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PAGE 1

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
( ) 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 (I.R.S. Employer
incorporation or organization) Identification No.)

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

Registrant's telephone number, including area code: (904) 359-3100

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on which each
Title of each class class is registered
- ---------------------------------- -------------------------------------
The Baltimore and Ohio Railroad Company
First Consolidated Mortgage 4-1/4%
Bonds, Series C, due October 1, 1995 New York Stock Exchange

Hocking Valley Railroad Company
First Consolidated Mortgage 4-1/2%
Bonds, due July 1, 1999 New York Stock Exchange

Louisville and Nashville Railroad
Company First and Refunding Mortgage
3-3/8% Bonds, Series F, due April 1, 2003 New York Stock Exchange

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







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PAGE 2

Securities registered pursuant to Section 12(b) of the Act: continued,

Name of each exchange on which each
Title of each class class is registered
- ---------------------------------- -------------------------------------
Louisville and Nashville Railroad
Company First and Refunding Mortgage
2-7/8% Bonds, Series G, due April 1, 2003 New York Stock Exchange

Monon Railroad 6% Income Debentures,
due January 1, 2007 New York Stock Exchange


Securities Registered Pursuant to Section 12(g) of the Act: None.

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 ( )

State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value of the voting stock at March 4,
1994, was $-0-, excluding the voting stock held by the parent of the registrant.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date. The registrant has 9,061,038
shares of common stock, par value $20.00, outstanding at March 4, 1994.



























- 2 -



PAGE 3
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
1993 FORM 10-K ANNUAL REPORT
Table of Contents
Item No. Page
- -------- ----

PART I

1. Business 4
2. Properties 4
3. Legal Proceedings 6
4. Submission of Matters to a Vote of Security Holders 7

PART II

5. Market for Registrant's Common Stock and Related
Stockholder Matters 7
6. Selected Financial Data 7
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
8. Financial Statements and Supplementary Data 7
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 7

PART III

10. Directors, Executive Officers, Promoters
and Control Persons of the Registrant 8
11. Executive Compensation 8
12. Security Ownership of Certain Beneficial
Owners and Management 8
13. Certain Relationships and Related Transactions 8


PART IV

14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 8



Signatures 9

Index to Financial Statements 10












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PAGE 4
PART I

Items 1. & 2. Business and Properties.

General
-------
CSX Transportation, Inc. (CSXT) is engaged principally in the business
of railroad transportation and operates a system comprising 18,779 miles of
first main line track in 20 states principally east of the Mississippi River
(exclusive of New England), southern Ontario and the District of Columbia,
employing an average of 29,216 employees. It conducts railroad operations in
its own name and through railroad subsidiaries.

CSXT is a wholly-owned subsidiary of CSX Corporation (CSX). CSX is a
publicly-owned Virginia corporation with headquarters at One James Center, 901
East Cary Street, Richmond, Virginia, 23219. CSXT is one of the largest
railroads in the United States, offering single-system service in its operating
area. Also in the transportation field, CSX controls Sea-Land Service, Inc., an
ocean container-shipping company, CSX Intermodal, Inc., an intermodal and
trucking company and American Commercial Lines, Inc., which engages in inland
barging and other marine-related businesses. CSX also has interests in contract
logistics, real estate holdings, including resort management and operations, and
information technology.

For information concerning business done by CSXT during 1993, see
"Management's Narrative Analysis and Results of Operations" on pages 35 through
41.





























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PAGE 5

Roadway
-------
On December 31, 1993, CSXT's consolidated system consisted of 32,844
miles of track as follows:


Track
Miles
-----

First Main 18,779
Second Main 3,025
Passing, Crossovers
and Turnouts 2,464
Way and Yard Switching 8,576
------
Total 32,844
======

Included above are 887 miles of leased track, 2,822 miles of track
under trackage rights agreements with other railroads and 185 miles of track
under operating contracts.

Equipment
---------
On December 31, 1993, CSXT and subsidiaries owned or leased the
following:

Owned Leased Total
----- ------ ------
Locomotives
Freight 1,882 585 2,467
Switching 150 15 165
Auxiliary Units 178 --- 178
------- ------- -------
Total 2,210 600 2,810
======= ======= =======

Freight Cars
Open Top Hoppers 26,082 9,846 35,928
Gondolas 6,646 13,958 20,604
Covered Hoppers 11,034 7,774 18,808
Box Cars 9,820 5,192 15,012
Flat Cars 497 9,906 10,403
Other 2,379 2,002 4,381
------- ------- -------
Total 56,458 48,678 105,136
======= ======= =======







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PAGE 6

Item 3. Legal Proceedings.

In December 1993, a Consent Decree was entered in the U. S. District
Court in Jacksonville, Florida to settle claims of Federal Clean Water Act
violations alleged against CSXT. The Consent Decree resolves a civil
enforcement action initiated in June, 1992, by the U.S. Environmental Protection
Agency with respect to alleged violations by CSXT of permit discharge
limitations at five rail yard waste water treatment facilities in Florida and
North Carolina. The settlement called for a civil penalty of $3 million, which
has been paid by CSXT, as well as the establishment of an escrow account in the
amount of $4 million to fund certain environmentally beneficial projects.

See Note 12 to the Consolidated Financial Statements, Contingent
Liabilities and Long-Term Operating Agreements, on pages 32 and 33.









































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PAGE 7

Item 4. Submission of Matters to a Vote of Security Holders.

Information omitted in accordance with General Instruction J(2)(c).

PART II

Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.

There is no market for CSXT's common stock as CSXT is a wholly-
owned subsidiary of CSX. During the years 1993, 1992 and 1991, CSXT paid
dividends on its common stock aggregating $28 million, $74 million and $120
million, respectively.


Item 6. Selected Financial Data.

Information omitted in accordance with General Instruction J(2)(a).

However, included as part of "Management's Narrative Analysis and
Results of Operations" on page 35 is various selected financial and statistical
information.


Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

Information omitted in accordance with General Instruction J(2)(a).

However, in compliance with said Instruction, see "Management's
Narrative Analysis and Results of Operations" on pages 35 through 41.


Item 8. Financial Statements and Supplementary Data.

The consolidated financial statements of CSXT and notes thereto
required in response to this item are included herein (refer to Index to
Financial Statements on page 10).


Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

None.












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PAGE 8
PART III

Item 10. Directors, Executive Officers, Promoters and Control Persons
of the Registrant.

Information omitted in accordance with General Instruction J(2)(c).


Item 11. Executive Compensation.

Information omitted in accordance with General Instruction J(2)(c).


Item 12. Security Ownership of Certain Beneficial Owners and Management.

Information omitted in accordance with General Instruction J(2)(c).


Item 13. Certain Relationships and Related Transactions.

Information omitted in accordance with General Instruction J(2)(c).


PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a) 1. Financial Statements.

See Index to Financial Statements on page 10.

2. Financial Statement Schedules.

None.

3. Exhibits.

(3.1) Articles of Incorporation, as amended, incorporated
herein by reference to Registrant's report on
Form 10-K for the year ended December 31, 1987.

(3.2) By-laws of the Registrant, incorporated herein by
reference to Registrant's report on Form 10-K for
the year ended December 31, 1992.

(b) Reports on Form 8-K.

None.








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PAGE 9

Pursuant to the requirements of Section 13 or 15(d) 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, on the 11th day of
March, 1994.

CSX TRANSPORTATION, INC.

/s/ GREGORY R. WEBER
------------------------------
Gregory R. Weber
(Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


Signatures Title
- ----------------------- -------------------------------------

/s/ John W. Snow Chairman of the Board and Director
- -----------------
John W. Snow*

/s/ Alvin R. Carpenter President and Chief Executive Officer
- ----------------------- (Principal Executive Officer) and
Alvin R. Carpenter* Director

/s/ Jerry R. Davis Executive Vice-President and Chief
- ------------------- Operating Officer and Director
Jerry R. Davis*

/s/ Mark G. Aron Director
- -----------------
Mark G. Aron*

/s/ James Ermer Director
- ----------------
James Ermer*

/s/ Paul R. Goodwin Senior Vice President - Finance
- -------------------- (Principal Finance Officer)
Paul R. Goodwin*





/s/ PATRICIA J. AFTOORA
- -----------------------
*Patricia J. Aftoora
(Attorney-in-Fact) March 11, 1994



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PAGE 10
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements

Page
----
Report of Independent Auditors 11


CSX Transportation, Inc. and Subsidiaries:

Consolidated Financial Statements and Notes to Consolidated
Financial Statements Submitted Herewith:

Consolidated Statement of Earnings -
Years Ended December 31, 1993, 1992 and 1991 12

Consolidated Statement of Cash Flows -
Years Ended December 31, 1993, 1992 and 1991 13

Consolidated Statement of Financial Position -
December 31, 1993 and 1992 15

Consolidated Statement of Retained Earnings -
Years Ended December 31, 1993, 1992 and 1991 16

Notes to Consolidated Financial Statements 17


All schedules are omitted because of the absence of the conditions
under which they are required or because the required information is set forth
in the financial statements or related notes thereto.

























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PAGE 11

REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
---------------------------------------------

To the Shareholder and Board of Directors
of CSX Transportation, Inc.

We have audited the accompanying consolidated statement of financial
position of CSX Transportation, Inc. and subsidiaries as of December 31, 1993
and 1992, and the related consolidated statements of earnings and cash flows for
each of the three years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above (appearing on pages 12-34) present fairly, in all material respects, the
consolidated financial position of CSX Transportation, Inc. and subsidiaries at
December 31, 1993 and 1992, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31,
1993 in conformity with generally accepted accounting principles.

As discussed in Notes 1 and 11 to the consolidated financial
statements, CSXT changed its method of accounting for post-retirement benefits
other than pensions in 1991.


/s/ ERNST & YOUNG
-----------------
Ernst & Young


Richmond, Virginia
January 28, 1994













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PAGE 12
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Millions of Dollars)

Year Ended December 31,
--------------------------------
1993 1992 1991
------- ------- -------
OPERATING REVENUE
Merchandise $ 2,909 $ 2,770 $ 2,634
Coal 1,363 1,565 1,573
Other 108 99 129
------- ------- -------
Transportation 4,380 4,434 4,336
Non-Transportation 64 74 88
------- ------- -------
Total 4,444 4,508 4,424
------- ------- -------
OPERATING EXPENSE
Labor and Fringe Benefits 1,809 1,830 1,849
Materials, Supplies and Other 1,011 973 1,026
Equipment Rent 387 383 376
Depreciation 371 354 344
Fuel 253 262 271
Productivity Charge --- 664 647
------- ------- -------
Transportation 3,831 4,466 4,513
Non-Transportation 22 20 20
------- ------- -------
Total 3,853 4,486 4,533
------- ------- -------

OPERATING INCOME (LOSS) 591 22 (109)
Other Income 11 1 20
Interest Expense 60 73 87
------- ------- -------

EARNINGS (LOSS) BEFORE INCOME TAXES 542 (50) (176)

Income Tax Expense (Benefit) 234 (33) (71)
------- ------- -------
EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING 308 (17) (105)
Cumulative Effect on Years Prior to 1991
of Change in Accounting for Post-
retirement Benefits Other than Pensions --- --- (159)
------- ------- -------
NET EARNINGS (LOSS) $ 308 $ (17) $ (264)
======= ======= =======


See accompanying Notes to Consolidated Financial Statements.




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PAGE 13
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of Dollars)

Year Ended December 31,
--------------------------
1993 1992 1991
------- ------- -------

OPERATING ACTIVITIES
Net Earnings (Loss) $ 308 $ (17) $ (264)
Adjustments to Reconcile Earnings (Loss) to
Cash Provided
Depreciation 371 354 344
Deferred Income Taxes (Benefits) 183 (52) (152)
Productivity Charge - Provision --- 664 647
- Payments (245) (353) (72)
Cumulative Effect of Change in Accounting --- --- 159
Proceeds from Real Estate Sales 28 41 41
Gain on Sale of Investments (26) --- (39)
Gain on Sale of South Florida Track (20) (7) (7)
Gain from Disposition of Properties (25) (38) (32)
Other Operating Activities 12 (31) (38)
Changes in Operating Assets and Liabilities
Accounts Receivable 27 30 60
Sale of Accounts Receivable-Net 6 200 ---
Materials and Supplies (4) 10 43
Other Current Assets 22 20 (9)
Accounts Payable and Other Current
Liabilities (7) (96) (156)
------- ------- -------
Cash Provided by Operating Activities 630 725 525
------- ------- -------
INVESTING ACTIVITIES
Property Additions (569) (539) (563)
Proceeds from Sale-Leaseback Transactions --- --- 117
Acquisition and Reconstruction Costs for
Sale-Leaseback Transactions --- --- (80)
Proceeds from Property Dispositions 36 41 53
Proceeds from Sale of Investments 26 --- 106
Proceeds from Sale of South Florida Track 26 10 9
Other Investing Activities 3 (18) (37)
------- ------- -------
Cash Used by Investing Activities (478) (506) (395)
------- ------- -------











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PAGE 14
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS, CONTINUED
(Millions of Dollars)

Year Ended December 31,
--------------------------
1993 1992 1991
------- ------- -------
FINANCING ACTIVITIES
Long-Term Debt Issued 80 148 79
Long-Term Debt Repaid (160) (213) (135)
Cash Dividends Paid (28) (74) (120)
Affiliated Company Activity (18) (123) 82
Other Financing Activities (2) 4 8
------- ------- -------
Cash Used by Financing Activities (128) (258) (86)
------- ------- -------

CASH AND CASH EQUIVALENTS
Increase (Decrease) in Cash and Cash Equivalents 24 (39) 44

Cash and Cash Equivalents at Beginning of Year 248 287 243
------- ------- -------
Cash and Cash Equivalents at End of Year $ 272 $ 248 $ 287
======= ======= =======

See accompanying Notes to Consolidated Financial Statements.





























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PAGE 15
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Millions of Dollars)

December 31,
---------------------
1993 1992
------ ------
ASSETS
Current Assets
Cash and Cash Equivalents $ 272 $ 248
Accounts and Notes Receivable 98 83
Materials and Supplies 116 112
Deferred Income Taxes 103 ---
Other Current Assets 43 63
------ ------
Total Current Assets 632 506
------ ------
Properties and Other Assets
Properties-Net 8,631 8,463
Affiliates and Other Companies 155 169
Other Assets 235 337
------ ------
Total Properties and Other Assets 9,021 8,969
------ ------
Total Assets $9,653 $9,475
====== ======
LIABILITIES
Current Liabilities
Accounts Payable and Other Current
Liabilities $1,111 $1,280
Current Maturities of Long-Term Debt 87 114
Due to Parent Company 40 43
------ ------
Total Current Liabilities 1,238 1,437
------ ------
Long-Term Debt 593 646
------ ------
Due to Parent Company 69 86
------ ------
Deferred Income Taxes 1,937 1,649
------ ------
Long-Term Liabilities and Deferred Gains 1,631 1,754
------ ------
SHAREHOLDER'S EQUITY
Common Stock, $20 Par Value; Authorized
10,000,000 Shares; 9,061,038 Shares
Issued and Outstanding 181 181
Other Capital 1,047 1,047
Retained Earnings 2,957 2,675
------ ------
Total Shareholder's Equity 4,185 3,903
------ ------
Total Liabilities and Shareholder's Equity $9,653 $9,475
====== ======
See accompanying Notes to Consolidated Financial Statements.
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PAGE 16
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(Millions of Dollars)

1993 1992 1991
------ ------ ------
BALANCE - JANUARY 1 $2,675 $2,764 $3,152

Net Earnings (Loss) 308 (17) (264)

Dividends - Common (28) (74) (120)

Minimum Pension Liability Adjustments
and Other 2 2 (4)
------ ------ ------

BALANCE - DECEMBER 31 $2,957 $2,675 $2,764
====== ====== ======


See accompanying Notes to Consolidated Financial Statements.



































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PAGE 17
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars)

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES.


Principles of Consolidation

The Consolidated Financial Statements reflect the results of
operations, cash flows and financial position of CSXT and its majority-owned
subsidiaries as a single entity. All significant intercompany accounts and
transactions have been eliminated. CSXT is a wholly-owned subsidiary of CSX
Corporation (CSX).

Investments in companies that are not majority-owned are carried at
either cost or equity, depending on the extent of control.


Cash and Cash Equivalents

Cash and cash equivalents primarily represent amounts due from CSX for
CSXT's participation in the CSX cash management plan and are net of outstanding
checks which are funded daily as presented for payment.


Accounts Receivable

CSXT has an ongoing agreement to sell without recourse, on a revolving
basis each month, an undivided percentage ownership interest in all freight
accounts receivable to CSX Trade Receivable Corporation (CTRC), a wholly-owned
subsidiary of CSX. At December 31, 1993 and 1992, accounts receivable sold
under this agreement totaled $556 million and $600 million, respectively. In
addition, CSXT has an agreement to sell with recourse on a monthly basis, an
undivided ownership interest in all miscellaneous accounts receivable to a
financial institution. At December 31, 1993, accounts receivable sold under
this agreement totaled $50 million.

Materials and Supplies

Materials and supplies are carried at average cost.















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PAGE 18
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES, Continued

Properties

Properties are carried principally at cost. Provisions for
depreciation are based on estimated useful service lives of seven to 42 years,
computed primarily on the straight-line composite method. Under this method,
gains and losses on ordinary dispositions are recorded to accumulated
depreciation.

Post-retirement Benefits Other Than Pensions

CSXT has adopted SFAS No. 106, "Employers' Accounting for
Post-retirement Benefits Other than Pensions." Under the accrual method
specified by SFAS No. 106, the total future cost of providing other
post-retirement employment benefits (OPEBs) is estimated and recognized as
expense over the employees' requisite service period.

Fair Values of Financial Instruments

The following methods and assumptions were used by CSXT in estimating
fair values for financial instruments as required by SFAS No. 107, "Disclosures
about Fair Value of Financial Instruments":

Current Assets and Current Liabilities
The carrying amounts reported in the statement of financial position
for current assets and current liabilities qualifying as financial
instruments approximate their fair values.

Long-Term Debt
The fair values of CSXT's long-term debt have been based upon market
quotations for similar debt instruments or have been estimated using
discounted cash flow analyses based upon CSXT's current incremental
borrowing rates for similar types of borrowing arrangements.
Currently, CSXT has no short-term debt arrangements.

CSXT's remaining financial instruments at December 31, 1993, are not
significant.

Environmental Costs

Environmental costs that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to remediating an existing
condition caused by past operations, and which do not contribute to current or
future revenue generation, are expensed. Liabilities are recorded when CSXT's
responsibility for environmental remedial efforts is deemed probable, and the
costs can be reasonably estimated. Generally, the timing of these accruals
coincides with the completion of a feasibility study or CSXT's commitment to a
formal plan of action. The recorded liabilities for estimated future
environmental costs at December 31, 1993, 1992 and 1991, were $131 million, $77
million and $81 million, respectively.


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PAGE 19
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES, Continued

Common Stock and Other Capital

There have been no changes in common stock during the last three
years.

Prior Year Data

Certain prior-year data have been reclassified to conform to the 1993
presentation.

NOTE 2. PRODUCTIVITY CHARGES.

In the fourth quarter of 1991, CSXT recorded a pretax charge to
provide for the estimated costs of implementing work force reductions,
improvements in productivity and other cost reductions. The charge amounted to
$647 million on a pretax basis and reduced 1991 net earnings by $409 million.
In the second quarter of 1992, CSXT recorded a charge principally to recognize
the estimated additional costs of buying out certain trip-based compensation
elements paid to train crew employees. The additional pretax charge amounted to
$664 million and reduced net earnings for 1992 by $427 million.

The $1.3 billion in combined charges includes $1.2 billion for
reductions from three to two member train crews and for buying out productivity
funds and short-crew allowances. CSXT has reached labor agreements across
virtually all of its rail system allowing it to operate trains with two-member
crews. The estimated cost based on the ratified labor agreements with the
United Transportation Union members is approximately 93% of the amount initially
provided.

As of December 31, 1993, payments totaling $518 million have been
recorded as a reduction of the aggregate liabilities for the productivity
charges. The remaining liability consists of $604 million for employee
separations and associated costs and $189 million for claims, litigation and
other negotiated settlements.

















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PAGE 20
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 3. SUPPLEMENTAL STATEMENT OF EARNINGS FINANCIAL DATA.

1993 1992 1991
------ ------ ------

Maintenance and Repair Expense $987 $994 $1,015
==== ==== ======

Selling, General and Administrative Expense (a) $802 $673 $ 687
==== ==== ======

Taxes Other Than Income and Payroll Taxes $ 79 $ 75 $ 68
==== ==== ======

(a) Selling, general and administrative expense during 1993 increased
$129 million over 1992 primarily due to an increase in the management service
fee charged by CSX and increases in certain employee related incentive costs.

NOTE 4. OTHER INCOME (EXPENSE).
1993 1992 1991
---- ---- ----

Interest Income - Other $ 16 $ 18 $ 21
- CSX 12 9 9
Gain on Sale of RF&P Corporation Stock (a) --- --- 39
Gain on Sale of Investment 26 --- ---
Gain on Sale of South Florida Track (b) 20 7 7
Fees on Sale of Accounts Receivable (44) (17) (32)
Miscellaneous (19) (16) (24)
---- ---- ----
Total $ 11 $ 1 $ 20
==== ==== ====

(a) In a series of transactions consummated in October 1991, CSXT
exchanged its 6.8 million shares of RF&P Corporation (RF&P) stock for the rail
assets of RF&P and $106 million in cash. These transactions resulted in a
pretax gain of $39 million, before associated minority interest expense of $5
million.

(b) In May 1988, CSXT sold approximately 80 miles of track and right
of way in Broward, Dade and Palm Beach counties to the state of Florida for $264
million. The sale, which is being recognized on the installment basis, resulted
in cash proceeds of $75 million, a pretax gain of $59 million and an after-tax
gain of $37 million. The remaining proceeds of $189 million, which were
received in the form of an installment mortgage note, are subject to annual
legislative appropriations. The deferred installment gain of $148 million will
be recognized each year through 1997 as scheduled payments are received. At
December 31, 1993 and 1992, the long-term portion of the mortgage note
receivable totaled $102 and $130 million, respectively, and was included in
other assets in the consolidated statement of financial position.



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PAGE 21
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 5. INCOME TAXES.

Effective January 1, 1993, CSXT adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." SFAS No.
109 superseded SFAS No. 96, "Accounting for Income Taxes," which CSXT adopted
effective January 1, 1987. SFAS No. 109 requires that deferred income tax
assets and liabilities be classified as current or non-current based upon the
classification of the related asset or liability for financial reporting. Net
earnings for 1993 were not impacted by the adoption of SFAS No. 109. As
permitted under the new rules, prior-year financial statements have not been
restated.

Income tax expense (benefit) information is as follows:

1993 1992 1991
------- ------- -------
Current
Federal $ 47 $ 17 $ 66
State and Foreign 4 2 15
---- ---- ----
Total Current 51 19 81
---- ---- ----
Deferred
Federal 166 (48) (122)
State 17 (4) (30)
---- ---- ----
Total Deferred 183 (52) (152)
---- ---- ----
Total Expense (Benefit) $234 $(33) $(71)
==== ==== ====

Income tax expense (benefit) reconciled to the tax computed at
statutory rate is as follows:

1993 1992 1991
----------- ----------- -----------


Tax at Statutory Rates $190 35 % $(17) (34)% $(60) (34)%
State Income Taxes 13 2 (2) (4) (10) (6)
Prior Years' Income Taxes (15) (3) (10) (20) (10) (6)
Increase in Statutory Rate (a) 46 9 --- -- --- --
Other --- -- (4) (9) 9 6
---- -- ---- -- ---- --
Total Expense (Benefit) $234 43 % $(33) (67)% $(71) (40)%
==== == ==== == ==== ==

(a) CSXT revised its annual effective tax rate in 1993 to reflect the
change in the federal statutory rate from 34 to 35 percent. The
effect of this change was to increase deferred income tax expense by
$46 million related to applying the newly enacted statutory income tax
rate to deferred tax balances as of January 1, 1993.

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PAGE 22
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 5. INCOME TAXES, Continued

The significant components of deferred tax assets and liabilities
after considering the adoption of SFAS No. 109 include:

December 31, January 1,
1993 1993
------ ------
Deferred Tax Assets
Productivity Charge $ 289 $ 356
Employee Benefit Plans 167 143
Investment Tax Credits 100 126
Alternative Minimum Tax Credits 168 148
Other 215 206
------ ------
Total 939 979
------ ------
Deferred Tax Liabilities
Accelerated Depreciation 2,556 2,455
Other 217 173
------ ------
Total 2,773 2,628
------ ------
Net Deferred Tax Liabilities $1,834 $1,649
====== ======


CSXT and its subsidiaries are included in the consolidated federal
income tax return filed by CSX. The consolidated federal income tax expense or
benefit is allocated to CSXT and its subsidiaries as though CSXT had filed a
separate consolidated return.

Federal income tax payments to CSX and payments to state taxing
authorities during 1993, 1992 and 1991 totaled $80 million, $56 million and $58
million, respectively.

At December 31, 1993 and 1992, investment tax credits of approximately
$100 million and $126 million and alternative minimum tax credits of $168
million and $148 million, respectively, are being carried forward for separate
tax return purposes and have been recognized for financial reporting purposes as
a reduction of the deferred tax liability. Investment tax credits are accounted
for under the flow-through method. The earliest carryforwards of investment tax
credits begin to expire in 1997.

Examinations of the federal income tax returns of CSX and its
principal subsidiaries have been completed through 1987. Returns for 1988-1990
are currently under examination. Management believes adequate provision has
been made for any adjustments that might be assessed.





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PAGE 23
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 6. RELATED PARTIES.

Cash and cash equivalents at December 31, 1993 and 1992, includes $336
million and $310 million, respectively, representing amounts due from CSX for
CSXT's participation in the CSX cash management plan. 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. CSX is committed to repay
all amounts due on demand should circumstances require. The companies are
charged for borrowings or compensated for investments based on returns earned by
the plan portfolio.

Effective December 18, 1992, CSXT entered into an agreement with CTRC
to sell, on a revolving basis, without recourse, all existing accounts
receivable to CTRC. In October, 1993, this agreement was amended to sell only
freight accounts receivable to CTRC. As of December 31, 1993 and 1992, CSXT had
sold $556 million and $600 million, respectively, of accounts receivable to
CTRC.

CSXT has formal long-term borrowings from CSX which mature from 1994
to 2012 and total $86 million at December 31, 1993, and $106 million at December
31, 1992. Maturities during the next five years aggregate $17 million in 1994,
$17 million in 1995, $7 million in 1996, $7 million in 1997 and $7 million in
1998. Fixed interest rates range from 9% to 10% per annum and are based on the
market rates in effect when the respective borrowings were placed. Interest
expense on borrowings from CSX was $9 million, $11 million and $15 million in
1993, 1992 and 1991, respectively.

In 1989, CSXT's pension plan for salaried employees was merged with
the CSX Corporation Plan, and all assets of CSXT's plan were transferred to the
CSX merged plan. Since the plans were merged, CSX has allocated to CSXT a
portion of the net pension expense for the CSX Corporation Plan based on CSXT's
relative level of participation in the merged plan which considers the assets
and personnel previously in the CSXT plan. The allocated expense from the CSX
Corporation Plan amounted to $32 million in 1993, $23 million in 1992 and $32
million in 1991.

Included in Materials, Supplies and Other expense are amounts related
to a management service fee charged by CSX, data processing related charges from
CSX Technology, Inc., and the reimbursement, under an operating agreement, from
CSX Intermodal, Inc. (CSXI), for costs incurred by CSXT related to intermodal
operations. CSX Technology and CSXI are wholly-owned subsidiaries of CSX.
Materials, Supplies and Other expense includes net expense of $214 million, $128
million and $183 million in 1993, 1992 and 1991, respectively, relating to the
above arrangements. The $86 million increase from 1993 to 1992 was
predominately the result of an increase in the management fee charged by CSX and
a one-time intercompany transfer to CSXI in 1992.

In 1991, CSXT entered into an operating lease agreement with CSXI for
3,400 rebuilt coal gondola cars. The cars, which were previously owned and
rebuilt by CSXT, were sold to CSXI for $117 million which resulted in no gain.
These cars are presently being leased by CSXT through March 2006. In addition,
CSXT is leasing 65 locomotives from CSXI pursuant to a pre-existing operating

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PAGE 24
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 6. RELATED PARTIES, Continued

lease agreement acquired by CSXI from a third party at year-end 1992. These
locomotives are being leased by CSXT through May 2008. The minimum lease
payments for the locomotives and coal gondola cars discussed above are
approximately $18 million annually. These lease payments are included in the
minimum lease payments as discussed in Note 12.

In 1988, CSXT participated with Sea-Land Service, Inc. (Sea-Land), a
wholly-owned subsidiary of CSX, in four sale-leaseback arrangements. Under
these arrangements, Sea-Land sold equipment to a third party and CSXT leased the
equipment and assigned the lease to Sea-Land. Sea-Land is obligated for all
lease payments and other associated equipment expenses. If Sea-Land defaults on
its obligations, CSXT would assume the asset lease rights and obligations of
$174 million at December 31, 1993, under the arrangements.

CSX purchases futures and options contracts as a partial hedge against
fluctuations in fuel oil prices on behalf of CSXT and other CSX subsidiaries.
Gains and losses on contracts to hedge fuel oil commitments are deferred and
accounted for as a part of the commitment transaction. When recognized, these
gains and losses are recorded by the subsidiary. During 1993 and 1991, CSXT
recognized $2 million and $3 million, respectively, in net losses with 1992
yielding a slight gain associated with these fuel hedges. The counterparties to
certain futures and options contracts consist of a large number of major
financial institutions. Through CSX, the positions and the credit ratings of
these counterparties are continually monitored, and the amount of agreements or
contracts entered into with any one party are limited. While the company may be
exposed to credit losses in the event of non-performance by counterparties, it
does not currently anticipate losses.

NOTE 7. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES.

December 31,
----------------------
1993 1992
------ ------
Trade Accounts Payable $ 457 $ 457
Labor and Fringe Benefits(a) 337 543
Interest, Taxes and Other 180 144
Casualty Reserves 137 136
------ ------
Total $1,111 $1,280
====== ======

(a) Labor and Fringe Benefits includes separation liabilities of $26
million for 1993 and $225 million for 1992.







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PAGE 25
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 8. PROPERTIES.

Balance Balance
at Beginning Retirements Other at End
of Year Additions and Sales Changes of Year
------------ --------- ----------- ------- -------
1993
- ----
Property:
Transportation
Road $ 9,074 $ 323 $380 $ 9 $ 9,026
Equipment 3,567 243 199 4 3,615
------- ------ ---- ---- -------
12,641 566 579 13 12,641
Non-transportation 61 3 2 1 63
------- ------ ---- ---- -------
Total $12,702 $ 569 $581 $ 14 $12,704
======= ====== ==== ==== =======


Accumulated Depreciation:
Transportation
Road $ 2,781 $ 209 $373 $--- $ 2,617
Equipment 1,453 162 163 --- 1,452
------- ------ ---- ---- -------
4,234 371 536 --- 4,069
Non-transportation 5 --- 1 --- 4
------- ------ ---- ---- -------
Total $ 4,239 $ 371 $537 $--- $ 4,073
======= ====== ==== ==== =======

Properties - December 31, 1993 $ 8,631
=======




















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PAGE 26
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 8. PROPERTIES, Continued

Balance Balance
at Beginning Retirements Other at End
of Year Additions and Sales Changes of Year
------------ --------- ----------- ------- -------
1992
- ----
Property:
Transportation
Road $ 9,003 $ 313 $ 211 $(31) $9,074
Equipment 3,618 226 268 (9) 3,567
------- ------ ----- ---- -------
12,621 539 479 (40) 12,641
Non-transportation 63 --- 1 (1) 61
------- ------ ----- ---- -------
Total $12,684 $ 539 $ 480 $(41) $12,702
======= ====== ===== ==== =======


Accumulated Depreciation:
Transportation
Road $ 2,787 $ 205 $ 208 $ (3) $ 2,781
Equipment 1,527 149 223 --- 1,453
------- ------ ----- ---- -------
4,314 354 431 (3) 4,234
Non-transportation 5 1 --- (1) 5
------- ------ ----- ---- -------
Total $ 4,319 $ 355 $ 431 $ (4) $ 4,239
======= ====== ===== ==== =======

Properties - December 31, 1992 $ 8,463
=======




















- 26 -



PAGE 27
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 9. CASUALTY AND OTHER RESERVES, SEPARATION LIABILITIES AND DEFERRED GAINS.

Long-term liabilities and deferred gains totaled $1.6 billion and $1.8
billion in 1993 and 1992, respectively, and include casualty reserves; deferred
gains; pension and other post-retirement obligations; productivity/restructuring
charge liabilities; and other liabilities.

Activity relating to casualty reserves, separation liabilities and
deferred gains is as follows:

Deferred Gains
---------------------------

Casualty Separation Sale-Leaseback Installment
Reserves(a) Liabilities(a) Transactions(c) Sale(d)
----------- ------------ --------------- -----------

Balance 12/31/91 $ 354 $ 655 $ 84 $ 129

Charged to Expense
and Other Additions 237 644 (1) ---
Payments and Other
Reductions (222) (382)(b) (6) (7)
----- ----- ----- -----
Balance 12/31/92 369 917 77 122

Charged to Expense
and Other Additions 189 --- --- ---
Payments and Other
Reductions (179) (295)(b) (6) (20)
----- ----- ----- -----
Balance 12/31/93 $ 379 $ 622 $ 71 $ 102
===== ===== ===== =====

(a) Balances include current portion of casualty reserves and separation
liabilities, respectively, of $136 million and $225 million at
December 31, 1992 and $137 million and $26 million at December 31,
1993.

(b) Includes reallocation of $95 million in 1993 and $62 million in 1992
to litigation claims and other negotiated settlements.

(c) Deferred gains on sale-leaseback transactions are being amortized over
periods not exceeding 21 years.

(d) A portion of the deferred gain on South Florida Track installment sale
will be recognized each year through 1997 as scheduled payments are
received.





- 27 -



PAGE 28
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 10. LONG-TERM DEBT.


December 31,
Type Average ----------------------
(Maturity Dates) Interest Rates 1993 1992
- ----------------- -------------- ------ ------

Equipment Obligations
(1994-2008) 9% $ 417 $ 437
Mortgage Bonds
(1995-2003) 4% 84 137
Other Obligations
(1994-2021) 6% 179 186
------ ------
Total 8% 680 760

Less Debt Due Within One Year 87 114
------ ------
Total Long-Term Debt $ 593 $ 646
====== ======

The estimated fair value of long-term debt at December 31, 1993 and
1992, is as follows:
Fair Value of Total Debt
1993 1992
------------------------
Equipment Obligations $453 $476
Mortgage Bonds 69 115
Other Obligations 192 194
---- ----
Total $714 $785
==== ====

In March 1993, CSXT issued $74 million of Series A Equipment Trust
Certificates. The certificates will mature in 15 annual installments from 1994
through 2008.

CSXT has long-term debt maturities during the next five years
aggregating $87 million in 1994, $85 million in 1995, $64 million in 1996, $45
million in 1997 and $41 million in 1998.

Substantially all of the properties and certain other assets of CSXT
and its subsidiaries are pledged as security for various long-term debt issues.

Interest payments, including the amounts on CSX borrowings totaled $74
million, $85 million and $93 million, respectively, for 1993, 1992 and 1991.
These payments are net of capitalized interest, which was approximately $7
million for each of the three years.




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PAGE 29
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 11. EMPLOYEE BENEFIT PLANS.

Pension Plans

CSX and its subsidiaries, including CSXT, have defined benefit pension
plans principally for salaried employees. The plans provide for eligible
employees to receive benefits primarily based on years of service and
compensation rates near retirement. Contributions to the plans are made on the
basis of not less than the minimum funding standards set forth in the Employee
Retirement Income Security Act of 1974, as amended. See Note 6 for the
allocated pension expense from the CSX Corporation Plan.

Savings Plans

CSXT has established savings plans for virtually all full-time
salaried employees and certain employees covered by collective bargaining units
of CSXT and subsidiary companies. CSXT matches 50% of each salaried employee's
contribution, which is limited to 6% of the employee's earnings. CSXT
contributes fixed amounts for each participating employee covered by a
collective bargaining agreement. Expense for these plans was $22 million for
each of the years 1993, 1992 and 1991.

Other Post-Retirement Benefit Plans

In addition to the CSX defined benefit pension plans, CSXT
participates in two defined benefit post-retirement plans along with CSX and
other affiliates which cover most full-time salaried employees. One plan
provides medical benefits and another provides life insurance benefits. The
post-retirement health care plan is contributory, with retiree contributions
adjusted annually, and contains other cost-sharing features such as deductibles
and coinsurance. The accounting for the health care plan anticipates future
cost-sharing changes to the written plan that are consistent with the company's
expressed intent to increase the retiree contribution rate annually for the
expected medical inflation rate for that year. The life insurance plan is non-
contributory.

Effective January 1, 1991, CSXT adopted SFAS No. 106. The effect of
adopting the new guidelines had a minimal impact on 1991 results, as the net
periodic post-retirement benefit expense of $28 million approximated the expense
under the prior method of accounting for the above defined benefit plans, which
was on a pay-as-you-go basis. Net earnings for 1991 were decreased by $159
million (net of related income tax benefit of $96 million), by the cumulative
effect of the change in accounting related to years prior to 1991, which were
not restated.

The SFAS No. 106 calculations shown below were prepared for CSXT as if
it was participating in such plans on a stand-alone basis. Therefore, although
CSXT participates along with CSX and other affiliates in these two plans, a
separate measurement of the funding status and benefit expense attributable to
its participation in the plans was determined and recognized by CSXT on this
basis.


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PAGE 30
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 11. EMPLOYEE BENEFIT PLANS, Continued

Other Post-Retirement Benefit Plans, Continued

The company's current policy is to fund the cost of the post-
retirement health care and life insurance benefits on a pay-as-you-go basis, as
in prior years. The following table shows the two plans' combined status
reconciled with the amounts recognized in CSXT's statement of financial
position:

Life
Medical Insurance
Plan Plan
1993 1992 1993 1992
---- ---- ---- ----
Accumulated Post-Retirement
Benefit Obligation:
Retirees $154 $125 $67 $62
Fully Eligible Active Participants 13 13 2 2
Other Active Participants 20 16 2 1
---- ---- --- ---
Accumulated Post-Retirement
Benefit Obligation 187 154 71 65
Unrecognized Prior Service Cost 17 21 4 4
Unrecognized Net Loss (40) (10) (10) (3)
---- ---- --- ---
Net Post-Retirement Benefit Obligation $164 $165 $65 $66
==== ==== === ===

Net periodic post-retirement benefit expense for 1993, 1992 and 1991
is as follows:

Life
Medical Insurance
Plan Plan
1993 1992 1991 1993 1992 1991
---- ---- ---- ---- ---- ----
Service Cost $ 4 $ 4 $ 5 $1 $1 $1
Interest Cost 12 13 16 5 6 6
Amortization of Prior Service
Cost (Benefit) (4) (2) -- - - -
Unrecognized Net Gain (2) -- -- - - -
--- --- --- -- -- --
Net Periodic Post-Retirement
Benefit Expense $10 $15 $21 $6 $7 $7
=== === === == == ==

The weighted-average annual assumed rate of increase in the per capita
cost of covered benefits (i.e., health care cost trend rate) for the medical
plan is 11.5% for 1993-1994 and is assumed to decrease gradually to 5.5% in 2005
and remain at that level thereafter. The health care cost trend rate assumption
has a significant effect on the amounts reported. For example, increasing the

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PAGE 31
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 11. EMPLOYEE BENEFIT PLANS, Continued

Other Post-Retirement Benefit Plans, Continued

assumed health care cost trend rates by one percentage point in each year would
increase the accumulated post-retirement benefit obligation for the medical plan
as of December 31, 1993 by 9%, and the aggregate of the service and interest
cost components of net periodic post-retirement benefit expense for 1993 by $2
million.

The weighted-average discount rate used in determining the accumulated
post-retirement benefit obligation was 7.25% and 8.25% at December 31, 1993 and
1992, respectively.

Post-employment Benefits

Effective January 1, 1994, the company will adopt SFAS No. 112
"Employers' Accounting for Post-employment Benefits." This statement requires
that certain benefits provided to former or inactive employees, after employment
but before retirement, such as workers' compensation and disability benefits, be
accrued if attributable to employees' service already rendered. The financial
impact of adopting SFAS No. 112 is not expected to be significant.

Other Plans

Under collective bargaining agreements, the company participates in a
number of union-sponsored, multi-employer benefit plans. Payments to these
plans are made as part of aggregate assessments generally based on hours worked,
tonnage moved or a combination thereof. The administrators of the multi-
employer plans generally allocate funds received from participating companies to
various health and welfare benefit plans and pension plans. Current information
regarding such allocations has not been provided by the administrators. Total
contributions of $139 million, $125 million and $150 million were made to these
plans in 1993, 1992 and 1991, respectively.

Certain officers and key employees of CSXT participate in stock
purchase performance and award plans of CSX. CSXT is allocated its share of any
cost to participate in these plans.

NOTE 12. SUMMARY OF COMMITMENTS AND CONTINGENCIES.

Lease Commitments

CSXT leases equipment under agreements with terms up to 21 years.
Non-cancelable, long-term leases generally include provisions for maintenance,
options to purchase at fair value and to extend the terms. At December 31,
1993, minimum equipment rentals under non-cancelable operating leases totaled
approximately $180 million for 1994, $165 million for 1995, $161 million for
1996, $165 million for 1997, $167 million for 1998 and $1.6 billion thereafter.




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PAGE 32
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 12. SUMMARY OF COMMITMENTS AND CONTINGENCIES, Continued

Lease Commitments, Continued

Rent expense on equipment operating leases, including net daily rental
charges on railroad operating equipment of $214 million, $204 million and $182
million in 1993, 1992 and 1991, respectively, amounted to $387 million in 1993,
$383 million in 1992 and $376 million in 1991. Deferred gains arising from
sale-leaseback transactions are being amortized over periods not exceeding 21
years and have reduced rent expense by $6 million in 1993, $6 million in 1992
and $5 million in 1991.

Purchase Commitment

CSXT entered into an agreement to purchase 300 locomotives from GE
Transportation Systems, a unit of General Electric Co. This large single order
will cover CSXT's normal locomotive replacement needs over the next four years.
This purchase agreement will introduce alternating current traction technology
to CSXT's locomotive fleet. CSXT will take delivery of 50 direct current and 30
alternating current locomotives in 1994, and the remaining 220 alternating
current units will be delivered during 1995-1997.

Contingent Liabilities and Long-Term Operating Agreements

CSXT and its subsidiaries are contingently liable individually and
jointly with others principally as guarantors of long-term debt and obligations,
primarily related to leased properties, joint ventures and joint facilities.
These contingent obligations amounted to approximately $199 million at December
31, 1993.

CSXT has various long-term railroad operating agreements that allow
for exclusive operating rights over various railroad lines. Under these
agreements, CSXT is obligated to pay usage fees of approximately $10 million
annually. The terms of these agreements range from 30 to 40 years.

CSXT is a party to various proceedings brought both by private parties
and regulatory agencies related to environmental issues. CSXT has been
identified as a potentially responsible party in a number of governmental
investigations and actions relating to environmentally impaired sites that are
or may be subject to remedial action under the Federal Superfund Statute
("Superfund") or corresponding state statutes. The majority 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 typically 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.

The assessment of the required response and remedial costs associated
with these sites is extremely complex. Among the variables that management must
assess are imprecise and changing remedial cost estimates and continually
evolving governmental standards.


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PAGE 33
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 12. SUMMARY OF COMMITMENTS AND CONTINGENCIES, Continued

Contingent Liabilities and Long-Term Operating Agreements, Continued

CSXT frequently 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
potentially responsible parties at the location. Further, CSXT periodically
reviews its exposure in all non-Superfund environmental proceedings with which
it is involved.

Based upon such reviews and updates of the sites with which it is
involved, CSXT has recorded, and periodically reviews for adequacy, reserves to
cover estimated contingent future environmental costs with respect to such
sites. Liabilities are recorded for environmental matters in accordance with
CSXT's accounting policy described in Note 1. CSXT 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. Such additional liabilities could be significant to future
consolidated results of operations and cash flows. Based upon information
currently available, however, CSXT believes that its environmental reserves are
adequate to accomplish remedial actions to comply with present laws and
regulations.

Legal Proceedings

A number of legal actions, other than environmental, are pending
against CSXT in which claims are made in substantial amounts. While the
ultimate results of environmental investigations, lawsuits and claims involving
CSXT cannot be predicted with certainty, management does not currently expect
that these matters will have a material adverse effect on the consolidated
financial position, results of operations and cash flows of the company.

In December 1993, a Consent Decree was entered in the U. S. District
Court in Jacksonville, Florida to settle claims of Federal Clean Water Act
violations alleged against CSXT. The Consent Decree resolves a civil
enforcement action initiated in June, 1992, by the U.S. Environmental Protection
Agency with respect to alleged violations by CSXT of permit discharge
limitations at five rail yard waste water treatment facilities in Florida and
North Carolina. The settlement called for a civil penalty of $3 million, which
has been paid by CSXT, as well as the establishment of an escrow account in the
amount of $4 million to fund certain environmentally beneficial projects.








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PAGE 34
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 13. QUARTERLY DATA (Unaudited).
1993
-----------------------------------------
1st 2nd 3rd(a) 4th(b)
------ ------ ------ ------
Operating Revenue $1,094 $1,134 $1,081 $1,135
Operating Income 105 172 123 191
Net Earnings 56 131 19 102
1992
-----------------------------------------
1st 2nd(c) 3rd 4th
------ ------ ------ ------
Operating Revenue $1,123 $1,123 $1,104 $1,158
Operating Income (Loss) 125 (498) 149 246
Net Earnings (Loss) 65 (322) 80 160
1991
-----------------------------------------
1st(d) 2nd 3rd 4th(e)(f)
------ ------ ------ ------
Operating Revenue $1,059 $1,079 $1,130 $1,156
Operating Income (Loss) 111 137 150 (507)
Earnings (Loss) before Cumulative
Effect of Change in Accounting 57 74 78 (314)

(a) CSXT revised its estimated annual effective tax rate in the third
quarter of 1993 to reflect the change in the federal statutory rate
from 34 to 35 percent. The effect of this change was to increase
income tax expense for the third quarter of 1993 by $50 million. Of
this amount, $46 million, related to applying the newly enacted
statutory income tax rate to deferred tax balances as of January 1,
1993.

(b) The quarterly results were affected by certain adjustments, including
credits of $12 million for favorable experience on health and welfare
benefits. Other adjustments were not significant to the operating
results for the quarter.

(c) Includes impact of $664 million pretax productivity charge, $427
million after tax.

(d) The first quarter 1991 results exclude the cumulative effect of the
accounting change for years prior to 1991 that decreased net earnings
$159 million. The effect of adopting SFAS No. 106 on 1991 operating
income was not significant and was included in the results of the
fourth quarter. The first-, second- and third-quarter 1991 results
were not restated.

(e) Includes impact of $647 million pretax productivity charge, $409
million after tax.

(f) Includes pretax gain of $39 million, before associated minority
interest expense of $5 million, on the sale of the stock of RF&P
Corporation.
- 34 -



PAGE 35
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
MANAGEMENT'S NARRATIVE ANALYSIS AND RESULTS OF OPERATIONS
(Millions of Dollars)

The following information should be read in conjunction with all other
items in this report including "Business", "Properties" and "Financial
Statements and Supplementary Data."

Selected Financial & Statistical Information
--------------------------------------------
1993 1992(a) 1991(b)(c)1990 1989
------- ------ ----- ------ ------
Selected Earnings Data:
Operating Revenue $4,444 $4,508 $4,424 $4,551 $4,470
Operating Expense 3,853 3,822 3,886 3,929 3,876
Productivity/Restructuring
Charge --- 664 647 --- ---
------ ------ ------ ------ ------
Operating Income (Loss) 591 22 (109) 622 594
Other Income 11 1 20 --- 29
Interest Expense 60 73 87 111 146
Income Tax Expense (Benefit)
Productivity/Restructuring
Charge --- (237) (238) --- ---
Other 234 204 167 164 173
Cumulative Effect of Change
in Accounting --- --- (159) --- ---
------ ------ ------ ------ ------
Net Earnings (Loss) $ 308 $ (17) $ (264) $ 347 $ 304
====== ====== ====== ====== ======
Selected Cash Flow Data:
Cash Provided by Operating
Activities $ 630 $ 725 $ 525 $ 814 $ 881
Cash Used by Investing
Activities $ (478) $ (506) $ (395) $ (394) $ (296)
Cash Used by Financing
Activities $ (128) $ (258) $ (86) $ (364) $ (461)
Selected Financial Position Data:
Cash and Cash Equivalents $ 272 $ 248 $ 287 $ 243 $ 187
Working Capital (Deficit) $ (606) $ (931) $ (773) $ (707) $ (590)
Total Assets $9,653 $9,475 $9,629 $9,510 $9,357
Long-Term Debt $ 593 $ 646 $ 639 $ 742 $ 874
Due to Parent Company:
Long-Term Advances $ 69 $ 86 $ 178 $ 157 $ 198
Shareholder's Equity $4,185 $3,903 $3,992 $4,368 $4,103

(a) Includes impact of $664 million pretax productivity charge, $427
million after tax.

(b) Includes impact of $647 million pretax productivity charge, $409
million after tax.

(c) Net earnings for 1991 were decreased by $159 million by the cumulative
effect of the change in accounting related to the adoption of SFAS No.
106.

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PAGE 36
CSX TRANSPORTATION, INC. AND SUBSIDIARIES
MANAGEMENT'S NARRATIVE ANALYSIS AND RESULTS OF OPERATIONS

Results of Operations
---------------------

CSXT met the challenges of a prolonged U.S. coal strike and sharp
decline in its export coal markets in 1993 by continuing to lower the cost of
its operations while increasing its focus on merchandise markets. Despite a $202
million decline in coal revenue, this dual emphasis allowed CSXT to earn
operating income of $591 million, $95 million below 1992's comparable $686
million. Operating income rose 10% compared with 1991 earnings of $538 million
on a like basis. These comparisons exclude productivity charges of $664 million
and $647 million in 1992 and 1991, respectively, associated with labor
reductions. Including these charges, the rail unit recorded operating income of
$22 million in 1992 and an operating loss of $109 million in 1991.

Transportation operating revenue was $4.38 billion, a 1% decline from
$4.43 billion a year earlier, but a slight increase from 1991's revenue of $4.34
billion. The decrease in 1993 was caused by a 13% decline in coal revenue, the
largest source of CSXT revenue. Coal revenue also was 13% lower than 1991's
level. Total coal originated by CSXT was 144.1 million tons in 1993, 11% and 13%
below levels originated in 1992 and 1991, respectively.

CSXT COMMODITIES BY CARLOADS AND REVENUE

Market
Share (a) Carloads Revenue
(Percent) (Thousands) (Millions of Dollars)
--------- -------------------- ----------------------
1993 1993 1992 1991 1993 1992 1991
---- ----- ----- ----- ----- ------ ------
Automotive 27 326 288 265 $ 461 $ 413 $ 367
Chemicals 40 371 356 347 652 619 587
Minerals 36 374 345 327 332 310 290
Food and Consumer 34 166 161 164 196 196 201
Agricultural Products 30 284 264 262 327 297 295
Metals 22 258 225 199 243 219 200
Forest Products 30 435 441 439 442 448 425
Phosphates and Fertilizer 70 423 457 475 256 268 269
Coal 40 1,566 1,760 1,816 1,363 1,565 1,573
----- ----- ----- ----- ------ ------
Total Freight Revenue 4,203 4,297 4,294 4,272 4,335 4,207
===== ===== =====
Other Revenue 108 99 129
------ ------ ------
Total Transportation Operating Revenue $4,380 $4,434 $4,336
====== ====== ======

(a) Market share is defined as CSXT carloads vs. carloads handled by all
major Eastern railroads.

Weakened demand for U.S. coal from the European Community nations and
Japan, due to lower levels of economic growth, continued foreign government


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PAGE 37

subsidies and intensified foreign competition, caused CSXT's export coal
shipments to decline significantly from the prior two years. In addition, both
domestic and export shipments were negatively affected by selective coal strikes
against eastern coal operators, which diminished shipments during nine months of
1993. While CSXT anticipates only a slight recovery in the export coal market,
the company does expect notably higher carloadings of coal to utilities since
the strikes ended in December 1993.

CSXT merchandise volume and revenue jumped 4% and 5% from 1992's
levels and 6% and 10% from 1991's results, respectively, to 2.6 million carloads
and $2.9 billion in revenue. The gains reflected expansion in the domestic
economy and improved conditions in key industries served by CSXT.

With U.S. auto producers enjoying large gains in market share and
increased demand from consumers, CSXT's automotive traffic led the growth in
merchandise carloadings and revenue. CSXT also recorded large gains in metals,
due to surging scrap demand from U.S. mini-mill steel producers. Minerals
traffic advanced due to renewed activity in construction and highway projects.
CSXT's agriculture volumes and revenues moved well beyond prior-year levels,
benefiting from export of 1992's bumper grain crop through late summer 1993 and
continued expansion in the southeastern poultry and feed grain businesses
throughout the year. The strengthening economy and higher level of auto
production contributed to a sizeable increase in chemical traffic.

With foreign demand for U.S.-mined phosphates remaining depressed,
phosphate and fertilizer carloadings declined further. The forest products
market also was off slightly from 1992 and 1991 levels as a result of excess
paper production during 1992.

CSXT anticipates modest improvement in merchandise traffic volume and
revenue for 1994, reflecting continued expansion of the U.S. economy. Also,
while no marked improvement is forecast in export phosphate demand, increased
shipments of fertilizer products to the U.S. Midwest is expected as farmers
replenish fields following last year's flooding.

CSXT transportation operating expense was $3.8 billion, an increase of
1% from comparable 1992 expense and a decline of 1% from 1991 expense, excluding
the previously mentioned productivity charges.

Labor expense continued to decline, to $1.81 billion, from a level of
$1.83 billion and $1.85 billion in 1992 and 1991, respectively, despite the
negative impact of a greater number of crew starts associated with moving a
larger proportion of merchandise traffic. The 1993 expense includes a 3% wage
increase awarded to most contract employees mid-year and also reflects a
decrease in employment levels due to implementation of two-member crews and
continued personnel reductions. A 4% wage increase is scheduled for mid-1994.
CSXT expects to continue to decrease the size of its work force over the next
few years.

CSXT estimated the average size of its train crews for through, local
and yard trains to be 2.7 members at year-end. CSXT plans to lower its average
crew size for all trains to 2.3 over the next few years through implementation
of smaller yard and local crews as contemplated by the 1992 and 1991
productivity charges.

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PAGE 38

Materials, supplies and other expense, which includes the cost of
maintenance, information services, management fees from CSX and personal
injuries, increased 4% over 1992 and decreased 1% from 1991 levels. The 1993
increase over 1992 was primarily the result of increased management fees from
CSX, partially offset by CSXT's intensive Performance Improvement Team (PIT)
program and the company's ongoing commitment to safety.

CSXT's PIT process has been responsible for marked reductions in the
expense base of CSXT operations over the past two years and is expected to
contribute additional savings in 1994 and 1995. While shrinking expenses, this
program also has led to significant improvements in reliability, performance and
efficiency. Major strides have been made in locomotive and freight car
maintenance and repair, information technology, contract labor scheduling and
purchasing among other areas of rail activity. Specifically, through PIT
initiatives, CSXT reduced expenses by $147 million and $116 million in 1993 and
1992, respectively. Further savings of over $100 million each year are targeted
for 1994 and 1995.

Fuel expense fell to $253 million from $262 million and $271 million
in 1992 and 1991, respectively. Fuel consumption decreased from levels in
earlier years, reflecting the level of operation and increased fuel efficiency.
In 1993, CSXT locomotives consumed 1.33 gallons of diesel fuel per thousand
gross ton miles, compared with 1.37 gallons in the prior year and 1.4 gallons in
1991. CSXT diesel fuel averaged 64 cents per gallon vs. 65 cents in 1992 and 68
cents in 1991, net of the CSX hedging program.

Building and equipment rent expense increased slightly from earlier
years. Depreciation expense increased slightly from earlier years as new
equipment was purchased and deployed in the business.

With continued effort throughout CSXT to lower its expense base, the
company anticipates only a slight increase in total operating expense for 1994,
assuming modest improvements in traffic levels and no unusual operating
conditions.

Property additions for 1993 totaled $569 million, compared with $539
million and $563 million for the years 1992 and 1991, respectively. Included in
the 1993 total was $323 million for roadway improvements, including 400 miles of
rail that were installed or replaced.

CSXT added a total of 75 new, fuel-efficient locomotives to its fleet
during the year at a cost of $101 million, bringing the total fleet to 2,810
locomotives compared with 2,965 and 3,123 for year-end 1992 and 1991,
respectively. At year-end 1993, the average age of the locomotive fleet was 14.3
years, reflecting the retirement of 230 older units from service.

CSXT's car fleet benefited from $73 million in new capital. Additional
capital was spent on terminals, technology and other equipment.

For 1994, CSXT projects an increase of approximately 10% in its
capital additions program. As in past years, the largest share of the total will
be directed to track and roadway improvements.



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PAGE 39

Property Additions
---------------------
(Millions of Dollars)

Property Additions 1993 1992 1991
- ------------------ ---- ---- ----
Merchandise Cars $ 68 $ 45 $ 43
Coal Cars 5 4 10
---- ---- ----
Total Freight Cars 73 49 53
---- ---- ----
Locomotives 120 134 168
Roadway 323 306 327
Other Equipment and Properties 53 50 15
---- ---- ----
Total Property Additions $569 $539 $563
==== ==== ====

CSXT has embarked on a four-year program to acquire 300 locomotives,
with 80 of these to be delivered in 1994. Included will be 50 Dash-9-44CW direct
current (DC) powered and 250 alternating current (AC) locomotives, 197 of these
at 4,400 horsepower and 53 at 6,000 horsepower. The first of the AC units will
be delivered in mid-1994. This new technological breakthrough for the railroad
industry will allow CSXT to replace an average of two units in its existing
fleet with each new unit.

Remaining capital in the 1994 budget has been earmarked for car
acquisitions, technology and a rail-barge venture to transfer freight between
CSXT's rail territory in the southeastern United States and ports along Mexico's
eastern coast.

























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PAGE 40

Financial Condition
Liquidity and Capital Resources
-------------------------------

Cash provided by operating activities totaled $630 million, a decrease
of $95 million from 1992 and an increase of $105 million from 1991. Cash
provided by operating activities included an increase of $6 million for 1993, an
increase of $200 million for 1992 and a decrease of $75 million for 1991,
relating to the amount of accounts receivable sold. In addition, cash provided
by operating activities included payments for productivity and restructuring
charges of $245 million, $353 million and $72 million for 1993, 1992 and 1991,
respectively. Excluding the effect of the sale of receivables and the
productivity charge payments, cash provided by operating activities would have
been $869 million in 1993, $878 million in 1992 and $672 million in 1991.

Cash used by investing activities was $478 million which was $28
million lower than the $506 million used in 1992 and $83 million higher than the
$395 million used in 1991. Proceeds from the sale of RF&P Corporation stock of
$106 million in 1991 resulted in lower overall uses of cash in 1991 as compared
to 1993 and 1992.

Property additions of $569 million in 1993 increased $30 million from
$539 million in 1992, and $6 million from $563 million in 1991. In the late
1980's, the company launched a major roadway, equipment and locomotive
improvement program. Completion of this program has allowed a return to a
normalized capital budget that assures the required level of routine
maintenance, customer service and safe operation.

Sale-leaseback transactions provided net cash of $37 million in 1991.
These transactions were focused primarily on improving the rail car fleet.
There were no sale-leaseback transactions in 1993 and 1992.

Cash used by financing activities decreased to $128 million in 1993
from $258 million in 1992 and increased from $86 million in 1991. The 1993
decrease in cash used was primarily the result of lower repayments of public and
affiliated company debt.

Cash and cash equivalents increased $24 million during 1993 to a level
of $272 million versus $248 million at the end of 1992 and decreased $15 million
over the 1991 level of $287 million.

Working capital increased by $325 million to a year-end deficit of
$606 million in 1993, compared to $931 million in 1992 and $773 million in 1991.
A working capital deficit is not unusual for CSXT and does not indicate a lack
of liquidity. CSXT maintains adequate current assets to satisfy current
liabilities when they are due and has sufficient financial resource capacity,
primarily from access to advances from CSX, to manage its day-to-day cash
requirements.

Environmental concerns have drawn considerable attention. CSXT, like
many American companies today, faces the challenge of dealing with this issue
and is addressing its environmental responsibilities and managing the related
expenditures. Environmental management is an important part of CSXT's strategic
planning, which includes promotion of policies and procedures that emphasize
environmental awareness throughout the company.
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PAGE 41

The following financial ratios, exclusive of the cumulative effect of
the change in accounting in 1991, are measures of the condition of CSXT and its
subsidiaries as of year end:

1993 1992 1991
---- ---- ----
Current Ratio .5 .4 .5
Debt-to-Total Capitalization Ratio 13.7% 15.8% 16.4%
Return on Assets 3.2% (0.2)% (1.1)%
Return on Equity 7.4% (0.4)% (2.5)%
Ratio of Earnings to Fixed Charges 4.8X 0.6X N/A

Excluding the impacts of the 1992 and 1991 productivity charges, the
measures would have been as follows:

1993 1992 1991
---- ---- ----
Current Ratio .5 .4 .5
Debt-to-Total Capitalization Ratio 13.7% 14.5% 15.2%
Return on Assets 3.2% 4.3% 3.2%
Return on Equity 7.4% 9.5% 6.7%
Ratio of Earnings to Fixed Charges 4.8X 4.6X 3.6X

































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