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Conrail deal still hurts CSX
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October 23, 1997: 11:33 a.m. ET
Transportation firm misses earnings expectations due to Conrail debt
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NEW YORK (CNNfn) - CSX Corp.'s deal to acquire part of Conrail Corp. earlier this year continues to restrain profits, the transportation company said Thursday.
CSX earned $206 million, or 95 cents per share, during the third quarter, far below First Call consensus estimates of $1.06 per share.
In March, CSX agreed to split up Conrail, a railroad it originally had hoped to buy with an $8.4 billion friendly offer. However, competitor Norfolk Southern Corp. launched a hostile bid of $10.3 billion, which caused Conrail shareholders to reject the CSX offer.
Eventually, CSX said it would sell some of Conrail's rail lines to Norfolk Southern, most of them located in the Eastern United States. CSX ended up paying about $4.1 billion for a 42 percent stake in Conrail, and it is debt from this transaction that has been holding back earnings.
If the effects of the Conrail deal were excluded, CSX (CSX) would have posted earnings of $230 million, or $1.06 per share, for the quarter.
Richmond, Va.-based CSX offers a variety of rail, container-shipping, trucking and barge services.
The company may face another financial hit. Last month, a jury in New Orleans, La., returned a $2.5 billion punitive damages award against CSX's rail unit.
More than 8,000 people in a New Orleans neighborhood claimed damages after a railroad car carrying a flammable gas leaked, emitting vapors that caused a two-day neighborhood fire.
No one was killed in the explosion but lawyers claimed that several people died as a result of breathing the airborne pollutants. CSX, however, said the award was excessive and plans to appeal the judgment.
-- by staff writer Randy Schultz
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CSX Corp.
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