Exceptional charges, rail problems trigger $103-million 3Q loss at CSX
CSX Corp. lost $103 million in the third quarter, as its operating result moved into the red and the company faced charges from a change in accounting for liabilities and the expected cost of settling disputes following the sale of Sea-Land Service in 1999. The net loss for the quarter compares with net earnings of $127 million in the third quarter of 2002.
The result for the latest quarter included after-tax expenses of $145 million due to a change in CSX’s estimate for occupational and personal injury liabilities. Most of the charge represents CSX’s estimated cost of asbestos and other occupational disease claims.
In addition, the quarter included an after-tax charge of $67 million to account for the expected settlement of disputes in connection with the 1999 sale of Sea-Land’s assets (see related article).
“Neither charge is expected to have a material impact on cash flows in future periods,” the company said.
The group suffered an operating loss of $98 million in the third quarter, as compared to an operating income of $276 million last year.
CSX said that operating inefficiencies in its rail activities “continued to keep our expenses too high.” It blamed a “lack of network fluidity” for higher equipment, employee and fuel costs. CSX faced additional costs, and delayed or lost revenue from the power blackout in the Northeast and Midwest, the impact of a computer virus and the effects of Hurricane Isabel in the Mid-Atlantic states.
Surface transportation activities, which include the rail and intermodal units of CSX, had an operating loss of $16 million in the third quarter, reflecting the change in liability accounting estimates. Excluding this change, the surface transportation business would have had an operating income for the quarter of $213 million, down from $227 million in last year’s third quarter.
CSX’s international container terminal business, not included in surface transportation, reported operating income of $20 million, up from $18 million in the third quarter of 2002.
Surface transportation revenue rose by 2 percent in the latest quarter, to $1.82 billion. While revenue and volume
increased in the company’s merchandise markets, revenue was flat for coal, auto and intermodal shipments.
In the latest quarter, CSX did not repeat the prior-year revenue of $215 million from CSX Lines, sold to the Carlyle Group in February of this year.
Ward said he is confident that CSX will improve its rail service, raise productivity and “deliver more to the bottom
line.”