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Commitments and Contingencies
12 Months Ended
Dec. 28, 2012
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies

Lease Commitments

The Company has various lease agreements with other parties with terms up to 30 years.  Non-cancelable, long-term leases may include provisions for maintenance, options to purchase, and options to extend the terms.  The Company uses the straight-line method to recognize rent expense associated with operating leases that include escalations over their terms.
 
 
Fiscal Years
(Dollars in Millions)
 
2012
 
2011
 
2010
Rent Expense on Operating Leases
 
$
73

 
$
68

 
$
67



At December 2012, minimum rentals on land, buildings, track, equipment and commitments for vessels (utilized in a shipping business formerly owned by CSX) under operating leases are disclosed in the table below.  Also, payments to Conrail, Inc. ("Conrail") for leases on equipment and shared rail infrastructure are included in these amounts. (See Note 12, Related Party Transactions).

(Dollars in Millions)
 
 
Operating
 
Sublease
 
Net Lease
Years
 
Leases
 
Income
 
Commitments
2013
 
$
103

 
$
(32
)
 
$
71

2014
 
115

 
(19
)
 
96

2015
 
60

 

 
60

2016
 
57

 

 
57

2017
 
52

 

 
52

Thereafter
 
302

 

 
302

Total
 
$
689

 
$
(51
)
 
$
638



Operating leases and sublease income include approximately $72 million and $47 million, respectively, relating to ongoing operating lease commitments for vessels and other, which have been subleased to Horizon Lines, Inc. (“Horizon”), a former subsidiary previously named CSX Lines.  On January 31, 2013, a lease buy out and closure arrangement was reached with Horizon Lines, Inc. which terminated CSX's commitments to these leases and corresponding sublease income.
 
NOTE 7.  Commitments and Contingencies, continued

Purchase Commitments
 
CSXT has a commitment under a long-term maintenance program that currently covers 44% of CSXT’s fleet of locomotives.  The agreement is based on the maintenance cycle for each locomotive.  Under CSXT’s current obligations, the agreement will expire no earlier than 2031.  The costs expected to be incurred throughout the duration of the agreement fluctuate as locomotives are placed into or removed from service, or as required maintenance schedules are revised.  The table below includes both active and inactive locomotives covered under this agreement. 

The following table summarizes the number of locomotives covered and CSXT’s payments under the long-term maintenance program.
 
 
Fiscal Years
(Dollars in Millions)
 
2012

 
2011

 
2010

Amounts Paid
 
$
287

 
$
281

 
$
252

Number of Locomotives
 
1,899

 
1,928

 
1,859



     Annual payments related to the locomotive purchase obligations, including amounts that would be payable under the long-term maintenance program, are estimated in the table below. The amount of the ultimate purchase commitment depends upon the model of locomotive acquired and the timing of delivery. 

Additionally, the Company has various other commitments to purchase technology, communications, railcar maintenance and other services from various suppliers.  Total annual payments under all of these purchase commitments are also estimated in the table below.

(Dollars in Millions)
Locomotive & Maintenance Payments
 
Other
Commitments
 
Total
2013
$
472

 
$
87

 
$
559

2014
347

 
59

 
406

2015
263

 
43

 
306

2016
257

 
14

 
271

2017
247

 
5

 
252

Thereafter
1,833

 
54

 
1,887

Total
$
3,419

 
$
262

 
$
3,681




NOTE 7.  Commitments and Contingencies, continued

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’s 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. 

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, 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 predicted with certainty, 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 approximately $20 million in aggregate at December 28, 2012. 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.

NOTE 7.  Commitments and Contingencies, continued

On June 21, 2012, the 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. On August 28, 2012, the Court of Appeals referred the petition to a merits panel, and directed that the parties to the case submit briefs addressing both the petition and the merits of the appeal. The District Court stayed dissemination of notice to members of the class certified pending the outcome of the appeal.

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.