CSX » Topics » Sources and Uses of Cash

This excerpt taken from the CSX 10-K filed Feb 15, 2007.

Sources and Uses of Cash

CSX has multiple sources of and required uses of its cash. CSX generates substantial cash balances from its operations. Its financing sources of cash include strong access to the capital markets as well as a significant long-term credit facility. Uses of cash include significant, annual reinvestment in infrastructure and equipment, as well as scheduled payments of debt, and leases with manageable near-term maturities. The company’s cash requirements also include any declared dividends to shareholders.

Cash provided by operations in 2006 was $2.1 billion, which was $1.0 billion higher than a year ago. This change was driven mostly by higher earnings from operations. Additionally, the Company made lower cash income tax payments in 2006 primarily due to large cash income tax payments made in 2005 related to the sale of the International Terminals business.

 

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Table of Contents

CSX CORPORATION

PART II

 

Credit facilities are an untapped source of funding available to CSX. CSX has a $1.25 billion five-year unsecured revolving credit facility that expires in May, 2011. See Note 9 Debt and Credit Agreements for more information.

CSX also has a $900 million shelf registration. It may be used, subject to market conditions and CSX board authorization, to issue debt or equity securities at CSX’s discretion. CSX presently intends to use the proceeds to finance cash requirements, including refinancing existing debt as it matures. While CSX seeks to give itself flexibility with respect to meeting such needs, there can be no assurance that market conditions would permit CSX to sell such securities on acceptable terms at any given time, or at all.

During 2006, the primary use of cash was to fund property additions and capital expansion projects. Net cash used by investing activities was $1.6 billion in 2006 compared to $36 million last year. This change was attributable primarily to the utilization of $1.0 billion of cash proceeds received from the disposition of CSX’s International Terminals business in 2005. Additionally, the Company spent approximately $500 million more for capital additions in 2006. This included additions for property damaged by Hurricane Katrina.

The Company completed a debt repurchase of $1.0 billion last year which drove the change in financing activities between 2006 and 2005. Financing activities used cash of $296 million during 2006 compared to cash used of $1.3 billion during 2005. Additionally, in 2006, there was cash used for the share repurchase program partially offset by an increase in cash from proceeds of stock option exercises. The Company anticipates moderately increased use of debt in funding its future cash requirements.

Dividend payments are another use of cash. The Company paid dividends of $145 million in 2006, $52 million more than last year. The increase in 2006 was primarily due to the Company increasing post-stock-split dividends by 54% on a per share basis to $0.10 per share.

On February 14, 2007, CSX announced a $2.0 billion share repurchase program and an increased quarterly dividend on the Company’s common stock of 20% to $0.12 per share. The Company intends to complete the repurchase program by the end of 2008. The timing and amount of repurchase transactions will be determined by the Company’s management based on their evaluation of market conditions, share price and other factors. The program may be suspended or discontinued at any time. CSX will use cash on hand and cash from operations to fund the share repurchase and the dividend increase.

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