8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 24, 2003

CSX CORPORATION

(Exact name of registrant as specified in its charter)

Virginia

(State or other jurisdiction of incorporation or organization)

1-8022	62-1051971
(Commission File No.)	(I.R.S. Employer Identification No.)

500 Water Street, 15^th Floor, Jacksonville, FL 32202

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:

(904) 359-3200

ITEM 7.    EXHIBITS

(c) The following exhibits are being furnished herewith:

99.1 Press Release as of July 24, 2003 from CSX Corporation

99.2 Quarterly Flash Document

ITEM 9.    REGULATION FD DISCLOSURE (ITEM 12, DISCLOSURE OF RESULTS  

                  OF OPERATIONS AND FINANCIAL CONDITION).

CSX Corporation issued a press release and its quarterly Flash document on financial and operating results for the second quarter ended June 27, 2003. A copy of the press release is attached as Exhibit 99.1 and a copy of the Flash document is attached as Exhibit 99.2, each of which is incorporated by reference herein. These documents are available on the Company’s website, www.csx.com.

Signature

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

CSX CORPORATION
By:	/s/ CAROLYN T. SIZEMORE
	Carolyn T. Sizemore Vice President and Controller (Principal Accounting Officer)

Date: July 24, 2003

EX-99.1

Exhibit 99.1

Contact: Adam Hollingsworth

(904) 359-3161

CSX Reports Second-Quarter Earnings

JACKSONVILLE, Fla., July 24, 2003 – CSX Corporation (NYSE: CSX) today reported second quarter net earnings of $127 million, or 59 cents per share, versus $135 million, or 63 cents per share, a year ago.

Revenue at Surface Transportation, which includes CSX’s rail and intermodal units, was $1.89 billion, up from $1.83 billion in the second quarter of 2002. Surface Transportation operating income was $259 million compared to $293 million in the prior-year period. The quarter also included previously announced expenses of $17 million related to new asbestos claims filed in West Virginia; while the 2002 second quarter included $11 million in net favorable settlements of contract disputes. Operating income on a consolidated basis totaled $285 million, down from $321 million a year ago.

“We continued to see strong revenue growth in the quarter, and have successfully converted more than one million truck loads from the highway to our railroad since the beginning of 2001,” said Michael J. Ward, CSX chairman and chief executive officer. “Despite a continued sluggish economy, our modal conversion efforts produced solid gains in the forest products, metals, waste and intermodal markets. In addition, coal rebounded in the quarter and showed solid year-over-year improvement.

“However, we continued to be challenged by slowed operations as the railroad struggled to recover from a difficult operating environment during the early parts of the quarter. Reduced network fluidity caused a significant increase in labor expenses, partially offsetting the strong revenue gains. Looking ahead, we will regain our operational discipline and push more of our revenue to the bottom line,” Ward added.

Ward said Surface Transportation revenue growth outpaced the nation’s gross domestic product in the first half of 2003 and that revenue growth will continue even as questions about the economy remain. He also noted that the company is still on target to meet its year-end staff reduction and free cash flow plans.

On a consolidated basis, revenues were $1.94 billion versus $2.07 billion a year ago. Operating income at the company’s international terminal business was $17 million, compared to $16 million in the second quarter of 2002. A significant real estate sale in the second quarter of 2003 benefited the “Other Income” category.

CSX Corporation, based in Jacksonville, Fla., operates one of the largest rail networks in the United States and also provides intermodal and international terminal

management services. More information about the company is available at its Internet address: www.csx.com

###

This press release and other statements by the Company contain 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, 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 in the Company’s SEC reports, accessible on the SEC’s website at www.sec.gov and the Company’s website at www.csx.com.

EX-99.2

Exhibit 99.2

CSX REPORTS SECOND-QUARTER EARNINGS

JACKSONVILLE, Fla., July 24, 2003 – CSX Corporation (NYSE: CSX) today reported second quarter net earnings of $127 million, or 59 cents per share, versus $135 million, or 63 cents per share, a year ago.

Revenue at Surface Transportation, which includes CSX’s rail and intermodal units, was $1.89 billion, up from $1.83 billion in the second quarter of 2002. Surface Transportation operating income was $259 million compared to $293 million in the prior-year period. The quarter also included previously announced expenses of $17 million related to new asbestos claims filed in West Virginia; while the 2002 second quarter included $11 million in net favorable settlements of contract disputes. Operating income on a consolidated basis totaled $285 million, down from $321 million a year ago.

”We continued to see strong revenue growth in the quarter, and have successfully converted more than one million truck loads from the highway to our railroad since the beginning of 2001,” said Michael J. Ward, CSX chairman and chief executive officer. “Despite a continued sluggish economy, our modal conversion efforts produced solid gains in the forest products, metals, waste and intermodal markets. In addition, coal rebounded in the quarter and showed solid year-over-year improvement.

“However, we continued to be challenged by slowed operations as the railroad struggled to recover from a difficult operating environment during the early parts of the quarter. Reduced network fluidity caused a significant increase in labor expenses, partially offsetting the strong revenue gains. Looking ahead, we will regain our operational discipline and push more of our revenue to the bottom line,” Ward added.

Ward said Surface Transportation revenue growth outpaced the nation’s gross domestic product in the first half of 2003 and that revenue growth will continue even as questions about the economy remain. He also noted that the company is still on target to meet its year-end staff reduction and free cash flow plans.

On a consolidated basis, revenues were $1.94 billion versus $2.07 billion a year ago. Operating income at the company’s international terminal business was $17 million, compared to $16 million in the second quarter of 2002. A significant real estate sale in the second quarter of 2003 benefited the “Other Income” category.

CSX Corporation, based in Jacksonville, Fla., operates one of the largest rail networks in the United States and also provides intermodal and international terminal management services. More information about the company is available at its Internet address: www.csx.com

This press release and other statements by the Company contain 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, 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 in the Company’s SEC reports, accessible on the SEC’s website at www.sec.gov and the Company’s website at www.csx.com

500 Water Street

15^th Floor, C900

Jacksonville, FL 32202

http://www.csx.com

Contact:

Fredrik Eliasson

(904) 359-3305

TABLE OF CONTENTS

	Page
Consolidated Financial Statements	2
Business Segments	5
Surface Transportation Results	6
International Terminals Results	10
Consolidated Highlights	11

The accompanying unaudited financial information should be read in conjunction with the Company’s 2002 Annual Report on Form 10-K, 2003 Quarterly Reports on Form 10-Q, and any Current Reports on Form 8-K.

CSX Corporation and Subsidiaries Quarterly Flash

CONSOLIDATED INCOME STATEMENTS

(Dollars in Millions, Except Per Share Amounts)

		(Unaudited)
		Quarters Ended				Six Months Ended
		June 27, 2003		June 28, 2002		June 27, 2003		June 28, 2002
Revenue	Operating Revenue	$	1,942	$	2,073	$	3,958	$	4,037
and Expense	Operating Expense		1,657		1,752		3,496		3,504
	Operating Income		285		321		462		533
	Other Income		19		4		9		13
	Interest Expense		105		116		208		230
Earnings	Earnings Before Income Taxes and Cumulative Effect of Accounting Change		199		209		263		316
	Income Tax Expense		72		74		94		113
	Earnings Before Cumulative Effect of Accounting Change		127		135		169		203
	Cumulative Effect of Accounting Change—Net of Tax		—		—		57		(43	)
	Net Earnings	$	127	$	135	$	226	$	160
Per Common	Earnings Per Share, Assuming Dilution:
Share	Before Cumulative Effect of Accounting Change	$	0.59	$	0.63	$	0.79	$	0.95
	Cumulative Effect of Accounting Change		—		—		0.26		(0.20	)
	Net Earnings	$	0.59	$	0.63	$	1.05	$	0.75
	Average Diluted Common Shares Outstanding (Thousands)		214,297		213,541		214,230		213,364
	Cash Dividends Paid Per Common Share	$	0.10	$	0.10	$	0.20	$	0.20

Notes to Consolidated Financial Statements

(1) Statement of Financial Accounting Standard (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations,” was issued in 2001. This statement addresses financial accounting and reporting for legal obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. In conjunction with the group-life method of accounting for asset costs, the Company historically accrued crosstie removal costs as a component of depreciation, which is not permitted under SFAS 143. With the adoption of SFAS 143 in fiscal year 2003, CSX recorded pretax income of $93 million, $57 million after tax, or 26 cents per share, as a cumulative effect of an accounting change in the first quarter, representing the reversal of the accrued liability for crosstie removal costs. The adoption of SFAS 143 did not have a material effect on prior reporting periods, and the Company does not believe it will have a material effect on future earnings. On an ongoing basis, depreciation expense will be reduced, while labor and fringe and materials, supplies and other expense will be increased.

(2) In February 2003, CSX conveyed most of its interest in its domestic container-shipping subsidiary, CSX Lines LLC (“CSX Lines”), to a new venture formed with the Carlyle Group for approximately $300 million (gross cash proceeds of approximately $240 million, $214 million net of transaction costs, and $60 million of securities). CSX Lines was subsequently renamed Horizon Lines LLC (“Horizon”). Horizon has subleased equipment from CSX covering CSX’s primary financial obligations related to $319 million of vessel and equipment leases under which CSX will remain a lessee. A deferred pretax gain of approximately $127 million as a result of the transaction will be recognized over the 12-year sublease term. Approximately $3 million of this gain was recognized in the second quarter, with $4 million being recognized year to date. The $60 million of securities have a term of 7 years and a preferred return feature. CSX will account for the investment under the cost method.

(3) SFAS 142, “Goodwill and Other Intangible Assets,” was issued in 2001. Under the provisions of SFAS 142, goodwill and other indefinite lived intangible assets are no longer amortized but are reviewed for impairment on a periodic basis. The Company adopted this standard at the beginning of fiscal year 2002 and incurred a pretax charge of $83 million, $43 million after tax and consideration of minority interest, 20 cents per share, as a cumulative effect of an accounting change, which represents the difference between book value and the fair value of indefinite lived intangible assets. These indefinite lived intangible assets are permits and licenses that the Company holds relating to a proposed pipeline to transfer natural gas from Alaska’s north slope to the port in Valdez, Alaska. The fair value was determined using a discount method of projected future cash flows relating to these assets. The carrying value of these assets is now approximately $3 million. The adoption of SFAS 142 did not have a material effect on prior reporting periods and it does not have a material effect on future earnings.

2

CSX Corporation and Subsidiaries Quarterly Flash

CONSOLIDATED BALANCE SHEETS

(Dollars in Millions)

		(Unaudited)
		June 27, 2003			Dec. 27, 2002
Assets	Current Assets
	Cash, Cash Equivalents and Short-term Investments	$	311		$	264
	Accounts Receivable—Net		1,219			799
	Materials and Supplies		178			180
	Deferred Income Taxes		139			128
	Other Current Assets		185			155
	Domestic Container Assets Held for Disposition		—			263
	Total Current Assets		2,032			1,789
	Properties—Net		13,504			13,286
	Investment in Conrail		4,658			4,653
	Affiliates and Other Companies		487			381
	Other Long-term Assets		858			842
	Total Assets	$	21,539		$	20,951
Liabilities	Current Liabilities
	Accounts Payable	$	768		$	802
	Labor and Fringe Benefits Payable		402			457
	Casualty, Environmental and Other Reserves		223			246
	Current Maturities of Long-term Debt		586			391
	Short-term Debt		704			143
	Income and Other Taxes Payable		102			144
	Other Current Liabilities		135			167
	Domestic Container Liabilities Held for Disposition		—			104
	Total Current Liabilities		2,920			2,454
	Casualty, Environmental and Other Reserves		629			604
	Long-term Debt		6,204			6,519
	Deferred Income Taxes		3,715			3,567
	Other Long-term Liabilities		1,635			1,566
	Total Liabilities		15,103			14,710
Shareholders’ Equity	Common Stock, $1 Par Value		215			215
	Other Capital		1,554			1,547
	Retained Earnings		4,981			4,797
	Accumulated Other Comprehensive Loss		(314	)		(318	)
	Total Shareholders’ Equity		6,436			6,241
	Total Liabilities and Shareholders’ Equity	$	21,539		$	20,951

3

CSX Corporation and Subsidiaries Quarterly Flash

CONSOLIDATED CASH FLOW STATEMENTS

(Dollars in Millions)

		(Unaudited)
		Six Months Ended
		June 27, 2003			June 28, 2002
Operating Activities	Net Earnings	$	226		$	160
	Adjustments to Reconcile Net Earnings to Net Cash (Used) Provided:
	Depreciation		322			312
	Deferred Income Taxes		98			50
	Cumulative Effect of Accounting Change—Net of Tax		(57	)		43
	Other Operating Activities		16			(13	)
	Changes in Current Operating Assets and Liabilities:
	Accounts Receivable		(65	)		17
	Termination of Sale of Receivables Program		(380	)		—
	Other Current Assets		(42	)		(34	)
	Accounts Payable		(15	)		(54	)
	Other Current Liabilities		(138	)		30
	Net Cash (Used) Provided by Operating Activities		(35	)		511
Investing Activities	Property Additions		(479	)		(431	)
	Net Proceeds from Divestitures		214			—
	Other Investing Activities		(20	)		2
	Net Cash Used by Investing Activities		(285	)		(429	)
Financing Activities	Short-term Debt—Net		561			576
	Long-term Debt Issued		83			474
	Long-term Debt Repaid		(218	)		(991	)
	Dividends Paid		(43	)		(43	)
	Other Financing Activities		(16	)		16
	Net Cash Provided by Financing Activities		367			32
Cash, Cash Equivalents and Short-term Investments	Net Increase in Cash and Cash Equivalents		47			114
	Cash and Cash Equivalents at Beginning of Period		127			137
	Cash and Cash Equivalents at End of Period		174			251
	Short-Term Investments at End of Period		137			480
	Cash, Cash Equivalents and Short-term
	Investments at End of Period	$	311		$	731

4

CSX Corporation and Subsidiaries Quarterly Flash

BUSINESS SEGMENTS (Unaudited)⁽¹⁾

(Dollars in Millions)

Quarters Ended June 27, 2003, and June 28, 2002

	Rail						Intermodal						Surface Transportation						International Terminals						Eliminations/ Other(2)						Total
	2003			2002			2003			2002			2003			2002			2003			2002			2003			2002			2003			2002
Operating Revenue	$	1,573		$	1,538		$	314		$	296		$	1,887		$	1,834		$	54		$	58		$	1		$	181		$	1,942		$	2,073
Operating Expense
Labor and Fringe		645			625			18			16			663			641			13			15			1			57			677			713
Materials, Supplies and Other		331			325			47			44			378			369			16			18			2			64			396			451
Conrail		87			79			—			—			87			79			—			—			—			—			87			79
Building and Equipment Rent		92			107			39			33			131			140			2			2			(3	)		12			130			154
Inland Transportation		(98	)		(92	)		175			146			77			54			2			1			—			22			79			77
Depreciation		148			138			8			8			156			146			2			2			2			7			160			155
Fuel		136			112			—			—			136			112			—			—			—			16			136			128
Miscellaneous		—			—			—			—			—			—			2			4			(10	)		(9	)		(8	)		(5	)
Total Operating Expense		1,341			1,294			287			247			1,628			1,541			37			42			(8	)		169			1,657			1,752
Operating Income	$	232		$	244		$	27		$	49		$	259		$	293		$	17		$	16		$	9		$	12		$	285		$	321
Operating Ratio		85.3	%		84.1	%		91.4	%		83.4	%		86.3	%		84.0	%		68.5	%		72.4	%

Six Months Ended June 27, 2003, and June 28, 2002

	Rail						Intermodal						Surface Transportation						International Terminals						Eliminations/ Other(2)						Total
	2003			2002			2003			2002			2003			2002			2003			2002			2003			2002			2003			2002
Operating Revenue	$	3,104		$	3,024		$	616		$	558		$	3,720		$	3,582		$	110		$	116		$	128		$	339		$	3,958		$	4,037
Operating Expense
Labor and Fringe		1,293			1,265			37			33			1,330			1,298			26			31			60			110			1,416			1,439
Materials, Supplies and Other		670			649			96			85			766			734			35			40			49			119			850			893
Conrail		173			166			—			—			173			166			—			—			—			—			173			166
Building and Equipment Rent		199			209			70			64			269			273			4			4			3			25			276			302
Inland Transportation		(197	)		(178	)		348			295			151			117			4			3			16			43			171			163
Depreciation		293			276			16			15			309			291			4			4			4			12			317			307
Fuel		294			216			—			—			294			216			—			—			15			28			309			244
Miscellaneous		—			—			—			—			—			—			5			7			(21	)		(17	)		(16	)		(10	)
Total Operating Expense		2,725			2,603			567			492			3,292			3,095			78			89			126			320			3,496			3,504
Operating Income	$	379		$	421		$	49		$	66		$	428		$	487		$	32		$	27		$	2		$	19		$	462		$	533
Operating Ratio		87.8	%		86.1	%		92.0	%		88.2	%		88.5	%		86.4	%		70.9	%		76.7	%

(1) Prior periods have been reclassified to conform to the current presentation.

(2) Eliminations/Other consists of the following:

(a) Reclassification of International Terminals minority interest expense

(b) Operations of CSX Lines and gain amortization

(c) Expenses related to the 2003 retirement of the Company’s former Chairman and Chief Executive Officer

(d) Other items

5

CSX Corporation and Subsidiaries Quarterly Flash

SURFACE TRANSPORTATION TRAFFIC AND REVENUE⁽¹⁾

Loads (Thousands); Revenue (Dollars in Millions)

	Second Quarter Loads			Second Quarter Revenue
	2003	2002	% Change	2003		2002		% Change
Merchandise
Phosphates and Fertilizers	113	119	(5) %	$	85	$	83	2 %
Metals	87	80	9		108		100	8
Forest and Industrial Products	153	152	1		207		197	5
Agricultural and Food	113	110	3		165		159	4
Chemicals	134	140	(4)		244		246	(1)
Emerging Markets	125	115	9		118		107	10
	725	716	1		927		892	4
Automotive	139	148	(6)		224		231	(3)
Coal, Coke and Iron Ore
Coal	400	391	2		401		380	6
Coke and Iron Ore	18	18	—		15		19	(21)
	418	409	2		416		399	4
Other	—	—	—		6		16	(63)
Total Rail	1,282	1,273	1		1,573		1,538	2
Intermodal
Domestic	265	242	10		192		168	14
International	300	295	2		121		124	(2)
Other	—	—	—		1		4	(75)
Total Intermodal	565	537	5		314		296	6
Total Surface Transportation	1,847	1,810	2 %	$	1,887	$	1,834	3 %
	Six Months Loads			Six Months Revenue
	2003	2002	% Change	2003		2002		% Change
Merchandise
Phosphates and Fertilizers	230	238	(3) %	$	172	$	172	—  %
Metals	175	157	11		218		198	10
Forest and Industrial Products	301	296	2		402		386	4
Agricultural and Food	227	225	1		332		325	2
Chemicals	272	275	(1)		495		484	2
Emerging Markets	226	208	9		230		195	18
	1,431	1,399	2		1,849		1,760	5
Automotive	270	277	(3)		432		431	0
Coal, Coke and Iron Ore
Coal	773	784	(1)		771		761	1
Coke and Iron Ore	30	30	—		28		35	(20)
	803	814	(1)		799		796	—
Other	—	—	—		24		37	(35)
Total Rail	2,504	2,490	1		3,104		3,024	3
Intermodal
Domestic	512	462	11		375		320	17
International	579	556	4		234		234	—
Other	—	—	—		7		4	75
Total Intermodal	1,091	1,018	7		616		558	10
Total Surface Transportation	3,595	3,508	2 %	$	3,720	$	3,582	4 %

(1) Certain prior period traffic has been reclassified to conform to the current presentation.

6

CSX Corporation and Subsidiaries Quarterly Flash

SURFACE TRANSPORTATION OPERATING RESULTS

REVENUE

Merchandise

Merchandise revenue in the second quarter of 2003 was up 4 percent on 1 percent volume growth as compared to the 2002 quarter. All markets except chemicals showed quarter-over-quarter revenue improvement.

• Phosphates and Fertilizers –Strong demand for domestic phosphates was offset by reduced export shipments through Tampa area ports. Export shipments to China were down compared with a very strong 2002.

• Metals – Inventory replenishments, increased modal conversions of sheet metal and strong scrap volume contributed to the quarter-over-quarter improvement.

• Forest and Industrial Products – Paper showed strength quarter-over-quarter due to modal conversions and imports. Volume gains in building products reflected increased demand in residential construction and home improvement markets.

• Agricultural and Food – Feed grain and soybean demand remains strong. Sweeteners continue to be negatively impacted by source shifts and a plant closure. Shipments of refrigerated products and canned goods were strong in the second quarter.

• Chemicals – Plastics and other chemicals were negatively impacted by high oil and natural gas prices, and weak demand. Producers limited production to minimize the impact of higher feedstock costs.

• Emerging Markets – Emerging markets benefited from continued growth in waste and military shipments. Southern aggregate shipments were strong due to increased regional construction.

Automotive

Automotive revenue decreased $7 million or 3 percent. Vehicle production declined 9 percent versus 2002. Haul extensions on existing business, and new business activities partially mitigated the impact of reduced vehicle production.

Coal, Coke and Iron Ore

Coal, coke and iron ore revenue increased 4 percent quarter-over-quarter on 2 percent volume growth. Strong utility demand and modal conversion initiatives drove performance. Favorable yield was due to improved mix and continued pricing success.

Intermodal

• Domestic – Transloading of international container imports into domestic equipment, new 53 foot containers, and strength in load board volumes all contributed to double-digit revenue growth.

• International – Unfavorable quarter-over-quarter comparisons with strong 2002 West Coast strike-related volumes and increased transloading activity caused a decline in revenue. Growth in low revenue per unit empty volume and a reduction in loaded volume negatively impacted revenue per unit.

7

CSX Corporation and Subsidiaries Quarterly Flash

SURFACE TRANSPORTATION OPERATING RESULTS (continued)

EXPENSE

Labor and Fringe expenses were up $22 million in the second quarter of 2003, as compared to the prior year quarter. The effects of inflation continue to drive labor and fringe expense increases, while greater labor needs associated with diminished network fluidity and volume increased expenses. Costs related to variable deferred compensation plans tied to market performance also contributed to the quarter-over-quarter increase.

Materials, Supplies and Other expenses increased $9 million period-over-period. Increased occupational and personal injury claims, including a charge relating to new asbestos claims filed in West Virginia during the second quarter 2003, were primary drivers of the increase. These increases were offset, in part, by favorable resolution of property tax litigation in the state of New York.

Conrail expenses increased $8 million in the second quarter as compared to the prior year period due primarily to less favorable claims experience on personal injury and occupational reserves and increased usage charges on the Shared Asset Areas.

Building and Equipment Rent decreased $9 million quarter-over-quarter because of favorable mix and due to renegotiated carhire rates which more than offset unfavorable utilization due to the network fluidity decline.

Inland Transportation costs increased $23 million primarily due to the inclusion of a positive $15 million contract settlement in 2002. The remainder of the increase relates to increased volumes.

Depreciation expenses increased $10 million in the second quarter, as compared to the same period of 2002. The increase is primarily due to property additions, but was also negatively impacted by higher depreciation rates resulting from an asset life study. These increases were somewhat offset by a decrease in the depreciation of crossties due to the adoption of SFAS 143 in the first quarter of 2003.

Fuel expenses increased $24 million quarter-over-quarter. Fuel prices increased expense by $23 million, but the net impact on operating income was $8 million, as $15 million was recovered through fuel surcharges included in revenue.

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CSX Corporation and Subsidiaries Quarterly Flash

RAIL OPERATING STATISTICS ⁽¹⁾

		Second Quarter					Six Months
		2003		2002		% Change	2003		2002		% Change
Coal	Domestic:
(Millions of Tons)	Utility	33.9		32.4		5%	66.3		65.3		2%
	Other	6.6		6.7		(1)	11.5		11.9		(3)
	Total Domestic	40.5		39.1		4	77.8		77.2		1
	Export	2.0		2.4		(17)	4.2		5.9		(29)
	Total	42.5		41.5		2	82.0		83.1		(1)
Revenue Ton-Miles	Merchandise	32.2		32.1		—	65.0		63.3		3
(Billions)	Automotive	2.4		2.5		(4)	4.6		4.6		—
	Coal	18.4		17.9		3	35.3		36.1		(2)
	Intermodal	5.5		5.4		2	10.6		10.3		3
	Total	58.5		57.9		1	115.5		114.3		1
Gross Ton-Miles(2)	Total Gross Ton-Miles	112.8		112.0		1	221.6		219.9		1
(Billions)
Safety Statistics	Personal Injury Frequency Index (Per 100 Employees)	1.88		1.84		(2)	2.04		1.97		(4)
	FRA Train Accidents Frequency (Per Million Train Miles)	4.14		2.80		(48)	3.99		3.07		(30)
Inventory	Average Total Cars-On-Line	227,565		231,036		2	229,537		232,303		1
Velocity	Average, All Trains (Miles Per Hour)	20.8		22.5		(8)	21.0		22.7		(7)
Crews	Average Recrews (Per Day)	47.0		26.0		(81)	46.0		24.0		(92)
Yard/Terminal	Average System Dwell Time (Hours)	24.1		22.6		(7)	24.5		23.0		(7)
	On-Time Originations	63.2	%	77.3	%	(18)	63.3	%	77.0	%	(18)
	On-Time Destinations	57.0	%	78.0	%	(27)	59.0	%	79.0	%	(25)
Locomotives	Average Setback Hours (Per Day)	88		11		(700)%	65		11		(491)%

(1) Amounts for 2003 are estimated.

(2) Amounts exclude locomotive gross ton-miles.

SURFACE TRANSPORTATION FUEL STATISTICS

	Second Quarter					Six Months
	2003			2002		2003			2002
Diesel No. 2:
Estimated Fuel Consumption (Millions of Gallons)		145.5			144.0		294.0			289.6
Price Per Gallon (Dollars)	$	0.9381		$	0.7769	$	1.0005		$	0.7463
Impact of Year-to-Year Price Variance on Operating Expense (Dollars in Millions)	$	(23	)			$	(75	)

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CSX Corporation and Subsidiaries Quarterly Flash

INTERNATIONAL TERMINALS

OPERATING RESULTS

Revenue decreased $4 million, or 7 percent to $54 million for the 2003 quarter, compared to $58 million in the prior year quarter, primarily due to the discontinuance of transpacific operations by one of Hong Kong’s major customers.

Expenses decreased $5 million to $37 million for the second quarter, compared to $42 million for the 2002 quarter. Reduced labor and fringe and materials, supplies and other costs were also due to reduced volume at its Hong Kong operations.

Operating income increased $1 million for the 2003 quarter, as compared to the 2002 quarter, as strong performance in several operating units and aggressive cost focus more than offset the revenue decline in Hong Kong.

OPERATING STATISTICS⁽¹⁾

	(Unaudited)
	Second Quarter				Six Months
	2003		2002		2003		2002
Gross Revenue (Dollars in Millions)	$	99	$	96	$	197	$	185
Gross Lifts		819,242		515,707		1,548,918		1,008,730
Average Port Productivity (Port Moves Per Crane Per Hour)		32.1		31.5		31.5		32.5

(1) Includes all consolidated and unconsolidated subsidiaries of CSX World Terminals.

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CSX Corporation and Subsidiaries Quarterly Flash

CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)

(Dollars in Millions, Except Per Share Amounts) (All Per Share Amounts Assume Dilution)

	Revenue						Operating Income						Earnings Per Share
	2003		2002(4)		2001(4)		2003		2002(4)		2001(1)(4)		2003(2)		2002(3)		2001(1)
First Quarter	$	2,016	$	1,964	$	2,025	$	177	$	212	$	189	$	.46	$	.12	$	.10
Second Quarter		1,942		2,073		2,057		285		321		265		.59		.63		.51
Third Quarter				2,055		2,019				276		282				.60		.47
Fourth Quarter				2,060		2,009				318		221				.64		.31
Year	$	3,958	$	8,152	$	8,110	$	462	$	1,127	$	957			$	1.99	$	1.38

(1) Fourth quarter 2001 includes a charge of $60 million pretax, $37 million after tax, 17 cents per share, for the settlement of the 1997 New Orleans tank car fire litigation.

(2) First quarter 2003 includes a credit of $57 million after tax, 26 cents per share, as a result of a cumulative effect of an accounting change for asset retirement obligations.

(3) First quarter 2002 includes a charge of $43 million after tax, 20 cents per share, as a result of the cumulative effect of an accounting change for indefinite lived intangible assets.

(4) In the first quarter of 2003, CSX conveyed its interest in CSX Lines. Revenue from CSX Lines is included in previous quarters of $189 million in second quarter of 2002 and $168 million in second quarter of 2001. CSX Lines’ operating income of $9 million and $7 million is included in the second quarters of 2002 and 2001, respectively.

FINANCIAL MEASURES (Unaudited)

	Six Months Ended
	June 27, 2003			June 28, 2002
Working Capital Deficit (Dollars in Millions)	$	(888	)	$	(803	)
Current Ratio		0.7			0.7
Commercial Paper—Short-term (Dollars in Millions)	$	704		$	578
Debt Ratio(1)		52	%		51	%
All-in Debt Ratio(2)		55	%		57	%
12-Month Rolling Return on Assets		2.1	%		2.0	%
12-Month Rolling Return on Equity		6.8	%		6.6	%

(1) Adjusted to include 42 percent of Conrail obligations.

(2) Adjusted to include off-balance sheet financing, leases, and 42 percent of Conrail obligations.

OTHER INCOME (EXPENSE)⁽¹⁾ (Unaudited)

(Dollars in Millions)

	Quarters Ended						Six Months Ended
	June 27, 2003			June 28, 2002			June 27, 2003			June 28, 2002
Interest Income	$	4		$	8		$	8		$	15
Income from Real Estate and Resort Operations		32			11			33			43
Discounts on Sales of Accounts Receivable		(4	)		(7	)		(10	)		(14	)
Minority Interest		(9	)		(10	)		(20	)		(18	)
Miscellaneous		(4	)		2			(2	)		(13	)
Total	$	19		$	4		$	9		$	13
Gross Revenue from Real Estate and Resort Operations
Included in Other Income	$	75		$	51		$	110		$	114

(1) Prior periods have been reclassified to conform to current presentation.

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CSX Corporation and Subsidiaries Quarterly Flash

EBITDA (Unaudited)

(Dollars in Millions)

This computation of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) is presented because management believes it is a financial indicator used by investors and analysts to evaluate companies on the basis of operating performance. This is not considered to be better information than is available in the Company’s publicly available reports filed with the Securities and Exchange Commission and does not conform with generally accepted accounting principles. CSX owns a 42 percent undivided interest in Conrail Inc., and operates over a portion of the Conrail territory under the terms of an operating agreement. Conrail loans its excess cash to its owners under loan agreements at market interest rates. The calculation of EBITDA combines CSX and Conrail financial data for analytical purposes only and is not intended to suggest that CSX has control over Conrail’s operations.

	CSX Consolidated						42% of Conrail						Other(1)						Combined EBITDA
	2003			2002			2003			2002			2003			2002			2003			2002
Quarters Ended June 27, 2003, and June 28, 2002
Net Earnings (Loss)	$	127		$	135		$	16		$	18		$	(16	)	$	(18	)	$	127		$	135
Depreciation and Amortization		160			156			36			34			18			16			214			206
Interest Income		(4	)		(8	)		(2	)		(3	)		1			3			(5	)		(8	)
Discounts on Sales of Accounts Receivable		4			7			—			—			—			—			4			7
Interest Expense		105			116			10			11			(1	)		(3	)		114			124
Income Tax Expense		72			74			9			11			(5	)		(3	)		76			82
Combined EBITDA	$	464		$	480		$	69		$	71		$	(3	)	$	(5	)	$	530		$	546
Six Months Ended June 27, 2003, and June 28, 2002
Net Earnings (Loss) Before Cumulative
Effect of Accounting Change	$	169		$	203		$	32		$	33		$	(32	)	$	(33	)	$	169		$	203
Depreciation and Amortization		317			307			70			68			42			39			429			414
Interest Income		(8	)		(15	)		(4	)		(5	)		3			4			(9	)		(16	)
Discounts on Sales of Accounts Receivable		10			14			—			—			—			—			10			14
Interest Expense		208			230			21			22			(3	)		(4	)		226			248
Income Tax Expense		94			113			18			19			(11	)		(9	)		101			123
Combined EBITDA	$	790		$	852		$	137		$	137		$	(1	)	$	(3	)	$	926		$	986

(1) Other includes purchase price amortization, eliminations and reclassifications.

EMPLOYEE COUNTS BY SEGMENT—ESTIMATED

	2003		2002
	May	Feb.	Nov.	Aug.	May	Feb.
Surface Transportation
Rail	33,427	32,445	33,271	33,912	33,878	32,951
Intermodal	1,115	1,122	1,124	1,110	1,077	1,063
Technology and Corporate	858	884	900	912	896	878
Total Surface Transportation	35,400	34,451	35,295	35,934	35,851	34,892
International Terminals	1,013	1,035	1,238	1,242	1,264	1,275
Other	1,858	1,234	3,272	3,496	3,260	2,742
Total	38,271	36,720	39,805	40,672	40,375	38,909

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