11-K 1 f11k123102capbuild.txt CAPITAL BUILDER PLAN UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K [x] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 or [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the year ended December 31, 2002 Commission file number 1-8022 CSX CORPORATION CAPITAL BUILDER PLAN CSX CORPORATION A Virginia Corporation IRS Employer Identification Number 62-1051971 500 Water Street 15th Floor Jacksonville, Florida 32202 Telephone (904) 359-3200 CSX CORPORATION CAPITAL BUILDER PLAN FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 AND 2001 Contents Report of Independent Certified Public Accountants ............... 3 Statements of Net Assets Available for Benefits................... 4 Statement of Changes in Net Assets Available for Benefits......... 5 Notes to Financial Statements..................................... 6-12 Signature......................................................... 13 Exhibit 23 - Consent of Ernst & Young LLP, Independent Certified Public Accountants..................................... I-1
Report of Independent Certified Public Accountants The Finance Committee of the Board of Directors CSX Corporation Capital Builder Plan CSX Corporation Jacksonville, Florida We have audited the accompanying statements of net assets available for benefits of the CSX Corporation Capital Builder Plan as of December 31, 2002 and 2001, and the related statement of changes in net assets available for benefits for the year ended December 31, 2002. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2002 and 2001, and the changes in its net assets available for benefits for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP Jacksonville, Florida June 23, 2003 3 CSX CORPORATION CAPITAL BUILDER PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS (Dollars in Thousands)
December 31 2002 2001 ----------------------- ASSETS Investment in Master Trust, at fair value (see Note 3) $289,771 $332,468 LIABILITY Accrued expenses 132 152 ----------------------- NET ASSETS AVAILABLE FOR BENEFITS $289,639 $332,316 =======================
See Notes to Financial Statements. 4 CSX CORPORATION CAPITAL BUILDER PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 2002 (Dollars in Thousands) ADDITIONS Employer contributions $ 6,196 Member contributions 25,647 ----------- 31,843 DEDUCTIONS Net loss on Investment in Master Trust 52,887 Distributions to members 21,174 Fees and expenses 459 ----------- 74,520 ----------- NET DECREASE (42,677) Net Assets Available for Benefits at Beginning of Year 332,316 ----------- Net Assets Available for Benefits at End of Year $289,639 ===========
See Notes to Financial Statements. 5 CSX CORPORATION CAPITAL BUILDER PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 (Dollars in Thousands) NOTE 1 - DESCRIPTION OF THE PLAN The following description of the CSX Corporation Capital Builder Plan (the Plan) provides only general information. Members should refer to the Summary Plan Description and the Plan document for a more complete description of the Plan's provisions. General: The Plan is a defined contribution plan covering certain union employees of CSX Corporation (CSX) and affiliated companies (collectively, the Company or Plan Sponsor). The Plan is an Employee Stock Ownership Plan (ESOP) designed to comply with Section 4975(e)(7) of the Internal Revenue Code of 1986, as amended and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended. Contributions: Effective January 1, 2002, the Plan was amended to allow a member to contribute from 1% up to 50%, (in 1% multiples) of eligible compensation, as defined by the Plan, on a pre-tax or after-tax basis. Prior to January 1, 2002, members could contribute a maximum of 15% of eligible compensation. Certain eligible members may also contribute other compensatory awards to the Plan. Subject to certain limitations, members may reinvest distributions from another qualified plan or Individual Retirement Account. Members may change percent of contribution and investment options daily. The Company contributes the value of a specified number of shares of CSX common stock on an annual basis to certain member accounts of the eligible groups, as defined by the Plan (ESOP Allocation). In 2002, Company contributions were funded from the CSX Corporation rabbi trust account which holds CSX common stock and cash. Shares to fund the contributions may be purchased throughout the year and held by CSX Corporation in a rabbi trust until they are contributed to the Plan and credited to the members' accounts. The Plan also provides for a Company matching contribution of stock or cash to certain eligible members. The amount and timing of the Company contributions varies according to applicable collective bargaining agreements. All Company contributions are invested in CSX common stock, except for certain contributions that can be directed by the members of certain eligible groups as defined by the Plan. 6 CSX CORPORATION CAPITAL BUILDER PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2002 (Dollars in Thousands) NOTE 1 - DESCRIPTION OF THE PLAN (Continued) Diversification: The Plan was amended effective May 1, 2002 to allow all members to immediately diversify the nonmember-directed contributions to the CSX Stock Fund to other investment options offered under the Plan. Prior to May 1, 2002, the Plan was amended effective January 1, 2002 to change the age requirement for a member to diversify nonmember-directed contributions from age 55 to age 50. Member Accounts: Each member's account is credited with the member's contributions and allocations of (a) the Company's contributions and (b) Plan earnings, and is charged with an allocation of administrative expenses. Allocations are based on member earnings or account balances, as defined. The benefit to which a member is entitled is the benefit that can be provided from the member's account. Vesting: Members are 100% vested in their accounts. Loans: Members may borrow from their account in amounts equal to no more than the lesser of $50 in an aggregate amount of all loans from the Plan or 50% of their vested account balance. Members may not borrow from an ESOP account or the Company match account even though those accounts are used in the calculation to determine the amount available for the loan. Loan terms range from one to five years unless the loan is to be used in conjunction with the purchase of a primary residence. The loans are secured by the balance in the member's account and bear interest at the prime rate in effect at CitiBank at the beginning of the quarter in which the loan originated. Principal and interest are paid ratably through payroll deductions. Dividends: Dividends paid on shares of Company stock held in a member's account are reinvested in shares of Company stock. A member or spousal beneficiary may elect to have dividends paid to them in cash. Any change in an election will apply only to ex-dividend dates occurring after the date such election is received. A member who does not make a timely election will have the dividends paid to their account and reinvested in shares of Company stock. Payment of Benefits: Upon termination of service, a member may receive a lump-sum amount equal to the vested value of his or her account, or upon disability or retirement, elect to receive monthly installments over a 240-month period. Surviving spouses of retired or disabled members may elect to continue or initiate monthly installments. A member with an account balance of $5 or less shall be paid in lump sum. 7 CSX CORPORATION CAPITAL BUILDER PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2002 (Dollars in Thousands) NOTE 1 - DESCRIPTION OF THE PLAN (Continued) Plan Termination: Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, members will remain 100% vested in their accounts. Administrative Expenses: The administrative expenses of the Plan are paid by the Company or from Plan funds as the Plan Sponsor directs. All of the administrative expenses of the Plan during the year ended December 31, 2002 were paid from Plan funds. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation: The financial statements have been prepared under the accrual method of accounting in accordance with accounting principles generally accepted in the United States. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. NOTE 3 - INVESTMENT IN MASTER TRUST All investments of the Master Trust are held by The Northern Trust Company, the Master Trust's trustee. At December 31, 2002 and 2001, the Plan's interest in the net assets of the Master Trust was approximately 31%. Investments in CSX Common Stock (stated at fair value) are valued at the last reported sales price on the last business day of the year. Investments in mutual funds are measured by quoted market prices and are reported at aggregate fair value at year-end. Synthetic guaranteed investment contracts (defined on page 10) are reported at fair value, which in the case of such contracts approximates contract value. Member loans are valued at their outstanding balances, which approximates fair value. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. 8 CSX CORPORATION CAPITAL BUILDER PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2002 (Dollars in Thousands) NOTE 3 - INVESTMENT IN MASTER TRUST (Continued) Summarized financial information of the Master Trust is presented below:
December 31 2002 2001 -------------------------- Assets: Accrued income $ 7 $ 15 Investments at fair value: Cash and cash equivalents 4,536 6,327 Mutual funds: Fidelity Equity-Income Fund 67,450 90,403 Vanguard Institutional Index Fund 101,505 140,309 Twentieth Century Select Fund 64,201 91,642 Other 51,487 58,760 CSX Corporation common stock 323,124 399,644 Other 266,709 208,441 Collective trust fund 27,510 36,313 Loans to members 27,028 24,761 -------------------------- Total assets 933,557 1,056,615 Liabilities: Due to brokers 518 - Accrued expenses 165 - ------------------------- Total Master Trust net assets $932,874 $1,056,615 =========================
9 CSX CORPORATION CAPITAL BUILDER PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2002 (Dollars in Thousands) NOTE 3 - INVESTMENT IN MASTER TRUST, (Continued) Investment income and expenses are allocated to each plan based upon its pro-rata share in the net assets of the Master Trust. Investment income (loss) for the Master Trust for the year ended December 31, 2002 is as follows: Net appreciation (depreciation) in fair value of investments determined by quoted market prices: Mutual funds $ (79,737) CSX Corporation common stock (73,247) Collective trust fund 1,421 ------------- (151,563) Interest and dividend income 24,471 ------------- Investment loss for the Master Trust $ (127,092) =============
Synthetic guaranteed investment contracts (SICs), included above in other investments, represent a diversified portfolio of primarily corporate and government bonds held in the name of the Master Trust in conjunction with a corresponding contract with the issuer of the SIC to provide a variable rate of return (based on investment experience and reset quarterly) on the cost of the investment. The crediting rate for the AIG Life Contract and the JP Morgan Contract at December 31, 2002 was 5.42% and 5.26%, respectively (6.17% and 6.19%, respectively, at December 31, 2001). The average crediting rate during 2002 was 5.92% for the AIG Life Contract and 5.94% for the JP Morgan contract. As of December 31, 2002, detail regarding the SICs is as follows:
AIG Life JP Morgan Contract Contract ------------------------------ Fair value of investments $146,179 $138,947 Fair value of corresponding contract (8,774) (9,643) --------- --------- Contract value $137,405 $129,304 ========= =========
10 CSX CORPORATION CAPITAL BUILDER PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2002 (Dollars in Thousands) Note 4 - NONMEMBER-DIRECTED INVESTMENTS As stated in Note 1 (Diversification), the plan was amended May 1, 2002 to allow members to reallocate their nonmember-directed contributions to the CSX Stock Fund. Therefore, as of May 1, 2002 there were no nonmember-directed investments. Information about the net assets and the significant components of the changes in net assets relating to the nonmember-directed investments is as follows: Net assets at December 31, 2001: CSX Corporation common stock $147,579 Change in net assets: Contributions 653 Dividends and interest 410 Transfers to other funds (537) Net appreciation in fair value of CSX stock 4,700 Distributions to participants (4,597) Reclassification to member-directed investments on May 1, 2002 (148,208) ----------- Net assets at December 31, 2002 $ - ===========
NOTE 5 - RELATED PARTY TRANSACTIONS CSX and its subsidiaries provide the Plan with certain management and accounting services. During the year ended December 31, 2002, the Master Trust reimbursed CSX and its subsidiaries approximately $116 for these services. During the year ended December 31, 2002, the Master Trust received cash dividends from investments in CSX common stock of $4,474. The Plan's share of these dividends was $2,214. The Trustee, Northern Trust Company, routinely invests assets in its Collective Short-Term Investment Fund. During the year ended December 31, 2002, the Master Trust earned interest of $110 for transactions with this fund, a portion of which was allocated to the Plan based upon the Plan's pro-rata share in the net assets of the Master Trust and included in the net loss on investment in Master Trust in the statement of changes in net assets available for benefits. 11 CSX CORPORATION CAPITAL BUILDER PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2002 (Dollars in Thousands) NOTE 6 - INCOME TAX STATUS The Plan has received a determination letter from the Internal Revenue Service dated March 12, 2002, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code and, therefore, the related trust is exempt from taxation. Subsequent to this issuance of the determination letter, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Sponsor believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan, as amended, is qualified and the related trust is tax exempt. 12 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the administrative committee members have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. CSX CORPORATION CAPITAL BUILDER PLAN By: /s/Carolyn T. Sizemore -------------------------- Carolyn T. Sizemore Vice President and Controller CSX Corporation (Plan Sponsor) Date: June 23, 2003 13