Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of September 27, 2002: 213,030,402March 28, 2003: 213,718,513 shares.

In the opinion of management, the accompanying consolidated financial statements contain all adjustments necessary to fairly present fairly the financial position of CSX Corporation and subsidiaries (“CSX” or the “Company”) at SeptemberMarch 28, 2003 and December 27, 2002, and December 28, 2001, the results of its operations for the quarters and nine months ended September 27, 2002 and September 28, 2001, and its cash flows for the ninethree months ended September 27,March 28, 2003 and March 29, 2002, and September 28, 2001, such adjustments being of a normal recurring nature. Certain prior-year data have been reclassified to conform to the 20022003 presentation.

The Company believes that the disclosures presented are accurate and not misleading, butand suggests that these financial statements be read in conjunction with the financial statements and the notes included in the Company’s latestmost recent Annual Report and Form 10-K.

CSX follows a 52/53 week fiscal reporting calendar. Fiscal years 20022003 and 20012002 consist of 52 weeks ending on December 27, 200226, 2003 and December 28, 2001,27, 2002, respectively. The financial statements presented are for the 13-week quarters ended September 27,March 28, 2003 and March 29, 2002, and September 28, 2001, the 39-week periods ended September 27, 2002 and September 28, 2001, and as of December 28, 2001.

Comprehensive income approximates net earnings for all periods presented in the accompanying consolidated statement of earnings.

The following table sets forth the computation of basic earnings per share and earnings per share, assuming dilution:

Earnings per share are based on the weighted-average number of common shares outstanding for the fiscal quarters and nine months ended September 27, 2002 and September 28, 2001.outstanding. Earnings per share, assuming dilution, are based on the weighted-average number of common shares outstanding adjusted for the effect of potentialpotentially dilutive common shares outstanding, during the period, principallymainly arising from employee stock plans. Share informationoptions. Potentially dilutive common shares at CSX include stock options and awards, and common stock that would be issued relating to convertible long-term debt. During the quarters ended March 28, 2003 and March 29, 2002, no shares and 0.7 million shares, respectively, were issued for the fiscal quarters and nine months ended September 27, 2002 and September 28, 2001 is as follows:

Certain potentialpotentially dilutive common shares outstanding at September 27,March 28, 2003 and March 29, 2002 and September 28, 2001 were not included in the computation of earnings per share, assuming dilution, since their exercise or conversion prices were greater than the average market price of the common shares during the period and, accordingly,therefore, their effect is antidilutive. These potentially dilutive common shares totaled 33.8 million at a weighted-average exercise price of $46.32 per share at September 27, 2002 and 18.8 million with a weighted-average exercise price of $43.38 per share at September 28, 2001. were as follows:

A substantial increase in the fair market value of the Company’s stock price could negatively impact earnings per share dueif the 34 million shares were to the dilutive effect of stock options and convertible debt.

In 2001, Statement of Financial Accounting Standard (SFAS)(“SFAS”) 143, “Accounting for Asset Retirement Obligations” was issued. 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 the first quarter of 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, 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.

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CSX CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

NOTE 4.    NEW ACCOUNTING PRONOUNCEMENTS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES, Continued

In December 2002, SFAS 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” was issued. SFAS 148 amends SFAS 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition to Statement 123’s fair value method of accounting for stock-based employee compensation and require disclosure of the effects of an entity’s accounting policy with respect to stock-based employee compensation. Effective beginning with fiscal year 2003, CSX has voluntarily adopted the fair value recognition provisions of SFAS 123, “Accounting for Stock-Based Compensation,” and adopted the disclosure requirements of SFAS 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of SFAS 123.” In accordance with the prospective method of adoption permitted under SFAS 148, any future stock-based compensation will be accounted for under the fair value recognition provisions of SFAS 123 utilizing the Black-Scholes valuation method and, accordingly, will be expensed.

In 2002, the FASB issued Financial Accounting Standard Interpretation (“FASI”) No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This statement requires that certain guarantees entered into be recorded at fair value on the balance sheet and additional disclosures be made about guarantees. CSX is required to adopt the accounting provisions of this statement in fiscal year 2003.

In 2001, SFAS 142, “Goodwill and Other Intangible Assets,” was issued. Under the provisions of SFAS 142, goodwill and other indefinite-livedindefinite lived intangible assets are no longer amortized, but are reviewed for impairment on a periodic basis. The Company adopted this standard in the first quarter of 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-livedindefinite 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 will not have a material effect on future earnings. The Company does not have any other indefinite lived intangible assets.

CSX and Norfolk Southern Corporation (“Norfolk Southern”) completed the acquisition ofacquired Conrail Inc. (“Conrail”) in May 1997. Conrail owns the primary freight railroad system serving the northeasternNortheastern United States, and its rail network extends intothroughout several midwesternMidwestern states and into Canada. CSX and Norfolk Southern, through a jointly owned acquisition entity, hold ownershipeconomic 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.

The rail subsidiaries of CSX and Norfolk Southern operate their respective portions of the Conrail system pursuant to certainvarious 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 serviceservices in certain shared geographic areas (“Shared Asset Areas”) for the joint benefit of CSX and Norfolk Southern, for which it is compensated on the basis of usage by the respective railroads.

CSX’s rail and intermodal operating revenue and expense includes activityrevenue from traffic moving on the territory acquired inConrail property. Operating expenses include costs incurred to handle that traffic and operate the Conrail transaction.lines. Rail operating expenses includeexpense includes an expense category, “Conrail, Operating Fee, Rent and Services,” which reflects payments to Conrail for the use of 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 CSX and Norfolk Southern. This expense category also includes amortization of the fair value write-up arising from the acquisition of Conrail, as well as CSX’s proportionate share of Conrail’s net income or loss recognized under the equity method of accounting.

Summary financial information for Conrail for its fiscal periods ended September 30, 2002 and 2001, and at December 31, 2001, is as follows:

As listed below, CSX has amounts payable to Conrail, representing expenses incurred under the operating, equipment and shared area agreements. Also, Conrail advances its available cash balances to CSX and Norfolk Southern under variable-rate notes, with CSX’s note maturing on March 28, 2007.

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CSX CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

NOTE 6.    ACCOUNTS RECEIVABLE, Continued

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts based uponon the expected collectibility of all accounts receivable, including receivables transferred to the master trust. Allowancestrust that could be subsequently sold to outside parties with recourse. The allowance for doubtful accounts is included in the balance sheet as follows: