Filed by: CSX Corporation, CSX Transportation, Inc.,
Norfolk Southern Corporation, Norfolk Southern Railway Company,
and Consolidated Rail Corporation
Pursuant to Rule 425
under the Securities Act of 1933, as amended.
Subject Company: Consolidated Rail Corporation
Commission File Nos: 1-8022, 1-3359, 1-8339, 1-743, 1-3744, 1-4793 and 1-5462
QUESTIONS AND ANSWERS REGARDING
PROPOSED CONRAIL SPIN OFF TRANSACTIONS
1. Please list the specific benefits that Norfolk Southern Corporation
("NSC") and CSX Corporation ("CSX") expect to receive from direct
ownership of Pennsylvania Lines LLC ("PRR") and New York Central Lines LLC
("NYC"), respectively.
The proposed transfer of NYC to CSX Transportation, Inc. ("CSXT")
and PRR to Norfolk Southern Railway Company ("NSR") would simplify the
existing management structure of Consolidated Rail Corporation ("Conrail")
assets. Specifically, both CSX and NSC will benefit from:
- Increased independence over the management of the assets of
NYC and PRR;
- Improved transparency of financial reporting of CSX and NSC by
consolidation of the financial results of NYC and PRR into
those of CSX and NSR, respectively, thereby enhancing access
to the capital markets;
- Elimination of the dependence of CSXT on NSR's consent and NSR
on CSXT's consent for many decisions relating to CSXT's and
NSR's respective management of the underlying assets of NYC
and PRR;
- Improved incentives for new business innovations, long-term
capital improvements and strategic dispositions and
acquisitions of NYC and PRR properties and assets; and
- Reductions in potential conflicts associated with the indirect
joint ownership of NYC's and PRR's assets, which arise because
CSX and NSC, though joint owners of NYC and PRR, do not share
a joint economic agenda regarding NYC and PRR due to their
status as competitors.
See p. 58 of the NSR Registration Statement on Form S-4 (File
No. 333-114795) (the "NSR S-4") and the CSXT S-4 Registration Statement on
Form S-4 (File No. 333-11476) (the "CSXT S-4") filed with the Securities
and Exchange Commission ("SEC") on April 23, 2004. See also pp. 8-11 and
17-20 of the CSX/NSC Joint Supplemental Order Petition filed with the
Surface Transportation Board (the "Board" or the "STB") in STB Finance
Docket No. 33388 (Sub-No. 94) on June 4, 2003 (the "Joint Petition").
Further, see pp. 5-6 of the STB's Decision No.
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2, served November 7, 2003, in the proceeding named above, in which the
Board discusses the benefits to each of NSC and CSX resulting from direct
ownership of PRR and NYC, respectively.
2. What is the benefit of increased independence over the management of
assets?
As provided by CSX and NSC on p. 10 of the Joint Petition, the
current corporate structure presents an unnecessary degree of entanglement
between CSX and NS. One example provided in the Joint Petition was the
need for involvement by both CSX and NSC in management activities such as
the disposition of property. Although the day-to-day activities of the two
railroads on the NYC and PRR properties, including most disposals of
property, can be performed by the operating railroad (CSXT or NSR) itself,
the fair market value of any property disposed of by the operating
railroad must be placed in an account that ultimately is for the
respective benefit of CSX and NSC in accordance with their 42% - 58%
ownership interests.
3. What is the specific benefit of more transparent financial reporting?
The financials of NSR include line items related to its operations
over PRR lines. See Note 2 to NSR's Consolidated Financials on p. 29 of
the 2003 NSR Annual Report on Form 10-K. The financials of NSC include
line items related to NSR's operations over PRR lines as well as NSC's
investment in Conrail. See Note 2 to NSC's Consolidated Financials on
p. K49 of the 2003 NSC Annual Report on Form 10-K. After the Conrail Spin
Off Transactions, NSR's (and, as a result, NSC's) financials will reflect
direct ownership of the PRR properties.
The financials of CSXT include items related to its operations over
NYC lines. See Note 2 to CSXT's Consolidated Financials beginning on p. 31
of the 2003 CSXT Annual Report on Form 10-K. The financials of CSX include
line items related to CSXT's operations over NYC lines as well as CSX's
investment in Conrail. See Note 2 to CSX's Consolidated Financials
beginning on p. 52 of the 2003 CSX Annual Report on Form 10-K. After the
Conrail Spin Off Transactions, CSXT's (and, accordingly CSX's) financials
will reflect direct ownership of the NYC properties.
4. How will the Conrail Spin Off Transactions affect the "Shared Assets
Areas"?
As described on p. 56 of the NSR S-4 and CSXT S-4:
The Conrail Spin Off Transactions, as defined in the NSR S-4 and
CSXT S-4, have been structured to preserve the existing rail operating
structure in Conrail's "Shared Assets Areas" separately designated as
North Jersey, South Jersey/Philadelphia and Detroit, and are intended to
preserve the competitive rail service by NSC and CSX to and from the
Shared Assets Areas that resulted from the creation of the Shared Assets
Areas and otherwise from the original joint acquisition of Conrail.
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For more discussion, see footnote 4 on p. 3 and footnote 9 on p. 10
of the Joint Petition. See also p. 6 of the Board's Decision.
5. How will the Conrail Spin Off Transactions affect the operations on the
current PRR and NYC properties (the "Allocated Assets")?
The proposed transfer of ownership and merger of NYC to and with
CSXT and of PRR to and with NSR will not affect rail operations or
service, either in the Allocated Assets areas or elsewhere. See p. 12 of
the Joint Petition.
6. What is the financial effect of the Conrail Spin Off Transactions on each
of NSR and CSXT?
See the pro forma financials and accompanying footnotes giving
effect to the Conrail Spin Off Transactions shown on pp. NSR-6 through
NSR-10 of the NSR Appendix to the NSR S-4. Also, please see pp. CSXT-5
through CSXT-9 of the CSXT Appendix to the CSXT S-4.
7. How does the Conrail General Oversight Proceeding before the STB
(Proceeding Sub-No. 91 in STB Finance Docket No. 33388 or "Proceeding
Sub-No. 91") relate to the Supplemental Order Proceeding related to the
Conrail Spin Off Transactions (Proceeding Sub-No. 94 in STB Finance Docket
No. 33388, or "Proceeding Sub-No. 94")?
Proceeding Sub-No. 91 was instituted by the Board as part of its
oversight of the implementation of the Conrail Transaction that it
approved in 1998.
Proceeding Sub-No. 94 relates to the joint petition by CSX, NSC and
Conrail for a Supplemental Order from the Board authorizing the Conrail
Spin Off Transactions contemplated by the Distribution Agreement. The
STB's Decision No. 2, served on November 7, 2003 in Proceeding Sub-No. 94,
provides that the Conrail Spin Off Transactions will conform the corporate
structure of the three petitioners with the reality that has existed since
June 1, 1999.
Both sub-proceedings are part of a joint application process between
CSX and NS, and the parties have conducted themselves as joint applicants
before the STB in the Conrail matter.
8. What is the Distribution Agreement and is it publicly available?
A form of the Distribution Agreement was filed by the parties with
the STB on June 4, 2003 in connection with Proceeding Sub-No. 94. It is
currently anticipated that a form of the Distribution Agreement will be
filed as an exhibit to the S-4 registration statements. The Distribution
Agreement is one of the agreements that must be executed in connection
with the Conrail Spin Off Transactions.
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This description contains forward-looking statements which speak only as of the
date they are made, and none of CSX, NSC or Conrail undertakes any obligation to
update or revise any forward-looking statement. If CSX, NSC or Conrail do update
any forward-looking statement, no inference should be drawn that CSX, NSC or
Conrail will make additional updates with respect to that statement or any other
forward-looking statements. Forward-looking statements are subject to a number
of risks and uncertainties, and other factors which are, in some cases, beyond
the control of CSX, NSC and Conrail and could materially affect actual results,
performance or achievements. Factors that may cause actual results to differ
materially from those contemplated by these forward-looking statements include,
among others: (i) success in implementing its financial and operational
initiatives; (ii) changes in domestic or international economic or business
conditions, including those affecting the rail industry (such as the impact of
industry competition, conditions, performance and consolidation); (iii)
legislative or regulatory changes; and (iv) the outcome of claims and litigation
involving or affecting a company. Other important assumptions and factors that
could cause actual results to differ materially from those in the
forward-looking statements made by each of NSC and CSX are specified elsewhere
in NSC's and CSX's respective documents filed with the SEC. Documents filed with
the SEC by CSX and NSC are accessible on the SEC's website at www.sec.gov, CSX's
website at www.csx.com and NSC's website at www.nscorp.com.
Registration statements relating to the new CSXT and NSR unsecured debt
securities have been filed with the SEC but have not yet become effective. These
debt securities may not be sold nor may offers to exchange be accepted prior to
the time the registration statements become effective. This document shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
Prospectus and consent solicitation statements and related exchange offer
materials will be mailed to holders of Conrail's unsecured debentures in
connection with the proposed exchange offer and consent solicitation. These
documents will contain important information about the proposed transaction and
the proposed exchange offer and consent solicitation. INVESTORS AND HOLDERS OF
CONRAIL'S UNSECURED DEBENTURES ARE URGED TO READ THESE DOCUMENTS CAREFULLY WHEN
THEY BECOME AVAILABLE. Investors and holders of Conrail's unsecured debentures
will be able to obtain free copies of these documents through the website
maintained by the SEC at http://www.sec.gov. In addition, free copies of these
documents may be obtained from Conrail by directing a request to: Consolidated
Rail Corporation, 2001 Market Street, Philadelphia, PA 19103, Attention:
Corporate Secretary, (215) 209-4054. In addition to the registration statements
and prospectuses, CSX and NSC file annual, quarterly and special reports, proxy
statements and other information with the SEC. These SEC filings are available
to the public through the website maintained by the SEC at http://www.sec.gov.
Upon the SEC's declaration of effectiveness of the Registration Statements, a
written prospectus meeting the
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requirements of Section 10 of the Securities Act of 1933 may also be obtained
from: Morgan Stanley & Co. Incorporated, Liability Management Group, 1585
Broadway, Second Floor, New York, New York 10036, Attention: Simon Morgan, phone
number: (212) 761-2219.
For media inquiries, please contact Adam A. Hollingsworth at CSXT at (904)
366-2929 and Bob Fort at NSR at (757) 629-2710. Investors may contact Adam A.
Hollingsworth at CSXT at (904) 366-2929 and Leanne McGruder at NSR at (757)
629-2861.
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