capbldr2008.htm
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, 2008
Commission
file number 1-8022
CSX
CORPORATION
CAPITAL
BUILDER PLAN
CSX
CORPORATION
A
Virginia Corporation
IRS
Employer Identification Number 62-1051971
500 Water
Street
Jacksonville,
Florida 32202
Telephone
(904) 359-3200
CAPITAL
BUILDER PLAN
|
AUDITED
FINANCIAL STATEMENTS AND SUPPLEMENTAL
SCHEDULE
|
AS OF
DECEMBER 31, 2008 AND 2007
AND FOR
THE YEAR ENDED DECEMBER 31, 2008
The Plan
Administrator and the Audit Committee
CSX
Corporation Capital Builder Plan
CSX
Corporation
Jacksonville,
FL
We have
audited the accompanying statements of net assets available for benefits of the
CSX Corporation Capital Builder Plan as of December 31, 2008 and 2007, and the
related statement of changes in net assets available for benefits for the year
ended December 31, 2008. 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 the standards of the Public Company
Accounting Oversight Board (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. We were not engaged to perform an
audit of the Plan's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Plan's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
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 at December
31, 2008 and 2007, and the changes in its net assets available for benefits for
the year ended December 31, 2008, in conformity with US generally accepted
accounting principles.
Our
audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
(held at end of year) as of December 31, 2008 is presented for purposes of
additional analysis and is not a required part of the financial statements, but
is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ Ernst & Young LLP
Independent Registered Public
Accounting Firm
Jacksonville,
Florida
June 19,
2009
|
CAPITAL
BUILDER PLAN
|
|
|
|
STATEMENTS
OF NET ASSETS AVAILABLE FOR BENEFITS
|
(Dollars
in Thousands)
|
|
|
|
|
|
|
|
December
31
|
|
2008
|
2007
|
ASSETS
|
|
|
Investments,
at fair value:
|
|
|
Investment
in Master Trust (Note 3)
|
$506,445
|
$678,486
|
Loans
to members
|
19,960
|
18,176
|
|
526,405
|
696,662
|
Receivables
|
|
|
Member
contributions
|
89
|
-
|
Employer
contributions
|
2
|
-
|
|
91
|
-
|
TOTAL
ASSETS
|
526,496
|
696,662
|
|
|
|
LIABILITIES
|
|
|
Accrued
expenses
|
180
|
40
|
|
|
|
NET
ASSETS AVAILABLE FOR BENEFITS, AT FAIR VALUE
|
526,316
|
696,622
|
|
|
|
Adjustment
from fair value to contract value for interest in Master
|
|
|
Trust
relating to fully benefit-responsive investment contracts (Note
4)
|
(2,195)
|
(3,903)
|
|
|
|
NET
ASSETS AVAILABLE FOR BENEFITS
|
$524,121
|
$692,719
|
See
accompanying Notes to Financial Statements
|
CAPITAL
BUILDER PLAN
|
|
|
STATEMENT
OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
|
|
|
FOR
THE YEAR ENDED DECEMBER 31, 2008
|
(Dollars
in Thousands)
|
|
|
|
|
ADDITIONS
|
|
Member
contributions
|
$38,658
|
Employer
contributions
|
8,362
|
Interest
from loans to members
|
1,426
|
|
48,446
|
DEDUCTIONS
|
|
Net
loss from investment in Master Trust (Note 3)
|
143,925
|
Distributions
to members
|
72,020
|
Fees
and expenses
|
1,099
|
|
217,044
|
|
|
NET
DECREASE
|
(168,598)
|
|
|
Net
Assets Available for Benefits at Beginning of Year
|
692,719
|
|
|
Net
Assets Available for Benefits at End of Year
|
$524,121
|
See
accompanying Notes to Financial Statements
CSX
CORPORATION
CAPITAL
BUILDER PLAN
NOTES TO
FINANCIAL STATEMENTS
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 effective August 1, 1989 covering certain union
employees of CSX Corporation (“CSX” or “Plan Sponsor”) and affiliated companies
(collectively, “the Company”). Effective January 1, 2001,
CSX established a portion of the Plan as an Employee Stock Ownership Plan
(“ESOP”) designed to comply with Section 4975(e)(7) of the Internal Revenue Code
of 1986 (“the Code”), as amended. The Plan also
contains a cash or deferred arrangement described in Section 401(k) of the Code
and is subject to the provisions of the Employee Retirement Income Security Act
of 1974 (“ERISA”), as amended. The ESOP component is designed to invest
primarily in CSX common stock and may invest 100% in
such securities.
Contributions:
Members, as defined in the Plan document, may contribute from 1% to 50% (in 1%
multiples) of eligible compensation, as defined by the Plan document, on a
pre-tax or after-tax basis up to the current Code limit. Beginning January 1,
2003, members who are age 50 or older by the end of the applicable calendar year
are eligible to make catch-up contributions in accordance with the Code. Certain
eligible members may also contribute other compensatory awards and/or sellback
contributions (unused sick, vacation or personal leave) to the Plan. Subject to
certain limitations, members may rollover distributions from another qualified
plan or an individual retirement account (“Rollover Account”). Members may
change contribution rates and investment elections 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 document (“ESOP allocation”). The shares required to fund
the 2008 ESOP allocation were purchased on the open market.
The Plan
also provides for a Company matching contribution to certain eligible members.
The amount and timing of the Company contributions varies according to the
applicable collective bargaining agreements but cannot exceed 50% of the Basic
Capital Savings contribution made by or on behalf of the member. Basic Capital
Savings contributions are limited to 6% of each member’s eligible compensation
as defined in the Plan document. In accordance with the applicable collective
bargaining agreement, CSX may also make additional contributions to the
Plan.
CSX
CORPORATION
CAPITAL
BUILDER PLAN
NOTES TO
FINANCIAL STATEMENTS
NOTE 1 -
DESCRIPTION OF THE PLAN (continued)
Diversification: All
Company contributions are initially invested in CSX common stock except for
certain contributions that can be directed by the members of certain eligible
groups, as defined under the Plan document. Members may immediately transfer
these contributions made in CSX common stock to other investment options offered
under the Plan.
Transfers/Reallocations:
Beginning June 1, 2005, a trading restriction was in place on certain trade
activities in all available investment funds. These restrictions require a
30-day period of time during which investments must remain in the fund (“the
holding period”). If these trading restrictions are not followed, a redemption
fee of 2% will apply to the current value of the units withdrawn prior to the
expiration of the holding period. Effective July 1, 2007, CSX changed the
restrictions on trade activities in all available investment funds. The new
trade control policy, which is consistent with benefit plan administration best
practices, does not permit members to purchase shares of the same fund through
investment fund activity for 30 calendar days. Members may, however, transfer
funds to the Stable Value Fund at any time without restriction. Any amounts
invested prior to July 1, 2007 are considered to have met the 30-day holding
requirement.
Member Accounts: Each
member’s account is credited with the member’s contributions and allocations of
(a) Company contributions and (b) Plan earnings and is charged for
administrative expenses. Company contributions are calculated in accordance with
a bargained formula or benefit amount. Plan earnings are allocated on a
proportionate share of the increase or decrease in the fair market value of each
fund in which the member’s accounts are invested on each valuation date. Expense
allocations are made on the basis of assets in the individual account. A member
is entitled to the value of his or her account.
Vesting: Members are
100% vested in their accounts.
CSX
CORPORATION
CAPITAL
BUILDER PLAN
NOTES TO
FINANCIAL STATEMENTS
NOTE 1 -
DESCRIPTION OF THE PLAN (continued)
Loans: Certain
members may borrow from their accounts an amount equal to the lesser of fifty
thousand dollars in the aggregate (reduced by the highest outstanding balance
during the one-year period preceding the loan) or 50% of their account balance
(reduced by the outstanding balance of all Plan loans at the time of the loan).
Members may not borrow from their ESOP account even though it is 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. Loans are secured by the balance in the
member’s account. The loan interest rates
are calculated using the prime rate in the Wall Street Journal as of the first
business day of the current month in which the loan originates plus 1%. The
interest rate in effect when a member applies for the loan will remain in effect
for the term of the loan. It will not change even though the interest rate
applicable to new loans may change. Principal and interest are paid
ratably through payroll deductions.
Dividends: Dividends
paid on shares of CSX common stock held in a member’s account are reinvested in
shares of CSX common 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 his or her
account and reinvested in shares of CSX common stock.
Payment of Benefits:
Upon termination of service, a member may receive a lump-sum amount equal to the
value of his or her account. Upon disability or retirement, a member
may elect to receive a lump-sum or monthly installments over a period not to
exceed the lesser of 240 months or the life expectancy of the last survivor of
the member and his or her beneficiary. Surviving spouses of retired or disabled
members may also elect monthly installments. A terminated member’s account
balance of five thousand dollars or less (excluding the Rollover Account) as of
his or her date of termination or the last day of any Plan year shall be rolled
over into an individual retirement account (IRA) at American Century Investments
unless the member makes an alternate distribution request.
Administrative
Expenses: The administrative expenses of the Plan are paid by the Company
or from Plan assets as the Plan Sponsor directs. All of the administrative
expenses of the Plan during 2008 were paid from Plan funds.
Plan Termination:
Although it has not expressed any intent to do so, the Company has the right to
discontinue its contributions to the Plan at any time and to terminate the Plan
subject to the provisions of ERISA. If the Plan were to terminate, members would
remain 100% vested in their accounts.
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 U.S. generally accepted
accounting principles. Certain other prior-year data have been reclassified to
conform to the 2008 presentation.
New Accounting
Pronouncements: Statement of Financial Accounting Standards No. 157,
Fair Value Measurements
(“SFAS 157”) establishes a framework for measuring fair value under generally
accepted accounting principles (GAAP), clarifies the definition of fair value
within that framework, and expands financial statement disclosures about the use
of fair value measurements. See Note 9 for additional fair value disclosures
related to the CSX Corporation Master Retirement Savings Plan Trust (“Master
Trust”) and loans to members.
Investments: The
Master Trust (See Note 3) holds all investments of this Plan and the Tax Savings
Thrift Plan for Employees of CSX Corporation and Affiliated Companies except for
loans to members. Loans to members are valued at their outstanding balances,
which approximate fair value. Each participating retirement plan has an
undivided interest in the Master Trust.
Use of Estimates: The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles 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
Trustee of the Master Trust. Each participating plan’s interest in the Master
Trust is based on account balances of the participants and their elected
investment fund options.
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.
CSX
CORPORATION
CAPITAL
BUILDER PLAN
NOTES TO
FINANCIAL STATEMENTS
NOTE 3 -
INVESTMENT IN MASTER TRUST (continued)
Summarized
financial information of the Master Trust is presented below:
(Dollars
in Thousands)
|
|
Plan's
|
|
Plan's
|
|
December
31,
|
Percentage
|
December
31,
|
Percentage
|
|
2008
|
Interest(a)
|
2007
|
Interest(a)
|
Assets:
|
|
|
|
|
CSX
Common Stock
|
$446,083
|
59%
|
$672,411
|
60%
|
|
|
|
|
|
Mutual
Funds
|
|
|
|
|
Vanguard
Institutional Index Instl Plus
|
101,889
|
45%
|
166,063
|
43%
|
Fidelity
Equity Income Fund
|
47,078
|
22%
|
97,952
|
21%
|
Vanguard
Morgan Growth
|
41,749
|
35%
|
79,335
|
35%
|
Vanguard
Wellington Fund
|
71,524
|
41%
|
77,609
|
37%
|
Morgan
Stanley International Fund
|
47,396
|
35%
|
72,782
|
31%
|
T.
Rowe Price Retirement 2005 Fund
|
470
|
6%
|
645
|
2%
|
T.
Rowe Price Retirement 2010 Fund
|
5,325
|
16%
|
8,710
|
19%
|
T.
Rowe Price Retirement 2015 Fund
|
3,822
|
32%
|
6,551
|
27%
|
T.
Rowe Price Retirement 2020 Fund
|
3,190
|
36%
|
4,711
|
29%
|
T.
Rowe Price Retirement 2025 Fund
|
1,143
|
35%
|
1,494
|
23%
|
T.
Rowe Price Retirement 2030 Fund
|
1,338
|
45%
|
1,956
|
32%
|
T.
Rowe Price Retirement 2035 Fund
|
1,165
|
48%
|
1,393
|
49%
|
T.
Rowe Price Retirement 2040 Fund
|
1,167
|
37%
|
1,425
|
36%
|
T.
Rowe Price Retirement 2045 Fund
|
720
|
54%
|
1,233
|
30%
|
T.
Rowe Price Retirement 2050 Fund
|
204
|
58%
|
48
|
45%
|
T.
Rowe Price Retirement 2055 Fund
|
79
|
59%
|
80
|
82%
|
T.
Rowe Price Retirement Income Fund
|
1,225
|
34%
|
437
|
26%
|
Total
Mutual Funds
|
329,484
|
|
522,424
|
|
|
|
|
|
|
Common
Collective Trust Funds
|
1,356
|
59%
|
2,387
|
60%
|
|
|
|
|
|
(a) Represents
the Plan's percentage participation in each individual fund held by the
Master Trust.
|
CSX
CORPORATION
CAPITAL
BUILDER PLAN
NOTES TO
FINANCIAL STATEMENTS
NOTE 3 -
INVESTMENT IN MASTER TRUST (continued)
(Dollars
in Thousands)
|
|
Plan's
|
|
Plan's
|
|
December
31,
|
Percentage
|
December
31,
|
Percentage
|
|
2008
|
Interest(a)
|
2007
|
Interest(a)
|
Separately
Managed Accounts
|
|
26%
|
|
23%
|
Government
securities, corporate bonds,
|
|
|
|
|
mortgages
and other
|
192,587
|
|
166,896
|
|
Pooled
separate accounts and common collective trust funds
|
142,452
|
|
97,737
|
|
Cash
and cash equivalents
|
72,393
|
|
89,530
|
|
Common
stock
|
22,828
|
|
36,291
|
|
Common
stock - loaned
|
-
|
|
(18,622)
|
|
Mutual
funds
|
22,867
|
|
29,035
|
|
Synthetic
guaranteed investment
|
|
|
|
|
contract
- wrappers
|
1,364
|
|
875
|
|
Government
securities, corporate bonds,
|
|
|
|
|
mortgages
and other - loaned
|
-
|
|
(24,195)
|
|
Total
Separately Managed Accounts
|
454,491
|
|
377,547
|
|
|
|
|
|
|
Collateral
held under securities lending
|
|
|
|
|
agreements
(excluding noncash collateral)
|
-
|
|
39,984
|
|
|
|
|
|
|
Securities
on loan
|
-
|
|
42,817
|
|
Total
Assets:
|
1,231,414
|
|
1,657,570
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Obligations
under securities lending agreements
|
-
|
|
39,984
|
|
Accrued
expenses
|
431
|
|
478
|
|
|
|
|
|
|
Net
assets available for benefits, at fair value
|
1,230,983
|
|
1,617,108
|
|
|
|
|
|
|
Adjustment
from fair value to contract value for
|
|
|
|
|
interest
in Master Trust relating to fully benefit-
|
|
|
|
|
responsive
investment contracts
|
(8,557)
|
|
(17,352)
|
|
|
|
|
|
|
Net
assets
|
$1,222,426
|
|
$1,599,756
|
|
|
|
|
|
|
Plan’s
investment in the Master Trust’s net assets
|
$504,251
|
42%
|
$674,583
|
42%
|
|
|
|
|
|
(a) Represents
the Plan's percentage participation in each individual fund held by the
Master Trust.
|
CSX
CORPORATION
CAPITAL
BUILDER PLAN
NOTES TO
FINANCIAL STATEMENTS
NOTE 3 -
INVESTMENT IN MASTER TRUST (continued)
Investment income and
expenses, other than those related to CSX common stock, are allocated to each
plan in a pro-rata fashion based on the member’s average daily investment
balances. Investment income and expenses related to CSX common stock are
allocated based on actual shares held. Investment income for
the Master Trust for 2008 was as follows:
(Dollars
in Thousands)
|
|
|
|
|
Net
losses from investments in Master Trust:
|
|
|
Mutual
funds (quoted market price)
|
$(195,184)
|
|
CSX
common stock (quoted market price)
|
(148,210)
|
|
Common
stock (quoted market price)
|
(9,363)
|
|
|
(352,757)
|
Interest
and dividend income
|
43,225
|
Investment
loss for the Master Trust
|
$(309,532)
|
NOTE 4 -
SYNTHETIC GUARANTEED INVESTMENT CONTRACTS
The
Master Trust holds investments in synthetic GICs as part of the Stable Interest
Fund. Synthetic GICs are investment contracts that allow
participants to earn fixed income for a specified period of
time. These synthetic GICs are fully benefit-responsive, which allows
participants to initiate all permitted transactions, such as withdrawals, loans
or transfers to other funds within the Plan. A corresponding contract
wrapper with the issuer provides a fixed rate of return on the underlying
investments. A contract wrapper is a contractual agreement with a
third party that regulates the return on investment. The agreement
provides for the third party to compensate the Plan if the return on investment
drops below a certain threshold and vice versa. The fair value of the synthetic
GICs is calculated as described in Note 9.
Certain
events limit the ability of the Plan to transact at contract value with the
issuer. These events include, but are not limited to, the following:
(1) amendments to the Plan document, (2) bankruptcy of the Plan Sponsor or other
Plan Sponsor events which cause a significant withdrawal from the Plan or (3)
the failure of the Master Trust to qualify for exemption from federal income
taxes or any required prohibited transaction exemption under
ERISA. CSX does not believe that the occurrence of any event limiting
the Plan’s ability to transact at contract value with members is
probable.
CSX
CORPORATION
CAPITAL
BUILDER PLAN
NOTES TO
FINANCIAL STATEMENTS
NOTE 4 -
SYNTHETIC GUARANTEED INVESTMENT CONTRACTS (continued)
The
contract value of the synthetic GICs represents contributions plus earnings,
less participant withdrawals and administrative expenses. The
synthetic GIC issuers can only terminate the contract under very limited
circumstances such as CSX or the investment fund managers breaching any of their
obligations under the agreement. CSX does not believe it is likely
that the synthetic GICs will be terminated.
The
average yield of the synthetic GICs based on actual earnings was approximately
5.82% and 5.25% at December 31, 2008 and 2007, respectively. The average yield
of the synthetic GICs based on interest rate credited to members was
approximately 5.87% and 5.07% during 2008 and 2007, respectively. The
crediting interest rate is based on a mutually agreed upon formula that resets
on a quarterly basis depending on the portfolio yield, market value, and
duration along with the book value of the contract. The minimum crediting
rate is 0%.
NOTE 5 -
RELATED PARTY TRANSACTIONS
During
2008, the Master Trust received cash dividends from investments in CSX common
stock of $10.4 million. The Plan’s share of these dividends was $6.2
million.
The
Trustee routinely invests assets in its Collective Short-Term Investment Fund.
During 2008, the Master Trust earned interest of $182,360 for transactions with
this fund, a portion of which is allocated to the Plan based upon the Plan’s
pro-rata share in the net assets of the Master Trust and is included in net loss
from investment in Master Trust in the Statement of Changes in Net Assets
Available for Benefits.
NOTE 6 -
SECURITIES LENDING
The
Trustee was previously authorized to engage in the lending of certain Master
Trust assets. Securities lending is an investment management strategy that
utilizes the existing securities (government bonds, corporate bonds or equities)
of the Master Trust to earn additional income. It involves the loaning of
securities to a select group of approved broker-dealers. In return for the
loaned securities, the Trustee simultaneously receives collateral in the form of
cash or U.S. Treasury bills as a safeguard against possible default of any
borrower on the return of the loan. Each security lending transaction is
collateralized by a margin requirement, as specified in the terms of the
securities borrowing agreements. As of November 2008, due to market
conditions, the trustee was instructed to cease securities
lending. However, the Trust may engage in securities lending in the
future.
CSX
CORPORATION
CAPITAL
BUILDER PLAN
NOTES TO
FINANCIAL STATEMENTS
NOTE 6 -
SECURITIES LENDING (continued)
The
Master Trust accounts for its securities lending activities in accordance with
Statement of Financial Accounting Standards No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities (“SFAS
140”). Cash received by the Trustee is invested in money market securities by
the Master Trust and, accordingly, recorded at fair value in the financial
statements with a corresponding obligation to repay the collateral in accordance
with the securities borrowing agreements. Noncash collateral provided to the
Master Trust was in the form of U.S. Treasury bills and, in accordance with SFAS
140, was not recorded in the investments of the Master Trust.
Activities
related to securities lending in 2008 and 2007 were as follows:
(Dollars
in Thousands)
|
2008
|
2007
|
Securities
on loan
|
$ -
|
$42,817
|
Cash
collateral held by the Master Trust
|
-
|
39,984
|
Noncash
collateral held by the Master Trust
|
-
|
3,833
|
Income
earned through each year
|
310
|
142
|
NOTE 7 -
INCOME TAX STATUS
The Plan
received a determination letter from the Internal Revenue Service (“IRS”), dated
January 18, 2008, stating that the Plan is qualified under Section 401(a) of the
Code and, therefore, the related trust is exempt from
taxation. Subsequent to this determination by the IRS, the Plan was
amended. Once qualified, the Plan is required to operate in conformity with the
Code to maintain its qualification. The plan administrator believes the Plan is
being operated in compliance with the applicable requirements of the Code and
therefore believes the Plan, as amended, is qualified and the related trust is
tax-exempt.
NOTE 8 -
RISKS AND UNCERTAINTIES
The Plan
invests in various investment securities. Investment securities are exposed to
various risks such as interest rate, market and credit risks. Due to the level
of risk associated with certain investment securities, it is possible that
changes in the values of investment securities will occur in the near term and
that such changes could materially affect the amounts reported in the Statements
of Net Assets Available for Benefits.
CSX
CORPORATION
CAPITAL
BUILDER PLAN
NOTES TO
FINANCIAL STATEMENTS
NOTE 9 -
FAIR VALUE MEASUREMENTS
SFAS 157
establishes a framework for measuring fair value which provides a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (level 1
measurements) and the lowest priority to unobservable inputs (level 3
measurements). The three levels of the fair value hierarchy under
FASB Statement No. 157 are described below:
Level
1
|
Inputs
to the valuation methodology are unadjusted quoted prices for identical
assets or liabilities in active markets that the Plan has the ability to
access.
|
Level
2
|
Inputs
to the valuation methodology include:
· Quoted
prices for similar assets or liabilities in active markets;
· Quoted
prices for identical or similar assets or liabilities in inactive
markets;
· Inputs
other than quoted prices that are observable for the asset or
liability;
· Inputs
that are derived principally from or corroborated by observable market
data by correlation or other means.
If
the asset or liability has a specified (contractual) term, the Level 2
input must be observable for substantially the full term of the
asset or liability.
|
Level
3
|
Inputs
to the valuation methodology are unobservable and significant to the fair
value
measurement.
|
The
asset’s or liability’s fair value measurement level within the fair value
hierarchy is based on the lowest level of any input that is significant to the
fair value measurement. Valuation techniques used need to maximize
the use of observable inputs and minimize the use of unobservable
inputs.
CSX
CORPORATION
CAPITAL
BUILDER PLAN
NOTES TO
FINANCIAL STATEMENTS
NOTE 9 -
FAIR VALUE MEASUREMENTS (continued)
Following
is a description of the valuation methodologies used for Plan assets measured at
fair value.
CSX common stock: Valued at
the closing price reported on the active market on which the security is traded
on the last day of the Plan year.
Mutual funds: Valued at the
net asset value of shares held by the Master Trust at year end based on quoted
market prices determined in an active market.
Government securities, corporate
bonds, mortgages and other: Valued at the closing price reported on the
active market on which the individual securities are traded on the last day of
the Plan year.
Pooled separate accounts and common
collective trust funds: Valued at the net asset value of shares held by
the Master Trust at year end as determined by the issuer of the
fund.
Cash and cash equivalents:
Valued at amortized cost, which approximates fair value.
Common stock: Valued at the
closing price reported on the active market on which the individual securities
are traded on the last day of the Plan year.
Synthetic guaranteed investment
contract – wrappers: Valued at fair value by discounting the related cash
flows based on current yields of similar instruments with comparable
durations.
The
methods described above may produce a fair value calculation that may not be
indicative of net realizable value or reflective of future fair values.
Furthermore, while the Plan believes its valuation methods are appropriate and
consistent with other market participants, the use of different methodologies or
assumptions to determine the fair value of certain financial instruments could
result in different fair value measurement at the reporting date.
CSX
CORPORATION
CAPITAL
BUILDER PLAN
NOTES TO
FINANCIAL STATEMENTS
NOTE 9 -
FAIR VALUE MEASUREMENTS (continued)
The
following table sets forth by level, within the fair value hierarchy, the Master
Trust’s assets at fair value as of December 31, 2008:
|
Level
1
|
Level
2
|
Level
3
|
Total
|
CSX
common stock
|
$446,083
|
-
|
-
|
$446,083
|
Mutual
funds
|
352,351
|
-
|
-
|
352,351
|
Government
securities, corporate bonds,
|
|
|
|
|
mortgages
and other
|
192,587
|
-
|
-
|
192,587
|
Pooled
separate accounts and common collective trust funds
|
-
|
143,808
|
-
|
143,808
|
Cash
and cash equivalents
|
72,393
|
-
|
-
|
72,393
|
Common
stock
|
22,828
|
-
|
-
|
22,828
|
Synthetic
guaranteed investment
|
|
|
|
|
contract
- wrappers
|
-
|
-
|
1,364
|
1,364
|
|
|
|
|
|
Total
assets at fair value
|
$1,086,242
|
$143,808
|
$1,364
|
$1,231,414
|
In
addition to the Plan’s investment in the Master Trust, whose investments are
detailed above, the Plan holds participant loans with a fair value of $19,960 as
of December 31, 2008. Participant loans are classified as Level 3 and
valued at amortized cost, which approximates fair value.
Level
3 Gains and Losses
The table
below sets forth a summary of changes in the fair value of the Plan’s level 3
assets for the year ended December 31, 2008. The changes in fair value are
included in the net loss from investment in Master Trust on the Statement of
Changes in Net Assets Available for Benefits.
|
Synthetic
guaranteed investment contract - wrappers (a)
|
Participant
loans
|
Balance,
beginning of year
|
$875
|
$18,176
|
Realized
gains/(losses)
|
-
|
1,468
|
Unrealized
gains/(losses) relating to instruments
|
|
|
still
held at the reporting date
|
489
|
-
|
Purchases,
sales, issuances and settlements (net)
|
-
|
316
|
|
|
|
Balance,
end of year
|
$1,364
|
$19,960
|
|
|
|
(a)
Represents amounts for the Master Trust, a portion of which is allocable
to the Plan.
|
|
Supplemental
Schedule
|
|
|
|
|
CAPITAL
BUILDER PLAN
|
|
|
|
|
EIN:
62-1051971 Plan Number: 004
|
|
|
|
|
SCHEDULE
H, LINE 4i
|
SCHEDULE
OF ASSETS (HELD AT END OF YEAR)
|
|
|
|
|
December
31, 2008
|
|
|
|
|
(a)
|
(b)
Identity
of Issue, Borrower, Lessor, or Similar Party
|
(c)
Description
of Investment Including Maturity Date, Rate of Interest, Collateral, Par
or Maturity Value
|
(d)
Current
Value
|
|
|
|
|
*
|
Members
|
Loans
with interest rates of 4.00% to 18.68%, maturing through
2033
|
$19,960,040
|
|
|
|
|
*Indicates
a party-in-interest to the Plan.
|
|
|
|
|
Note:
Cost information has not been included, because all investments are member
directed.
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the CSX Plan
Administrator has duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
CSX
CORPORATION CAPITAL BUILDER PLAN
By: /s/ MICHELE
MASTREAN
Michele
Mastrean
Vice
President
Compensation
& Benefits
CSX
Corporation
(Plan
Sponsor)
Date: June
29, 2009
|
INDEX
TO EXHIBITS OF CSX CORPORATION
|
CAPITAL
BUILDER PLAN
|
AS
OF DECEMBER 31, 2008 AND 2007
|
|
AND
FOR THE YEAR ENDED DECEMBER 31,
2008
|
23 Consent
of Independent Registered Public Accounting Firm I-1