(X) | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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.) |
Large Accelerated Filer (X) | Accelerated Filer ( ) | |
Non-accelerated Filer ( ) | Smaller Reporting Company ( ) |
CSX Q1 2017 Form 10-Q p.1 |
Page | |||
PART I. | FINANCIAL INFORMATION | ||
Item 1. | |||
Quarters Ended March 31, 2017 and March 25, 2016 | |||
Quarters Ended March 31, 2017 and March 25, 2016 | |||
At March 31, 2017 (Unaudited) and December 30, 2016 | |||
Three Months Ended March 31, 2017 and March 25, 2016 | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
PART II. | OTHER INFORMATION | ||
Item 1. | |||
Item 1A. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
Item 5. | |||
Item 6. | |||
CSX Q1 2017 Form 10-Q p.2 |
First Quarters | ||||||
2017 | 2016 | |||||
Revenue | $ | 2,869 | $ | 2,618 | ||
Expense | ||||||
Labor and Fringe | 789 | 796 | ||||
Materials, Supplies and Other | 567 | 550 | ||||
Fuel | 218 | 150 | ||||
Depreciation | 320 | 313 | ||||
Equipment and Other Rents | 90 | 105 | ||||
Restructuring Charge (Note 1) | 173 | — | ||||
Total Expense | 2,157 | 1,914 | ||||
Operating Income | 712 | 704 | ||||
Interest Expense | (137 | ) | (143 | ) | ||
Other Income - Net | 7 | 7 | ||||
Earnings Before Income Taxes | 582 | 568 | ||||
Income Tax Expense | (220 | ) | (212 | ) | ||
Net Earnings | $ | 362 | $ | 356 | ||
Per Common Share (Note 2) | ||||||
Net Earnings Per Share, Basic | $ | 0.39 | $ | 0.37 | ||
Net Earnings Per Share, Assuming Dilution | $ | 0.39 | $ | 0.37 | ||
Average Shares Outstanding (In millions) | 927 | 962 | ||||
Average Shares Outstanding, Assuming Dilution (In millions) | 929 | 963 | ||||
Cash Dividends Paid Per Common Share | $ | 0.18 | $ | 0.18 |
First Quarters | ||||||
2017 | 2016 | |||||
Total Comprehensive Earnings (Note 10) | $ | 368 | $ | 363 |
CSX Q1 2017 Form 10-Q p.3 |
(Unaudited) | ||||||
March 31, 2017 | December 30, 2016 | |||||
ASSETS | ||||||
Current Assets: | ||||||
Cash and Cash Equivalents | $ | 930 | $ | 603 | ||
Short-term Investments | 287 | 417 | ||||
Accounts Receivable - Net (Note 1) | 943 | 938 | ||||
Materials and Supplies | 415 | 407 | ||||
Other Current Assets | 85 | 122 | ||||
Total Current Assets | 2,660 | 2,487 | ||||
Properties | 43,399 | 43,227 | ||||
Accumulated Depreciation | (12,140 | ) | (12,077 | ) | ||
Properties - Net | 31,259 | 31,150 | ||||
Investment in Conrail | 847 | 840 | ||||
Affiliates and Other Companies | 622 | 619 | ||||
Other Long-term Assets | 324 | 318 | ||||
Total Assets | $ | 35,712 | $ | 35,414 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
Current Liabilities: | ||||||
Accounts Payable | $ | 898 | $ | 806 | ||
Labor and Fringe Benefits Payable | 445 | 545 | ||||
Casualty, Environmental and Other Reserves (Note 4) | 114 | 115 | ||||
Current Maturities of Long-term Debt (Note 7) | 331 | 331 | ||||
Income and Other Taxes Payable | 302 | 129 | ||||
Other Current Liabilities | 187 | 114 | ||||
Total Current Liabilities | 2,277 | 2,040 | ||||
Casualty, Environmental and Other Reserves (Note 4) | 252 | 259 | ||||
Long-term Debt (Note 7) | 10,963 | 10,962 | ||||
Deferred Income Taxes - Net | 9,648 | 9,596 | ||||
Other Long-term Liabilities | 903 | 863 | ||||
Total Liabilities | 24,043 | 23,720 | ||||
Shareholders' Equity: | ||||||
Common Stock, $1 Par Value | 923 | 928 | ||||
Other Capital | 170 | 138 | ||||
Retained Earnings | 11,197 | 11,253 | ||||
Accumulated Other Comprehensive Loss (Note 10) | (634 | ) | (640 | ) | ||
Noncontrolling Interest | 13 | 15 | ||||
Total Shareholders' Equity | 11,669 | 11,694 | ||||
Total Liabilities and Shareholders' Equity | $ | 35,712 | $ | 35,414 |
CSX Q1 2017 Form 10-Q p.4 |
Three Months | ||||||
2017 | 2016 | |||||
OPERATING ACTIVITIES | ||||||
Net Earnings | $ | 362 | $ | 356 | ||
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities: | ||||||
Depreciation | 320 | 313 | ||||
Restructuring Charge | 161 | — | ||||
Deferred Income Taxes | 59 | 80 | ||||
Other Operating Activities | 2 | (29 | ) | |||
Changes in Operating Assets and Liabilities: | ||||||
Accounts Receivable | (30 | ) | 57 | |||
Other Current Assets | 33 | (30 | ) | |||
Accounts Payable | 91 | 50 | ||||
Income and Other Taxes Payable | 162 | 59 | ||||
Other Current Liabilities | (117 | ) | (102 | ) | ||
Net Cash Provided by Operating Activities | 1,043 | 754 | ||||
INVESTING ACTIVITIES | ||||||
Property Additions | (441 | ) | (425 | ) | ||
Purchase of Short-term Investments | (75 | ) | (235 | ) | ||
Proceeds from Sales of Short-term Investments | 205 | 670 | ||||
Other Investing Activities | 25 | 31 | ||||
Net Cash (Used in) Provided by Investing Activities | (286 | ) | 41 | |||
FINANCING ACTIVITIES | ||||||
Dividends Paid | (166 | ) | (173 | ) | ||
Shares Repurchased | (258 | ) | (249 | ) | ||
Other Financing Activities | (6 | ) | (270 | ) | ||
Net Cash Used in Financing Activities | (430 | ) | (692 | ) | ||
Net Increase in Cash and Cash Equivalents | 327 | 103 | ||||
CASH AND CASH EQUIVALENTS | ||||||
Cash and Cash Equivalents at Beginning of Period | 603 | 628 | ||||
Cash and Cash Equivalents at End of Period | $ | 930 | $ | 731 | ||
CSX Q1 2017 Form 10-Q p.5 |
NOTE 1. | Nature of Operations and Significant Accounting Policies |
• | Consolidated income statements for the three months ended March 31, 2017 and March 25, 2016; |
• | Consolidated comprehensive income statements for the three months ended March 31, 2017 and March 25, 2016; |
• | Consolidated balance sheets at March 31, 2017 and December 30, 2016; and |
• | Consolidated cash flow statements for the three months ended March 31, 2017 and March 25, 2016. |
CSX Q1 2017 Form 10-Q p.6 |
• | The first fiscal quarters of 2017 and 2016 consisted of 13 weeks ending on March 31, 2017 and March 25, 2016, respectively. |
• | Fiscal year 2017 will consist of 52 weeks ending on December 29, 2017. |
• | Fiscal year 2016 consisted of 53 weeks ending on December 30, 2016. |
CSX Q1 2017 Form 10-Q p.7 |
First Quarters | ||||||
(Dollars in millions) | 2017 | 2016 | ||||
Severance and Pension | $ | 131 | $ | — | ||
Other Post-retirement Benefits Curtailment | 13 | — | ||||
Employee Equity Awards Proration and Other | 11 | — | ||||
Subtotal Management Workforce Reduction | $ | 155 | — | |||
Executive Equity Awards Proration | 8 | — | ||||
Advisory Fees Related to Shareholder Matters | 10 | — | ||||
Total Restructuring Charge | $ | 173 | — |
CSX Q1 2017 Form 10-Q p.8 |
First Quarters | ||||||
2017 | 2016 | |||||
Numerator (Dollars in millions): | ||||||
Net Earnings | $ | 362 | $ | 356 | ||
Denominator (Units in millions): | ||||||
Average Common Shares Outstanding | 927 | 962 | ||||
Other Potentially Dilutive Common Shares | 2 | 1 | ||||
Average Common Shares Outstanding, Assuming Dilution | 929 | 963 | ||||
Net Earnings Per Share, Basic | $ | 0.39 | $ | 0.37 | ||
Net Earnings Per Share, Assuming Dilution | $ | 0.39 | $ | 0.37 |
CSX Q1 2017 Form 10-Q p.9 |
First Quarters | ||||||
(Dollars in millions) | 2017 | 2016 | ||||
Share-Based Compensation Expense | ||||||
Performance Units | $ | 20 | $ | 1 | ||
Stock Options | 12 | 2 | ||||
Restricted Stock Units and Awards | 4 | 3 | ||||
Stock Awards for Directors | 2 | 2 | ||||
Total Share-Based Compensation Expense | $ | 38 | $ | 8 | ||
Income Tax Benefit | 13 | 3 |
CSX Q1 2017 Form 10-Q p.10 |
First Quarters | ||||||
2017 | 2016 | |||||
Weighted-average grant date fair value | $ | 12.83 | $ | 4.68 | ||
Stock options valuation assumptions: | ||||||
Annual dividend yield | 1.5 | % | 3.0 | % | ||
Risk-free interest rate | 2.2 | % | 1.4 | % | ||
Annualized volatility | 27.1 | % | 27.3 | % | ||
Expected life (in years) | 6.3 | 6.5 | ||||
Other pricing model inputs: | ||||||
Weighted-average grant-date market price of CSX stock (strike price) | $ | 49.61 | $ | 24.13 |
CSX Q1 2017 Form 10-Q p.11 |
NOTE 4. | Casualty, Environmental and Other Reserves |
March 31, 2017 | December 30, 2016 | ||||||||||||||||||
(Dollars in millions) | Current | Long-term | Total | Current | Long-term | Total | |||||||||||||
Casualty: | |||||||||||||||||||
Personal Injury | $ | 46 | $ | 122 | $ | 168 | $ | 46 | $ | 124 | $ | 170 | |||||||
Occupational(a) | 7 | 51 | 58 | 7 | 52 | 59 | |||||||||||||
Total Casualty | 53 | 173 | 226 | 53 | 176 | 229 | |||||||||||||
Environmental | 42 | 51 | 93 | 42 | 53 | 95 | |||||||||||||
Other | 19 | 28 | 47 | 20 | 30 | 50 | |||||||||||||
Total | $ | 114 | $ | 252 | $ | 366 | $ | 115 | $ | 259 | $ | 374 |
(a) | Occupational reserves include asbestos-related diseases and occupational injuries. |
CSX Q1 2017 Form 10-Q p.12 |
CSX Q1 2017 Form 10-Q p.13 |
• | 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. |
CSX Q1 2017 Form 10-Q p.14 |
CSX Q1 2017 Form 10-Q p.15 |
CSX Q1 2017 Form 10-Q p.16 |
Pension Benefits | ||||||
(Dollars in millions) | First Quarters | |||||
2017 | 2016 | |||||
Service Cost | $ | 11 | $ | 12 | ||
Interest Cost | 23 | 30 | ||||
Expected Return on Plan Assets | (42 | ) | (39 | ) | ||
Amortization of Net Loss | 11 | 12 | ||||
Net Periodic Benefit Cost | 3 | 15 | ||||
Special Termination Benefits - Management Workforce Reduction(a) | 50 | — | ||||
Total Expense | $ | 53 | $ | 15 | ||
Other Post-retirement Benefits | ||||||
(Dollars in millions) | First Quarters | |||||
2017 | 2016 | |||||
Interest Cost | $ | 2 | 3 | |||
Amortization of Net Loss | — | 1 | ||||
Net Periodic Benefit Cost | 2 | 4 | ||||
Special Termination Benefits - Management Workforce Reduction Curtailment(a) | 13 | — | ||||
Total Expense | $ | 15 | $ | 4 |
CSX Q1 2017 Form 10-Q p.17 |
(Dollars in millions) | Current Portion | Long-term Portion | Total | ||||||
Long-term debt as of December 30, 2016 | $ | 331 | $ | 10,962 | $ | 11,293 | |||
2017 activity: | |||||||||
Discount, premium and other activity | — | (1 | ) | (1 | ) | ||||
Debt issue cost activity | — | 2 | 2 | ||||||
Long-term debt as of March 31, 2017 | $ | 331 | $ | 10,963 | $ | 11,294 |
CSX Q1 2017 Form 10-Q p.18 |
• | 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.); and |
• | Level 3 - significant unobservable inputs (including the Company's own assumptions about the assumptions market participants would use in determining the fair value of investments). |
• | Certificates of Deposit and Commercial Paper (Level 2): Valued at amortized cost, which approximates fair value; and |
• | Corporate Bonds and Government Securities (Level 2): Valued using broker quotes that utilize observable market inputs. |
CSX Q1 2017 Form 10-Q p.19 |
(Dollars in Millions) | March 31, 2017 | December 30, 2016 | |||||
Certificates of Deposit and Commercial Paper | $ | 285 | $ | 415 | |||
Corporate Bonds | 64 | 63 | |||||
Government Securities | 22 | 22 | |||||
Total investments at fair value | $ | 371 | $ | 500 |
(Dollars in millions) | March 31, 2017 | December 30, 2016 | |||||
Less than 1 year | $ | 287 | $ | 417 | |||
1 - 2 years | 12 | 12 | |||||
2 - 5 years | 6 | 4 | |||||
Greater than 5 years | 66 | 67 | |||||
Total investments at fair value | $ | 371 | $ | 500 |
(Dollars in millions) | March 31, 2017 | December 30, 2016 | |||||
Long-term Debt (Including Current Maturities): | |||||||
Fair Value | $ | 12,055 | $ | 12,096 | |||
Carrying Value | 11,294 | 11,293 |
CSX Q1 2017 Form 10-Q p.20 |
Pension and Other Post-Employment Benefits | Other | Accumulated Other Comprehensive Income (Loss) | |||||||
(Dollars in millions) | |||||||||
Balance December 30, 2016, Net of Tax | $ | (580 | ) | $ | (60 | ) | $ | (640 | ) |
Other Comprehensive Income (Loss) | |||||||||
Loss Before Reclassifications | — | (1 | ) | (1 | ) | ||||
Amounts Reclassified to Net Earnings | 11 | — | 11 | ||||||
Tax Expense | (4 | ) | — | (4 | ) | ||||
Total Other Comprehensive Income (Loss) | 7 | (1 | ) | 6 | |||||
Balance March 31, 2017, Net of Tax | $ | (573 | ) | $ | (61 | ) | $ | (634 | ) |
CSX Q1 2017 Form 10-Q p.21 |
Consolidating Income Statements | ||||||||||||
(Dollars in millions) | ||||||||||||
First Quarter 2017 | CSX Corporation | CSX Transportation | Eliminations and Other | Consolidated | ||||||||
Revenue | $ | — | $ | 2,851 | $ | 18 | $ | 2,869 | ||||
Expense | (48 | ) | 2,228 | (23 | ) | 2,157 | ||||||
Operating Income | 48 | 623 | 41 | 712 | ||||||||
Equity in Earnings of Subsidiaries | 422 | — | (422 | ) | — | |||||||
Interest (Expense) / Benefit | (142 | ) | (10 | ) | 15 | (137 | ) | |||||
Other Income / (Expense) - Net | 3 | 11 | (7 | ) | 7 | |||||||
Earnings Before Income Taxes | 331 | 624 | (373 | ) | 582 | |||||||
Income Tax Benefit / (Expense) | 31 | (235 | ) | (16 | ) | (220 | ) | |||||
Net Earnings | $ | 362 | $ | 389 | $ | (389 | ) | $ | 362 | |||
Total Comprehensive Earnings | $ | 368 | $ | 387 | $ | (387 | ) | $ | 368 | |||
First Quarter 2016 | CSX Corporation | CSX Transportation | Eliminations and Other | Consolidated | ||||||||
Revenue | $ | — | $ | 2,598 | $ | 20 | $ | 2,618 | ||||
Expense | (72 | ) | 2,064 | (78 | ) | 1,914 | ||||||
Operating Income | 72 | 534 | 98 | 704 | ||||||||
Equity in Earnings of Subsidiaries | 401 | — | (401 | ) | — | |||||||
Interest (Expense) / Benefit | (143 | ) | (10 | ) | 10 | (143 | ) | |||||
Other Income / (Expense) - Net | 1 | 7 | (1 | ) | 7 | |||||||
Earnings Before Income Taxes | 331 | 531 | (294 | ) | 568 | |||||||
Income Tax (Expense) / Benefit | 25 | (198 | ) | (39 | ) | (212 | ) | |||||
Net Earnings | $ | 356 | $ | 333 | $ | (333 | ) | $ | 356 | |||
Total Comprehensive Earnings | $ | 363 | $ | 332 | $ | (332 | ) | $ | 363 |
CSX Q1 2017 Form 10-Q p.22 |
Consolidating Balance Sheet | ||||||||||||
(Dollars in millions) | ||||||||||||
March 31, 2017 | CSX Corporation | CSX Transportation | Eliminations and Other | Consolidated | ||||||||
ASSETS | ||||||||||||
Current Assets | ||||||||||||
Cash and Cash Equivalents | $ | 648 | $ | 272 | $ | 10 | $ | 930 | ||||
Short-term Investments | 285 | — | 2 | 287 | ||||||||
Accounts Receivable - Net | 2 | 198 | 743 | 943 | ||||||||
Receivable from Affiliates | 1,122 | 2,397 | (3,519 | ) | — | |||||||
Materials and Supplies | — | 415 | — | 415 | ||||||||
Other Current Assets | — | 74 | 11 | 85 | ||||||||
Total Current Assets | 2,057 | 3,356 | (2,753 | ) | 2,660 | |||||||
Properties | 1 | 40,670 | 2,728 | 43,399 | ||||||||
Accumulated Depreciation | (1 | ) | (10,662 | ) | (1,477 | ) | (12,140 | ) | ||||
Properties - Net | — | 30,008 | 1,251 | 31,259 | ||||||||
Investments in Conrail | — | — | 847 | 847 | ||||||||
Affiliates and Other Companies | (39 | ) | 646 | 15 | 622 | |||||||
Investments in Consolidated Subsidiaries | 24,434 | — | (24,434 | ) | — | |||||||
Other Long-term Assets | 2 | 603 | (281 | ) | 324 | |||||||
Total Assets | $ | 26,454 | $ | 34,613 | $ | (25,355 | ) | $ | 35,712 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
Current Liabilities | ||||||||||||
Accounts Payable | $ | 171 | $ | 698 | $ | 29 | $ | 898 | ||||
Labor and Fringe Benefits Payable | 34 | 383 | 28 | 445 | ||||||||
Payable to Affiliates | 3,478 | 475 | (3,953 | ) | — | |||||||
Casualty, Environmental and Other Reserves | — | 102 | 12 | 114 | ||||||||
Current Maturities of Long-term Debt | 313 | 19 | (1 | ) | 331 | |||||||
Income and Other Taxes Payable | (29 | ) | 310 | 21 | 302 | |||||||
Other Current Liabilities | — | 178 | 9 | 187 | ||||||||
Total Current Liabilities | 3,967 | 2,165 | (3,855 | ) | 2,277 | |||||||
Casualty, Environmental and Other Reserves | — | 203 | 49 | 252 | ||||||||
Long-term Debt | 10,206 | 757 | — | 10,963 | ||||||||
Deferred Income Taxes - Net | (207 | ) | 9,592 | 263 | 9,648 | |||||||
Other Long-term Liabilities | 832 | 396 | (325 | ) | 903 | |||||||
Total Liabilities | $ | 14,798 | $ | 13,113 | $ | (3,868 | ) | $ | 24,043 | |||
Shareholders' Equity | ||||||||||||
Common Stock, $1 Par Value | $ | 923 | $ | 181 | $ | (181 | ) | $ | 923 | |||
Other Capital | 170 | 5,095 | (5,095 | ) | 170 | |||||||
Retained Earnings | 11,197 | 16,232 | (16,232 | ) | 11,197 | |||||||
Accumulated Other Comprehensive Loss | (634 | ) | (21 | ) | 21 | (634 | ) | |||||
Noncontrolling Interest | — | 13 | — | 13 | ||||||||
Total Shareholders' Equity | $ | 11,656 | $ | 21,500 | $ | (21,487 | ) | $ | 11,669 | |||
Total Liabilities and Shareholders' Equity | $ | 26,454 | $ | 34,613 | $ | (25,355 | ) | $ | 35,712 |
CSX Q1 2017 Form 10-Q p.23 |
Consolidating Balance Sheet (Dollars in millions) | ||||||||||||
December 30, 2016 | CSX Corporation | CSX Transportation | Eliminations and Other | Consolidated | ||||||||
ASSETS | ||||||||||||
Current Assets | ||||||||||||
Cash and Cash Equivalents | $ | 305 | $ | 281 | $ | 17 | $ | 603 | ||||
Short-term Investments | 415 | — | 2 | 417 | ||||||||
Accounts Receivable - Net | 2 | 215 | 721 | 938 | ||||||||
Receivable from Affiliates | 1,157 | 2,351 | (3,508 | ) | — | |||||||
Materials and Supplies | — | 407 | — | 407 | ||||||||
Other Current Assets | — | 106 | 16 | 122 | ||||||||
Total Current Assets | 1,879 | 3,360 | (2,752 | ) | 2,487 | |||||||
Properties | 1 | 40,518 | 2,708 | 43,227 | ||||||||
Accumulated Depreciation | (1 | ) | (10,634 | ) | (1,442 | ) | (12,077 | ) | ||||
Properties - Net | — | 29,884 | 1,266 | 31,150 | ||||||||
Investments in Conrail | — | — | 840 | 840 | ||||||||
Affiliates and Other Companies | (39 | ) | 643 | 15 | 619 | |||||||
Investment in Consolidated Subsidiaries | 24,179 | — | (24,179 | ) | — | |||||||
Other Long-term Assets | 2 | 607 | (291 | ) | 318 | |||||||
Total Assets | $ | 26,021 | $ | 34,494 | $ | (25,101 | ) | $ | 35,414 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
Current Liabilities | ||||||||||||
Accounts Payable | $ | 95 | $ | 678 | $ | 33 | $ | 806 | ||||
Labor and Fringe Benefits Payable | 40 | 440 | 65 | 545 | ||||||||
Payable to Affiliates | 3,457 | 500 | (3,957 | ) | — | |||||||
Casualty, Environmental and Other Reserves | — | 102 | 13 | 115 | ||||||||
Current Maturities of Long-term Debt | 313 | 19 | (1 | ) | 331 | |||||||
Income and Other Taxes Payable | (346 | ) | 459 | 16 | 129 | |||||||
Other Current Liabilities | — | 112 | 2 | 114 | ||||||||
Total Current Liabilities | 3,559 | 2,310 | (3,829 | ) | 2,040 | |||||||
Casualty, Environmental and Other Reserves | — | 208 | 51 | 259 | ||||||||
Long-term Debt | 10,203 | 759 | — | 10,962 | ||||||||
Deferred Income Taxes - Net | (203 | ) | 9,541 | 258 | 9,596 | |||||||
Other Long-term Liabilities | 783 | 410 | (330 | ) | 863 | |||||||
Total Liabilities | $ | 14,342 | $ | 13,228 | $ | (3,850 | ) | $ | 23,720 | |||
Shareholders' Equity | ||||||||||||
Common Stock, $1 Par Value | $ | 928 | $ | 181 | $ | (181 | ) | $ | 928 | |||
Other Capital | 138 | 5,095 | (5,095 | ) | 138 | |||||||
Retained Earnings | 11,253 | 15,994 | (15,994 | ) | 11,253 | |||||||
Accumulated Other Comprehensive Loss | (640 | ) | (19 | ) | 19 | (640 | ) | |||||
Noncontrolling Minority Interest | — | 15 | — | 15 | ||||||||
Total Shareholders' Equity | $ | 11,679 | $ | 21,266 | $ | (21,251 | ) | $ | 11,694 | |||
Total Liabilities and Shareholders' Equity | $ | 26,021 | $ | 34,494 | $ | (25,101 | ) | $ | 35,414 |
CSX Q1 2017 Form 10-Q p.24 |
Consolidating Cash Flow Statements | ||||||||||||
(Dollars in millions) | ||||||||||||
Three Months 2017 | CSX Corporation | CSX Transportation | Eliminations and Other | Consolidated | ||||||||
Operating Activities | ||||||||||||
Net Cash Provided by (Used in) Operating Activities | $ | 644 | $ | 566 | $ | (167 | ) | $ | 1,043 | |||
Investing Activities | ||||||||||||
Property Additions | — | (397 | ) | (44 | ) | (441 | ) | |||||
Purchases of Short-term Investments | (75 | ) | — | — | (75 | ) | ||||||
Proceeds from Sales of Short-term Investments | 205 | — | — | 205 | ||||||||
Other Investing Activities | (1 | ) | (24 | ) | 50 | 25 | ||||||
Net Cash Provided by (Used in) Investing Activities | 129 | (421 | ) | 6 | (286 | ) | ||||||
Financing Activities | ||||||||||||
Dividends Paid | (166 | ) | (150 | ) | 150 | (166 | ) | |||||
Shares Repurchased | (258 | ) | — | — | (258 | ) | ||||||
Other Financing Activities | (6 | ) | (4 | ) | 4 | (6 | ) | |||||
Net Cash Provided by (Used in) Financing Activities | (430 | ) | (154 | ) | 154 | (430 | ) | |||||
Net Increase (Decrease) in Cash and Cash Equivalents | 343 | (9 | ) | (7 | ) | 327 | ||||||
Cash and Cash Equivalents at Beginning of Period | 305 | 281 | 17 | 603 | ||||||||
Cash and Cash Equivalents at End of Period | $ | 648 | $ | 272 | $ | 10 | $ | 930 |
CSX Q1 2017 Form 10-Q p.25 |
Consolidating Cash Flow Statements | ||||||||||||
(Dollars in millions) | ||||||||||||
Three Months 2016 | CSX Corporation | CSX Transportation | Eliminations and Other | Consolidated | ||||||||
Operating Activities | ||||||||||||
Net Cash Provided by (Used in) Operating Activities | $ | 36 | $ | 834 | $ | (116 | ) | $ | 754 | |||
Investing Activities | ||||||||||||
Property Additions | — | (391 | ) | (34 | ) | (425 | ) | |||||
Purchases of Short-term Investments | (235 | ) | — | — | (235 | ) | ||||||
Proceeds from Sales of Short-term Investments | 670 | — | — | 670 | ||||||||
Other Investing Activities | (1 | ) | 26 | 6 | 31 | |||||||
Net Cash Provided by (Used in) Investing Activities | 434 | (365 | ) | (28 | ) | 41 | ||||||
Financing Activities | ||||||||||||
Dividends Paid | (173 | ) | (150 | ) | 150 | (173 | ) | |||||
Shares Repurchased | (249 | ) | — | — | (249 | ) | ||||||
Other Financing Activities | 1 | (271 | ) | — | (270 | ) | ||||||
Net Cash Provided by (Used in) Financing Activities | (421 | ) | (421 | ) | 150 | (692 | ) | |||||
Net Increase (Decrease) in Cash and Cash Equivalents | 49 | 48 | 6 | 103 | ||||||||
Cash and Cash Equivalents at Beginning of Period | 444 | 175 | 9 | 628 | ||||||||
Cash and Cash Equivalents at End of Period | $ | 493 | $ | 223 | $ | 15 | $ | 731 |
CSX Q1 2017 Form 10-Q p.26 |
• | The Company named E. Hunter Harrison CEO and began implementing Precision Scheduled Railroading. |
• | The Company reduced the management workforce and completed other restructuring activities that resulted in a restructuring charge of $173 million. |
First Quarters | ||||||||||
2017 | 2016 | Fav / (Unfav) | % Change | |||||||
Volume (in thousands) | 1,592 | 1,551 | 41 | 3% | ||||||
(in millions) | ||||||||||
Revenue | $ | 2,869 | $ | 2,618 | $ | 251 | 10% | |||
Expense | 2,157 | 1,914 | (243 | ) | (13)% | |||||
Operating Income | $ | 712 | $ | 704 | $ | 8 | 1% | |||
Operating Ratio | 75.2 | % | 73.1 | % | (210 | ) | bps | |||
Earnings Per Diluted Share | $ | 0.39 | $ | 0.37 | $ | 0.02 | 5% |
CSX Q1 2017 Form 10-Q p.27 |
Volume and Revenue (Unaudited) | ||||||||||||||||||||||||||||||
Volume (Thousands of units); Revenue (Dollars in Millions); Revenue Per Unit (Dollars) | ||||||||||||||||||||||||||||||
First Quarters | ||||||||||||||||||||||||||||||
Volume | Revenue | Revenue Per Unit | ||||||||||||||||||||||||||||
2017 | 2016 | % Change | 2017 | 2016 | % Change | 2017 | 2016 | % Change | ||||||||||||||||||||||
Agricultural | ||||||||||||||||||||||||||||||
Agricultural and Food Products (a) | 121 | 121 | — | % | $ | 332 | $ | 323 | 3 | % | $ | 2,744 | $ | 2,669 | 3 | % | ||||||||||||||
Fertilizers (a) | 77 | 76 | 1 | 129 | 127 | 2 | 1,675 | 1,671 | — | |||||||||||||||||||||
Industrial | ||||||||||||||||||||||||||||||
Chemicals (a) | 175 | 175 | — | 566 | 546 | 4 | 3,234 | 3,120 | 4 | |||||||||||||||||||||
Automotive | 119 | 113 | 5 | 316 | 290 | 9 | 2,655 | 2,566 | 3 | |||||||||||||||||||||
Metals and Equipment (a) | 70 | 62 | 13 | 190 | 165 | 15 | 2,714 | 2,661 | 2 | |||||||||||||||||||||
Housing and Construction | ||||||||||||||||||||||||||||||
Minerals (a) | 70 | 58 | 21 | 114 | 94 | 21 | 1,629 | 1,621 | — | |||||||||||||||||||||
Forest Products | 67 | 68 | (1 | ) | 192 | 189 | 2 | 2,866 | 2,779 | 3 | ||||||||||||||||||||
Total Merchandise | 699 | 673 | 4 | 1,839 | 1,734 | 6 | 2,631 | 2,577 | 2 | |||||||||||||||||||||
Coal | 205 | 200 | 3 | 522 | 399 | 31 | 2,546 | 1,995 | 28 | |||||||||||||||||||||
Intermodal | 688 | 678 | 1 | 434 | 405 | 7 | 631 | 597 | 6 | |||||||||||||||||||||
Other | — | — | 74 | 80 | (8 | ) | — | — | — | |||||||||||||||||||||
Total | 1,592 | 1,551 | 3 | % | $ | 2,869 | $ | 2,618 | 10 | % | $ | 1,802 | $ | 1,688 | 7 | % | ||||||||||||||
• | Agricultural and Food Products includes the combination of the previous Agricultural Products and Food and Consumer markets. |
• | Fertilizers was previously named Phosphates and Fertilizers. |
• | Metals and Equipment includes the Equipment portion of the previous Waste and Equipment market. |
• | Chemicals includes the Waste portion of the previous Waste and Equipment market. Chemicals also includes fly ash for remediation purposes (a form of waste) which was previously included within the Minerals market. |
CSX Q1 2017 Form 10-Q p.28 |
CSX Q1 2017 Form 10-Q p.29 |
• | Inflation of $36 million was driven primarily by increased health and welfare costs. |
• | Incentive compensation was $30 million higher reflecting the expected award payouts on existing plans. |
• | Volume-related costs were $21 million higher. |
• | Efficiency savings of $74 million were driven by lower T&E and operating support costs. |
• | Other costs decreased by $20 million primarily due to a $14 million decrease in pension expense. |
• | Inflation resulted in $9 million of additional cost. |
• | Volume-related costs were $15 million higher. |
• | Efficiency savings of $41 million were primarily related to lower operating support costs. |
• | Other costs increased $34 million due to $14 million in prior year favorable adjustments that did not repeat in the current quarter and several other items. |
• | A 45 percent price increase drove $67 million in additional fuel expense. |
• | Volume-related costs were $6 million higher due to a five percent year-over-year increase in gross ton miles. |
• | Efficiency savings of $5 million were related to process improvement and locomotive fuel reduction initiatives. |
CSX Q1 2017 Form 10-Q p.30 |
• | Inflation resulted in $3 million of additional cost due to higher rates on automotive freight cars. |
• | Volume-related costs decreased by $4 million, despite an overall year-over-year volume increase, due to lower rents on certain boxcars primarily attributable to demand decreases in paper products. |
• | Efficiency savings of $3 million were due to improved miles per car. |
• | Other costs decreased $11 million primarily due to rental income that was previously classified as other income in the prior years being reclassified to operating expense in the current year. |
CSX Q1 2017 Form 10-Q p.31 |
For the Quarter ended March 31, 2017 | ||||||||||||||
(in millions, except operating ratio and net earnings per share, assuming dilution) | Operating Income | Operating Ratio | Net Earnings | Net Earnings Per Share, Assuming Dilution | ||||||||||
GAAP Operating Results | $ | 712 | 75.2 | % | $ | 362 | $ | 0.39 | ||||||
Restructuring Charge | 173 | (6.0 | )% | 108 | 0.12 | |||||||||
Adjusted Operating Results (non-GAAP) | $ | 885 | 69.2 | % | $ | 470 | $ | 0.51 | ||||||
Quarter Ended | ||||||
(Dollars in millions) | March 31, 2017 | March 25, 2016 | ||||
Net cash provided by operating activities | 1,043 | 754 | ||||
Property additions | (441 | ) | (425 | ) | ||
Other investing activities | 25 | 31 | ||||
Free Cash Flow (before payment of dividends) | 627 | 360 | ||||
Add back: Cash paid related to Restructuring Charge (after-tax) | 7 | — | ||||
Adjusted Free Cash Flow Before Dividends (non-GAAP) | $ | 634 | $ | 360 |
CSX Q1 2017 Form 10-Q p.32 |
First Quarters | ||||||
2017 | 2016 | Improvement/ (Deterioration) | ||||
Safety and Service Measurements | ||||||
FRA Personal Injury Frequency Index | 0.99 | 0.91 | (9 | )% | ||
FRA Train Accident Rate | 2.37 | 3.14 | 25 | % | ||
On-Time Originations | 81 | % | 81 | % | — | % |
On-Time Arrivals | 61 | % | 64 | % | (5 | )% |
Train Velocity | 20.2 | 21.1 | (4 | )% | ||
Dwell | 26.1 | 26.0 | — | % | ||
Cars-On-Line | 210,589 | 207,357 | (2 | )% |
CSX Q1 2017 Form 10-Q p.33 |
• | Cash provided by operating activities increased $289 million primarily driven by higher collections of freight accounts receivable and the timing of tax, payroll and interest payments. |
• | Cash used in investing activities increased $327 million primarily driven by lower net sales of short-term investments. |
• | Cash used in financing activities decreased $262 million as a repayment of seller-financed assets that occurred in the prior year did not repeat in the current year. |
CSX Q1 2017 Form 10-Q p.34 |
CSX Q1 2017 Form 10-Q p.35 |
• | casualty, environmental and legal reserves; |
• | pension and post-retirement medical plan accounting; |
• | depreciation policies for assets under the group-life method; and |
• | income taxes. |
• | projections and estimates of earnings, revenues, margins, volumes, rates, cost-savings, expenses, taxes or other financial items; |
• | expectations as to results of operations and operational initiatives; |
• | expectations as to the effect of claims, lawsuits, environmental costs, commitments, contingent liabilities, labor negotiations or agreements on the Company's financial condition, results of operations or liquidity; |
• | management's plans, strategies and objectives for future operations, capital expenditures, dividends, share repurchases, safety and service performance, proposed new services and other matters that are not historical facts, and management's expectations as to future performance and operations and the time by which objectives will be achieved; and |
• | future economic, industry or market conditions or performance and their effect on the Company's financial condition, results of operations or liquidity. |
CSX Q1 2017 Form 10-Q p.36 |
• | legislative, regulatory or legal developments involving transportation, including rail or intermodal transportation, the environment, hazardous materials, taxation and initiatives to further regulate the rail industry; |
• | the outcome of litigation, claims and other contingent liabilities, including, but not limited to, those related to fuel surcharge, environmental matters, taxes, shipper and rate claims subject to adjudication, personal injuries and occupational illnesses; |
• | changes in domestic or international economic, political or business conditions, including those affecting the transportation industry (such as the impact of industry competition, conditions, performance and consolidation) and the level of demand for products carried by CSXT; |
• | natural events such as severe weather conditions, including floods, fire, hurricanes and earthquakes, a pandemic crisis affecting the health of the Company's employees, its shippers or the consumers of goods, or other unforeseen disruptions of the Company's operations, systems, property or equipment; |
• | competition from other modes of freight transportation, such as trucking and competition and consolidation or financial distress within the transportation industry generally; |
• | the cost of compliance with laws and regulations that differ from expectations (including those associated with PTC implementation), as well as costs, penalties and operational and liquidity impacts associated with noncompliance with applicable laws or regulations; |
• | the impact of increased passenger activities in capacity-constrained areas, including potential effects of high speed rail initiatives, or regulatory changes affecting when CSXT can transport freight or service routes; |
• | unanticipated conditions in the financial markets that may affect timely access to capital markets and the cost of capital, as well as management's decisions regarding share repurchases; |
• | changes in fuel prices, surcharges for fuel and the availability of fuel; |
• | the impact of natural gas prices on coal-fired electricity generation; |
• | availability of insurance coverage at commercially reasonable rates or insufficient insurance coverage to cover claims or damages; |
• | the inherent business risks associated with safety and security, including the transportation of hazardous materials or a cybersecurity attack which would threaten the availability and vulnerability of information technology; |
CSX Q1 2017 Form 10-Q p.37 |
• | adverse economic or operational effects from actual or threatened war or terrorist activities and any governmental response; |
• | labor and benefit costs and labor difficulties, including stoppages affecting either the Company's operations or customers' ability to deliver goods to the Company for shipment; |
• | the Company's success in implementing its strategic, financial and operational initiatives; |
• | changes in operating conditions and costs or commodity concentrations; and |
• | the inherent uncertainty associated with projecting economic and business conditions. |
CSX Q1 2017 Form 10-Q p.38 |
CSX Purchases of Equity Securities for the Quarter | ||||||||||
First Quarter (a) | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||
Beginning Balance | $ | 270,270,134 | ||||||||
January | 2,044,818 | $ | 38.93 | 1,938,768 | 195,428,197 | |||||
February | 1,660,565 | 47.58 | 1,660,500 | 116,424,432 | ||||||
March | 2,175,500 | 47.78 | 2,175,500 | 12,474,350 | ||||||
Ending Balance | 5,880,883 | $ | 44.65 | 5,774,768 | $ | 12,474,350 |
CSX Q1 2017 Form 10-Q p.39 |
Exhibit designation | Nature of exhibit | Previously filed as exhibit to |
3.01 | Amended and Restated Bylaws of the Registrant, effective as of March 6, 2017 | March 7, 2017 Exhibit 3.1, Form 8-K |
Material Contracts: | ||
10.01 | CSX 2017-2019 Long Term Incentive Plan, effective as of February 22, 2017 | February 27, 2017 Exhibit 10.1, Form 8-K |
10.02 | Separation Agreement, effective February 27, 2017, between Michael J. Ward and CSX Corporation | February 27, 2017 Exhibit 10.2, Form 8-K |
10.03 | Separation Agreement, effective February 27, 2017, between Clarence W. Gooden and CSX Corporation | February 27, 2017 Exhibit 10.3, Form 8-K |
10.04 | CSX Section 16 Officer Severance Benefit Plan, effective as of February 22, 2017 | February 27, 2017 Exhibit 10.4, Form 8-K |
10.05 | Letter Agreement, dated as of March 6, 2017, between CSX Corporation and MR Argent Advisor LLC | March 7, 2017 Exhibit 10.1, Form 8-K |
10.06 | Registration Rights Agreement, dated as of March 30, 2017, between CSX Corporation and MR Argent Advisor LLC | April 3, 2017 Exhibit 10.1, Form 8-K |
10.07* | Employment Agreement, effective as of March 6, 2017, between CSX Corporation and E. Hunter Harrison | |
10.08* | Inducement Non-Qualified Stock Option Agreement Under the CSX 2010 Stock and Incentive Award Plan between CSX Corporation and E. Hunter Harrison | |
10.09* | Inducement Non-Qualified Stock Option Agreement Under the CSX Special Executive Equity Award Program between CSX Corporation and E. Hunter Harrison | |
Officer certifications: | ||
31* | Rule13a-14(a) Certifications | |
32* | Section 1350 Certifications | |
Interactive data files: | ||
101* | The following financial information from CSX Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 filed with the SEC on April 19, 2017, formatted in XBRL includes: (i) consolidated income statements for the fiscal periods ended March 31, 2017 and March 25, 2016, (ii) consolidated comprehensive income statements for the fiscal periods ended March 31, 2017 and March 25, 2016 (iii) consolidated balance sheets at March 31, 2017 and December 30, 2016, (iv) consolidated cash flow statements for the fiscal periods ended March 31, 2017 and March 25, 2016, and (v) the notes to consolidated financial statements. | |
* Filed herewith |
CSX Q1 2017 Form 10-Q p.40 |
CSX Q1 2017 Form 10-Q p.41 |
1. | Starting Date; Term; Place of Employment |
2. | Exclusivity |
3. | Base Salary |
4. | Annual Incentive Compensation |
5. | Stock Option Award |
6. | Incentive, Savings and Retirement Plans |
7. | Welfare Benefit Plans |
8. | Fringe Benefits |
9. | Expenses |
10. | Vacation |
11. | Termination of Employment |
12. | Consequences of Termination |
13. | Change of Control |
14. | Limitations on Payments by the Company |
15. | Full Settlement |
16. | Confidential Information and Restrictive Covenants |
17. | Other Agreements/Prior Employment |
18. | No Mitigation or Offset |
19. | Withholding |
20. | Indemnification |
21. | D&O Insurance |
22. | Severability |
23. | Notices |
24. | Code Section 409A |
25. | Governing Law |
26. | Arbitration |
27. | Assignment |
28. | Amendments/No Waiver/Entire Agreement |
Sincerely, CSX CORPORATION | |
By: | |
E. Hunter Harrison | (Date) |
Options: | 1,000,000 |
Grant Date: | March 6, 2017 |
Option Exercise Price: | $49.79 |
Expiration Date: | March 5, 2027, except as set forth in the Option Agreement |
Section 4. | Termination of Employment. |
(a) | Termination Prior to March 6, 2021. The provisions of this Section 4(a) shall govern the treatment of the Options in the event of the termination of Optionee’s employment prior to March 6, 2021 as specified in subsections (i) through (iii) below. |
(i) | Termination Without Cause or Resignation for Good Reason Prior to March 6, 2021. If Optionee’s employment is terminated prior to March 6, 2021 by the Company without Cause or Optionee resigns Optionee’s employment with the Company for Good Reason: |
(A) | any Options that are vested as of the Termination Date shall remain outstanding until the Expiration Date; and |
(B) | any Options that are unvested as of the Termination Date shall vest in full and become exercisable and shall remain outstanding until the Expiration Date. |
(ii) | Resignation or Retirement without Good Reason Prior to March 6, 2021. If Optionee resigns Optionee’s employment without Good Reason, including due to Optionee’s retirement, prior to March 6, 2021: |
(A) | all Options that are unvested as of the Termination Date shall be forfeited and cancelled as of the Termination Date; and |
(B) | any Options that are vested as the Termination Date shall remain outstanding for one (1) year following Optionee’s Termination Date and shall be forfeited and cancelled as of the day following the end of such one (1) year period, to the extent not exercised prior to that date. |
(iii) | Death or Disability Prior to March 6, 2021. If Optionee terminates employment due to his death or Disability prior to March 6, 2021: |
(A) | if Optionee’s termination of employment occurs due to Optionee’s death or Disability on or after the first anniversary of the Grant Date, (1) any Options that are vested as of the Termination Date shall remain outstanding until the Expiration Date and (2) if the Termination Date (x) occurs between the second and third anniversaries of the Grant Date, any unvested Options shall immediately vest and shall remain outstanding for two years thereafter and (y) occurs prior to the second anniversary of the Grant Date, all unvested Options shall be forfeited and cancelled as of the Termination Date. |
(b) | Termination Other than for Cause On or After March 6, 2021. If Optionee separates from employment on or after March 6, 2021 other than upon a termination of Optionee’s employment by the Company for Cause, any Options that are vested as the Termination Date shall remain outstanding until the Expiration Date. |
(c) | Termination for Cause. Notwithstanding anything to the contrary, if Optionee’s employment is terminated for Cause at any time all rights under any outstanding Options (whether vested or unvested) shall be forfeited and cancelled immediately. |
Section 5. | Exercise. |
(a) | Manner of Exercise. Optionee may exercise vested Options, in whole or in part, to purchase a whole number of shares of Company Stock at any time following the date on which such vested Options become vested by following the exercise procedures below. If Optionee wishes to exercise a vested Option, Optionee shall notify the Company of the number of shares as to which Optionee wishes to exercise (the “Exercised Option”) and within 24 hours of such notice the Company shall notify Optionee whether or not the Company elects to apply a net exercise of exercise price and withholding. If the Company elects not to apply a net exercise, Optionee may exercise the |
(b) | Expiration. All exercises must take place before the Expiration Date or any outstanding and unexercised Options shall lapse and terminate on the Expiration Date. |
(c) | Delivery of Shares. No shares of Company Stock shall be delivered pursuant to any exercise of an Option until payment in full of the Exercise Price and the related withholding taxes for federal, state or local jurisdictions, or adequate provision therefor (in the discretion of the Committee), is received by the Company. Optionee shall not have any rights as a shareholder with respect to any Company Stock underlying any Options until the Option has been exercised and Optionee has been issued such Company Stock. |
Section 6. | Non-Transferability. |
Section 7. | Adjustments; Change in Control. |
(a) | Adjustments. In the event that any corporate transaction or distribution (including, without limitation, any stock split, stock dividend, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split up, spin off, repurchase, combination or exchange of Company Stock or other securities of the Company, but not including ordinary dividends) affects the Company Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Options, then (a) the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number of shares of Company Stock or other securities of the Company (or number and kind of other securities and property) subject to the Options; and (ii) the Exercise Price of the Options or, (b) if deemed appropriate, the Committee may make provision for a cash payment to Optionee in full or partial satisfaction of the |
(b) | Change in Control. In the event of a Change in Control in which the Company is not the successor or acquiring company or a direct or indirect parent entity of the successor or acquiring company (the “Surviving Company”) and the Surviving Company does not arrange to continue or convert the Option or grant a Substitute Award, as provided under Section 20 of the Plan, the Company may, without Optionee’s consent, elect to provide any one or more of the following: |
(i) | The Option shall be terminated as of the Change in Control in exchange for a payment in cash and/or securities equal to the amount, if any, by which the Fair Market Value of the shares of Company Stock underlying the Option exceeds the Option Exercise Price; |
(ii) | The Option shall become immediately and fully exercisable as of a date prior to the Change in Control, to the extent not previously exercised or terminated, and shall be terminated as of the Change in Control; or |
(iii) | To the extent that the Option Exercise Price exceeds the Fair Market Value of the shares of Company Stock underlying the Option as of the Change in Control, the Option shall lapse and terminate as of the Change in Control. |
Section 8. | Severability. |
Section 9. | Choice of Law; Jurisdiction. |
Section 10. | Registration and Resales of Shares Acquired Pursuant to Option Exercise. |
(a) | Registration. The Company shall register the shares of Company Stock underlying the Options under the Securities Act of 1933 on a Form S-8 |
(b) | Resale. The Company may impose such reasonable restrictions, conditions or limitations as it in good faith deems appropriate as to the timing and manner of any resales by Optionee or other subsequent transfers by Optionee of any Common Stock issued as a result of the exercise of the Option, including without limitation (a) restrictions under an insider trading policy, (b) restrictions designed to delay and/or coordinate the timing and manner of sales by Optionee and other option-holders and (c) restrictions as to the use of a specified brokerage firm for such resales or other transfers so long as similar provisions are implemented to apply to all executive officers of the Company and does not cause the Option to expire without being able to be exercised. |
Section 11. | Nonqualified Stock Option. |
Section 12. | Income Taxes. |
Time Options: | 3,500,000 |
[Performance] Options: | [4,500,000] |
Total Options: | 8,000,000 |
Grant Date: | March 6, 2017 |
Option Exercise Price: | $49.79 |
Expiration Date: | March 5, 2027, except as set forth in the Option Agreement |
(a) | Time Options. A portion of the Time Options shall vest and become exercisable on each of the first four anniversaries of the Grant Date as described below, subject to your continued employment with the Company as of the applicable anniversary date, provided that the “Fourth Anniversary” in the table below shall be the day before the actual fourth anniversary of the Grant Date. |
Grant Date Anniversary | Number of Time Options That Vest |
First Anniversary | 1,125,000 |
Second Anniversary | 1,125,000 |
Third Anniversary | 125,000 |
Fourth Anniversary | 1,125,000 |
(b) | Performance Options. A portion of the [Performance] Options shall be eligible to vest and become exercisable as of each Audit Report Date as provided below, subject to your continued employment with the Company as of the applicable Audit Report Date except as otherwise provided herein, and provided that for the Audit Report Date for fiscal year 2020, Optionee shall only need to be employed on the day before the fourth anniversary of the Grant Date. |
(i) | [Tranche One Performance] Options. 500,000 [Performance] Options shall vest and become exercisable as of the Audit Report Date for each Fiscal Year [2017 through 2020 based on prescribed performance targets, subject to prescribed performance catchups]. |
(ii) | [Tranche Two Performance] Options. 62,500 [Performance] Options shall vest and become exercisable as of the Audit Report Date for each Fiscal Year [2017 through 2020 based on prescribed performance targets, subject to prescribed performance catchups]. |
(iii) | [Tranche Three Performance] Options. 500,000 [Performance] Options shall vest and become exercisable as of the Audit Report Date each Fiscal Year [2017 through 2020 based on prescribed performance targets, subject to prescribed performance catchups]. |
(iv) | [Tranche Four Performance] Options. 62,500 [Performance] Options shall vest and become exercisable as of the Audit Report Date each Fiscal Year [2017 through 2020 based on prescribed performance targets, subject to prescribed performance catchups]. |
(v) | Vesting End Date. Any Performance Options that have not vested and become exercisable as of the Audit Report Date for the Fiscal Year ending in 2020 shall be forfeited and cancelled as of such Audit Report Date. |
Section 4. | Termination of Employment. |
(a) | Termination Prior to March 6, 2021. The provisions of this Section 4(a) shall govern the treatment of the Options in the event of the termination of Optionee’s employment prior to March 6, 2021 as specified in subsections (i) through (iii) below. |
(i) | Termination Without Cause or Resignation for Good Reason Prior to March 6, 2021. If Optionee’s employment is terminated prior to March 6, 2021 by the Company without Cause or Optionee resigns Optionee’s employment with the Company for Good Reason: |
(A) | any Options that are vested as of the Termination Date shall remain outstanding until the Expiration Date; |
(B) | any Time Options that are unvested as of the Termination Date shall vest in full and become exercisable and shall remain outstanding until the Expiration Date; and |
(C) | the Service-Based Vesting Condition applicable to any unvested Performance Options shall be satisfied in full and such Performance Options shall remain outstanding and eligible to vest subject to satisfaction of the applicable Performance-Based Vesting Conditions applied as if Optionee continued to be employed by the Company through each of the remaining Audit Report Dates. Any Performance Options that become vested upon satisfaction of the applicable Performance-Based Vesting Condition in accordance with this Section 4(a)(i)(C), shall remain exercisable until the Expiration Date. Any such Performance Options that have not become vested and exercisable as of the Audit Report Date for the Fiscal Year ending in 2020 shall be forfeited and cancelled as of such Audit Report Date. |
(ii) | Resignation or Retirement without Good Reason Prior to March 6, 2021. If Optionee resigns Optionee’s employment without Good Reason, including due to Optionee’s retirement, prior to March 6, 2021: |
(A) | all Options that are unvested as of the Termination Date shall be forfeited and cancelled as of the Termination Date; and |
(B) | any Options that are vested as the Termination Date shall remain outstanding for one (1) year following Optionee’s Termination Date and |
(iii) | Death or Disability Prior to March 6, 2021. If Optionee terminates employment due to his death or Disability prior to March 6, 2021: |
(A) | if Optionee’s termination of employment occurs due to Optionee’s death or Disability prior to the first anniversary of the Grant Date all Options shall be forfeited and cancelled as of the Termination Date; and |
(B) | if Optionee’s termination of employment occurs due to Optionee’s death or Disability on or after the first anniversary of the Grant Date, (1) any Options that are vested as of the Termination Date shall remain outstanding until the Expiration Date, (2) the unvested Time Options that would vest on the next vesting date shall immediately vest and any other unvested Time Options shall be forfeited and cancelled as of the Termination Date, (3) any vested [Performance] Options shall remain outstanding until the Expiration Date, (4) any unvested [Performance] Options for which the Service-Vesting Condition has been satisfied prior to the Termination Date and a pro rata portion of those due to vest on the next vesting date based on the relative period of service during the vesting year prior to the Termination Date (which service period shall be deemed satisfied) shall remain outstanding and eligible to vest subject to satisfaction of the applicable Performance-Based Vesting Conditions applied as if Optionee continued to be employed by the Company through each of the remaining Audit Report Dates and (5) any unvested [Performance] Options for which the Service-Vesting Condition has not been satisfied prior to or at the Termination Date shall be forfeited and cancelled as of the Termination Date. Any Performance Options that vest in accordance with clause (4) of the preceding sentence shall remain outstanding until the Expiration Date. Any such Performance Options that have not become vested and exercisable as of the Audit Report Date for the Fiscal Year ending in 2020 shall be forfeited and cancelled as of such Audit Report Date. Notwithstanding the foregoing, if the termination is a First Year Disability after the first anniversary of the Grant Date, then there shall be no additional vesting of Time-Based Options not then vested or of Performance-Based Options for which the Service-Based Vesting Conditions had not been satisfied and any such Time-Based Options that are vested as of such Termination Date shall remain outstanding for two years thereafter and any such Performance-Based Options for which the Service-Based Vesting Conditions have been satisfied that vest upon satisfaction of applicable Performance-Based Vesting Conditions shall remain outstanding for two years after |
(b) | Termination Other than for Cause On or After March 6, 2021. If Optionee separates from employment on or after March 6, 2021 other than upon a termination of Optionee’s employment by the Company for Cause, any Options that are vested as the Termination Date shall remain outstanding until the Expiration Date. |
(c) | Termination for Cause. Notwithstanding anything to the contrary, if Optionee’s employment is terminated for Cause at any time all rights under any outstanding Options (whether vested or unvested) shall be forfeited and cancelled immediately. |
Section 5. | Exercise. |
(a) | Manner of Exercise. Optionee may exercise vested Options, in whole or in part, to purchase a whole number of shares of Company Stock at any time following the date on which such vested Options become vested by following the exercise procedures below. If Optionee wishes to exercise a vested Option, Optionee shall notify the Company of the number of shares as to which Optionee wishes to exercise (the “Exercised Option”) and within 24 hours of such notice the Company shall notify Optionee whether or not the Company elects to apply a net exercise of exercise price and withholding. If the Company elects not to apply a net exercise, Optionee may exercise the Exercised Option pursuant to any procedures applicable under the Company’s employee option program at the time of such exercise, including by tendering the full exercise price and applicable tax withholding or by executing a market-based cashless exercise to cover the exercise price and applicable tax withholding through the Company’s stock plan administrator. If the Company elects to apply a net exercise, the Company shall arrange to cancel a portion of the Exercised Option covering shares of Company Stock with a Fair Market Value equal to the sum of the exercise price and applicable tax withholding and issue the net number of shares of Company Stock to Optionee, pursuant to procedures mutually agreed between Optionee and the Company. In the case of a net exercise the applicable withholding shall be at the rate applied by the Company to option holders resident in Florida. |
(b) | Expiration. All exercises must take place before the Expiration Date or any outstanding and unexercised Options shall lapse and terminate on the Expiration Date. |
(c) | Delivery of Shares. No shares of Company Stock shall be delivered pursuant to any exercise of an Option until payment in full of the Exercise Price and the related withholding taxes for federal, state or local jurisdictions, or adequate provision therefor (in the discretion of the Committee), is received by the Company. Optionee shall not have any rights as a shareholder with respect to any Company Stock underlying any Options until the Option has been exercised and Optionee has been issued such Company Stock. |
Section 6. | Non-Transferability. |
Section 7. | Adjustments; Change in Control. |
(a) | Adjustments. In the event that any corporate transaction or distribution (including, without limitation, any stock split, stock dividend, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split up, spin off, repurchase, combination or exchange of Company Stock or other securities of the Company, but not including ordinary dividends) affects the Company Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Options, then (a) the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number of shares of Company Stock or other securities of the Company (or number and kind of other securities and property) subject to the Options; and (ii) the Exercise Price of the Options or, (b) if deemed appropriate, the Committee may make provision for a cash payment to Optionee in full or partial satisfaction of the any of the Options, provided that such Committee action shall be consistent with what it does for other outstanding options. |
(b) | Change in Control. In the event of a Change in Control in which the Company is not the successor or acquiring company or a direct or indirect parent entity of the successor or acquiring company (the “Surviving Company”) and the Surviving Company does not arrange to continue or convert the Option or grant a Substitute Award, as provided under Section 20 of the Plan, the Company may, without Optionee’s consent, elect to provide any one or more of the following: |
(i) | The Option shall be terminated as of the Change in Control in exchange for a payment in cash and/or securities equal to the amount, if any, by which the Fair Market Value of the shares of Company Stock underlying the Option exceeds the Option Exercise Price; |
(ii) | The Option shall become immediately and fully exercisable as of a date prior to the Change in Control, to the extent not previously exercised or terminated, and shall be terminated as of the Change in Control; or |
(iii) | To the extent that the Option Exercise Price exceeds the Fair Market Value of the shares of Company Stock underlying the Option as of the Change in Control, the Option shall lapse and terminate as of the Change in Control. |
Section 8. | Severability. |
Section 9. | Choice of Law; Jurisdiction. |
Section 10. | Registration and Resales of Shares Acquired Pursuant to Option Exercise. |
(a) | Registration. The Company shall register the shares of Company Stock underlying the Options under the Securities Act of 1933 on a Form S-8 registration statement prior to the date on which the Options become exercisable within respect to such shares and shall maintain that registration statement in effect until the date that such Options have been exercised or cease to be exercisable with respect such shares. |
(b) | Resale. The Company may impose such reasonable restrictions, conditions or limitations as it in good faith deems appropriate as to the timing and manner of any resales by Optionee or other subsequent transfers by Optionee of any Common Stock issued as a result of the exercise of the Option, including without limitation (a) restrictions under an insider trading policy, (b) restrictions designed to delay and/or coordinate the timing and manner of sales by Optionee and other option-holders and (c) restrictions as to the use of a specified brokerage firm for such resales or other transfers so long as similar provisions are implemented to apply to all executive officers of the Company and does not cause the Option to expire without being able to be exercised. |
Section 11. | Nonqualified Stock Option. |
Section 12. | Income Taxes. |
1. | I have reviewed this Quarterly Report on Form 10-Q of CSX Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
1. | I have reviewed this Quarterly Report on Form 10-Q of CSX Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant. |
1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the issuer. |
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Document And Entity Information |
3 Months Ended |
---|---|
Mar. 31, 2017
shares
| |
Document and Entity Information [Abstract] | |
Entity Registrant Name | CSX CORP |
Entity Central Index Key | 0000277948 |
Current Fiscal Year End Date | --12-29 |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 922,687,144 |
Document Fiscal Year Focus | 2017 |
Document Fiscal Period Focus | Q1 |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | Mar. 31, 2017 |
CONSOLIDATED INCOME STATEMENTS (Unaudited) - USD ($) shares in Millions, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 25, 2016 |
|
Income Statement | ||
Revenue | $ 2,869 | $ 2,618 |
Expense | ||
Labor and Fringe | 789 | 796 |
Materials, Supplies and Other | 567 | 550 |
Fuel | 218 | 150 |
Depreciation | 320 | 313 |
Equipment and Other Rents | 90 | 105 |
Restructuring Charge (Note 1) | 173 | 0 |
Total Expense | 2,157 | 1,914 |
Operating Income | 712 | 704 |
Interest Expense | (137) | (143) |
Other Income - Net | 7 | 7 |
Earnings Before Income Taxes | 582 | 568 |
Income Tax Expense | (220) | (212) |
Net Earnings | $ 362 | $ 356 |
Per Common Share | ||
Net Earnings Per Share, Basic (in dollars per share) | $ 0.39 | $ 0.37 |
Net Earnings Per Share, Assuming Dilution (in dollars per share) | $ 0.39 | $ 0.37 |
Average Shares Outstanding (in shares) | 927 | 962 |
Average Shares Outstanding, Assuming Dilution (in shares) | 929 | 963 |
Cash Dividends Paid Per Common Share (in dollars per share) | $ 0.18 | $ 0.18 |
CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS (Unaudited) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 25, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||
Total Comprehensive Earnings | $ 368 | $ 363 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Mar. 31, 2017 |
Dec. 30, 2016 |
---|---|---|
Shareholders' Equity: | ||
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Nature of Operations and Significant Accounting Policies |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Operations and Significant Accounting Policies | Nature of Operations and Significant Accounting Policies Background CSX Corporation (“CSX”), 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 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 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. The biggest Transflo markets are chemicals and agriculture, which include shipments of plastics and ethanol. CSX Technology and other subsidiaries provide support services for the Company. CSX’s other holdings include CSX Real Property, Inc. ("CSX Real Property"), a subsidiary responsible for the Company’s real estate sales, leasing, acquisition and management and development activities. As substantially all of CSX Real Property's remaining activities are focused on supporting railroad operations, beginning in first quarter 2017, all results of these activities are included in operating income. Previously, these activities were classified as operating or non-operating based on the nature of the activity and were not material for any periods presented. Basis of Presentation In the opinion of management, the accompanying consolidated financial statements contain all normal, recurring adjustments necessary to fairly present the following:
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. NOTE 1. Nature of Operations and Significant Accounting Policies, continued Fiscal Year CSX follows a 52/53 week fiscal reporting calendar with the last day of each reporting period ending on a Friday:
Except as otherwise specified, references to “first quarter(s)” or “three months” indicate CSX's fiscal periods ending March 31, 2017 and March 25, 2016, and references to "year-end" indicate the fiscal year ended December 30, 2016. 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 creditworthiness 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 $23 million and $33 million is included in the consolidated balance sheets as of the end of first quarter 2017 and December 30, 2016, respectively. New Accounting Pronouncements In March 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires that only the service cost component of net periodic benefit costs be recorded as compensation cost in the operating expense section of the income statement. All other components of net periodic benefit cost (interest cost, expected return on plan assets and amortization of net loss) will be presented in other income - net. This standard update is effective beginning with the first quarter 2018 and must be applied retrospectively. The Company does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity. In March 2017, the FASB issued ASU Simplifying the Test for Goodwill Impairment, which eliminates step two, the calculation of the implied fair value of goodwill, from the goodwill impairment test. Impairment will be quantified in step one of the test as the amount by which the carrying amount exceeds the fair value. This standard update is effective beginning first quarter 2020 and must be applied prospectively. The Company does not believe this standard will have a material effect on its financial condition, results of operations or liquidity. In May 2014, the FASB issued ASU Revenue from Contracts with Customers, which supersedes previous revenue recognition guidance. The new standard requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. Companies will need to use more judgment and estimates than under the guidance currently in effect, including estimating the amount of variable revenue to recognize over each identified performance obligation. Additional disclosures will be required to help users of financial statements understand the nature, amount and timing of revenue and cash flows arising from contracts. This standard update is effective for CSX beginning with the first quarter 2018 and can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. NOTE 1. Nature of Operations and Significant Accounting Policies, continued The FASB has recently issued several amendments to the revenue standard, including clarification on accounting for principal versus agent considerations (i.e., reporting gross versus net), licenses of intellectual property and identifying performance obligations. These amendments do not change the core principle of the standard, but provide clarity and implementation guidance. The Company is currently finalizing its review of the impact of adopting this new guidance and developing a comprehensive implementation plan. In-depth reviews of a significant portion of commercial contracts have been completed, additional contracts are presently being reviewed and changes to processes and internal controls have been identified to meet the standard’s reporting and disclosure requirements. At this time, the Company does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity. In February 2016, the FASB issued ASU, Leases, which will require lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability, and lessors to recognize a net lease investment. Additional qualitative and quantitative disclosures will also be required. This standard update is effective for CSX beginning with the first quarter 2019 and will be adopted using a modified retrospective method. Changes to processes and internal controls to meet the standard’s reporting and disclosure requirements have been identified and continue to be implemented. For example, software has been implemented that will assist in recognition of additional assets and liabilities to be included on the balance sheet related to operating leases with durations greater than twelve months, with certain allowable exceptions. The Company continues to evaluate the expected financial impact of this standard update. Other Items Restructuring charge In March 2017, the Company reduced its management workforce by 765 employees through an involuntary separation program with enhanced benefits. The majority of separation benefits will be paid from general corporate funds while certain benefits will be paid through CSX’s qualified pension plans. Cash expenditures, most of which will take place in second quarter 2017, will total approximately $90 million primarily related to one-time severance costs. Additionally, the terms of unvested equity awards for the outgoing CEO and President were modified prior to their retirements on March 6, 2017 to permit prorated vesting through May 31, 2018. The restructuring charge includes costs related to the management workforce reduction, the proration of equity awards and other advisory costs related to the leadership transition. The majority of the costs for restructuring activities for these 765 employees were recognized in first quarter 2017 as shown in the table below. The Company expects to incur additional costs as reductions continue until the program is completed.
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Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share The following table sets forth the computation of basic earnings per share and earnings per share, assuming dilution:
Basic earnings per share is based on the weighted-average number of shares of common stock outstanding. Earnings per share, assuming dilution, is based on the weighted-average number of shares of common stock equivalents outstanding adjusted for the effects of common stock that may be issued as a result of potentially dilutive instruments. CSX's potentially dilutive instruments are made up of equity awards, which include long-term incentive awards, and employee stock options. The Earnings Per Share Topic in the FASB's 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, this rule requires CSX to include the potential shares that would be outstanding if all outstanding stock options were exercised. This number is different from outstanding stock options, which is included in Note 3, Share-Based Compensation, because it is offset by shares CSX could repurchase using the proceeds from these hypothetical exercises to obtain the common stock equivalent. Approximately three million and four million of total average outstanding stock options for the first quarters ended March 31, 2017 and March 25, 2016, respectively, were excluded from the diluted earnings per share calculation because their effect was antidilutive. Dividend Increase and Share Repurchases On April 20, 2017, the Company announced an 11 percent increase in the quarterly dividend to $0.20 per common share, payable on June 15, 2017 to shareholders of record at the close of business on May 31, 2017. Also, on April 20, 2017, the Company announced a new $1 billion share repurchase program, which is expected to be completed over the next 12 months. During the first quarters of 2017 and 2016, the Company repurchased approximately $258 million, or six million shares, and $249 million, or ten million shares, respectively under the $2 billion share repurchase program announced in April 2015. As of April 5, 2017, the Company had completed all share repurchases under this program. NOTE 2. Earnings Per Share, continued Management's assessment of market conditions and other factors guides the timing and volume of repurchases. Future share repurchases are expected to be funded by cash on hand, cash generated from operations and debt issuances. Shares are retired immediately upon repurchase. 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. |
Share-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | Share-Based Compensation Under CSX's share-based compensation plans, awards consist of performance units, restricted stock awards, restricted stock units and stock options for management and stock grants for directors. 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. Share-based compensation expense is measured using the fair value of the award on the grant date and is recognized on a straight-line basis over the service period of the respective award. Total pre-tax expense associated with share-based compensation and its related income tax benefit is shown in the table below. The year over year increase in expense related to performance units and stock options is primarily due to modifications to the terms of awards (see Equity Award Modifications below) and higher expected award payouts.
Long-term Incentive Plan On February 22, 2017, the Company granted approximately 600 thousand performance units to certain employees under a new long-term incentive plan ("2017-2019 LTIP"), which was adopted under the CSX Stock and Incentive Award Plan. Payouts of performance units for the cycle ending with fiscal year 2019 will be based on the achievement of goals related to both operating ratio and return on assets in each case excluding non-recurring items as disclosed in the Company's financial statements. The cumulative operating ratio and average return on assets over the plan period will each comprise 50% of the payout and will be measured independently of the other. Grants were made in performance units, with each unit representing the right to receive 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. Payouts for certain executive officers are subject to downward adjustment by up to 30% based upon total shareholder return relative to specified comparable groups. NOTE 3. Share-Based Compensation, continued Stock Options Also, on February 22, 2017, the Company granted approximately 1.3 million stock options along with the corresponding LTIP plan. The fair value of stock options on the date of grant was $12.54 per option which was calculated using the Black-Scholes valuation model. Stock options have been granted with ten-year terms and vest three years after the date of grant. The exercise price for stock options granted equals the closing market price of the underlying stock on the date of grant. These awards are time-based and are not based upon attainment of performance goals. Restricted Stock Units Finally, on February 22, 2017, the Company granted approximately 300 thousand restricted stock units along with the corresponding LTIP plan. 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 attainment of performance goals. For information related to the Company's other outstanding long-term incentive compensation, see CSX's most recent annual report on Form 10-K. CEO Stock Option Award On March 6, 2017, the Company granted 9 million stock options to the incoming CEO at a fair value of $12.88 per option calculated using the Black-Scholes valuation model. These options were granted with a ten-year term and an exercise price equal to the closing market price of the underlying stock on the date of grant. Half of the options, or 4.5 million, will vest on the CEO's service anniversary in equal annual installments over 4 years. The other half will vest based on achievement of performance targets related to both operating ratio and earnings before interest, taxes, depreciation and amortization adjusted for certain items. Fair Value of All Stock Option Awards The fair value of all stock option awards during the quarter, including those granted along with 2017-2019 LTIP and the CEO stock option award, was estimated at the grant date with the following weighted average assumptions:
NOTE 3. Share-Based Compensation, continued Equity Award Modifications The terms of performance units, restricted stock units and stock options granted as part of the Company's long-term share-based compensation plans typically require participants to be employed through the final day of the respective performance or vesting period as applicable, except in the case of death, disability or retirement. As part of an enhanced severance benefit under the management streamlining and realignment initiative discussed in Note 1, unvested performance units, restricted stock units and stock options for separated employees not eligible for retirement were permitted to vest on a pro-rata basis. Additionally, the terms of unvested equity awards for the outgoing CEO and President were modified prior to their retirements on March 6, 2017 to permit prorated vesting through May 31, 2018. The terms were modified in exchange for each agreeing to serve in an advisory capacity upon request until May 31, 2017, and waiving various rights and claims, including the cancellation of their respective change of control agreements with the Company. Together, these two award modifications impacted a total of 58 employees. The resulting increase to share-based compensation expense for revaluation of the affected awards was $12 million. |
Casualty, Environmental and Other Reserves |
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Casualty, Environmental and Other Reserves [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Casualty, Environmental and Other Reserves | Casualty, Environmental and Other Reserves Casualty, environmental and other reserves are considered critical accounting estimates due to the need for significant management judgment. They are provided for in the consolidated balance sheets as shown in the table below:
These liabilities are accrued when reasonably estimable and probable in accordance with the Contingencies Topic in the ASC. Actual settlements and claims received could differ, and final outcomes 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 adverse effect on the Company's financial condition, results of operations or liquidity. Should a number of these items occur in the same period, however, their combined effect could be material in that particular period. NOTE 4. Casualty, Environmental and Other Reserves, continued Casualty Casualty reserves of $226 million and $229 million as of March 31, 2017 and December 30, 2016, respectively, represent accruals for personal injury, occupational disease and occupational injury 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 estimate. 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 Company's casualty 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 current or former CSX subsidiaries are covered by various state workers’ compensation laws, the Federal Longshore and Harbor Workers’ Compensation Program or the Maritime Jones Act. CSXT retains an independent actuary to assist management in assessing the value of personal injury claims. An analysis is performed by the actuary quarterly and is reviewed by management. This analysis for the quarter resulted in an immaterial adjustment to the personal injury reserve. 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 Occupational reserves represent liabilities for occupational disease and injury claims. Occupational disease claims arise primarily from allegations of exposure to asbestos in the workplace. Occupational injury claims arise from allegations of exposure to certain other 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. The greatest possible exposure to asbestos for employees resulted from work conducted in and around steam locomotive engines that were largely phased out beginning around the 1950s. Other types of exposures, however, including exposure from locomotive component parts and building materials, continued until these exposures were substantially eliminated by 1985. Diseases associated with asbestos typically have long latency periods (amount of time between exposure to asbestos and the onset of the disease) which can range from 10 to 40 years after exposure. Management reviews asserted asbestos claims quarterly. Unasserted or incurred but not reported ("IBNR") asbestos claims are analyzed by a third-party specialist and reviewed by management annually. CSXT’s historical claim filings, settlement amounts, and dismissal rates are analyzed to determine future anticipated claim filing rates and average settlement values for asbestos claims reserves. The potentially exposed population is estimated by using CSXT’s employment records and industry data. From this analysis, the specialist estimates the IBNR claims liabilities. NOTE 4. Casualty, Environmental and Other Reserves, continued Environmental Environmental reserves were $93 million and $95 million as of March 31, 2017 and December 30, 2016, respectively. 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 222 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 ("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. 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:
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 reasonably 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. Environmental remediation costs are included in materials, supplies and other on the consolidated income statement. 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 estimated cost of remedial actions currently required. NOTE 4. Casualty, Environmental and Other Reserves, continued Other Other reserves of $47 million and $50 million as of March 31, 2017 and December 30, 2016, respectively, include liabilities for various claims, such as property, automobile and general liability. Also included in other reserves are longshoremen disability claims related to a previously owned international shipping business (these claims are in runoff) as well as claims for current port employees. |
Commitments and Contingencies |
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Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 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 property and liability 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 insurance coverage is adequate, 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 practices, tax matters, environmental and hazardous material exposure matters, FELA and labor claims by current or former 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 management that none of these pending items is likely to 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 $6 million to $129 million in aggregate at March 31, 2017. 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 in federal court in the District of Columbia, where they are now pending. 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 5. Commitments and Contingencies, continued 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, but 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. The District Court remand proceedings are underway and the class certification hearing was held in September 2016. The District Court has delayed proceedings on the merits of the case pending the outcome of the class certification remand proceedings. The court has given no indication of timing on its ruling regarding class certification. 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 resolution of this matter or 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. Environmental CSXT is indemnifying Pharmacia LLC (formerly known as Monsanto Company) for certain liabilities associated with real estate located in Kearny, New Jersey along the Lower Passaic River (the “Property”). The Property, which was formerly owned by Pharmacia, is now owned by CSXT. CSXT's indemnification and defense duties arise with respect to several matters. The U.S. Environmental Protection Agency ("EPA"), using its CERCLA authority, seeks cleanup and removal costs and other damages associated with the presence of hazardous substances in the 17-mile Lower Passaic River Study Area (the "Study Area”). CSXT, on behalf of Pharmacia, and a significant number of other potentially responsible parties are together conducting a Remedial Investigation and Feasibility Study of the Study Area pursuant to an Administrative Settlement Agreement and Order on Consent with the EPA. In March 2016, EPA issued its Record of Decision detailing the agency’s mandated remedial process for the lower 8 miles of the Study Area, which was based on a Focused Feasibility Study. EPA has estimated that it will take the potentially responsible parties approximately ten years to complete the work. At a later date, EPA will select a remedy for the remainder of the Study Area and is expected to again seek the participation of private parties to implement the selected remedy using EPA’s CERCLA authority to compel such participation, if necessary. CSXT is also defending and indemnifying Pharmacia in a cooperative natural resource damages assessment process related to the Property. Based on currently available information, the Company does not believe any indemnification or remediation costs potentially allocable to CSXT with respect to the Property and the Study Area would be material to the Company's financial condition, results of operations or liquidity. |
Employee Benefit Plans |
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Compensation and Retirement Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Benefit Plans | Employee Benefit Plans The Company sponsors defined benefit pension plans principally for salaried, management personnel. For employees hired prior to January 1, 2003, 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 post-retirement medical plan and a life insurance plan that provide certain benefits to full-time, salaried, management employees, hired prior to January 1, 2003, upon their retirement if certain eligibility requirements are met. Eligible retirees who are age 65 years or older (Medicare-eligible) are covered by a health reimbursement arrangement, which is an employer-funded account that can be used for reimbursement of eligible medical expenses. Eligible retirees younger than 65 years (non-Medicare eligible) are covered by a self-insured program partially funded by participating retirees. The life insurance plan is non-contributory. As a result of the management streamlining and realignment program initiated in the first quarter 2017, the Company remeasured other post-retirement benefits as of March 1, 2017 (the remeasurement date) and recorded a curtailment loss of $13 million included in restructuring charge on the income statement. In connection with this remeasurement, the Company updated the effective discount rate assumption from 3.71% to 3.59%. The Company engages independent actuaries to compute the amounts of liabilities and expenses relating to these plans subject to the assumptions that the Company determines are appropriate based on historical trends, current market rates and future projections. These amounts are reviewed by management. The following table describes the components of expense / (income) related to net benefit expense recorded in labor and fringe on the income statement.
(a) Special termination benefits were charges in the first quarter 2017 that resulted from the management workforce reduction. For further information regarding the plan, see Note 1. Nature of Operations and Significant Accounting Policies. NOTE 6. Employee Benefit Plans, continued Qualified pension plan obligations are funded in accordance with regulatory requirements and with an objective of meeting or exceeding minimum funding requirements necessary to avoid restrictions on flexibility of plan operation and benefit payments. No contributions to the Company's qualified pension plans are expected in 2017. |
Debt and Credit Agreements |
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Debt and Credit Agreements | Debt and Credit Agreements Total activity related to long-term debt as of the end of first quarter 2017 is shown in the table below. 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 May 2020, 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. Commitment fees and interest rates payable under the facility were similar to fees and rates available to comparably rated investment-grade borrowers. As of first quarter 2017, CSX was in compliance with all covenant requirements under this facility. Receivables Securitization Facility The Company has a receivables securitization facility with a three-year term scheduled to expire in September 2019. The purpose of this facility is to provide an alternative to commercial paper and a low cost source of short-term liquidity of up to $200 million, depending on eligible receivables balances. As of the date of this filing, the Company has no outstanding balances under this facility. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes There have been no material changes to the balance of unrecognized tax benefits reported at December 30, 2016. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | 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.
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 and government 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.
The Company's investment assets are carried at fair value on the consolidated balance sheets as summarized in the table below. All of the inputs used to determine the fair value of the Company's investments are Level 2 inputs. The amortized cost basis of these investments was $369 million and $500 million as of March 31, 2017 and December 30, 2016, respectively. NOTE 9. Fair Value Measurements, continued
These investments have the following maturities:
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 adviser that utilizes closing transactions, market quotes or market values of comparable debt. For those instruments not valued by the independent adviser, 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 independent adviser. 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, credit ratings, 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. The fair value and carrying value of the Company's long-term debt is as follows:
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Other Comprehensive Income (Loss) |
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Other Comprehensive Income (Loss) | Other Comprehensive Income (Loss) 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 equal 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 $368 million and $363 million for first quarters 2017 and 2016, 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. Amounts reclassified in pension and other post-employment benefits to net earnings 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. Other primarily represents CSX's share of AOCI of equity method investees. Amounts reclassified in other to net earnings are included in materials, supplies and other on the consolidated income statements.
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Summarized Consolidating Financial Data |
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Condensed Financial Information of Parent Company Only Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summarized Consolidating Financial Data | Summarized Consolidating Financial Data In 2007, CSXT, a wholly-owned subsidiary of CSX Corporation, sold secured equipment notes maturing in 2023 in a registered public offering. 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 shown in the tables below.
Summarized Consolidating Financial Data, continued
Summarized Consolidating Financial Data, continued
Summarized Consolidating Financial Data, continued
NOTE 11. Summarized Consolidating Financial Data, continued
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Nature of Operations and Significant Accounting Policies (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||
Basis of Presentation | In the opinion of management, the accompanying consolidated financial statements contain all normal, recurring adjustments necessary to fairly present the following:
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. |
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Fiscal Year | CSX follows a 52/53 week fiscal reporting calendar with the last day of each reporting period ending on a Friday:
Except as otherwise specified, references to “first quarter(s)” or “three months” indicate CSX's fiscal periods ending March 31, 2017 and March 25, 2016, and references to "year-end" indicate the fiscal year ended December 30, 2016. |
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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 creditworthiness of customers, historical experience, the age of the receivable and current market and economic conditions. Uncollectible amounts are charged against the allowance account. |
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New Accounting Pronouncements | In March 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires that only the service cost component of net periodic benefit costs be recorded as compensation cost in the operating expense section of the income statement. All other components of net periodic benefit cost (interest cost, expected return on plan assets and amortization of net loss) will be presented in other income - net. This standard update is effective beginning with the first quarter 2018 and must be applied retrospectively. The Company does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity. In March 2017, the FASB issued ASU Simplifying the Test for Goodwill Impairment, which eliminates step two, the calculation of the implied fair value of goodwill, from the goodwill impairment test. Impairment will be quantified in step one of the test as the amount by which the carrying amount exceeds the fair value. This standard update is effective beginning first quarter 2020 and must be applied prospectively. The Company does not believe this standard will have a material effect on its financial condition, results of operations or liquidity. In May 2014, the FASB issued ASU Revenue from Contracts with Customers, which supersedes previous revenue recognition guidance. The new standard requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. Companies will need to use more judgment and estimates than under the guidance currently in effect, including estimating the amount of variable revenue to recognize over each identified performance obligation. Additional disclosures will be required to help users of financial statements understand the nature, amount and timing of revenue and cash flows arising from contracts. This standard update is effective for CSX beginning with the first quarter 2018 and can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. NOTE 1. Nature of Operations and Significant Accounting Policies, continued The FASB has recently issued several amendments to the revenue standard, including clarification on accounting for principal versus agent considerations (i.e., reporting gross versus net), licenses of intellectual property and identifying performance obligations. These amendments do not change the core principle of the standard, but provide clarity and implementation guidance. The Company is currently finalizing its review of the impact of adopting this new guidance and developing a comprehensive implementation plan. In-depth reviews of a significant portion of commercial contracts have been completed, additional contracts are presently being reviewed and changes to processes and internal controls have been identified to meet the standard’s reporting and disclosure requirements. At this time, the Company does not believe this standard update will have a material effect on its financial condition, results of operations or liquidity. In February 2016, the FASB issued ASU, Leases, which will require lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability, and lessors to recognize a net lease investment. Additional qualitative and quantitative disclosures will also be required. This standard update is effective for CSX beginning with the first quarter 2019 and will be adopted using a modified retrospective method. Changes to processes and internal controls to meet the standard’s reporting and disclosure requirements have been identified and continue to be implemented. For example, software has been implemented that will assist in recognition of additional assets and liabilities to be included on the balance sheet related to operating leases with durations greater than twelve months, with certain allowable exceptions. The Company continues to evaluate the expected financial impact of this standard update. |
Nature of Operations and Significant Accounting Policies (Tables) |
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Restructuring Charges |
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Earnings Per Share (Tables) |
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Computation of Basic Earnings Per Share, Assuming Dilution | The following table sets forth the computation of basic earnings per share and earnings per share, assuming dilution:
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Share-Based Compensation (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation and Related Income Tax Benefit | The year over year increase in expense related to performance units and stock options is primarily due to modifications to the terms of awards (see Equity Award Modifications below) and higher expected award payouts.
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Summary of Fair Value Assumptions for Stock Option Awards | The fair value of all stock option awards during the quarter, including those granted along with 2017-2019 LTIP and the CEO stock option award, was estimated at the grant date with the following weighted average assumptions:
|
Casualty, Environmental and Other Reserves (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Casualty, Environmental and Other Reserves [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Casualty, Environmental and Other Reserves | Casualty, environmental and other reserves are considered critical accounting estimates due to the need for significant management judgment. They are provided for in the consolidated balance sheets as shown in the table below:
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Employee Benefit Plans (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation and Retirement Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Expense/(Income) Related to Net Benefit Expense | The following table describes the components of expense / (income) related to net benefit expense recorded in labor and fringe on the income statement.
(a) Special termination benefits were charges in the first quarter 2017 that resulted from the management workforce reduction. For further information regarding the plan, see Note 1. Nature of Operations and Significant Accounting Policies. |
Debt and Credit Agreements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity Related to Long-Term Debt | Total activity related to long-term debt as of the end of first quarter 2017 is shown in the table below. For fair value information related to the Company's long-term debt, see Note 9, Fair Value Measurements.
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Fair Value Measurements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value of Investment Assets | The Company's investment assets are carried at fair value on the consolidated balance sheets as summarized in the table below. All of the inputs used to determine the fair value of the Company's investments are Level 2 inputs. The amortized cost basis of these investments was $369 million and $500 million as of March 31, 2017 and December 30, 2016, respectively. NOTE 9. Fair Value Measurements, continued
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Schedule of Investment Maturities | These investments have the following maturities:
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Schedule of Fair Value and Carrying Value of Long-Term Debt | The fair value and carrying value of the Company's long-term debt is as follows:
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Other Comprehensive Income (Loss) (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in AOCI balance by Component | Changes in the AOCI balance by component are shown in the table below. Amounts reclassified in pension and other post-employment benefits to net earnings 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. Other primarily represents CSX's share of AOCI of equity method investees. Amounts reclassified in other to net earnings are included in materials, supplies and other on the consolidated income statements.
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Summarized Consolidating Financial Data (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Condensed Financial Information of Parent Company Only Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidating Income Statements |
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Consolidating Balance Sheet |
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Consolidating Cash Flow Statements |
NOTE 11. Summarized Consolidating Financial Data, continued
|
Nature of Operations and Significant Accounting Policies - Narrative (Details) mi in Thousands, $ in Millions |
1 Months Ended | 3 Months Ended | |
---|---|---|---|
Mar. 31, 2017
USD ($)
state
employee
mi
|
Jun. 30, 2017
USD ($)
|
Dec. 30, 2016
USD ($)
|
|
Background | |||
Total number of rail route miles | mi | 21 | ||
Number of states rail network serves | state | 23 | ||
Allowance for Doubtful Accounts | |||
Allowance for doubtful accounts | $ 23 | $ 33 | |
Management Streamlining Initiative | |||
Other Items [Abstract] | |||
Workforce reduction (number of employees) | employee | 765 | ||
Severance and Pension | Scenario, Forecast | Management Streamlining Initiative | |||
Other Items [Abstract] | |||
Payments for restructuring | $ 90 |
Earnings Per Share - Computation of Basic Earnings Per Share, Assuming Dilution (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 25, 2016 |
|
Numerator: | ||
Net Earnings | $ 362 | $ 356 |
Denominator: | ||
Average Common Shares Outstanding (in shares) | 927 | 962 |
Other Potentially Dilutive Common Shares (in shares) | 2 | 1 |
Average Common Shares Outstanding, Assuming Dilution (in shares) | 929 | 963 |
Net Earnings Per Share, Basic (in dollars per share) | $ 0.39 | $ 0.37 |
Net Earnings Per Share, Assuming Dilution (in dollars per share) | $ 0.39 | $ 0.37 |
Earnings Per Share - Narrative (Details) - USD ($) $ / shares in Units, shares in Millions |
3 Months Ended | |||
---|---|---|---|---|
Apr. 20, 2017 |
Mar. 31, 2017 |
Mar. 25, 2016 |
Apr. 30, 2015 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Share repurchase program | $ 2,000,000,000 | |||
Shares repurchased value | $ 258,000,000 | $ 249,000,000 | ||
Shares repurchased during the period (in shares) | 6 | 10 | ||
Subsequent Event | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Dividend increase (as a percent) | 11.00% | |||
Quarterly dividend (in dollars per share) | $ 0.20 | |||
Share repurchase program | $ 1,000,000,000 | |||
Employee Stock Option | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities | 3 | 4 |
Share-Based Compensation - Share-Based Compensation and Related Income Tax Benefit (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 25, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-Based Compensation Expense | $ 38 | $ 8 |
Income Tax Benefit | 13 | 3 |
Performance Units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-Based Compensation Expense | 20 | 1 |
Stock Options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-Based Compensation Expense | 12 | 2 |
Restricted Stock Units and Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-Based Compensation Expense | 4 | 3 |
Stock Awards for Directors | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-Based Compensation Expense | $ 2 | $ 2 |
Share-Based Compensation - Summary of Fair Value Assumptions for Stock Option Awards (Details) - $ / shares |
3 Months Ended | |||
---|---|---|---|---|
Mar. 06, 2017 |
Feb. 22, 2017 |
Mar. 31, 2017 |
Mar. 25, 2016 |
|
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | ||||
Fair value of stock options (in dollars per share) | $ 12.54 | $ 12.83 | $ 4.68 | |
Expected dividend yield (as a percent) | 1.50% | 3.00% | ||
Risk-free interest rate (as a percent) | 2.20% | 1.40% | ||
Expected stock price volatility (as a percent) | 27.10% | 27.30% | ||
Expected Term (in years) | 6 years 3 months | 6 years 6 months | ||
Weighted average grant price (in dollars per share) | $ 49.61 | $ 24.13 | ||
Chief Executive Officer | ||||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | ||||
Fair value of stock options (in dollars per share) | $ 12.88 |
Casualty, Environmental and Other Reserves - Schedule of Casualty, Environmental and Other Reserves (Details) - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 30, 2016 |
---|---|---|
Loss Contingencies [Line Items] | ||
Current | $ 114 | $ 115 |
Long-term | 252 | 259 |
Total | 366 | 374 |
Total Casualty | ||
Loss Contingencies [Line Items] | ||
Current | 53 | 53 |
Long-term | 173 | 176 |
Total | 226 | 229 |
Personal Injury | ||
Loss Contingencies [Line Items] | ||
Current | 46 | 46 |
Long-term | 122 | 124 |
Total | 168 | 170 |
Occupational(a) | ||
Loss Contingencies [Line Items] | ||
Current | 7 | 7 |
Long-term | 51 | 52 |
Total | 58 | 59 |
Environmental | ||
Loss Contingencies [Line Items] | ||
Current | 42 | 42 |
Long-term | 51 | 53 |
Total | 93 | 95 |
Other | ||
Loss Contingencies [Line Items] | ||
Current | 19 | 20 |
Long-term | 28 | 30 |
Total | $ 47 | $ 50 |
Casualty, Environmental and Other Reserves - Narrative (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2017
USD ($)
claim
site
|
Dec. 30, 2016
USD ($)
|
|
All Contingencies Reserves [Line Items] | ||
Total reserves | $ 366,000,000 | $ 374,000,000 |
Casualty | ||
All Contingencies Reserves [Line Items] | ||
Total reserves | 226,000,000 | 229,000,000 |
Self-insured retention amount, per occurrence | $ 50,000,000 | |
Number of individual claims expected to exceed self insured retention amount | claim | 0 | |
Environmental | ||
All Contingencies Reserves [Line Items] | ||
Total reserves | $ 93,000,000 | 95,000,000 |
Environmental impaired sites | site | 222 | |
Other | ||
All Contingencies Reserves [Line Items] | ||
Total reserves | $ 47,000,000 | $ 50,000,000 |
Minimum | ||
All Contingencies Reserves [Line Items] | ||
Loss contingency, latency period (in years) | 10 years | |
Maximum | ||
All Contingencies Reserves [Line Items] | ||
Loss contingency, latency period (in years) | 40 years |
Employee Benefit Plans - Components of Expense/(Income) Related to Net Benefit Expense (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 25, 2016 |
|
Pension Benefits | ||
Components of expense/ (income) related to net benefit expense: | ||
Service Cost | $ 11 | $ 12 |
Interest Cost | 23 | 30 |
Expected Return on Plan Assets | (42) | (39) |
Amortization of Net Loss | 11 | 12 |
Net Periodic Benefit Cost | 3 | 15 |
Special Termination Benefits – Workforce Reduction Program | 50 | 0 |
Total Expense | 53 | 15 |
Other Post-retirement Benefits | ||
Components of expense/ (income) related to net benefit expense: | ||
Interest Cost | 2 | 3 |
Amortization of Net Loss | 0 | 1 |
Net Periodic Benefit Cost | 2 | 4 |
Special Termination Benefits – Workforce Reduction Program | 13 | 0 |
Total Expense | $ 15 | $ 4 |
Employee Benefit Plans - Narrative (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2017 |
Mar. 01, 2017 |
Feb. 28, 2017 |
|
Compensation and Retirement Disclosure [Abstract] | |||
Discount rate assumption (as a percent) | 3.59% | 3.71% | |
Expected pension contributions | $ 0 |
Debt and Credit Agreements - Activity Related to Long-Term Debt (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2017
USD ($)
| |
Movement, Debt Instruments [Roll Forward] | |
Beginning balance, current portion | $ 331 |
Beginning balance, long-term portion | 10,962 |
Beginning balance, total | 11,293 |
Discount, premium and other activity | (1) |
Debt issue cost activity | 2 |
Ending balance, current portion | 331 |
Ending balance, long-term portion | 10,963 |
Ending balance, total | 11,294 |
Current Portion | |
Movement, Debt Instruments [Roll Forward] | |
Beginning balance, current portion | 331 |
Discount, premium and other activity | 0 |
Debt issue cost activity | 0 |
Ending balance, current portion | 331 |
Long-term Portion | |
Movement, Debt Instruments [Roll Forward] | |
Beginning balance, long-term portion | 10,962 |
Discount, premium and other activity | (1) |
Debt issue cost activity | 2 |
Ending balance, long-term portion | $ 10,963 |
Debt and Credit Agreements - Narrative (Details) |
3 Months Ended |
---|---|
Mar. 31, 2017
USD ($)
| |
Credit Facility | |
Line of Credit Facility | |
Borrowing capacity | $ 1,000,000,000 |
Facility expiration date | May 21, 2020 |
Amount outstanding | $ 0 |
Receivables Securitization Facility | |
Line of Credit Facility | |
Borrowing capacity | $ 200,000,000 |
Facility expiration date | Sep. 01, 2019 |
Facility expiration period | 3 years |
Outstanding balance | $ 0 |
Income Taxes (Details) $ in Millions |
12 Months Ended |
---|---|
Dec. 30, 2016
USD ($)
| |
Income Tax Disclosure [Abstract] | |
Unrecognized tax benefits increase | $ 0 |
Unrecognized tax benefits decrease | $ 0 |
Fair Value Measurements - Schedule of Fair Value of Investment Assets (Details) - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 30, 2016 |
---|---|---|
Carrying Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Amortized cost basis of investments | $ 369 | $ 500 |
Fair Value | Level 1 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments fair value disclosure | 371 | 500 |
Fair Value | Level 1 | Certificates of Deposit and Commercial Paper | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments fair value disclosure | 285 | 415 |
Fair Value | Level 1 | Corporate Bonds | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments fair value disclosure | 64 | 63 |
Fair Value | Level 1 | Government Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments fair value disclosure | $ 22 | $ 22 |
Fair Value Measurements - Schedule of Investment Maturities (Details) - Fair Value - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 30, 2016 |
---|---|---|
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Less than 1 year | $ 287 | $ 417 |
1 - 2 years | 12 | 12 |
2 - 5 years | 6 | 4 |
Greater than 5 years | 66 | 67 |
Total investments at fair value | $ 371 | $ 500 |
Fair Value Measurements - Schedule of Fair Value and Carrying Value of Long-Term Debt (Details) - Level 2 - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 30, 2016 |
---|---|---|
Fair Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term Debt (Including Current Maturities): | $ 12,055 | $ 12,096 |
Carrying Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term Debt (Including Current Maturities): | $ 11,294 | $ 11,293 |
Other Comprehensive Income (Loss) - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 25, 2016 |
|
Equity [Abstract] | ||
Total comprehensive earnings, net of tax | $ 368 | $ 363 |
Other Comprehensive Income (Loss) - Changes in AOCI balance by Component (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2017
USD ($)
| |
Pension and Other Post-Employment Benefits | |
Other Comprehensive Income (Loss) | |
Beginning balance | $ (580) |
Loss Before Reclassifications | 0 |
Amounts Reclassified to Net Earnings | 11 |
Tax Expense | (4) |
Total Other Comprehensive Income (Loss) | 7 |
Ending balance | (573) |
Other | |
Other Comprehensive Income (Loss) | |
Beginning balance | (60) |
Loss Before Reclassifications | (1) |
Amounts Reclassified to Net Earnings | 0 |
Tax Expense | 0 |
Total Other Comprehensive Income (Loss) | (1) |
Ending balance | (61) |
Accumulated Other Comprehensive Income (Loss) | |
Other Comprehensive Income (Loss) | |
Beginning balance | (640) |
Loss Before Reclassifications | (1) |
Amounts Reclassified to Net Earnings | 11 |
Tax Expense | (4) |
Total Other Comprehensive Income (Loss) | 6 |
Ending balance | $ (634) |
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