SECURITIES AND EXCHANGE COMMISSION

~~Washington~~WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended ~~June~~September 2827, 2002

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-3359

CSX TRANSPORTATION, INC.

(Exact name of registrant as specified in its charter)

Virginia		54-6000720
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

500 Water Street, Jacksonville, Florida		32202
(Address of principal executive offices)		(Zip Code)

(904) 359-3100

(Registrant’s telephone number, including area code)

No Change

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of June 28, 2002: 9,061,038 shares.

REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H (1) (a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

CSX TRANSPORTATION, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~JUNE~~September 2827, 2002

INDEX

		Page Number
PART I. FINANCIAL INFORMATION
PART I.	FINANCIAL INFORMATION
Item 1: Financial Statements
Item 1:	Financial Statements
	Consolidated Statement of Earnings (Unaudited)—Quarters and Six Months Ended June 28, 2002 and June 29, 2001	3
	Consolidated Statement of Earnings (Unaudited)—Quarters and Nine Months Ended September 27, 2002 and September 28, 2001	3
	Consolidated Statement of Cash Flows (Unaudited)—Six Months Ended June 28, 2002 and June 29, 2001	4
	Consolidated Statement of Cash Flows (Unaudited)—Nine Months Ended September 27, 2002 and September 28, 2001	4
	Consolidated Statement of Financial Position—At June 28, 2002 (Unaudited) and December 28, 2001	5
	Consolidated Statement of Financial Position—At September 27, 2002 (Unaudited) and December 28, 2001	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2: Management’s Discussion and Analysis		13
Item 2:	Management’s Discussion and Analysis	13
Item 3: Quantitative and Qualitative Disclosures About Market Risk		17
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	18
PART II. OTHER INFORMATION
Item 4:	Disclosure Control and Procedures	18
Item 6: Exhibits and Reports on Form 8-K		18
PART II.	OTHER INFORMATION
Signature		18
Item 6:	Exhibits and Reports on Form 8-K	19
Signature		19
Certifications		20

CSX TRANSPORTATION, INC. AND SUBSIDIARIES

~~CONSOLIDATED~~Consolidated ~~STATEMENT~~Statement OFof ~~EARNINGS~~Earnings

(Millions of Dollars)

	(Unaudited)
	Quarter Ended							Nine Months Ended
	Quarter Ended						Six Months Ended
	September 27, 2002			September 28, 2001				September 27, 2002			September 28, 2001
	June 28, 2002			June 29, 2001			June 28, 2002			June 29, 2001
	(Unaudited)
OPERATING REVENUE
Merchandise	$	~~893~~871		$	~~881~~852		$	~~1,761~~$	2,632	$	~~1,771~~$	2,623
Automotive		~~231~~195			~~213~~184			~~431~~	626		~~407~~	591
Coal, Coke & Iron Ore		~~398~~401			~~436~~435			~~795~~	1,196		~~866~~	1,301
Other		166			2624			37	43		44	68
Total		1,~~538~~473			1,~~556~~495			~~3,024~~	4,497		~~3,088~~	4,583
OPERATING EXPENSE
Labor and Fringe		~~605~~611			~~618~~606			~~1,219~~	1,830		~~1,248~~	1,854
Materials, Supplies and Other		~~285~~261			~~283~~282			~~571~~	832		~~555~~	837
Conrail Operating Fee, Rent and Services		86			8984			~~174~~	260		~~177~~	261
Related Party Service Fees		68(9	)		4844			~~147~~	138		96	140
Equipment Rent		103			104			199			215
Building and Equipment Rent		112			102				311			317
Depreciation		~~131~~136			~~131~~130			~~261~~	397		~~262~~	392
Fuel		~~112~~109			~~131~~123			~~216~~	325		~~285~~	408
Total		1,~~390~~306			1,~~404~~371			~~2,787~~	4,093		~~2,838~~	4,209
OPERATING INCOME		~~148~~167			~~152~~124			~~237~~	404		~~250~~	374
Other Income (Expense)		~~(17~~16	)		18(6	)		1	17		5	(1	)
Interest Expense		28			3230			58	86		67	97
EARNINGS BEFORE INCOME TAXES		~~103~~155			~~138~~88			~~180~~	335		~~188~~	276
Income Tax Expense		3958			5431			69	127		73	104
NET EARNINGS	$	6497		$	8457		$	~~111~~$	208	$	~~115~~$	172

See accompanying Notes to Consolidated Financial Statements.

CSX TRANSPORTATION, INC. AND SUBSIDIARIES

~~CONSOLIDATED~~Consolidated ~~STATEMENT~~Statement OFof ~~CASH~~Cash ~~FLOWS~~Flows

(Millions of Dollars)

	Nine Months Ended
	September 27, 2002			September 28, 2001
	(Unaudited)
	Six Months Ended
	June 28, 2002			June 29, 2001
OPERATING ACTIVITIES
Net Earnings	$	~~111~~208		$	~~115~~172
Adjustments to Reconcile Net Earnings to Net Cash Provided:
Depreciation		~~261~~397			~~262~~392
Deferred Income Taxes		68144			5787
Other Operating Activities		85			4(17	)
Changes in Operating Assets and Liabilities:
Accounts and Notes Receivable		46(15	)		(5426	)
Sale of Accounts Receivable, Net		19(29	)		4910
Other Current Assets		(3439	)		(1514	)
Accounts Payable		(6681	)		8(145	)
Other Current Liabilities		(12108	)		1966
Net Cash Provided by Operating Activities		~~401~~482			~~445~~525
INVESTING ACTIVITIES
Property Additions		(~~352~~647	)		(~~377~~566	)
Short-term Investments		~~137~~220			—
Other Investing Activities		(25	)		61
Net Cash Used by Investing Activities		(~~217~~432	)		(~~371~~565	)
FINANCING ACTIVITIES
Long-term Debt Issued		1			—
Long-term Debt Repaid		(172	)		(134	)
Long-term Debt Repaid		(150	)		(118	)
Advances from CSX		244			324
Advances from CSX		79			118
Dividends Paid		(150	)		(159	)
Dividends Paid		(100	)		(106	)
Other Financing Activities		1			4
Net Cash Used by Financing Activities		(169	)		(102	)
Net Cash (Used) Provided by Financing Activities		(77	)		35
Net Increase (Decrease) in Cash and Cash Equivalents		15			(28	)
Net Decrease in Cash and Cash Equivalents		(27	)		(5	)
CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS
Cash and Cash Equivalents at Beginning of Period		27			28
Cash and Cash Equivalents at End of Period		42—			—23
Short-term Investments at End of Period		83—			—
Cash, Cash Equivalents and Short-term Investments at End of Period	$	~~125~~—		$	—23

See accompanying Notes to Consolidated Financial Statements.

CSX TRANSPORTATION, INC. AND SUBSIDIARIES

~~CONSOLIDATED~~Consolidated ~~STATEMENT~~Statement OFof ~~FINANCIAL~~Financial ~~POSITION~~Position

(Millions of Dollars)

	September 27, 2002			December 28, 2001
	(Unaudited)
	June 28, 2002			December 28, 2001
ASSETS
Current Assets
Cash, Cash Equivalents and Short-term Investments	$	~~125~~—		$	247
Accounts Receivable, Net		~~192~~275			289
Notes Receivable		4752			62
Materials and Supplies		~~190~~183			181
Deferred Income Taxes		101			142
Income Taxes Receivable		78			78
Other Current Assets		5263			32
Total Current Assets		~~785~~752			1,031
Properties		16,~~877~~992			16,644
Accumulated Depreciation		(4,~~580~~539	)		(4,427	)
Properties—Net		12,297			12,217
Properties-Net		12,453			12,217
Affiliates and Other Companies		~~206~~212			198
Other Long-term Assets		~~567~~609			567
Total Assets	$	1314,~~855~~026		$	14,013
LIABILITIES
Current Liabilities
Accounts Payable	$	~~661~~624		$	736
Labor and Fringe Benefits Payable		~~312~~286			320
Casualty, Environmental and Other Reserves		~~176~~174			178
Current Maturities of Long-term Debt		~~205~~207			170
Income and Other Taxes Payable		~~205~~207			192
Due to Parent Company		1,~~175~~338			1,107
Due to Affiliate		~~197~~201			209
Other Current Liabilities		~~144~~76			196
Total Current Liabilities		3,~~075~~113			3,108
Casualty, Environmental and Other Reserves		~~515~~507			532
Long-term Debt		~~894~~880			1,033
Deferred Income Taxes		3,~~277~~353			3,250
Other Long-term Liabilities		~~570~~602			577
Total Liabilities		8,~~331~~455			8,500
SHAREHOLDER’S EQUITY
Common Stock, $20 Par Value:
Authorized 10,000,000 Shares;
Issued and Outstanding 9,061,038 Shares		181			181
Other Capital		1,380			1,380
Retained Earnings		34,~~963~~010			3,952
Total Shareholder’s Equity		5,~~524~~571			5,513
Total Liabilities and Shareholder’s Equity	$	1314,~~855~~026		$	14,013

See accompanying Notes to Consolidated Financial Statements.

CSX TRANSPORTATION, INC. AND SUBSIDIARIES

~~NOTES~~Notes TOto ~~CONSOLIDATED~~Consolidated ~~FINANCIAL~~Financial ~~STATEMENTS~~Statements (~~UNAUDITED~~Unaudited)

(All ~~Tables~~tables in Millions of Dollars)

NOTE 1. BASIS OF PRESENTATION

In the opinion of management, the accompanying consolidated financial statements contain all adjustments necessary to present fairly the financial position of CSX Transportation, Inc. and its subsidiaries (“CSXT” or the “Company”) at ~~June~~September 2827, 2002 and December 28, 2001, the results of ~~their~~its operations for the quarters and ~~six~~nine months ended ~~June~~September 2827, 2002 and ~~June~~September 2928, 2001, and its cash flows for the ~~six~~nine months ended ~~June~~ 28September 27, 2002 and ~~June~~September 2928, 2001, such adjustments being of a normal recurring nature. Certain prior-year data have been reclassified to conform to the 2002 presentation. CSXT is a wholly-owned subsidiary of CSX Corporation (“CSX”).

~~While~~The ~~the~~ Company believes that the disclosures presented are ~~adequate~~accurate toand ~~make the information~~ not misleading, ~~it is~~but ~~suggested~~suggests that these financial statements be read in conjunction with the financial statements and the notes included in CSXT’s latest Form 10-K.

CSXT follows a 52/53 week fiscal reporting calendar. Fiscal years 2002 and 2001 consist of 52 weeks ending on December 27, 2002 and December 28, 2001, respectively. The financial statements presented are for the 13-week quarters ended ~~June~~September 2827, 2002 and ~~June~~September 2928, 2001, the 2639-week periods ended ~~June~~September 2827, 2002 and ~~June~~September 2928, 2001, and as of December 28, 2001.

NOTE 2. INTEGRATED RAIL OPERATIONS WITH CONRAIL.

Background

CSX and Norfolk Southern Corporation (“Norfolk Southern”) completed the acquisition of Conrail Inc. (“Conrail”) in May 1997. Conrail owns the primary freight railroad system serving the northeastern United States, and its rail network extends into several midwestern states and into Canada. CSX and Norfolk Southern, through a jointly owned acquisition entity, hold ~~economic~~ownership interests in Conrail of 42% and 58%, respectively, and voting interests of 50% each. CSX and Norfolk Southern operate over allocated portions of the Conrail lines.

CSXT and Norfolk Southern Railway Company (“Norfolk Southern Railway”), the rail subsidiary of Norfolk Southern, operate their respective portions of the Conrail system pursuant to ~~various~~certain operating agreements. Under these agreements, the railroads pay operating fees to Conrail for the use of right-of-way and rent for the use of equipment. Conrail continues to provide rail services in certain shared geographic areas (“Shared Asset Areas”) for the joint benefit of CSXT and Norfolk Southern Railway for which it is compensated on the basis of usage by the respective railroads.

CSX TRANSPORTATION, INC. AND SUBSIDIARIES

~~NOTES~~Notes TOto ~~CONSOLIDATED~~Consolidated ~~FINANCIAL~~Financial ~~STATEMENTS~~Statements (Unaudited)—(, Continued)

(All ~~Tables~~tables in Millions of Dollars)

NOTE 2. INTEGRATED RAIL OPERATIONS WITH CONRAIL, Continued.

~~CSXT’s~~ Accounting ~~for~~and ~~its~~Financial ~~Integrated~~Reporting ~~Rail~~Effects ~~Operations With Conrail~~

~~Upon integration, substantially all of Conrail~~CSXT’s ~~customer~~operating ~~freight~~revenue ~~contracts were assumed by CSXT~~ and ~~Norfolk~~expense ~~Southern Railway. As a result, CSXT’s operating revenue~~ includes ~~revenue~~activity from traffic ~~previously~~ moving on ~~Conrail. Operating expenses reflect corresponding increases for costs incurred to handle~~ the ~~new~~territory ~~traffic~~acquired ~~and~~in ~~operate~~ the ~~former~~ Conrail ~~lines~~transaction. Operating expenses also include an expense category, “Conrail Operating Fee, Rent and Services,” which reflects payments to Conrail for the use of Conrail right-of-way and equipment, as well as charges for transportation, switching and terminal services in the Shared Asset Areas that Conrail operates for the joint benefit of CSXT and Norfolk Southern Railway.

Transactions ~~With~~with Conrail

The agreement under which CSXT operates its allocated portion of the Conrail route system has an initial term of 25 years and may be renewed at CSXT’s option for two five-year terms. Operating fees paid to Conrail under the agreement are subject to adjustment every six years based on the fair value of the underlying Conrail railroad system. Lease agreements for the Conrail equipment operated by CSXT cover varying terms. CSXT is responsible for all costs of operating, maintaining, and improving the routes and equipment under these agreements.

AtAs ~~June~~listed 28below, ~~2002~~ CSXT ~~had~~has no amounts ~~receivable~~payable ~~from~~to Conrail, ~~while~~representing atexpenses ~~December~~incurred ~~28,~~under ~~2001~~the operating, ~~amounts~~equipment ~~receivable~~and ~~from~~shared ~~Conrail~~area ~~totaled~~agreements $3with ~~million, principally for reimbursement of certain capital improvement costs~~Conrail. ~~CSXT~~At ~~had amounts payable to Conrail of approximately $64 million and $88 million at June 28, 2002 and~~ December 28, 2001, ~~respectively,~~CSXT ~~representing~~also ~~expenses~~had ~~incurred~~receivables ~~under~~from ~~the operating~~Conrail, ~~equipment,~~principally ~~and~~for ~~shared~~reimbursement ~~area~~of ~~agreements~~certain ~~with Conrail~~capital improvement costs.

	September 27, 2002		December 28, 2001
CSXT Payable to Conrail	$	70	$	88
CSXT Receivable from Conrail		—		3

NOTE 3. ACCOUNTS RECEIVABLE

CSXT has an ongoing agreement to sell without recourse, on a revolving basis each month, an undivided percentage ownership interest in all rail freight accounts receivable to CSX Trade Receivables Corporation (“CTRC”), a wholly-owned subsidiary of CSX. ~~Accounts~~Outstanding accounts receivable sold under this agreement totaled $~~985~~936 million at ~~June~~September 2827, 2002 and $966 million at December 28, 2001. In addition, through November 2001, CSXT had a revolving agreement with a financial institution to sell with recourse on a monthly basis an undivided percentage ownership interest in all miscellaneous accounts receivable. Accounts receivable sold under this agreement ~~was~~were $47 million at ~~June~~September 2928, 2001. The sales of receivables have been reflected as reductions of Accounts ~~and Notes~~ Receivable in the Consolidated Statement of Financial Position. The net losses associated with sales of receivables were $1918 million for the quarter and $3856 million for the ~~six~~nine months ended ~~June~~September 2827, 2002, and $2019 million for the quarter and $3958 million for the ~~six~~nine months ended ~~June~~September 2928, 2001.

CSXT has retained the responsibility for servicing accounts receivable sold to CTRC. The average servicing period is approximately one month. No servicing asset or liability has been recorded since the fees CSXT receives for servicing the receivables approximates the related costs.

CSX TRANSPORTATION, INC. AND SUBSIDIARIES

~~NOTES~~Notes TOto ~~CONSOLIDATED~~Consolidated ~~FINANCIAL~~Financial ~~STATEMENTS~~Statements (Unaudited)—(, Continued)

(All ~~Tables~~tables in Millions of Dollars)

NOTE 3. ACCOUNTS RECEIVABLE, Continued

NOTE 4. OTHER INCOME (EXPENSE)

	Quarters Ended						~~Six~~Nine Months Ended
	June 28, 2002			June 29, 2001			June 28, 2002			June 29, 2001
	September 27, 2002			September 28, 2001			September 27, 2002			September 28, 2001
Income from Real Estate Operations(1)	$	—33		$	4115		$	4376		$	5065
Net Losses from Accounts Receivable Sold		(1918	)		(2019	)		(3856	)		(3958	)
Miscellaneous		21			(32	)		(43	)		(68	)
Total	$	~~(17~~16	)	$	18(6	)	$	117		$	5(1	)

(1) Gross revenue from real estate operations was $842 million for the quarter and $60102 million for the ~~six~~nine months ended ~~June~~September 2827, 2002, and $4921 million and $6586 million for the quarter and ~~six~~nine months ended ~~June~~September 2928, 2001.

NOTE 5. RELATED PARTIES

At ~~June~~September 2827, 2002 and December 28, 2001, CSXT had deficit balances of $1.3 billion and $1.1 billion, respectively, relating to its participation in the CSX cash management plan, which is shown as Due to Parent Company in the Consolidated Statement of Financial Position. Under this plan, excess cash is advanced to CSX for investment and CSX makes cash funds available to its subsidiaries as needed for use in their operations. CSXT and CSX are committed to repay all amounts due each other on demand should circumstances require. The companies are charged for borrowings or compensated for investments based on returns earned by the plan portfolio, which was 2.8879% and 4.8319% at ~~June~~ 28September 27, 2002 and ~~June~~September 2928, 2001, respectively. Interest expense related to this plan was $78.70 million and $1624.5 million for the quarter and ~~six~~nine months ended ~~June~~September 2827, 2002, and $7.6.8 million and $1623.97 million for the quarter and ~~six~~nine months ended ~~June 29~~September 28, 2001.

Related Party Service Fees ~~expense~~ consists of amounts related to:

• ACSX ~~management service fee of $77 million and $59 million for the quarters ended June 28~~Intermodal, ~~2002~~Inc. ~~and~~(“CSXI”) ~~June~~Reimbursements—Reimbursement ~~29,~~from ~~2001,~~CSXI ~~respectively,~~under ~~and~~an ~~$154~~operating ~~million~~agreement ~~and $119 million~~ for ~~the~~costs ~~six-months~~incurred ~~ended June 28, 2002 and June 29, 2001, respectively, charged~~ by ~~CSX representing compensation for certain corporate services provided to~~ the Company. ~~These~~related ~~services include, but are not limited~~ to ~~the~~intermodal ~~areas~~operations. ofThis ~~human~~reimbursement ~~resources,~~is ~~finance,~~based ~~administration,~~on ~~benefits,~~an ~~legal,~~amount ~~tax,~~which ~~internal~~approximates ~~controls~~actual ~~and corporate communications, as well as strategic management services~~costs. The ~~fee~~Company ~~for~~also ~~2002~~collects iscertain ~~calculated as a percentage of CSXT’s~~ revenue. ~~Prior~~on tobehalf ~~2002, the fee was calculated as a percentage~~ of ~~CSX’s~~CSXI ~~investment~~under ~~in CSXT. As of June 28, 2002 and December 28, 2001, $32 million and $42 million, respectively was payable to CSX and was included in Due to Parent on~~ the ~~Statement~~operating ~~of Financial Position~~agreement.

•

Total Distribution Services, Inc. (“TDSI”) Charges—Charges from TDSI for services provided to CSXT at automobile ramps. These charges are calculated based on direct costs.

•

TRANSFLO Terminal Services, Inc. (“TRANSFLO”) Charges—Charges from TRANSFLO for services provided to CSXT at bulk commodity facilities. These charges are calculated based on direct costs.

CSX TRANSPORTATION, INC. AND SUBSIDIARIES

~~NOTES~~Notes TOto ~~CONSOLIDATED~~Consolidated ~~FINANCIAL~~Financial ~~STATEMENTS~~Statements (Unaudited)—(, Continued)

(All ~~Tables~~tables in Millions of Dollars)

NOTE 5. RELATED PARTIES, Continued

• ~~Data~~CSX ~~processing~~Management ~~related~~Service ~~charges~~Fee—A ofmanagement ~~$52~~service ~~million~~fee ~~and~~charged ~~$54~~by ~~million~~CSX as compensation for ~~the~~certain ~~quarters~~corporate ~~ended~~services ~~June~~provided ~~28,~~to ~~2002~~the ~~and~~Company. ~~June~~These ~~29,~~services ~~2001~~include, ~~respectively,~~but ~~and~~are ~~$107~~not ~~million~~limited ~~and~~to, ~~$110 million for~~ the ~~six-months~~areas ~~ended~~of ~~June~~human 28resources, ~~2002~~finance, ~~and June 29~~administration, ~~2001~~benefits, ~~respectively~~legal, ~~from CSX Technology~~tax, ~~Inc.~~internal ~~(CSX~~controls ~~Technology)~~and ~~representing~~corporate ~~compensation to CSX Technology for the development~~communications, ~~implementation~~as ~~and~~well ~~maintenance~~as ofstrategic ~~computer~~management ~~systems,~~services. ~~software~~The ~~and~~fee ~~associated documentation~~ for ~~the~~2002 ~~day-to-day~~is ~~operations~~calculated ofas ~~the Company. These charges are based on~~ a ~~mark-up~~percentage of ~~direct~~CSXT’s ~~costs~~revenue. AsPrior ofto ~~June 28,~~ 2002 ~~and December 28~~, ~~2001,~~the ~~$35~~fee ~~million~~was ~~and~~calculated ~~$44~~as ~~million,~~a ~~respectively~~percentage ~~was~~of ~~payable to~~ CSX’s ~~and~~investment ~~was included~~ in ~~Due to Affiliate on the Statement of Financial Position~~CSXT.

• ~~Reimbursement~~CSX ofTechnology, ~~$92~~Inc. ~~million~~(“CSX ~~for~~Technology”) ~~the~~Charges—Data ~~quarters~~processing ~~ended~~charges ~~June~~from ~~28,~~CSX ~~2002~~Technology ~~and~~as ~~June~~compensation ~~29,~~to ~~2001,~~CSX ~~and~~Technology ~~$178 million and $186 million~~ for the ~~six-months ended June 28~~development, ~~2002~~implementation and ~~June~~maintenance ~~29,~~of ~~2001,~~computer ~~respectively~~systems, ~~under~~software anand ~~operating~~associated ~~agreement,~~documentation ~~from CSX Intermodal, Inc. (CSXI),~~ for ~~costs incurred by~~ the ~~Company related~~ day-to-day ~~intermodal~~ operations. ~~This~~of ~~reimbursement~~the ~~is based on an amount which approximates actual costs~~Company. AsThese ofcharges ~~June~~are ~~28,~~based ~~2002 and December 28, 2001, $28 million and $24 million, respectively was payable to CSX and was included in Due to Affiliate~~ on ~~the~~a ~~Statement~~mark-up of ~~Financial~~direct ~~Position~~costs.

• ~~Charges~~CTRC ofReimbursement—During ~~$12 million and $13 million for~~ the ~~quarters~~quarter ended ~~June~~September 2827, 2002 ~~and June 29~~, ~~2001, respectively, and $24 million and $27 million for~~ the ~~six-months~~Company ~~ended~~charged ~~June~~CTRC ~~28, 2002 and June 29, 2001, respectively, from Total Distribution Services, Inc. (TDSI),~~ for ~~services~~accounts ~~provided~~receivable atreserves ~~automobile~~recorded ~~ramps.~~by ~~These~~the ~~charges~~Company ~~are~~in ~~calculated~~current ~~based on direct costs. As of June 28, 2002~~ and ~~December~~prior ~~28,~~periods ~~2001,~~related ~~$3 million and $4 million, respectively was payable~~ to ~~CSX~~receivables ~~and~~sold ~~was included in Due~~ to ~~Affiliate on the Statement of Financial Position~~CTRC.

• Charges of $19 million and $14 million for the quarters ended June 28, 2002 and June 29, 2001, respectively, and $40 million and $26 million for the six-months ended June 28, 2002 and June 29, 2001, respectively, from TRANSFLO Terminal Services, Inc. (TRANSFLO) for services provided at bulk commodity facilities. These charges are calculated based on direct costs. As of June 28, 2002 and December 28, 2001, $8 million and $5 million, respectively was payable to CSX and was included in Due to Affiliate on the Statement of Financial Position.

CSX Technology, CSXI, TDSI, and TRANSFLO are wholly-owned subsidiaries of CSX.

~~CSXT~~Detail ~~and~~Of ~~CSX~~Due ~~Insurance Company (“CSX Insurance”), a wholly-owned subsidiary of CSX, have entered into a loan agreement whereby CSXT may borrow up~~ to ~~$125~~Affiliate million from CSX Insurance. The loan is payable in full on demand. At June 28, 2002 and December 28, 2001, $115 million and $125 million, respectively, was outstanding. Interest on the loan is payable monthly at .45% over the LIBOR rate, and was 2.29% at June 28, 2002 and 2.56 % at December 28, 2001. Interest expense related to the loan was $0.6 million and $1.3 million for the quarter and six months ended June 28, 2002, respectively, and $2 million and $4 million for the quarter and six months ended June 29, 2001, respectively.

	Quarters Ended
	September 27, 2002		December 28, 2001
CSXI	$	34	$	24
TDSI		—		4
TRANSFLO		9		5
CSX Technology		37		44
CSX Insurance		115		125
CTRC		6		6
Other		—		1

Total Due to Affiliate	$	201	$	209

Detail of Related Party Service Fees

	Quarters Ended						Nine Months Ended
	September 27, 2002			September 28, 2001			September 27, 2002			September 28, 2001
CSXI	$	(94	)	$	(94	)	$	(272	)	$	(280	)
TDSI		7			11			31			38
TRANSFLO		20			13			60			39
CSX Management Service Fee		59			60			213			179
CSX Technology		52			54			159			164
CTRC		(53	)		—			(53	)		—

Total Related Party Service Fees	$	(9	)	$	44		$	138		$	140

CSX TRANSPORTATION, INC. AND SUBSIDIARIES

~~NOTES~~Notes TOto ~~CONSOLIDATED~~Consolidated ~~FINANCIAL~~Financial ~~STATEMENTS~~Statements (Unaudited)—(, Continued)

(All ~~Tables~~tables in Millions of Dollars)

NOTE 5. RELATED PARTIES, Continued

CSXT ~~participates~~and ~~with~~ CSX ~~Lines,~~Insurance ~~LLC~~Company (“CSX ~~Lines~~Insurance”), a wholly-owned subsidiary of CSX, have entered into a loan agreement whereby CSXT may borrow up to $125 million from CSX Insurance. The loan is payable in ~~four~~full ~~sale-leaseback~~on ~~arrangements~~demand. ~~Under~~At ~~these~~September ~~arrangements~~27, ~~CSX~~2002 ~~Lines sold~~and ~~equipment~~December to28, a2001, ~~third~~$115 ~~party~~million and ~~CSXT~~$125 ~~leased~~million, ~~the~~respectively, ~~equipment~~was ~~and~~outstanding. ~~assigned~~Interest on the ~~lease~~loan tois ~~CSX~~payable ~~Lines~~monthly at 0.45% over ~~CSX~~the ~~Lines~~LIBOR israte, ~~obligated~~and ~~for~~was ~~all~~1.82% ~~lease~~at ~~payments~~September 27, 2002 and ~~other~~2.56% ~~associated~~at ~~equipment~~December ~~expenses~~28, 2001. IfInterest ~~CSX~~expense ~~Lines~~related ~~defaults~~to onthe ~~its~~loan ~~obligations~~was ~~under~~$0.6 ~~the arrangements,~~million ~~CSXT~~and ~~would~~$1.9 ~~assume~~million for the ~~asset~~quarter ~~lease~~and ~~rights~~nine months ended September 27, 2002, respectively, and ~~obligations~~$1.4 ofmillion and $384.19 million atfor ~~June~~the quarter and nine months ended September 28, ~~2002~~2001, respectively.

CSXT participates with SL Service, Inc., a wholly-owned subsidiary of CSX, in sale-leaseback arrangements. Under these arrangements, SL Service, Inc. sold equipment to a third party and CSXT leased the equipment and assigned the lease to SL Service, Inc. SL Service, Inc. is obligated for all lease payments and other associated equipment expenses. If SL Service, Inc. defaults on its obligations under the arrangements, CSXT would assume the asset lease rights and obligations of $27 million at September 27, 2002. These leases were assumed by Maersk as part of its purchase of the CSX international liner business. CSXT believes that Maersk will fulfill its contractual commitments with respect to such leases and that CSXT will have no further liability for those obligations.

NOTE 6. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

The Company has entered into fuel purchase agreements for approximately 50% of its fuel requirements over the next ~~six~~three months. ~~These~~The Company has not entered into any fuel purchase agreements for 2003. At September 27, 2002, the agreements amount to approximately ~~144~~70 million gallons in commitments at a weighted average of 78 cents per gallon. These contracts require the Company to take monthly delivery of specified quantities of fuel at a fixed price. ~~These contracts cannot be net settled.~~

CSXT also has a commitment under a long-term maintenance program for approximately 40% of the Company’s fleet of locomotives. The agreement expires in ~~2024~~2025 and totals $2.76 billion.

Contingencies

~~Environmental~~Self-Insurance

~~CSXT~~The isCompany aobtains ~~party~~substantial toamounts ~~various~~of ~~proceedings~~commercial ~~involving~~insurance ~~private~~for ~~parties~~potential ~~and~~losses ~~regulatory~~for ~~agencies~~third-party ~~related~~liability toand ~~environmental~~property ~~issues~~damages. ~~CSXT~~It ~~has~~also ~~been~~self-insures ~~identified as a potentially responsible party (“PRP”)~~ at 82reasonable ~~environmentally~~levels, ~~impaired sites that are or may be subject to remedial action under the Federal Superfund statute (“Superfund”) or similar state statutes. A number of these proceedings are~~ based on ~~allegations that CSXT, or~~ its ~~railroad~~ predecessors, sent hazardous substances to the facilities in question for disposal. Such proceedings arising under Superfund or similar state statutes can involve numerous other waste generators and disposal companies and seek to allocateassessment orof ~~recover~~market ~~costs~~risks ~~associated with site investigation~~ and ~~cleanup, which could be substantial~~practices.

CSXT is involved in a number of administrative and judicial proceedings and other clean-up efforts at 206 sites, including the sites addressed under Superfund or similar state statutes, where it is participating in the study and/or clean-up of alleged environmental contamination. The assessment of the required response and remedial costs associated with most sites is extremely complex. Cost estimates are based on information available for each site, financial viability of other PRPs, where available, and existing technology, laws and regulations. CSXT’s best estimates of the allocation method and percentage of liability when other PRPs are involved are based on assessments by consultants, agreements among PRPs, or determinations by the U.S. Environmental Protection Agency or other regulatory agencies.

CSX TRANSPORTATION, INC. AND SUBSIDIARIES

~~NOTES~~Notes TOto ~~CONSOLIDATED~~Consolidated ~~FINANCIAL~~Financial ~~STATEMENTS~~Statements (~~UNAUDITED~~Unaudited)—(, Continued)

(All ~~Tables~~tables in Millions of Dollars)

NOTE 6. COMMITMENTS AND CONTINGENCIES, Continued

~~Environmental~~Contingencies, Continued

AtCasualty least once each quarter, CSXT reviews its role, if any, with respect to each such location, giving consideration to the nature of CSXT’s alleged connection to the location (e.g., generator, owner or operator), the extent of CSXT’s alleged connection (e.g., volume of waste sent to the location and other relevant factors), the accuracy and strength of evidence connecting CSXT to the location, and the number, connection and financial position of other named and unnamed PRPs at the location. The ultimate liability for remediation can be difficult to determine with certainty because of the number and creditworthiness of PRPs involved. Through the assessment process, CSXT monitors the creditworthiness of such PRPs in determining ultimate liability.

~~Based~~CSXT ~~upon~~incurs ~~such~~claims ~~reviews~~for ~~and~~occupational ~~updates of the~~injuries, ~~sites~~personal ~~with~~injuries ~~which it is involved, CSXT has recorded,~~ and ~~reviews~~accidents. atCasualty ~~least quarterly for adequacy,~~ reserves toare ~~cover~~ estimated ~~contingent~~based ~~future~~upon ~~environmental~~the ~~costs~~first ~~with~~reporting ~~respect~~of toan ~~such~~accident ~~sites.~~or ~~The~~personal ~~recorded~~injury, ~~liabilities~~and ~~for~~updated ~~estimated~~as ~~future environmental~~information ~~costs~~develops. ~~were~~Liabilities ~~$32~~for ~~million~~accidents atare ~~June~~based ~~28,~~upon ~~2002~~the type and ~~December~~severity ~~28,~~of ~~2001.~~the ~~These~~injury ~~recorded~~or claim ~~liabilities,~~and ~~which~~the ~~are~~use ~~undiscounted, include amounts representing CSXT’s estimate~~ of ~~unasserted~~current ~~claims,~~trends ~~which~~and ~~CSXT~~historical ~~believes to be immaterial~~data. The ~~liability~~ ~~has~~Company ~~been~~believes ~~accrued~~it ~~for~~has ~~future~~recorded ~~costs~~liabilities ~~for~~in ~~all~~sufficient ~~sites~~amounts ~~where~~to ~~CSXT’s~~cover ~~obligation~~all isidentified ~~probable~~claims and ~~where~~estimates ~~such~~of ~~costs~~incurred, ~~can~~but benot ~~reasonably~~reported ~~estimated.~~personal ~~The~~injury ~~liability~~and ~~includes~~accident ~~future~~claims. Unreported ~~costs~~occupational ~~for~~injuries ~~remediation~~are ~~and~~not ~~restoration~~subject ofto ~~sites~~reasonable asestimation, ~~well~~thus asno ~~any significant~~provision ~~ongoing~~is ~~monitoring~~made ~~costs~~for incurred, but ~~excludes~~not ~~any~~reported ~~anticipated~~occupational ~~insurance recoveries~~injuries. ~~The~~Occupational ~~majority of the June 28~~injury, ~~2002~~personal ~~environmental~~injury ~~liability~~and isaccident ~~expected~~liabilities amount to be$425 ~~paid~~million ~~out~~and ~~over~~$435 million ~~the~~at ~~next~~September ~~five to seven years~~27, ~~funded~~2002 byand ~~cash~~December ~~generated~~28, ~~from operations~~2001, respectively.

~~The~~Environmental Company does not currently possess sufficient information to reasonably estimate the amounts of additional liabilities, if any, on some sites until completion of future environmental studies. In addition, latent conditions at any given location could result in exposure, the amount and materiality of which cannot presently be reliably estimated. Based upon information currently available, however, CSXT believes its environmental reserves are adequate to accomplish remedial actions to comply with present laws and regulations, and that the ultimate liability for these matters will not materially affect its overall results of operations and financial condition.

~~New~~CSXT ~~Orleans~~is ~~Tank~~a ~~Car~~party ~~Fire~~to various proceedings involving private parties and regulatory agencies related to environmental issues. CSXT has been identified as a potentially responsible party (PRP) at 89 environmentally impaired sites that are, or may be, subject to remedial action under the Federal Superfund statute (“Superfund”) or similar state statutes. A number of these proceedings are based on allegations that CSXT, or its railroad predecessors, sent hazardous substances to the facilities in question for disposal. Such proceedings arising under Superfund or similar state statutes can involve numerous other waste generators and disposal companies and seek to allocate or recover costs associated with site investigation and cleanup, which could be substantial.

InCSXT ~~2001~~is ~~CSXT~~involved ~~reached~~in a ~~settlement~~number of ~~the~~administrative ~~New~~and ~~Orleans~~judicial ~~Tank~~proceedings ~~Car~~and ~~Fire~~other ~~litigation,~~clean-up ~~which~~efforts ~~was~~at ~~subject~~206 ~~to a fairness hearing and court approval~~sites. The ~~amount~~206 tosites bewhere ~~paid~~it ~~by CSXT under the settlement~~ is ~~$220~~participating ~~million, $85 million to be paid net of insurance recoveries. The fairness hearing occurred~~ in ~~April 2002, and~~ the ~~Court~~study ~~approved~~or ~~the~~clean-up ~~settlement.~~of ~~The time~~alleged ~~has~~environmental ~~run~~contamination ~~for~~include ~~appeals. The Company is fully accrued for this settlement, which is subject to plaintiffs’ attorney’s reaching agreement with~~ the ~~group~~89 ofSuperfund ~~plaintiffs.~~sites ~~The~~noted ~~Company expects that agreement to be obtained and the settlement is expected to be paid in 2002~~above.

At least once each quarter, CSXT reviews its role, if any, with respect to each such location, giving consideration to the nature of CSXT’s alleged connection to the location (e.g., generator of waste sent to the site, owner or operator of the site), the extent of CSXT’s alleged connection (e.g., volume of waste sent to the location and other relevant factors), the accuracy of evidence connecting CSXT to the location, and the number, connection, financial position and ability to pay of other named and unnamed PRPs at the location.

Based upon the assessment review process, CSXT has recorded, and reviews at least quarterly for adequacy, reserves to cover estimated contingent future environmental costs with respect to such sites. The recorded liabilities for estimated future environmental costs at September 27, 2002, and December 28, 2001 were $34 and $32 million, respectively. These recorded liabilities, which are undiscounted, include amounts representing CSXT’s estimate of unasserted claims, which CSXT believes to be immaterial. The liability has been accrued for future costs for all sites where the Company’s obligation is probable and where such costs can be reasonably estimated. The liability includes future costs for remediation and restoration of sites as well as any significant ongoing monitoring costs, but excludes any anticipated insurance recoveries. The majority of the September 27, 2002 environmental liability is expected to be paid out over the next five to seven years, funded by cash generated from operations.

CSX TRANSPORTATION, INC. AND SUBSIDIARIES

~~NOTES~~Notes TOto ~~CONSOLIDATED~~Consolidated ~~FINANCIAL~~Financial ~~STATEMENTS~~Statements (Unaudited)—(, Continued)

(All ~~Tables~~tables in Millions of Dollars)

NOTE 6. COMMITMENTS AND CONTINGENCIES, Continued

Contingencies, Continued

Environmental, Continued

The Company does not currently possess sufficient information to reasonably estimate the amounts of additional liabilities, if any, on some sites until completion of future environmental studies. In addition, latent conditions at any given location could result in exposure, the amount and materiality of which cannot presently be reliably estimated. Based upon information currently available, however, the Company believes its environmental reserves are adequate to accomplish remedial actions to comply with present laws and regulations, and that the ultimate liability for these matters will not materially affect its overall results of operations and financial condition.

New Orleans Tank Car Fire

CSXT’s settlement of the New Orleans Tank Car Fire Litigation was $220 million, of which approximately $135 million was funded by CSXT’s insurers, and was paid during the third quarter of 2002 to the plaintiffs’ representatives.

Contract Settlement

In ~~July~~ July the Company received $44 million as the first of two payments to settle a contract dispute. ~~The~~In ~~second~~the ~~payment~~quarter ofended September 27, 2002, the Company recognized approximately $237 million isof ~~due~~this first payment in ~~January~~other ~~2003~~income as this amount related to prior periods. The ~~accounting~~remaining ~~for~~$37 ~~the~~million ~~settlement~~will isbe ~~under~~recognized ~~review,~~ratably ~~and~~over the ~~Company~~contract ~~believes~~period ~~some~~which ~~portion~~ends ~~will be recognized~~ in ~~the~~2020. ~~third~~The ~~quarter~~second payment of ~~2002,~~$23 ~~but~~million is due in January 2003 and will likewise be ~~primarily~~ recognized ~~ratably~~ over the ~~remaining~~contract 18period ~~year~~which ~~life~~ends in 2020. The results of ~~the~~this ~~contract~~settlement will provide approximately $3 million in annual pretax earnings through 2020.

Other Legal Proceedings

A number of other legal actions are pending against CSXT in which claims are made in substantial amounts. While the ultimate results of these actions against CSXT cannot be predicted with certainty, management does not currently expect that resolution of these matters will have a material ~~adverse~~ effect on CSXT’s consolidated financial position, results of operations or cash flows. The Company is also party to a number of actions, the resolution of which could result in gain realization in amounts that could be material to results of operations in the quarter received.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

~~Results~~RESULTS ofOF ~~Operations~~OPERATIONS

CSX Transportation, Inc. (“CSXT” or “Company”) follows a 52/53-week fiscal calendar. Fiscal years 2002 and 2001 consist of 52 weeks. ~~The~~ending ~~quarters ended~~on ~~June 28~~December 27, 2002 and ~~June~~December 2928, 2001, ~~each~~respectively. ~~consisted~~The offinancial statements presented are for the 13-week ~~weeks.~~quarters ~~The~~ended ~~six~~September 27, 2002 and September 28, 2001, the 39-~~month~~week periods ended ~~June~~September 2827, 2002 and ~~June~~September 2928, 2001, ~~each~~and ~~consisted~~as of 26December 28, ~~weeks~~2001.

CSXT earned $~~148~~167 million in operating income for the quarter ended ~~June~~September 2827, 2002, ~~down~~compared $4to ~~million, or 3%, from the~~ $~~152~~ 124 million reported in the ~~second~~third quarter of 2001. ~~Operating~~The ~~revenue decreased to~~ $~~1.54~~43 ~~billion~~million, inor ~~the current period from $1.56 billion in the same period of the prior year. Although volumes in the second quarter declined because of continued weakness in the national economy by 2~~35% ~~year-over-year~~, ~~revenue~~increase ~~declined~~was byprimarily ~~only~~due ~~1% compared~~ to ~~the~~a ~~corresponding~~related ~~quarter~~party ~~of the prior year because of the continued success of CSXT’s yield improvement program~~charge. Increased volumes for the phosphates and fertilizers, paper and forest, chemicals, emerging markets and automotive groups were offset by decreases in all other commodity groups. The metals, agricultural products, minerals, coal and coke markets realized price increases despite revenue declines.

~~Merchandise~~Revenue ~~revenue~~decreased ~~was~~to up $~~12 million or~~ 1~~% over the prior year period~~.473 ~~Merchandise~~billion ~~volumes increased for the first time~~ in ~~two years, growing by 1% for~~ the ~~second~~current ~~quarter of 2002, compared to the same~~ period infrom ~~2001~~$1.495 ~~This~~billion ~~increase was due to phosphates and fertilizers strong performance as well as year-over-year improved volumes~~ in ~~paper~~the ~~and~~same ~~forest,~~quarter ~~chemicals,~~of ~~and~~the ~~emerging~~prior ~~markets~~year. ~~Strong~~The ~~demand~~$22 ~~and~~million ~~low~~decrease ~~inventory levels~~resulted ~~caused~~from ~~some~~weaker ~~metals~~coal ~~shipments that normally move by rail to be diverted to trucks~~demand, which ~~had~~offset aincreases ~~negative impact on metals volume. Agriculture and minerals volumes also were down~~ in ~~the~~merchandise ~~quarter because of weakness in feed grains~~ and ~~foreign~~automotive ~~competition, respectively~~revenues. Food and consumer products experienced revenue yield deterioration because of increased shipments in private rail equipment. All other merchandise commodity groups showed either flat or improved revenue yield compared to the prior year quarter.

~~Automotive~~Merchandise ~~volumes~~revenue ~~were~~was up 6$19 million or 2% ~~versus~~over ~~second~~the ~~quarter~~prior year period due to volume and price increases. This increase was due to the continued strong performance of ~~2001~~phosphates and fertilizers as ~~manufacturers~~well ~~continue aggressive~~as ~~dealer~~year-over-year ~~incentive~~improvements ~~programs~~in metals, paper and forest, and chemical volumes. ~~Automotive~~Agriculture ~~revenue~~volumes ~~was~~were updown ~~$18~~in ~~million~~the orquarter 8%because ~~due~~of toa decline ~~both~~in ~~rate~~the demand for export grain. The phosphates and ~~mix~~fertilizers, ~~improvement~~paper and forest, agricultural, chemicals, minerals, and emerging markets commodity groups realized yield improvements as compared to the prior year period.

~~Coal,~~Automotive ~~coke~~revenue ~~and~~was ~~iron~~up ~~ore~~$11 ~~volumes~~million ~~were~~or ~~down 10~~6% ~~for~~due ~~the~~to ~~quarter~~yield ~~versus~~improvements ~~last~~driven ~~year.~~primarily ~~Coal,~~by ~~coke~~favorable mix and ~~iron~~extended ~~ore~~linehauls. Automotive ~~revenue~~sales ~~was~~are ~~down~~favorably ~~$38~~affected ~~million~~by orcontinued 9%dealer ~~versus the prior year~~incentives. ~~Coal~~The ~~revenue~~continuing ~~yields~~increase ~~were~~in ~~flat~~light astruck ~~rate~~production ~~increases~~capacity ~~were~~is ~~masked~~driving by volume ~~pickup~~ ~~in shorthaul coal traffic that was converted to rail from truck~~growth.

~~The~~Coal, ~~operating~~coke ~~ratio~~and ~~increased~~iron toore ~~90.4% for~~revenue ~~the~~was ~~quarter~~down ~~ended~~$34 ~~June~~million ~~28,~~versus ~~2002~~the ~~from~~prior 90year.2 Coal volumes were down 6% ~~for~~and ~~the~~revenue ~~quarter~~was ~~ended~~down ~~June~~8%. 29Unfavorable export, ~~2001.~~metallurgical, ~~Operating~~lake, ~~expenses~~and ~~decreased~~industrial tocoal ~~$1.39~~are ~~billion~~a ~~for~~result of ~~the~~plant ~~quarter~~closings ~~ended~~and ~~June~~reduced ~~28,~~competitive ~~2002,~~standing ~~from~~of $1U.40S. ~~billion~~coal in ~~the~~international ~~same~~markets. ~~period~~Pricing inand ~~the~~increased ~~prior~~tons ~~year.~~per ~~This~~car ~~$14~~continue ~~million~~to ~~decrease resulted~~improve ~~primarily~~revenue ~~from~~per ~~decreases~~car inyield, ~~fuel~~but ~~and~~were ~~labor~~offset ~~and~~by ~~fringe~~mix ~~benefits~~changes, ~~offset~~including byshort-haul anmodal ~~increase~~conversions to the river, and decline in ~~related~~higher ~~party~~revenue ~~service~~per ~~fees~~car movements, such as export and long-haul southern utility traffic.

Operating expenses were at $1.31 billion and $1.37 billion for the quarters ended September 27, 2002 and September 28, 2001, respectively. Labor and fringe benefits, equipment rent and depreciation increased in the current year quarter, offset by related party fees, lower materials, supplies and other and favorable fuel expenses.

Labor and fringe benefits increased $5 million primarily due to inflation and increased healthcare costs, partially offset by decreases attributed to headcount reductions. Equipment rent increased $10 million or 10% primarily as a result of unanticipated car hire reclaims from another railroad, which should not recur.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS, ~~CONTINUED~~Continued

RESULTS OF OPERATIONS, Continued

~~Labor~~Fuel ~~and~~costs ~~fringe~~were ~~benefits~~down ~~decreased~~ $1314 million ~~primarily resulting from increased crew productivity and net headcount reductions of approximately 1~~,~~700~~ ~~from~~$13 ~~prior~~million ~~year~~due ~~quarter as part of a continued effort by management~~ to ~~eliminate~~ ~~inefficiencies, which was somewhat offset by inflation. The positive effect of~~ lower fuel ~~prices, which reduced costs by $20 million, was offset by $1 million in increased volumes~~price. The net impact on operating income of reduced fuel price was $11 4 million, since $9 million of fuel surcharge revenue was eliminated.

~~These~~Materials, ~~operating~~supplies ~~expense~~and ~~decreases~~other ~~were~~expense improved ~~partially offset~~ by ~~increases~~ in$21 ~~related~~million ~~party~~as ~~service~~compared ~~fees~~to ofthe ~~$20~~prior ~~million,~~year ~~due~~quarter primarily due to ~~the~~reductions ~~change~~ in ~~the~~personal ~~management~~injuries, ~~service~~derailment ~~fee~~and ~~charged~~other bycosts. ~~CSX~~Expenses toassociated ~~better~~with ~~reflect~~ the ~~transition~~Baltimore ~~from~~tunnel afire ~~more~~last ~~diversified~~year ~~transportation~~were ~~company~~offset toby ~~one~~insurance ~~that~~recoveries isin ~~primarily~~the ~~rail-based.~~same period.

~~The~~Related ~~following~~party ~~tables~~service ~~provides~~fees ~~rail~~decreased ~~carload~~$53 ~~and~~million ~~revenue~~due ~~data~~to bythe ~~service~~Company ~~group~~charging ~~and~~CTRC ~~commodity~~ for ~~the~~accounts ~~quarters and~~receivable ~~six~~reserves ~~months~~recorded ~~ended~~by ~~June~~the ~~28,~~Company ~~2002~~in current and ~~June~~prior ~~29,~~periods ~~2001:~~related to receivables sold to CTRC.

	Carloads (Thousands) Quarter Ended		Revenue (Millions of Dollars) Quarter Ended
	June 28, 2002	June 29, 2001	June 28, 2002		June 29, 2001
Merchandise
Phosphates and Fertilizer	119	105	$	83	$	75
Metals	80	83		101		103
Food and Consumer Products	42	42		55		57
Paper and Forest Products	122	121		162		161
Agricultural Products	87	92		119		125
Chemicals	129	127		233		225
Minerals	23	24		34		35
Emerging Markets	115	113		106		100
Total Merchandise	717	707		893		881
Automotive	148	139		231		213
Coal, Coke and Iron Ore
Coal	390	430		379		415
Coke	9	11		14		13
Iron Ore	9	13		5		8
Total Coal, Coke and Iron Ore	408	454		398		436
Other	—	—		16		26
Total Rail	1,273	1,300	$	1,538	$	1,556

In addition, several cost categories reflected expenses associated with train speed restrictions due to the heat orders that were put in place during the height of the Company’s maintenance program in August and part of September.

The following tables provide rail carload and revenue data by service group and commodity for the quarters and nine months ended September 27, 2002 and September 28, 2001:

	Third Quarter Loads (Thousands)				Third Quarter Revenue (Millions of Dollars)
	2002	2001	% Change		2002		2001		% Change
Merchandise
Phosphates and Fertilizer	113	101	12		$	73	$	63	16
Metals	83	81	2			104		102	2
Food and Consumer	41	41	—			53		54	(2	)
Paper and Forest	122	120	2			161		161	—
Agricultural	86	88	(2	)		116		118	(2	)
Chemicals	124	123	1			224		216	4
Minerals	21	23	(9	)		33		36	(8	)
Emerging Markets	115	117	(2	)		107		102	5

Total Merchandise	705	694	2			871		852	2
Automotive	124	119	4			195		184	6
Coal, Coke and Iron Ore
Coal	395	422	(6	)		382		417	(8	)
Coke	9	10	(10	)		12		12	—
Iron Ore	13	12	8			7		6	17

Total Coal, Coke and Iron Ore	417	444	(6	)		401		435	(8	)
Other	—	—	—			6		24	(75	)

Total Rail	1,246	1,257	(1	)	$	1,473	$	1,495	(1	)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS, ~~CONTINUED~~Continued

RESULTS OF OPERATIONS, Continued

	Carloads(Thousands) Six Months Ended		Revenue(Millions of Dollars) Six Months Ended
	Nine Months Loads(Thousands)				Nine Months Revenue(Millions of Dollars)
	June 28, 2002	June 29, 2001	June 28, 2002		June 29, 2001
	2002	2001	% Change		2002		2001		% Change
Merchandise
Phosphates and Fertilizer	~~238~~351	~~224~~325	$8	~~172~~	$	~~164~~245	$	227	8
Metals	~~157~~240	~~164~~245	(2	~~198~~)		~~202~~302		304	(1	)
Food and Consumer Products	81	81		108		109
Food and Consumer	122	122	—			161		163	(1	)
Paper and Forest Products	238	243		318		321
Paper and Forest	360	363	(1	)		479		482	(1	)
Agricultural Products	179	192		246		259
Agricultural	265	280	(5	)		362		377	(4	)
Chemicals	~~254~~378	~~257~~380	(1	~~457~~)		~~457~~681		673	1
Minerals	4566	4770	(6	68)		71101		107	(6	)
Emerging Markets	~~208~~323	~~210~~327	(1	~~194~~)		~~188~~301		290	4
Total Merchandise	12,~~400~~105	12,~~418~~112	—	~~1,761~~		12,~~771~~632		2,623	—
Automotive	~~277~~401	~~266~~385	4	~~431~~		~~407~~626		591	6
Coal, Coke and Iron Ore
Coal	~~783~~1,178	~~869~~1,291	(9	~~760~~)		~~831~~1,142		1,248	(8	)
Coke	1726	2131	(16	27)		2439		36	8
Iron Ore	1326	1830	(13	8)		1115		17	(12	)
Total Coal, Coke and Iron Ore	~~813~~1,230	~~908~~1,352	(9	~~795~~)		~~866~~1,196		1,301	(8	)
Other	—	—	—	37		4443		68	(37	)
Total Rail	23,~~490~~736	23,~~592~~849	$(3	~~3,024~~)	$	34,~~088~~497	$	4,583	(2	)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS, ~~CONTINUED~~ Continued

OUTLOOK

During the remainder of 2002, CSXT expects that its financial results will improve as the industrial sector slowly recovers from the industrial recession that impacted the company’s volumes negatively over the last seven quarters. CSXT believes it is ready to capitalize and benefit significantly from an economic recovery through the inherent operating leverage that it possesses. Even if an economic recovery does not materialize until 2003, CSXT still anticipates posting quarterly year-over-year improvements in earnings throughout the remainder of the year.

OTHER MATTERS

~~Legal~~New ~~Proceedings~~Orleans Tank Car Fire

~~New~~CSXT’s settlement of the New Orleans Tank Car Fire Litigation was $220 million, of which approximately $135 million was funded by CSXT’s insurers, and was paid during the third quarter of 2002 to the plaintiffs’ representatives.

In 2001 CSXT reached a settlement of the New Orleans Tank Car Fire litigation, which was subject to a fairness hearing and court approval. The amount to be paid by CSXT under the settlement is $220 million, $85 million to be paid net of insurance recoveries. The fairness hearing occurred in April 2002, and the Court approved the settlement. The time has run for appeals. The Company is fully accrued for this settlement, which is subject to plaintiffs’ attorney’s reaching agreement with the group of plaintiffs. The Company expects that agreement to be obtained and the settlement is expected to be paid in 2002.

ITEM 2:. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS, ~~CONTINUED~~Continued

FORWARD LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to, among other items: projections and estimates of earnings, revenues, cost-savings, expenses, or other financial items; statements of management’s plans, strategies and objectives for future ~~operation~~operations, and management’s expectations as to future performance and operations and the time by which objectives will be achieved; statements concerning proposed new products and services; and statements regarding future economic, industry or market conditions or performance. Forward-looking statements are typically identified by words or phrases such as “believe”, “expect”, “anticipate”, “project”, and similar expressions. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise any forward-looking statement. If the Company does update any forward-looking statement, no inference should be drawn that the Company 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 actual performance or results could differ materially from that anticipated by these forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by these forward-looking statements include, among others: (i) the Company’s 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 the Company. Other important assumptions and factors that could cause actual results to differ materially from those in the forward-looking statements are specified elsewhere in this Quarterly Report and in the Company’s other SEC reports, accessible on the SEC’s website at www.sec.gov and the Company’s website at www.csx.com.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to risk relating to changes in the price of diesel fuel. Forward purchase agreements have been entered into with various suppliers for approximately 144 million gallons of fuel, which is approximately 50% of the remaining 2002 requirement, at a weighted average price of 78 cents per gallon. The Company is subject to fluctuations in prices for the remainder of its 2002 needs. A one cent change in the price per gallon of fuel would affect fuel expense for the remainder of 2002 by approximately $1.4 million.

CSXT participates in the CSX cash management plan, under which excess cash is advanced to CSX for investment. CSX than makes cash funds available to CSXT as needed for use in their operations, and are committed to repay all amounts due on demand should circumstances require. CSXT is charged for borrowings or compensated for investments based on returns earned by the plan portfolio. At June 28, 2002 and December 29, 2001, CSXT had a $1.1 billion deficit balance relating to CSXT’s participation in the CSX cash management plan, which is included in Due to Parent Company in the Statement of Financial Position. CSXT also had $108 million of floating rate debt outstanding at June 28, 2002 and December 28, 2001. A 1% increase or decrease in the interest rates would have an approximately $12 million effect on annual interest expense.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to risk relating to changes in the price of diesel fuel. Forward purchase agreements have been entered into with various suppliers for approximately 70 million gallons of fuel, which is approximately 50% of the requirement over the next three months, at a weighted average price of 78 cents per gallon. The Company is subject to fluctuations in prices for the remainder of its 2002 needs. A one cent change in the price per gallon of fuel would affect fuel expense for the remainder of 2002 by approximately $0.7 million. The Company has not entered into any fuel purchase contracts for 2003.

CSXT participates in the CSX cash management plan, under which excess cash is advanced to CSX for investment. CSX than makes cash funds available to CSXT as needed for use in its operations CSXT and CSX are committed to repay all amounts due on demand should circumstances require. CSXT is charged for borrowings or compensated for investments based on returns earned by the plan portfolio. At September 27, 2002 and December 28, 2001, CSXT had deficit balances of $1.3 billion and $1.1 billion, respectively, relating to its participation in the CSX cash management plan, which is included in Due to Parent Company in the Statement of Financial Position. CSXT also had $108 million of floating rate debt outstanding at September 27, 2002 and December 28, 2001. A 1% increase or decrease in the interest rates would have an approximately $1.1 million effect on annual interest expense.

ITEM 4: DISCLOSURE CONTROL AND PROCEDURES

As of October 23, 2002, under the supervision and with the participation of the Company’s Principal Executive Officer and the Principal Financial Officer, management has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Principal Executive Officer and the Principal Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of October 23, 2002. There were no significant changes in the Company’s internal controls or in the other factors that could significantly affect those controls subsequent to the date of evaluation.

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

None.

99.1		Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2		Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

None.

~~SIGNATURE~~Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CSX TRANSPORTATION, INC. (Registrant) ~~By: /s/ CAROLYN T. SIZEMORE Carolyn T. Sizemore (Principal Accounting Officer)~~

~~Dated~~By: ~~July~~/s/ ~~29,~~CAROLYN ~~2002~~T. SIZEMORE Carolyn T. Sizemore (Principal Accounting Officer)

18Dated: October 28, 2002

CERTIFICATE OF PRINCIPAL EXECUTIVE OFFICER

I, Michael J. Ward, certify that:

I have reviewed this quarterly report on Form 10-Q of CSX Transportation, Inc.;

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: October 28, 2002

/s/ MICHAEL J. WARD

Michael J. Ward

Principal Executive Officer

CERTIFICATE OF PRINCIPAL FINANCIAL OFFICER

I, Frederick J. Favorite Jr., certify that:

I have reviewed this quarterly report on Form 10-Q of CSX Transportation, Inc.;

evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: October 28, 2002

/s/ FREDERICK J. FAVORITE JR.

Frederick J. Favorite Jr.

Principal Financial Officer

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Filing Compare · CSX TRANSPORTATION INC