1.
|
We
note that the decrease in material, supplies and other is attributable to
several factors, including a decline in volume, a favorable adjustment to
casualty claims, charges related to a storm in 2008, and a decrease in bad
debt expense. Where changes in revenue and expense amounts are related to
several factors, each significant factor should be separately quantified
and discussed. Please revise future filings as
necessary.
|
2.
|
We
note from the roll forward analysis of the company’s casualty reserves
included in Note 5 that the company recognized changes in estimates with
respect to such reserves during both 2007 and 2009. In future filings,
please revise Note 5 to explain the nature and timing of the changes in
facts or circumstances that resulted in these changes in estimates during
all periods presented in the company’s financial statements. Also, in
future filings, please revise the notes to the company’s financial
statements to disclose the per share impact of the changes in estimates as
required by paragraph 50-4 of ASC
250-10-50.
|
3.
|
We
note from the discussion on page 94 that the company uses the group life
method to depreciate its rail assets including main-line track,
locomotives, and freight cars and that the assets depreciated under this
method comprise over 90% of the company’s total fixed assets of $31
billion on a gross basis at December 31, 2009. With respect to the
company’s use of the group life method of depreciation, please tell us and
revise MD&A and the notes to the company’s financial statements in
future filings to address the
following:
|
·
|
The
depreciation method by major class of depreciable
assets;
|
·
|
To
the extent depreciation is computed on a basis other than time, disclose
the major class of depreciable assets, the method employed (e.g., rail is
depreciated using the units of production method, etc.), and why a basis
other than time is appropriate (e.g., lives may be more closely correlated
with usage);
|
·
|
If
the units of production method is employed, disclose the basis upon which
usage is measured (e.g., millions of gross tons per mile of track, etc.)
and the basis upon which depreciation rates are computed (e.g., number of
gross ton-miles carried over the rail divided by the estimated service
lives of the rail as measured in millions of gross tons per
mile).
|
|
CSX
response
|
4.
|
We
note from your disclosure on page 98 that you capitalize certain repair
and maintenance activities such as the cost of rail grinding and ballast
maintenance. These activities typically recur at intervals shorter than
the life of the underlying assets, allow the underlying assets to reach
their currently estimated useful lives (rather than extend lives beyond
current estimates), and restore the condition of the underlying assets
(rather than enhance them beyond their condition when originally
acquired).
|
|
CSX
response
|
5.
|
We
refer to your discussion of asset retirements and disposals beginning on
page 95. Please revise future filings to disclose the following with
respect to these activities:
|
·
|
The
method of estimating the historical cost of retired or replaced property
that is accounted for under the group-life method and why estimates are
used in place of actual historical cost (e.g., impracticality of tracking
individual assets);
|
·
|
The
types of assumptions involved in your historical cost estimates. For
example, if estimates of historical cost are based on a deflation of
current replacement costs, disclose that the source of inflation factors,
why such inflation factors are appropriate, and that the assumptions
include the age of retired
assets;
|
·
|
Quantification
of the amounts of gains or losses recognized in earnings and charged to
accumulated depreciation due to abnormal and normal replacement or
retirements, respectively, during the various periods presented in your
financial statements.
|
|
CSX
response
|
6.
|
Please
revise future filings to quantify the amounts of maintenance costs
expensed as incurred for each period
presented.
|
|
CSX
response
|
7.
|
We
note from the disclosure provided on page 98 that a portion of the costs
capitalized for track projects relate to self constructed track work
performed by the company. In this regard, please revise future filings to
disclose the following:
|
·
|
How
such costs are distinguished from the costs of removal and deconstruction
of replaced assets;
|
·
|
The
basis for attributing these costs to capitalized depreciable
property;
|
·
|
How
such costs are measured.
|
|
CSX
response
|
8.
|
We
note from the disclosures provided in Note 14 that the company sold the
stock of the subsidiary that owned the stock of the Greenbriar Hotel
Corporation and as a result has reflected the results of operations of
this entity and related impairment charges recognized in 2008 as
discontinued operations. In future filings, please ensure that the notes
to the company’s financial statements include all of the disclosures
outlined in paragraph 50-1 of ASC 205-20-50 with respect to any operations
that are sold or classified as held for sale during the periods presented
in the company’s financial
statements.
|
|
CSX
response
|
·
|
the
Company is responsible for the adequacy and accuracy of the disclosure in
its filings;
|
·
|
Staff
comments or changes to disclosure in response to Staff comments do not
foreclose the Commission from taking any action with respect to the
filing; and
|
·
|
the
Company may not assert Staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
|
·
|
statistical
analysis of historical life and salvage data for each group of
property;
|
·
|
statistical
analysis of historical retirements for each group of
property;
|
·
|
evaluation
of current operations;
|
·
|
evaluation
of technological advances and maintenance
schedules;
|
·
|
previous
assessment of the condition of the assets and outlook for their continued
use;
|
·
|
expected
net salvage to be received upon retirement;
and
|
·
|
comparison
of assets to the same asset groups with other
companies.
|
Annual
|
Estimated
|
||||||
(Dollars
in Millions)
|
Accumulated
|
Net
Book
|
Depreciation
|
Depreciation
|
Useful
|
||
As
of December 2009
|
Cost
|
Depreciation
|
Value
|
Rate
(a)
|
Method
|
Life
|
|
Road
|
|||||||
Rail
and Other Track Material
|
$5,580
|
$(895)
|
$4,685
|
2.7%
|
Group
Life
|
||
Ties
|
3,678
|
(748)
|
2,930
|
3.7%
|
Group
Life
|
||
Ballast
|
2,279
|
(585)
|
1,694
|
2.5%
|
Group
Life
|
||
Other
|
8,650
|
(1,829)
|
6,821
|
3.0%
|
Group
Life
|
||
Total
Road
|
$20,187
|
$(4,057)
|
$16,130
|
6 -
80 years
|
|||
Equipment
|
|||||||
Locomotive
|
$4,358
|
$(1,716)
|
$2,642
|
3.5%
|
Group
Life
|
||
Freight
Cars
|
2,672
|
(1,142)
|
1,530
|
3.5%
|
Group
Life
|
||
Work
Equipment and Other
|
436
|
(180)
|
256
|
7.4%
|
Group
Life
|
||
Total
Equipment
|
$7,466
|
$(3,038)
|
$4,428
|
6 -
35 years
|
|||
Land
|
$1,899
|
N/A
|
$1,899
|
N/A
|
N/A
|
N/A
|
|
Intermodal
|
716
|
(397)
|
319
|
N/A
|
Straight
Line
|
5 -
30 years
|
|
Computer
Hardware/Software and Other
|
485
|
(376)
|
109
|
N/A
|
Straight
Line
|
4 -
30 years
|
|
Construction
In Progress
|
328
|
-
|
328
|
N/A
|
N/A
|
N/A
|
|
Total
Properties
|
$31,081
|
$(7,868)
|
$23,213
|
Annual
|
Estimated
|
||||||
(Dollars
in Millions)
|
Accumulated
|
Net
Book
|
Depreciation
|
Depreciation
|
Useful
|
||
As
of December 2008
|
Cost
|
Depreciation
|
Value
|
Rate
(a)
|
Method
|
Life
|
|
Road
|
|||||||
Rail
and Other Track Material
|
$5,324
|
$(822)
|
$4,502
|
2.9%
|
Group
Life
|
||
Ties
|
3,503
|
(685)
|
2,818
|
4.2%
|
Group
Life
|
||
Ballast
|
2,181
|
(601)
|
1,580
|
2.7%
|
Group
Life
|
||
Other
|
8,449
|
(1,715)
|
6,734
|
3.0%
|
Group
Life
|
||
Total
Road
|
$19,457
|
$(3,823)
|
$15,634
|
6 -
80 years
|
|||
Equipment
|
|||||||
Locomotive
|
$4,335
|
$(1,610)
|
$2,725
|
3.6%
|
Group
Life
|
||
Freight
Cars
|
2,777
|
(1,212)
|
1,565
|
3.8%
|
Group
Life
|
||
Work
Equipment and Other
|
356
|
(170)
|
186
|
7.9%
|
Group
Life
|
||
Total
Equipment
|
$7,468
|
$(2,992)
|
$4,476
|
6 -
35 years
|
|||
Land
|
$1,907
|
N/A
|
$1,907
|
N/A
|
N/A
|
N/A
|
|
Intermodal
|
672
|
(372)
|
300
|
N/A
|
Straight
Line
|
5 -
30 years
|
|
Computer
Hardware/Software and Other
|
443
|
(333)
|
110
|
N/A
|
Straight
Line
|
4 -
30 years
|
|
Construction
In Progress
|
261
|
-
|
261
|
N/A
|
N/A
|
N/A
|
|
Total
Properties
|
$30,208
|
$(7,520)
|
$22,688
|
·
|
labor
costs, because many of the assets are
self-constructed;
|
·
|
costs
to purchase or construct new track or to prepare ground for the laying of
track;
|
·
|
welding
(rail, field and plant) which are processes used to connect segments of
rail;
|
·
|
new
ballast, which is gravel and crushed stone that holds track in
line;
|
·
|
fuels
and lubricants associated with tie, rail and surfacing work which is the
process of raising track to a designated elevation over an extended
distance;
|
·
|
cross,
switch and bridge ties which are the braces that support the rails on a
track;
|
·
|
gauging
which is the process of standardizing the distance between
rails;
|
·
|
handling
costs associated with installing ties or ballast;
and
|
·
|
other
track materials.
|