

$
0.44

 
$
1.43

$
1.36

Net Earnings Per Share, Assuming Dilution
$
0.46

$
0.44

 
$
1.43

$
1.36


(a) Other potentially dilutive common shares include convertible debt, stock options, common stock equivalents and performance units granted under a long-term management incentive compensation plan.


8

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 2.    Earnings Per Share, continued

Basic earnings per share is based on the weighted-average number of common stock outstanding. Earnings per share, assuming dilution, is based on the weighted-average number of shares of common stock outstanding adjusted for the effects of common stock that may be issued as a result of the following types of potentially dilutive instruments:

convertible debt;

employee stock options; and

other equity awards, which include long-term incentive awards.

The Earnings Per Share Topic in the ASC requires CSX to include additional shares in the computation of earnings per share, assuming dilution. The additional shares included in diluted earnings per share represent the number of shares that would be issued if all of the above potentially dilutive instruments were converted into CSX common stock.

When calculating diluted earnings per share, the Earnings Per Share Topic in the ASC requires CSX to include the potential shares that would be outstanding if all outstanding stock options were exercised. This is offset by shares CSX could repurchase using the proceeds from these hypothetical exercises to obtain the common stock equivalent. This number is different from outstanding stock options, which is included in Note 3, Share-Based Compensation. All stock options were dilutive for the periods presented; therefore, no stock options were excluded from the diluted earnings per share calculation.

Diluted shares outstanding are not impacted when debentures are converted into CSX common stock because those shares were already included in the diluted shares calculation. Shares outstanding for basic earnings per share, however, are impacted on a weighted-average basis when conversions occur.  An immaterial amount of conversions occurred during third quarters 2013 and 2012. As of the end of third quarter 2013, approximately $2 million of convertible debentures at face value remained outstanding, which are convertible into approximately 244 thousand shares of CSX common stock.
                                                                
NOTE 3.
Share-Based Compensation

Under CSX's share-based compensation plans, awards primarily consist of performance grants, restricted stock awards, restricted stock units, stock options and stock grants for directors. CSX has not granted stock options since 2003. Awards granted under the various programs are determined and approved by the Compensation Committee of the Board of Directors or, in certain circumstances, by the Chief Executive Officer for awards to management employees other than senior executives. The Board of Directors approves awards granted to the Company's non-management directors upon recommendation of the Governance Committee.

On May 7, 2013, approximately 1.3 million performance units were granted to certain employees under a new long-term incentive plan ("LTIP") adopted under the CSX Stock and Incentive Award Plan.  This LTIP provides for a three-year cycle ending in fiscal year 2015.  Payouts of performance units will be based on the achievement of goals related to both operating ratio (operating expense divided by operating revenue) and return on assets (tax-adjusted operating income divided by net property) excluding non-recurring items as disclosed in the Company's financial statements. Operating ratio and return on assets will each comprise 50% of the payout and are measured independently of the other.

    

9

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 3.    Share-Based Compensation, continued

Grants were made in performance units, with each unit being equivalent to one share of CSX common stock, and payouts will be made in CSX common stock.  The payout range for participants will be between 0% and 200% of the target awards depending on Company performance against predetermined goals for the three-year cycle ending with fiscal year 2015.  Payouts for certain executive officers are subject to downward adjustment by up to 30% based upon total shareholder return relative to specified comparable groups.

Additionally, as part of the 2013 LTIP, the Company granted approximately 439 thousand restricted stock units to certain employees on May 7, 2013.  The restricted stock units vest three years after the date of grant. Participants receive cash dividend equivalents on the unvested shares during the restriction period.  These awards are time-based and are not based upon CSX's attainment of operational targets.

Both performance units and restricted stock units require participants to be employed through the final day of the respective vesting period except in the case of death, disability or retirement.  For information related to the Company's other outstanding long-term incentive compensation, see CSX's most recent annual report on Form 10-K.
Total pre-tax expense associated with all share-based compensation and the related income tax benefit are as follows:

 
Third Quarters
 
Nine Months
(Dollars in millions)
2013
2012
 
2013
2012
 
 
 
 
 
 
Share-Based Compensation Expense
$
7

$
6

 
$
9

$
10

Income Tax Benefit
3

3

 
4

4


    
The following table provides information about stock options exercised and expired.
 
Third Quarters
 
Nine Months
(In thousands)
2013
2012
 
2013
2012
 
 
 
 
 
 
Number of Stock Options Exercised

273

 

1,891

Number of Stock Options Expired


 

15


As of December 2009, all outstanding options were vested, and therefore, there will be no future expense related to these options.  As of the end of third quarter 2013, CSX had no stock options outstanding, as all remaining stock options expired in May 2013. 













10

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 4.
Casualty, Environmental and Other Reserves
Casualty, environmental and other reserves are considered critical accounting estimates due to the need for significant management judgments. They are provided for in the consolidated balance sheets as follows:
 
September 27,
2013
 
December 28,
2012
(Dollars in millions)
Current
Long-term
Total
 
Current
Long-term
Total
 
 
 
 
 
 
 
 
Casualty:
 
 
 
 
 
 
 
Personal Injury
$
79

$
122

$
201

 
$
75

$
158

$
233

Occupational
4

23

27

 
5

31

36

Asbestos
7

44

51

 
8

48

56

     Total Casualty
90

189

279

 
88

237

325

Environmental
41

47

88

 
33

55

88

Other
18

48

66

 
19

45

64

     Total
$
149

$
284

$
433

 
$
140

$
337

$
477


These liabilities are accrued when estimable and probable in accordance with the Contingencies Topic in the ASC. Actual settlements and claims received could differ. The final outcome of these matters cannot be predicted with certainty. Considering the legal defenses currently available, the liabilities that have been recorded and other factors, it is the opinion of management that none of these items individually, when finally resolved, will have a material effect on the Company's financial condition, results of operations or liquidity. Should a number of these items occur in the same period, however, they could have a material effect on the Company's financial condition, results of operations or liquidity in that particular period.

Casualty
 
Casualty reserves of $279 million for the third quarter 2013 represent accruals for personal injury, occupational injury and asbestos claims. The Company's self-insured retention amount for these claims is $50 million per occurrence. Currently, no individual claim is expected to exceed the self-insured retention amount. In accordance with the Contingencies Topic in the ASC, to the extent the value of an individual claim exceeds the self-insured retention amount, the Company would present the liability on a gross basis with a corresponding receivable for insurance recoveries. These reserves fluctuate based upon the timing of payments as well as changes in independent third-party estimates, which are reviewed by management. Actual results may vary from estimates due to the number, type and severity of the injury, costs of medical treatments and uncertainties in litigation. Most of the claims relate to CSXT unless otherwise noted below. Defense and processing costs, which historically have been insignificant and are anticipated to be insignificant in the future, are not included in the recorded liabilities.
 
Personal Injury
Personal injury reserves represent liabilities for employee work-related and third-party injuries. Work-related injuries for CSXT employees are primarily subject to the Federal Employers’ Liability Act (“FELA”). In addition to FELA liabilities, employees of other CSX subsidiaries are covered by various state workers’ compensation laws, the Federal Longshore and Harbor Workers’ Compensation Program or the Maritime Jones Act.
    
    

11

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 4. Casualty, Environmental and Other Reserves, continued

CSXT retains an independent actuarial firm to assist management in assessing the value of personal injury claims. An analysis is performed by the independent actuarial firm quarterly and is reviewed by management. The methodology used by the actuary includes a development factor to reflect growth or reduction in the value of these personal injury claims. It is based largely on CSXT's historical claims and settlement experience.

Occupational & Asbestos
    
Occupational claims arise from allegations of exposures to certain materials in the workplace, such as solvents, soaps, chemicals (collectively referred to as “irritants”) and diesel fuels (like exhaust fumes) or allegations of chronic physical injuries resulting from work conditions, such as repetitive stress injuries, carpal tunnel syndrome and hearing loss. The Company is also party to a number of asbestos claims by current or former employees alleging exposure to asbestos in the workplace.
    
An analysis of occupational claims is performed quarterly by an independent third-party actuarial firm and reviewed by management. Management performs a quarterly review of asserted asbestos claims, and an analysis is performed annually by an independent third-party specialist and reviewed by management. The objective of the occupational and asbestos claims analyses performed by the third-party actuarial firm and specialist (the "third-party specialists") is to determine the number of incurred but not reported (“IBNR”) claims. The third-party specialists analyze CSXT's historical claim filings, settlement amounts, and dismissal rates to determine future anticipated claim filing rates and average settlement values for occupational and asbestos claims reserves. The potentially exposed population is estimated by using CSX's employment records and industry data. From this analysis, the third-party specialists provide an estimate of the IBNR claims liability.

Environmental

Environmental reserves were $88 million for the third quarter 2013. The Company is a party to various proceedings related to environmental issues, including administrative and judicial proceedings involving private parties and regulatory agencies. The Company has been identified as a potentially responsible party at approximately 242 environmentally impaired sites. Many of these are, or may be, subject to remedial action under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, or CERCLA, also known as the Superfund Law, or similar state statutes. Most of these proceedings arose from environmental conditions on properties used for ongoing or discontinued railroad operations. A number of these proceedings, however, are based on allegations that the Company, or its predecessors, sent hazardous substances to facilities owned or operated by others for treatment, recycling or disposal. In addition, some of the Company's land holdings were leased to others for commercial or industrial uses that may have resulted in releases of hazardous substances or other regulated materials onto the property and could give rise to proceedings against the Company.

In any such proceedings, the Company is subject to environmental clean-up and enforcement actions under the Superfund Law, as well as similar state laws that may impose joint and several liability for clean-up and enforcement costs on current and former owners and operators of a site without regard to fault or the legality of the original conduct. These costs could be substantial.


12

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 4. Casualty, Environmental and Other Reserves, continued

In accordance with the Asset Retirement and Environmental Obligations Topic in the ASC, the Company reviews its role with respect to each site identified at least quarterly, giving consideration to a number of factors such as:
 
type of clean-up required;
nature of the Company's alleged connection to the location (e.g., generator of waste sent to the site or owner or operator of the site);
extent of the Company's alleged connection (e.g., volume of waste sent to the location and other relevant factors); and
number, connection and financial viability of other named and unnamed potentially responsible parties at the location.

Based on the review process, the Company has recorded amounts to cover contingent anticipated future environmental remediation costs with respect to each site to the extent such costs are estimable and probable. The recorded liabilities for estimated future environmental costs are undiscounted. 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. Payments related to these liabilities are expected to be made over the next several years.

Currently, the Company does not possess sufficient information to reasonably estimate the amounts of additional liabilities, if any, on some sites until completion of future environmental studies. In addition, conditions that are currently unknown could, at any given location, result in additional exposure, the amount and materiality of which cannot presently be reasonably estimated. Based upon information currently available, however, the Company believes its environmental reserves accurately reflect the cost of remedial actions currently required.

Other

Other reserves of $66 million for the third quarter 2013 include liabilities for various claims, such as longshoremen disability claims, and claims for property, automobile and general liability.

NOTE 5.    Commitments and Contingencies

Insurance

The Company maintains numerous insurance programs with substantial limits for property damage (which includes business interruption) and third-party liability.  A certain amount of risk is retained by the Company on each of the liability and property programs.  The Company has a $25 million retention per occurrence for the non-catastrophic property program (such as a derailment) and a $50 million retention per occurrence for the liability and catastrophic property programs (such as hurricanes and floods).
 
While the Company believes its current insurance coverage is adequate to cover its damages, future claims could exceed existing insurance coverage or insurance may not continue to be available at commercially reasonable rates.


13

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 5.    Commitments and Contingencies, continued

Legal
 
The Company is involved in litigation incidental to its business and is a party to a number of legal actions and claims, various governmental proceedings and private civil lawsuits, including, but not limited to, those related to fuel surcharge practices, environmental and hazardous material exposure matters, FELA claims by employees, other personal injury or property claims and disputes and complaints involving certain transportation rates and charges. Some of the legal proceedings include claims for compensatory as well as punitive damages and others are, or are purported to be, class actions. While the final outcome of these matters cannot be reasonably determined, considering, among other things, the legal defenses available and liabilities that have been recorded along with applicable insurance, it is currently the opinion of CSX management that none of these pending items will have a material adverse effect on the Company's financial condition, results of operations or liquidity. An unexpected adverse resolution of one or more of these items, however, could have a material adverse effect on the Company's financial condition, results of operations or liquidity in that particular period.
The Company is able to estimate a range of possible loss for certain legal proceedings for which a loss is reasonably possible in excess of reserves established. The Company has estimated this range to be $3 million to $17 million in aggregate at September 27, 2013. This estimated aggregate range is based upon currently available information and is subject to significant judgment and a variety of assumptions. Accordingly, the Company's estimate will change from time to time, and actual losses may vary significantly from the current estimate.

Fuel Surcharge Antitrust Litigation

In May 2007, class action lawsuits were filed against CSXT and three other U.S.-based Class I railroads alleging that the defendants' fuel surcharge practices relating to contract and unregulated traffic resulted from an illegal conspiracy in violation of antitrust laws. In November 2007, the class action lawsuits were consolidated and are now pending in federal court in the District of Columbia. The suit seeks treble damages allegedly sustained by purported class members as well as attorneys' fees and other relief. Plaintiffs are expected to allege damages at least equal to the fuel surcharges at issue.

In June 2012, the District Court certified the case as a class action. The decision was not a ruling on the merits of plaintiffs' claims, rather a decision to allow the plaintiffs to seek to prove the case as a class. The defendant railroads petitioned the U.S. Court of Appeals for the D.C. Circuit for permission to appeal the District Court's class certification decision. In August 2013, the D.C. Circuit issued a decision vacating the class certification decision and remanded the case to the District Court to reconsider its class certification decision. On October 15, 2013, the District Court held a case management conference to determine the scope and schedule of the remand proceedings.  The parties were directed to confer and propose a schedule to the District Court on the remand proceedings. In the interim, the District Court has delayed proceedings on the merits of the case.

CSXT believes that its fuel surcharge practices were arrived at and applied lawfully and that the case is without merit. Accordingly, the Company intends to defend itself vigorously. However, penalties for violating antitrust laws can be severe, and an unexpected adverse decision on the merits could have a material adverse effect on the Company's financial condition, results of operations or liquidity in that particular period or for the full year.


    

14

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 6.    Employee Benefit Plans

The Company sponsors defined benefit pension plans principally for salaried, management personnel.  For employees hired on or before December 31, 2002, the plans provide eligible employees with retirement benefits based predominantly on years of service and compensation rates near retirement.  For employees hired in 2003 or thereafter, benefits are determined based on a cash balance formula, which provides benefits by utilizing interest and pay credits based upon age, service and compensation. 

In addition to these plans, the Company sponsors a self-insured, post-retirement medical plan and a life insurance plan that provide benefits to full-time, salaried, management employees, hired prior to January 1, 2003, upon their retirement if certain eligibility requirements are met.  Medicare-eligible retirees are covered by a health reimbursement arrangement, which is an employer-funded account that can be used for reimbursement of eligible medical expenses. Non-Medicare eligible retirees are covered by a self-insured program.  The life insurance plan is non-contributory.

The Company engages independent actuaries to compute the amounts of liabilities and expenses relating to these plans subject to the assumptions that the Company selects.  These amounts are reviewed by management.  The following table describes the components of expense / (income) related to net benefit expense:
 
Pension Benefits
(Dollars in millions)
Third Quarters
 
Nine Months
 
2013
2012
 
2013
2012
Service Cost
$
12

$
11

 
$
37

$
33

Interest Cost
27

31

 
81

92

Expected Return on Plan Assets
(41
)
(43
)
 
(122
)
(124
)
Amortization of Net Loss
25

21

 
75

62

Total Expense
$
23

$
20

 
$
71

$
63

 
 
 
 
 
 
 
 
 
 
 
 
 
Other Post-retirement Benefits
(Dollars in millions)
Third Quarters
 
Nine Months
 
2013
2012
 
2013
2012
Service Cost
$
1

$
1

 
$
3

$
3

Interest Cost
3

4

 
9

12

Amortization of Net Loss
3

2

 
10

7

Amortization of Prior Service Costs


 
(1
)
(1
)
Total Expense
$
7

$
7

 
$
21

$
21


Qualified pension plan obligations are funded in accordance with prescribed regulatory requirements and with an objective of meeting minimum funding requirements necessary to avoid restrictions on flexibility of plan operation and benefit payments.  At this time, the Company anticipates that no contributions to its qualified pension plans will be required in 2013.








15

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 7.    Debt and Credit Agreements

Total activity related to long-term debt as of the end of third quarter 2013 was as follows:
(Dollars in millions)
Current Portion
Long-term Portion
Total
Long-term debt as of December 2012
$
780

$
9,052

$
9,832

2013 activity:
 
 
 
Long-term debt repaid
(779
)

(779
)
Reclassifications
263

(263
)

Discount and premium activity

(2
)
(2
)
Long-term debt as of third quarter 2013
$
264

$
8,787

$
9,051


For fair value information related to the Company's long-term debt, see Note 9, Fair Value Measurements.

Credit Facility
    
CSX has a $1 billion unsecured, revolving credit facility backed by a diverse syndicate of banks. This facility expires in September 2016, and as of the date of this filing, the Company has no outstanding balances under this facility. The facility allows borrowings at floating (LIBOR-based) interest rates, plus a spread, depending upon CSX's senior unsecured debt ratings. LIBOR is the London Interbank Offered Rate which is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds. As of third quarter 2013, CSX was in compliance with all covenant requirements under this facility.

Receivables Securitization Facility

The Company's $250 million receivables securitization facility has a 364-day term and expires in June 2014. The Company's intention is to continue to renew this facility prior to its expiration. The purpose of this facility is to provide an alternative to commercial paper and a low cost source of short-term liquidity. As of the date of this filing, the Company has no outstanding balances under this facility.

NOTE 8.    Income Taxes

During third quarter 2013, the Company recorded an income tax benefit of $11 million, or $0.01 per share, primarily as a result of changes in state legislation. During the prior year's third quarter, the Company recorded an income tax benefit of $8 million, or $0.01 per share, primarily due to a property disposition that occurred in the period.

There have been no material changes to the balance of unrecognized tax benefits during third quarters 2013 and 2012.











16

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 9.    Fair Value Measurements

The Financial Instruments Topic in the ASC requires disclosures about fair value of financial instruments in annual reports as well as in quarterly reports. For CSX, this statement applies to certain investments and long-term debt. Disclosure of the fair value of pension plan assets is only required annually. Also, this rule clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements.

Various inputs are considered when determining the value of the Company's investments, pension plan assets and long-term debt. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. These inputs are summarized in the three broad levels listed below.

Level 1 - observable market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets

Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.)

Level 3 - significant unobservable inputs (including the Company's own assumptions in determining the fair value of investments)

The valuation methods described below may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Investments
 
The Company's investment assets, valued with assistance from a third-party trustee, consist of certificates of deposits, commercial paper, corporate bonds, government securities and auction rate securities and are carried at fair value on the consolidated balance sheet per the Fair Value Measurements and Disclosures Topic in the ASC. There are several valuation methodologies used for those assets as described below.

Certificates of Deposit and Commercial Paper (Level 2): Valued by discounting the related cash flows based on current yields of similar instruments with comparable durations.
Corporate Bonds and Government Securities (Level 2): Valued using price evaluations reflecting the bid and/or ask sides of the market for a similar investment as of the last day of the period.
Auction Rate Securities (Level 3): Valued using a discounted cash flow model, because there is currently no active market for trading.
    

17

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 NOTE 9.    Fair Value Measurements, continued

The Company's investment assets are carried at fair value on the consolidated balance sheets as summarized in the table below. Additionally, the amortized cost basis of these investments was $315 million and $742 million as of September 27, 2013 and December 28, 2012, respectively.
 
September 27,
2013
 
December 28,
2012
(Dollars in Millions)
Level 1
Level 2
Level 3
Total
 
Level 1
Level 2
Level 3
Total
Certificates of Deposit and Commercial Paper
$

$
119

$

$
119

 
$

$
555

$

$
555

Corporate Bonds

132


132

 

122


122

Government Securities

50


50

 

51


51

Auction Rate Securities


15

15

 


15

15

Total investments at fair value
$

$
301

$
15

$
316

 
$

$
728

$
15

$
743


Certain prior year amounts have been reclassified to conform to the current year presentation.

These investments have the following maturities:
(Dollars in millions)
September 27,
2013
 
December 28,
2012
Less than 1 year
$
128

 
$
587

1 - 2 years
30

 
61

2 - 5 years
140

 
76

Greater than 5 years
18

 
19

Total
$
316

 
$
743


Long-term Debt
Long-term debt is reported at carrying amount on the consolidated balance sheets and is the Company's only financial instrument with fair values significantly different from their carrying amounts. The majority of the Company's long-term debt is valued with assistance from an independent third party who utilizes closing transactions, market quotes or market values of comparable debt. For those instruments not valued by the third party, the fair value has been estimated by applying market rates of similar instruments to the scheduled contractual debt payments and maturities. These market rates are provided by the same third party. All of the inputs used to determine the fair value of the Company's long-term debt are Level 2 inputs.

The fair value of outstanding debt fluctuates with changes in a number of factors. Such factors include, but are not limited to, interest rates, market conditions, values of similar financial instruments, size of the transaction, cash flow projections and comparable trades. Fair value will exceed carrying value when the current market interest rate is lower than the interest rate at which the debt was originally issued. The fair value of a company's debt is a measure of its current value under present market conditions. It does not impact the financial statements under current accounting rules.

    

18

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 NOTE 9.    Fair Value Measurements, continued

The fair value and carrying value of the Company's long-term debt is as follows:

(Dollars in millions)
September 27,
2013
 
December 28, 2012
Long-term Debt (Including Current Maturities):
 
 
 
Fair Value
$
9,884

 
$
11,562

Carrying Value
$
9,051

 
$
9,832


NOTE 10.     Other Comprehensive Income

CSX reports comprehensive earnings or loss in accordance with the Comprehensive Income Topic in the ASC in the Consolidated Comprehensive Income Statement. Total comprehensive earnings are defined as all changes in shareholders' equity during a period, other than those resulting from investments by and distributions to shareholders (e.g. issuance of equity securities and dividends). Generally, for CSX, total comprehensive earnings equals net earnings plus or minus adjustments for pension and other post-retirement liabilities. Total comprehensive earnings represent the activity for a period net of tax and were $479 million and $471 million for third quarters 2013 and 2012, respectively, and $1,507 million and $1,458 million for nine months 2013 and 2012, respectively.

While total comprehensive earnings is the activity in a period and is largely driven by net earnings in that period, accumulated other comprehensive income or loss (“AOCI”) represents the cumulative balance of other comprehensive income, net of tax, as of the balance sheet date. For CSX, AOCI is primarily the cumulative balance related to pension and other post-retirement benefit adjustments and CSX's share of AOCI of equity method investees. Changes in the AOCI balance by component are shown in the table below.

 
Pension and Other Post-Employment Benefits
Other (b)
Accumulated Other Comprehensive Income (Loss)
(Dollars in millions)
 
 
 
Balance December 28, 2012, Net of Tax
$
(851
)
$
(85
)
$
(936
)
Other Comprehensive Income (Loss)
 
 
 
Amounts Reclassified to Net Earnings (a)
85

(2
)
83

Tax Expense
(34
)
1

(33
)
Total Other Comprehensive Income (Loss)
51

(1
)
50

Balance September 27, 2013, Net of Tax
$
(800
)
$
(86
)
$
(886
)

(a) Amounts reclassified to net earnings primarily relate to the amortization of actuarial losses and are included in labor and fringe on the consolidated income statements. See Note 6. Employee Benefit Plans for further information.

(b) Other primarily represents CSX's share of AOCI of equity method investees. Amounts reclassified to net earnings are included in other income - net on the consolidated income statements.









19

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 11.    Summarized Consolidating Financial Data

In 2007, CSXT sold secured equipment notes maturing in 2023, and in 2008, CSXT sold additional secured equipment notes maturing in 2014 in registered public offerings. CSX has fully and unconditionally guaranteed the notes. In connection with the notes, the Company is providing the following condensed consolidating financial information in accordance with SEC disclosure requirements. Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements, except for the use of the equity method of accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation and the allocation of certain expenses of CSX incurred for the benefit of its subsidiaries.
Condensed consolidating financial information for the obligor, CSXT, and parent guarantor, CSX, is as follows:


20

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 11.    Summarized Consolidating Financial Data, continued

 Consolidating Income Statements
 (Dollars in millions)
Third Quarter 2013
 CSX Corporation
 CSX Transportation
 Eliminations and Other
 Consolidated
 Revenue
$

$
2,979

$
20

$
2,999

 Expense
(98
)
2,247

(4
)
2,145

 Operating Income
98

732

24

854

 
 
 
 
 
 Equity in Earnings of Subsidiaries
491


(491
)

 Interest (Expense) / Benefit
(125
)
(15
)
4

(136
)
 Other Income / (Expense) - Net
(2
)
2

5

5

 
 
 
 
 
 Earnings Before Income Taxes
462

719

(458
)
723

 Income Tax Benefit / (Expense)
1

(260
)
(1
)
(260
)
 Net Earnings
$
463

$
459

$
(459
)
$
463

 
 
 
 
 
Total Comprehensive Earnings
$
479

$
461

$
(461
)
$
479

 
 
 
 
 
Third Quarter 2012
 CSX Corporation
 CSX Transportation
 Eliminations and Other
 Consolidated
 Revenue
$

$
2,878

$
16

$
2,894

 Expense
(90
)
2,166

(36
)
2,040

 Operating Income
90

712

52

854

 
 
 
 
 
 Equity in Earnings of Subsidiaries
478


(478
)

 Interest (Expense) / Benefit
(126
)
(17
)
5

(138
)
 Other Income / (Expense) - Net
(1
)
2

4

5

 
 
 
 
 
 Earnings Before Income Taxes
441

697

(417
)
721

 Income Tax (Expense) / Benefit
14

(262
)
(18
)
(266
)
 Net Earnings
$
455

$
435

$
(435
)
$
455

 
 
 
 
 
Total Comprehensive Earnings
$
471

$
437

$
(437
)
$
471



21

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 11.    Summarized Consolidating Financial Data, continued

 Consolidating Income Statements
 (Dollars in millions)
Nine Months Ended September 27, 2013
 CSX Corporation
 CSX Transportation
 Eliminations and Other
 Consolidated
 Revenue
$

$
8,970

$
56

$
9,026

 Expense
(283
)
6,677

(60
)
6,334

 Operating Income
283

2,293

116

2,692

 
 
 
 
 
 Equity in Earnings of Subsidiaries
1,527

(1
)
(1,526
)

 Interest (Expense) / Benefit
(387
)
(47
)
11

(423
)
 Other Income / (Expense) - Net
(5
)
1

15

11

 
 
 
 
 
 Earnings Before Income Taxes
1,418

2,246

(1,384
)
2,280

 Income Tax (Expense) / Benefit
39

(825
)
(37
)
(823
)
 Net Earnings
$
1,457

$
1,421

$
(1,421
)
$
1,457

 
 
 
 
 
Total Comprehensive Earnings
$
1,507

$
1,425

$
(1,425
)
$
1,507

 
 
 
 
 
Nine Months Ended September 28, 2012
 CSX Corporation
 CSX Transportation
 Eliminations and Other
 Consolidated
 Revenue
$

$
8,823

$
49

$
8,872

 Expense
(266
)
6,587

(102
)
6,219

 Operating Income
266

2,236

151

2,653

 
 
 
 
 
 Equity in Earnings of Subsidiaries
1,512

(1
)
(1,511
)

 Interest (Expense) / Benefit
(381
)
(53
)
13

(421
)
 Other Income / (Expense) - Net
(3
)
6

11

14

 
 
 
 
 
 Earnings Before Income Taxes
1,394

2,188

(1,336
)
2,246

 Income Tax (Expense) / Benefit
22

(795
)
(57
)
(830
)
 Net Earnings
$
1,416

$
1,393

$
(1,393
)
$
1,416

 
 
 
 
 
Total Comprehensive Earnings
$
1,458

$
1,393

$
(1,393
)
$
1,458

 
 
 
 
 











22

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 11.    Summarized Consolidating Financial Data, continued

 Consolidating Balance Sheet
 (Dollars in millions)
As of September 2013
 CSX Corporation
 CSX Transportation
 Eliminations and Other
 Consolidated
 
 
 
 
 
ASSETS
 Current Assets
 
 
 
 
 Cash and Cash Equivalents
$
432

$
101

$
58

$
591

 Short-term Investments
120


8

128

 Accounts Receivable - Net
2

363

616

981

 Receivable from Affiliates
1,179

2,389

(3,568
)

 Materials and Supplies

267


267

 Deferred Income Taxes
(3
)
152

(1
)
148

 Other Current Assets
11

61

13

85

   Total Current Assets
1,741

3,333

(2,874
)
2,200

 
 
 
 
 
 Properties
3

34,535

2,099

36,637

 Accumulated Depreciation
(3
)
(8,606
)
(1,082
)
(9,691
)
 Properties - Net

25,929

1,017

26,946

 
 
 
 
 
 Investments in Conrail


715

715

 Affiliates and Other Companies
(39
)
607

(42
)
526

 Investments in Consolidated Subsidiaries
19,766


(19,766
)

 Other Long-term Assets
180

384

(8
)
556

   Total Assets
$
21,648

$
30,253

$
(20,958
)
$
30,943

 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 Current Liabilities
 
 
 
 
 Accounts Payable
$
143

$
898

$
37

$
1,078

 Labor and Fringe Benefits Payable
36

429

46

511

 Payable to Affiliates
3,309

481

(3,790
)

 Casualty, Environmental and Other Reserves

134

15

149

 Current Maturities of Long-term Debt
200

64


264

 Income and Other Taxes Payable
(379
)
490

27

138

 Other Current Liabilities

109

2

111

   Total Current Liabilities
3,309

2,605

(3,663
)
2,251

 
 
 
 
 
 Casualty, Environmental and Other Reserves

217

67

284

 Long-term Debt
7,808

979


8,787

 Deferred Income Taxes
(204
)
8,448

143

8,387

 Other Long-term Liabilities
887

603

(124
)
1,366

   Total Liabilities
$
11,800

$
12,852

$
(3,577
)
$
21,075

 
 
 
 
 
 Shareholders' Equity
 
 
 
 
 Common Stock, $1 Par Value
$
1,014

$
181

$
(181
)
$
1,014

 Other Capital
50

5,077

(5,077
)
50

 Retained Earnings
9,670

12,217

(12,217
)
9,670

 Accumulated Other Comprehensive Loss
(886
)
(98
)
98

(886
)
 Noncontrolling Interest

24

(4
)
20

 Total Shareholders' Equity
$
9,848

$
17,401

$
(17,381
)
$
9,868

 Total Liabilities and Shareholders' Equity
$
21,648

$
30,253

$
(20,958
)
$
30,943


23

CSX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 11.    Summarized Consolidating Financial Data, continued
Consolidating Balance Sheet
(Dollars in millions)
As of December 2012
 CSX Corporation
 CSX Transportation
Eliminations and Other
 Consolidated
ASSETS
 Current Assets
 
 
 
 
 Cash and Cash Equivalents
$
481

$
235

$
68

$
784

 Short-term Investments
555


32

587

 Accounts Receivable - Net
3

427

532

962

 Receivable from Affiliates
993

1,798

(2,791
)

 Materials and Supplies

274


274

 Deferred Income Taxes
52

62

5

119

 Other Current Assets
11

64


75

   Total Current Assets
2,095

2,860

(2,154
)
2,801

 
 
 
 
 
 Properties
8

33,333

1,938

35,279

 Accumulated Depreciation
(8
)
(8,225
)
(996
)
(9,229
)
 Properties - Net

25,108

942

26,050

 
 
 
 
 
 Investments in Conrail


695

695

 Affiliates and Other Companies
(39
)
593

(43
)
511

 Investment in Consolidated Subsidiaries
18,783


(18,783
)

 Other Long-term Assets
186

368

(40
)
514

   Total Assets
$
21,025

$
28,929

$
(19,383
)
$
30,571

 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 Current Liabilities
 
 
 
 
 Accounts Payable
$
133

$
846

$
35

$
1,014

 Labor and Fringe Benefits Payable
35

391

42

468

 Payable to Affiliates
2,679

411

(3,090
)

 Casualty, Environmental and Other Reserves

124

16

140

 Current Maturities of Long-term Debt
700

80


780

 Income and Other Taxes Payable
(262
)
334

13

85

 Other Current Liabilities
(1
)
139

2

140

   Total Current Liabilities
3,284

2,325

(2,982
)
2,627

 
 
 
 
 
 Casualty, Environmental and Other Reserves

256

81

337

 Long-term Debt
8,005

1,047


9,052

 Deferred Income Taxes
(153
)
8,131

118

8,096

 Other Long-term Liabilities
901

656

(100
)
1,457

   Total Liabilities
$
12,037

$
12,415

$
(2,883
)
$
21,569

 
 
 
 
 
 Shareholders' Equity
 
 
 
 
 Common Stock, $1 Par Value
$
1,020

$
181

$
(181
)
$
1,020

 Other Capital
28

5,672

(5,672
)
28

 Retained Earnings
8,876

10,740

(10,740
)
8,876

 Accumulated Other Comprehensive Loss
(936
)
(102
)
102

(936
)
 Noncontrolling Minority Interest

23

(9
)
14

   Total Shareholders' Equity
$
8,988

$
16,514

$
(16,500
)
$
9,002

   Total Liabilities and Shareholders' Equity
$
21,025