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.
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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
=========================
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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