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Quarterly report [Sections 13 or 15(d)]

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Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Consolidated Income Statements (Unaudited) - Quarters Ended March 25, 2016 and March 27, 2015 3
Consolidated Comprehensive Income Statements (Unaudited) - Quarters Ended March 25, 2016 and March 27, 2015 3
Consolidated Balance Sheets - At March 25, 2016 (Unaudited) and December 25, 2015 4
Consolidated Cash Flow Statements (Unaudited) - Three Months Ended March 25, 2016 and March 27, 2015
5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 24
Item 3. Quantitative and Qualitative Disclosures about Market Risk 33
Item 4. Controls and Procedures 33
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 33
Item 1A. Risk Factors 33
Item 2. CSX Purchases of Equity Securities 34
Item 3. Defaults upon Senior Securities 34
Item 4. Mine Safety Disclosures 34
Item 5. Other Information 34
Item 6. Exhibits 35
Signature 36
First Quarters
2016 2015
Revenue $ 2,618
$ 3,027
Expense
Labor and Fringe 796
879
Materials, Supplies and Other 550
627
Fuel 150
270
Depreciation 313
295
Equipment and Other Rents 105
113
Total Expense 1,914
2,184
Operating Income 704
843
Interest Expense (143 ) (134 )
Other Income - Net 7
2
Earnings Before Income Taxes 568
711
Income Tax Expense (212 ) (269 )
Net Earnings $ 356
$ 442
Per Common Share (Note 2)
Net Earnings Per Share, Basic $ 0.37
$ 0.45
Net Earnings Per Share, Assuming Dilution $ 0.37
$ 0.45
Average Shares Outstanding (In millions) 962
991
Average Shares Outstanding, Assuming Dilution (In millions) 963
992
Cash Dividends Paid Per Common Share $ 0.18
$ 0.16
First Quarters
2016 2015
Total Comprehensive Earnings (Note 10) $ 363
$ 440
(Unaudited)
March 25,
2016
December 25,
2015
ASSETS
Current Assets:
Cash and Cash Equivalents $ 731
$ 628
Short-term Investments 375
810
Accounts Receivable - Net (Note 1) 917
982
Materials and Supplies 370
350
Deferred Income Taxes 132
126
Other Current Assets 83
70
Total Current Assets 2,608
2,966
Properties 41,865
41,574
Accumulated Depreciation (11,572 ) (11,400 )
Properties - Net 30,293
30,174
Investment in Conrail 811
803
Affiliates and Other Companies 591
591
Other Long-term Assets 307
337
Total Assets $ 34,610
$ 34,871
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 815
$ 764
Labor and Fringe Benefits Payable 398
490
Casualty, Environmental and Other Reserves (Note 4) 130
131
Current Maturities of Long-term Debt (Note 7) 20
20
Income and Other Taxes Payable 170
108
Other Current Liabilities 159
439
Total Current Liabilities 1,692
1,952
Casualty, Environmental and Other Reserves (Note 4) 255
269
Long-term Debt (Note 7) 10,516
10,515
Deferred Income Taxes 9,396
9,305
Other Long-term Liabilities 1,145
1,162
Total Liabilities 23,004
23,203
Shareholders' Equity:
Common Stock, $1 Par Value 956
966
Other Capital 112
113
Retained Earnings 11,183
11,238
Accumulated Other Comprehensive Loss (Note 10) (658 ) (665 )
Noncontrolling Interest 13
16
Total Shareholders' Equity 11,606
11,668
Total Liabilities and Shareholders' Equity $ 34,610
$ 34,871
Three Months
2016 2015
OPERATING ACTIVITIES
Net Earnings $ 356
$ 442
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities:
Depreciation 313
295
Deferred Income Taxes 80
6
Other Operating Activities (29 ) 26
Changes in Operating Assets and Liabilities:
Accounts Receivable 57
19
Other Current Assets (30 ) (51 )
Accounts Payable 50
24
Income and Other Taxes Payable 59
130
Other Current Liabilities (102 ) (201 )
Net Cash Provided by Operating Activities 754
690
INVESTING ACTIVITIES
Property Additions (425 ) (598 )
Purchase of Short-term Investments (235 ) (105 )
Proceeds from Sales of Short-term Investments 670
140
Other Investing Activities 31
63
Net Cash Provided by (Used in) Investing Activities 41
(500 )
FINANCING ACTIVITIES
Dividends Paid (173 ) (158 )
Shares Repurchased (249 ) (127 )
Other Financing Activities (270 ) (13 )
Net Cash Used in Financing Activities (692 ) (298 )
Net Increase (Decrease) in Cash and Cash Equivalents 103
(108 )
CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents at Beginning of Period 628
669
Cash and Cash Equivalents at End of Period $ 731
$ 561
The first fiscal quarters of 2016 and 2015 consisted of 13 weeks ending on March 25, 2016 and March 27, 2015 , respectively.
First Quarters
2016 2015
Numerator (Dollars in millions) :
Net Earnings $ 356
$ 442
Denominator (Units in millions) :
Average Common Shares Outstanding 962
991
Other Potentially Dilutive Common Shares 1
1
Average Common Shares Outstanding, Assuming Dilution 963
992
Net Earnings Per Share, Basic $ 0.37
$ 0.45
Net Earnings Per Share, Assuming Dilution $ 0.37
$ 0.45
First Quarters
(Dollars in millions) 2016 2015
Share-Based Compensation Expense $ 8
$ 8
Income Tax Benefit 3
3
March 25,
2016
December 25,
2015
(Dollars in millions) Current Long-term Total Current Long-term Total
Casualty:
Personal Injury $ 57
$ 143
$ 200
$ 57
$ 147
$ 204
Asbestos 8
39
47
9
44
53
Occupational 3
8
11
3
9
12
Total Casualty 68
190
258
69
200
269
Environmental 43
37
80
42
40
82
Other 19
28
47
20
29
49
Total $ 130
$ 255
$ 385
$ 131
$ 269
$ 400
number, connection and financial viability of other named and unnamed potentially responsible parties at the location.
Pension Benefits
(Dollars in millions) First Quarters
2016 2015
Service Cost $ 12
$ 11
Interest Cost 30
29
Expected Return on Plan Assets (39 ) (40 )
Amortization of Net Loss 12
17
Net Periodic Benefit Cost 15
17
Special Termination Benefits – Workforce Reduction Program (a)
7
Total Expense $ 15
$ 24
Other Post-retirement Benefits
(Dollars in millions) First Quarters
2016 2015
Service Cost $
$ 1
Interest Cost 3
4
Amortization of Net Loss 1
1
Total Expense $ 4
$ 6
(Dollars in millions) Current Portion Long-term Portion Total
Long-term debt as of December 2015 (a) $ 20
$ 10,515
$ 10,535
2016 activity:
Discount and premium activity
(1 ) (1 )
Debt issue cost activity
2
2
Long-term debt as of March 2016 $ 20
$ 10,516
$ 10,536
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).
March 25,
2016
December 25,
2015
(Dollars in Millions) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Certificates of Deposit and Commercial Paper $
$ 375
$
$ 375
$
$ 810
$
$ 810
Corporate Bonds
60

60

73

73
Government Securities
16

16

32

32
Auction Rate Securities

4
4


4
4
Total investments at fair value $
$ 451
$ 4
$ 455
$
$ 915
$ 4
$ 919
(Dollars in millions) ...

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