-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CdQ1ygVaAJFQPFJ2oC8MvFaeW1khrm4CgYBK+tMF95ps/6tvMyTg0bYKKcaDc9Ok yZlBa64bhked/jg/OXX12w== 0000950157-97-000009.txt : 19970108 0000950157-97-000009.hdr.sgml : 19970108 ACCESSION NUMBER: 0000950157-97-000009 CONFORMED SUBMISSION TYPE: DEFA14A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19970107 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONRAIL INC CENTRAL INDEX KEY: 0000897732 STANDARD INDUSTRIAL CLASSIFICATION: RAILROADS, LINE-HAUL OPERATING [4011] IRS NUMBER: 232728514 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEFA14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12184 FILM NUMBER: 97502063 BUSINESS ADDRESS: STREET 1: TWO COMMERCE SQ STREET 2: P O BOX 41417 CITY: PHILADELPHIA STATE: PA ZIP: 19101-1417 BUSINESS PHONE: 2152094434 MAIL ADDRESS: STREET 1: P.O. BOX 41429 STREET 2: 2001 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19101-1429 DEFA14A 1 SCHEDULE 14A INFORMATION SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant X ----- Filed by a Party other than the Registrant ----- Check the appropriate box: Preliminary Proxy Statement - ----- Confidential, for Use of the Commission Only - ----- (as permitted by Rule 14a-6(e)(2)) Definitive Proxy Statement - ----- X Definitive Additional Materials - ----- Soliciting Material Pursuant to Section 240.14a-11(c) or - ----- Section 240.14a-12 CONRAIL INC. (Name of Registrant as Specified in its Charter) (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): X No fee required. - ----- Fee computed on table below per Exchange Act Rules 14a-6(i)(1) - ----- and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: - ----- Fee paid previously with preliminary materials. Check box if any part of the fee is offset as provided by - ----- Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: [Slides presented by Conrail management to certain institutional and employee shareholders] Overview o Strategic considerations drive the CSX/Conrail combination - Rationalizes eastern rail networks - Provides new level of transportation efficiency and service for customers - Attacks truck dominance in major markets - Positions CSX/Conrail for substantial transcontinental opportunities o Creates Leading Global Transportation Company - Annual revenues exceeding $14 billion - Serves 80 countries worldwide - Links rail, shipping, barge, intermodal and contract logistics customers o Enhances Shareholder Value - Most revenue growth - Highest cost savings - Greatest financial flexibility Summary of Benefits o Greatest Synergy Potential - Transportation efficiencies - Consolidations - Productivity gains o Broadest Geographic Scope - Extensive single-line service - Direct and efficient routes o Financial Strength - Solid investment grade credit - Strong cash flow Cost Savings o Consolidations $295M o Facility Coordinations $ 71M o Transportation Efficiencies $127M o Productivity Gains $ 72M ----- Total Synergies $565M Revenue Synergies o Top Line Growth Resulting in $165 Million Additional Operating Income - 80% from Coal, Automotive and other Carload Business - 20% from Intermodal o Margin Improvements from Incremental Traffic - Optimized train sizing - Increased length of haul - Reduced empty movements Synergy Timing Year 1 Year 2 Year 3 Incremental Operating Income Net Traffic $ 70 $125 $165 Cost Savings 170 396 565 ---- ---- ---- Total Synergies $240 $521 $730 Timing 33% 71% 100% One-Time Cash Flows Capital Expenditures $ 75 $100 $ 25 Transition Costs 205 130 75 ----- ----- ---- Total $280 $230 $100 Broadest Geographic Scope o Strong Coverage in East, Midwest and Southeast - 29,645 route miles - Serves 22 states east of the Mississippi - Covers major markets from Chicago, Boston and New York to Miami and New Orleans - Allows efficient rail service in North/South markets o Provides Extensive Single-Line Service - Connects producing points in South/Southeast with consuming region in Northeast - Creates faster and more reliable service at lower cost Combined Revenue Base [Pie Chart showing the following: Food and Agriculture: 10% Chemicals: 21% Forest: 9% Automotive: 12% Coal: 23% Intermodal: 18% Metals: 7%] Carload Business o Almost 50% of Combined Revenues from Carload Business o Breadth of Market Coverage is Critical - CSX has broadest customer access o Revenue Growth Will Result from: - Expanded single-line service - Penetration of North/South truck market - Improvements in asset utilization o Single-Line Service Opportunities - Chemicals from Gulf Origins to Northeast - Midwest grain producers to users in South - Recycled Pulp and Paper Products to Southeast o Penetration of Truck-Dominated North/South Markets - Forest products from Southern Mills - Citrus products from Southeast - Minerals business in the East o Improved Asset Utilization - Reduced empty car movements - Opportunities for backhauls - Cycle time improvements Coal Business o 23% of Combined Revenues from Coal o CSX Has Most Low Sulfur Coal Reserves in East - Provides additional long-term compliance choices for Conrail utility customers - Adds efficient single-line service opportunities o Allows More Competitive Access for Export Coal at Bayside and Curtis Bay Terminals in Baltimore - CRR "Pittsburgh Seam" coal not competitive at Hampton Roads Terminal o Reduces Circuity on Major Movements - 400 to 450 miles from Charleston, W. Virginia export coal - 200 miles for W. Virginia coal to Northeast utilities o Removes 15,000 Annual Carloads from Amtrak - Reduces transit time by 12 hours in each direction - Saves $7.0 million in trackage rights payments Automotive Business o Represents 12% of Combined Revenues o Eliminates Rail Inefficiencies in Truck Dominated Markets - 11,000 annual truckloads between North Jersey and CSX's Twin Oaks, PA terminal - 22,000 annual truckloads in Detroit area o Provides Access to Seven of Nine Major East Coast Ports for Export/Import Business - Customer can select most competitive port o Offers Unequaled Network Density and Scope - Serves every major metropolitan market east of the Mississippi - Opens single-line service to Nashville, Tampa and Miami Intermodal Business o Represents 18% of Combined Revenues Enhances Merchandise Flow in the "Eastern Triangle" o Complementary Infrastructure and Terminals - Conrail Access to New York, New England and Midwest - CSX terminal coverage in Orlando and Tampa o Allows Penetration of Truck Dominated Markets - East Coast - Atlanta - East Coast - Atlantic Seaboard, including Savannah, Charleston and Florida o Combines "Best Practices" of Each Railroad to Provide Superior Product for Customers - Conrail high speed reliable service - CSX equipment supply and rate quotation programs Regulatory Process o Public Interest is Served by CSX/CRR Combination - Broad network reach for customers - Single-line service - Operating efficiencies - Elimination of redundant assets - Capital investment - Reduced highway congestion - Progress in separation of freight and passenger operations o Preserving Competition - Competitive overlaps appreciably fewer than UPSP - CSX/CRR will proactively resolve all competitive and public issues Summary o Provides Greatest Opportunity for Long-Term Revenue Growth and Synergies - Comprehensive market coverage - Single-line service - Transportation efficiencies - Consolidation and productivity gains o Financial Strength Provides Further Opportunities for Increased Shareholder Value - Solid balance sheet - Strong cash flows - Financial management strategy Why CSX-CR? o Preferred commercial partner o Greater synergy and growth potential o More opportunities for employees o More public benefits CSX-CR o The strongest partnership - A more complete network - More customers - More single line service - More routes - More ports - More truck competitive Today, Trucks Dominate The Eastern Transportation Market [Pie chart showing the following: Trucks 86% CSX/Conrail 6% Other Eastern Railroads 5% Water 3%] Source: Reebie Associates CSX-Conrail o Ability to better compete along: - Interstate 75 - Interstate 85 - Interstate 81 - Interstate 95 CSX: Better For Employees o Less uncertainty for Conrail employees - Will become part of the second largest US rail network - Will join an integrated transportation business with a global presence - New opportunities in non-rail businesses - Sea-Land - CSXI - American Commercial Lines CSX-CR: A Merger Of Equals o Shared leadership - Equal board of directors representation - CR management team representation - Shared responsibility going forward - Commitment to region - Corporate headquarters in Philadelphia CSX-CR: A Merger Of Equals--Not A Sale Of The Company o What does that mean for you? - The new entity will be formed of the best of both Conrail and CSX - The Board of Directors will be 50-50 - Dave LeVan will be CEO of the combined railroad and succeed John Snow as chairman and CEO of the holding company - Ensures the greatest opportunity for Conrail employees - CSX plans to invest over $400 million more in the railroad than does NS - This translates into commitments to the customers and communities CR serves and to its employees CSX-CR Merger o Existing merger agreement with CSX protects employee interests - New CSX-CR is bound to honor existing contracts and benefit plans - Agreement guarantees that benefits, in the aggregate, will be no less favorable than similarly situated CSX employees - For CSX or CR employees displaced by the merger, provides for severance benefits at levels no less than those offered in other recent industry consolidations o Relative operating ratios of Conrail, CSX and NS indicate that - Synergies from an NS takeover would come largely from the elimination of CR jobs and facilities - Synergies from a CSX-CR merger come largely from growth opportunities and streamlining CSX operations The NS Offer o No commitments - to Philadelphia - to Conrail workers o Heavy debt burden will force NS to save wherever possible - Purchase will boost NS debt to over 75% of what the company is worth to shareholders - According to Henry Wolf, NS' executive vice president - finance, "We're going to have to be real penny pinchers under this plan." CSX-CR Merger Timetable o January 17 - Special Meeting of CR Shareholders o January 22 - CSX Tender Offer Closes for Additional 20.1% of CR Stock at $110 per Share o March-April - Consummation of CSX-CR Merger o March - File Application for Merger at STB - 300 Day Proposed Review Period -----END PRIVACY-ENHANCED MESSAGE-----