NORFOLK SOUTHERN CORP - 10-Q Quarterly Report

STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(X)	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934
	For the quarterly period ended SEPTEMBER 30, 2002

( )	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934
	For the transition period from to
	---------- ----------
	Commission file number 1-8339

NORFOLK SOUTHERN CORPORATION

(Exact name of registrant as specified in its charter)

Virginia	52-1188014
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)


Three Commercial Place
Norfolk, Virginia	23510-2191
(Address of principal executive offices)	Zip Code

Registrant's telephone number, including area code	(757) 629-2680

No Change
(Former name, former address and former fiscal year,
if changed since last report.)

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


The number of shares outstanding of each of the registrant's classes of Common Stock, as of the last
practicable date:

Class			Outstanding as of September 30, 2002
Common Stock (par value $1.00)			388,646,516 (excluding 21,169,125 shares
			held by registrant's consolidated subsidiaries)

1
TABLE OF CONTENTS

			Page

Part I.	Financial information:

	Item 1.	Financial statements:

		Consolidated Statements of Income	3
		Three and Nine Months Ended Sept. 30, 2002 and 2001

		Consolidated Balance Sheets	4
		Sept. 30, 2002 and Dec. 31, 2001

		Consolidated Statements of Cash Flows	5
		Nine Months Ended Sept. 30, 2002 and 2001

		Notes to Consolidated Financial Statements	6

	Item 2.	Management's Discussion and Analysis of	13
		Financial Condition and Results of Operations

	Item 3.	Quantitative and Qualitative Disclosures	20
		About Market Risks

	Item 4.	Controls and Procedures	20

Part II.	Other Information:

	Item 6.	Exhibits and Reports on Form 8-K	22

Signatures			23

Certifications of CEO and CFO			24

Exhibit Index			26

2
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income

($ in millions except per share amounts)

(Unaudited)

	Three Months Ended				Nine Months Ended
	Sept. 30,				Sept. 30,
	2002		2001		2002		2001

*Railway operating revenues*
Coal	$	371	$	366	$	1,080	$	1,154
General merchandise		917		862		2,734		2,655
Intermodal		310		280		875		831
Total railway operating revenues		1,598		1,508		4,689		4,640

*Railway operating expenses*
Compensation and benefits		489		478		1,509		1,499
Materials, services and rents		386		363		1,089		1,112
Conrail rents and services (Note 4)		100		113		316		324
Depreciation		129		129		385		384
Diesel fuel		81		93		246		316
Casualties and other claims		57		32		129		109
Other		45		55		145		164
Total railway operating expenses		1,287		1,263		3,819		3,908

Income from railway operations		311		245		870		732

Other income - net		4		16		40		67
Interest expense on debt		(126)		(137)		(390)		(417)

Income from continuing operations
before income taxes		189		124		520		382

Provision for income taxes		63		45		189		135

Income from continuing operations		126		79		331		247

Discontinued operations - gain on sale of
motor carrier, net of taxes (Note 3)		--		--		--		13
Net income	$	126	$	79	$	331	$	260

*Per share amounts (Note 8)*
Income from continuing operations,
basic and diluted	$	0.32	$	0.20	$	0.85	$	0.64
Net income, basic and diluted	$	0.32	$	0.20	$	0.85	$	0.67
Dividends	$	0.07	$	0.06	$	0.19	$	0.18


See accompanying notes to Consolidated Financial Statements.

Item 1. Financial Statements. (continued)

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

($ in millions)

(Unaudited)

	Sept. 30,		Dec. 31,
	2002		2001
*Assets*
Current assets:
Cash and cash equivalents	$	132	$	204
Accounts receivable, net (Note 6)		685		475
Due from Conrail (Note 4)		4		8
Materials and supplies		91		90
Deferred income taxes		167		162
Other current assets		65		108
Total current assets		1,144		1,047

Investment in Conrail (Note 4)		6,190		6,161
Properties less accumulated depreciation		11,332		11,208
Other assets		1,128		1,002
Total assets	$	19,794	$	19,418

*Liabilities and Stockholders' Equity*
Current liabilities:
Accounts payable	$	886	$	848
Income and other taxes		250		312
Due to Conrail (Note 4)		84		373
Other current liabilities		259		248
Current maturities of long-term debt		356		605
Total current liabilities		1,835		2,386

Long-term debt (Note 5)		7,027		7,027
Other liabilities		1,057		1,089
Due to Conrail (Note 4)		463		--
Minority interests		45		45
Deferred income taxes		2,942		2,781
Total liabilities		13,369		13,328

*Stockholders' equity*
Common stock $1.00 per share par value, 1,350,000,000
shares authorized; issued 409,815,641 and
407,000,871 shares, respectively		410		407
Additional paid-in capital		475		423
Accumulated other comprehensive loss (Note 9)		(33)		(55)
Retained income		5,593		5,335
Less treasury stock at cost, 21,169,125 shares		(20)		(20)
Total stockholders' equity		6,425		6,090

Total liabilities and stockholders' equity	$	19,794	$	19,418

See accompanying notes to Consolidated Financial Statements.

Item 1. Financial Statements. (continued)

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

($ in millions)

(Unaudited)

	Nine Months Ended
	Sept. 30,
	2002		2001
*Cash flows from operating activities*
Net income	$	331	$	260
Reconciliation of net income to net cash
provided by operating activities:
Depreciation		395		395
Deferred income taxes		139		49
Equity in earnings of Conrail		(32)		(31)
Gains and losses on properties and investments		(35)		(27)
Income from discontinued operations		--		(13)
Changes in assets and liabilities affecting operations:
Accounts receivable (Note 6)		(209)		(55)
Materials and supplies		(1)		2
Other current assets and due from Conrail		75		117
Current liabilities other than debt		21		--
Other - net		(62)		(120)
Net cash provided by operating activities		622		577

*Cash flows from investing activities*
Property additions		(517)		(594)
Property sales and other transactions		15		38
Investments, including short-term		(58)		(81)
Investment sales and other transactions		15		35
Net cash used for investing activities		(545)		(602)

*Cash flows from financing activities*
Dividends		(74)		(69)
Common stock issued - net		39		14
Proceeds from borrowings		609		1,940
Debt repayments		(723)		(1,726)
Net cash provided by (used for) financing activities		(149)		159

Net increase (decrease) in cash and cash equivalents		(72)		134

*Cash and cash equivalents*
At beginning of year		204		--

At end of period	$	132	$	134

*Supplemental disclosures of cash flow information*
Cash paid during the period for:
Interest (net of amounts capitalized)	$	348	$	360
Income taxes	$	49	$	71

See accompanying notes to Consolidated Financial Statements.

Item 1. Financial Statements. (continued)

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. Interim Presentation

In the opinion of Management, the accompanying unaudited interim financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the Corporation's financial position as of Sept. 30, 2002, its results of operations for the three and nine months ended Sept. 30, 2002 and 2001, and its cash flows for the nine months ended Sept. 30, 2002 and 2001.

Although Management believes that the disclosures presented are adequate to make the information not misleading, these Consolidated Financial Statements should be read in conjunction with: (a) the financial statements and notes included in the Corporation's latest Annual Report on Form 10‑K and in any subsequent Quarterly Reports on Form 10-Q and (b) any Current Reports on Form 8‑K.

2. Commitments and Contingencies

Lawsuits

Norfolk Southern and certain subsidiaries are defendants in numerous lawsuits and other claims relating principally to railroad operations. When management concludes that it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, it is accrued through a charge to expenses. While the ultimate amount of liability incurred in any of these lawsuits and claims is dependent on future developments, in management's opinion the recorded liability is adequate to cover the future payment of such liability and claims. However, the final outcome of any of these lawsuits and claims cannot be predicted with certainty, and unfavorable or unexpected outcomes could result in additional accruals that could be significant to results of operations in a particular year or quarter. Any adjustments to recorded liability will be reflected in expenses in the periods in which such adjustments are known.

Presently, there are two matters, one involving labor arbitration and other claims for "New York Dock" and other income protection benefits and the other involving contractual obligations of a fiber optic codeveloper, Williams Communications, LLC, where the aggregated range of loss could be from zero to $75 million. Management believes that NS will prevail in both these matters; however, the ability to collect the $36 million receivable due from Williams Communications, LLC may be limited because of its financial condition. The shortfall, if any, cannot now be determined. Its parent, Williams Communications Group, Inc., filed in April 2002 a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code, and emerged from bankruptcy in October 2002. Williams Communications, LLC was not included in the bankruptcy petition. Unfavorable outcomes in either of these matters could result in accruals that could be significant to results of operations in a particular year or quarter.

Casualty Claims

NS is generally self-insured for casualty claims. Claims in excess of self-insurance levels are insured up to excess coverage limits. The casualty claims liability is determined actuarially, based upon claims filed and an estimate of claims incurred but not yet reported. While the ultimate amount of claims incurred is dependent on future developments, in management's opinion, the recorded liability is adequate to cover the future payments of claims. However, it is possible that the recorded liability may not be adequate to cover the future payment of claims. Adjustments to the recorded liability will be reflected in operating expenses in the periods in which such adjustments are known.

Environmental Matters

NS is subject to various jurisdictions' environmental laws and regulations. It is NS' policy to record a liability where such liability or loss is probable and its amount can be estimated reasonably. Claims, if any, against third parties for recovery of cleanup costs incurred by NS are reflected as receivables (when collection is probable) in the balance

Item 1. Financial Statements. (continued)

sheet and are not netted against the associated NS liability. Environmental engineers regularly participate in ongoing evaluations of all known sites and in determining any necessary adjustments to liability estimates. NS also has established an Environmental Policy Council, composed of senior managers, to oversee and interpret its environmental policy.

NS' balance sheets included liabilities for environmental exposures in the amount of $30 million at Sept. 30, 2002, and $33 million at Dec. 31, 2001 (of which $8 million was accounted for as a current liability for each period). At Sept. 30, 2002, the liability represented NS' estimate of the probable cleanup and remediation costs based on available information at 124 known locations. On that date, 9 sites accounted for $15 million of the liability, and no individual site was considered to be material. NS anticipates that much of this liability will be paid out over five years; however, some costs will be paid out over a longer period.

At some of the 124 locations, certain NS subsidiaries, usually in conjunction with a number of other parties, have been identified as potentially responsible parties by the Environmental Protection Agency (EPA) or similar state authorities under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or comparable state statutes, which often impose joint and several liability for cleanup costs.

With respect to known environmental sites (whether identified by NS or by the EPA or comparable state authorities), estimates of NS' ultimate potential financial exposure for a given site or in the aggregate for all such sites are necessarily imprecise because of the widely varying costs of currently available cleanup techniques, the likely development of new cleanup technologies, the difficulty of determining in advance the nature and full extent of contamination and each potential participant's share of any estimated loss (and that participant's ability to bear it), and evolving statutory and regulatory standards governing liability.

The risk of incurring environmental liability - for acts and omissions, past, present and future - is inherent in the railroad business. Some of the commodities in NS' traffic mix, particularly those classified as hazardous materials, can pose special risks that NS and its subsidiaries work diligently to minimize. In addition, several NS subsidiaries own, or have owned, land used as operating property, or which is leased or may have been leased and operated by others, or held for sale. Because environmental problems may exist on these properties that are latent or undisclosed, there can be no assurance that NS will not incur environmentally related liabilities or costs with respect to one or more of them, the amount and materiality of which cannot be estimated reliably at this time. Moreover, lawsuits and claims involving these and potentially other now-unidentified environmental sites and matters are likely to arise from time to time. The resulting liabilities could have a significant effect on financial condition, results of operations or liquidity in a particular year or quarter.

However, based on its assessment of the facts and circumstances now known, management believes that it has recorded the probable costs for dealing with those environmental matters of which the Corporation is aware. Further, management believes that it is unlikely that any known matters, either individually or in the aggregate, will have a material adverse effect on NS' financial position, results of operations or liquidity.

Purchase Commitments

At Sept. 30, 2002, NS had outstanding purchase commitments of approximately $140 million in connection with its 2003 capital program.

3. Discontinued Operations

On March 28, 1998, NS sold all the common stock of North American Van Lines, Inc., its motor carrier subsidiary. Results for the nine months ended Sept. 30, 2001 include an additional after-tax gain of $13 million, or 3 cents per share, that resulted from the expiration of certain indemnities contained in the sales agreement.

Item 1. Financial Statements. (continued)

4. Investment in Conrail and Operations Over Its Lines

Overview

Through a limited liability company, Norfolk Southern and CSX Corporation (CSX) jointly own Conrail Inc. (Conrail), whose primary subsidiary is Consolidated Rail Corporation (CRC), the major freight railroad in the Northeast. NS has a 58% economic and 50% voting interest in the jointly owned entity, and CSX has the remainder of the economic and voting interests. From time to time, Norfolk Southern and CSX, as the indirect owners of Conrail, may need to make capital contributions, loans or advances to Conrail.

Operations of Conrail's Lines

Norfolk Southern's railroad subsidiary, Norfolk Southern Railway Company (NSR) operates as a part of its rail system the routes and assets of Pennsylvania Lines LLC (PRR), a wholly owned subsidiary of CRC, pursuant to operating and lease agreements. Costs necessary to operate and maintain the PRR assets, including leasehold improvements, are borne by NSR. CSX Transportation, Inc. (CSXT) operates the routes and assets of another CRC subsidiary under comparable terms. Certain other Conrail routes and assets (the "Shared Assets Areas") continue to be operated by CRC for the joint and exclusive benefit of NSR and CSXT. In addition to a fee paid for access, NSR and CSXT pay, based on usage, the costs incurred by CRC to operate the Shared Assets Areas.

Investment in Conrail

NS is applying the equity method of accounting to its investment in Conrail in accordance with APB Opinion No. 18, "The Equity Method of Accounting for Investments in Common Stock." NS is amortizing the excess of the purchase price over Conrail's net equity using the principles of purchase accounting, based primarily on the estimated remaining useful lives of Conrail's depreciable property and equipment, including the related deferred tax effect of the differences in tax and accounting bases for certain assets. At Sept. 30, 2002, the difference between NS' investment in Conrail and its share of Conrail's underlying net equity was $3.7 billion.

NS' Consolidated Balance Sheet at Sept. 30, 2002 includes $67 million of liabilities related to the Conrail transaction, principally for contractual obligations to Conrail employees imposed by the Surface Transportation Board when it approved the transaction. Through Sept. 30, 2002, NS has paid $136 million of these costs.

Related-Party Transactions

NS provides certain general and administrative support functions to Conrail, the fees for which are billed in accordance with several service-provider arrangements and amount to approximately $6 million annually.

"Conrail rents and services" includes: (1) expenses for amounts due to PRR and CRC for use by NSR of operating properties and equipment and operation of the Shared Assets Areas and (2) NS' equity in the earnings of Conrail, net of amortization. A significant portion of payments made to PRR is borrowed back from a PRR subsidiary. Previously, these loans were made under a demand note; however, in the first quarter of 2002, the PRR subsidiary exchanged this demand note for a new note due in 2032. As a result, borrowings owed to the PRR subsidiary now comprise the noncurrent balance "Due to Conrail." The interest rate for these loans is variable and was 2.11% at Sept. 30, 2002. The current balance "Due to Conrail" at Sept. 30, 2002, is composed of amounts related to expenses included in "Conrail rents and services," as discussed above. At Dec. 31, 2001, the current balance "Due to Conrail" included $72 million of such amounts and $301 million of advances owed under the previous demand note.

Item 1. Financial Statements. (continued)

Summary Financial Information - Conrail

The following historical cost basis financial information should be read in conjunction with Conrail's audited financial statements, included as Exhibit 99 with NS' 2001 Annual Report on Form 10‑K.

Summarized Consolidated Statements of Income - Conrail

	Three Months Ended				Nine Months Ended
	Sept. 30,				Sept. 30,
	2002		2001		2002		2001
	($ in millions)
	(unaudited)

Operating revenues	$	221	$	223	$	668	$	685
Operating expenses		151		165		473		487
Operating income		70		58		195		198
Other income (expense) - net		(2)		(2)		(4)		(13)
Income before income taxes		68		56		191		185
Provision for income taxes		24		21		69		58
Net income	$	44	$	35	$	122	$	127

Summarized Consolidated Balance Sheets - Conrail

	Sept. 30,		Dec. 31,
	2002		2001
	($ in millions)
	(unaudited)
Assets:
Current assets	$	323	$	846
Noncurrent assets		7,828		7,236

Total assets	$	8,151	$	8,082

Liabilities and stockholders' equity:
Current liabilities	$	448	$	408
Noncurrent liabilities		3,476		3,569
Stockholders' equity		4,227		4,105

Total liabilities and stockholders' equity	$	8,151	$	8,082

5. Long-Term Debt

In April 2002, NS received net proceeds of $298 million from issuing $200 million of 6% Senior Notes due April 30, 2008, and $100 million of Floating Rate Senior Notes due February 28, 2005. The notes were issued under NS' $1 billion shelf registration; NS has issued a total of $550 million of debt under this shelf.

Item 1. Financial Statements. (continued)

6. Accounts Receivable

A bankruptcy-remote special purpose subsidiary of NS sells without recourse undivided ownership interests in a pool of accounts receivable. The buyers have a priority collection interest in the entire pool of receivables, and as a result, NS has retained credit risk to the extent the pool of receivables exceeds the amount sold. NS services and collects the receivables on behalf of the buyers; however, no servicing asset or liability has been recognized because the benefits of servicing are estimated to be just adequate to compensate NS for its responsibilities. Payments collected from sold receivables can be reinvested in new accounts receivable on behalf of the buyers. Should NS' credit rating drop below investment grade, the buyers have the right to discontinue this reinvestment.

Accounts receivable sold under this arrangement, and therefore not included in "Accounts receivable, net" on the Consolidated Balance Sheets, were $100 million at Sept. 30, 2002, and $300 million at Dec. 31, 2001. The fees associated with the sale, which are based on the buyers' financing costs, are included in "Other income - net." NS' retained interest, which is included in "Accounts receivable, net" is recorded at fair value using estimates of dilution based on NS' historical experience. These estimates are adjusted regularly based on NS' actual experience with the pool, including defaults and credit deterioration. NS has experienced very low levels of default, and as a result, little dilution. If historical dilution percentages were to increase one percentage point, the value of NS' retained interest would be reduced by approximately $6 million.

NS' allowance for doubtful accounts was $4 million at Sept. 30, 2002, and $5 million Dec. 31, 2001.

7. Derivative Financial Instruments

NS uses derivative financial instruments to reduce the risk of volatility in its diesel fuel costs and to manage its overall exposure to fluctuations in interest rates. NS does not engage in the trading of derivatives. NS' management has determined that its derivative financial instruments qualify as either fair-value or cash-flow hedges, having values which highly correlate with the underlying hedged exposures, and has designated such instruments as hedging transactions. Credit risk related to the derivative financial instruments is considered to be minimal and is managed by requiring high credit standards for counterparties and periodic settlements.

Diesel Fuel Hedging

In second quarter 2001, NS began a program to hedge a portion of its diesel fuel consumption. The intent of the program is to assist in the management of NS' aggregate risk exposure to fuel price fluctuations, which can significantly affect NS' operating margins and profitability, through the use of one or more types of derivative instruments. Diesel fuel costs represented approximately 6% of NS' operating expenses for the third quarter and first nine months of 2002, and approximately 7% and 8% of NS' operating expenses for the third quarter and first nine months of 2001, respectively. The program provides that NS will not enter into any fuel hedges with a duration of more than thirty-six months, and that no more than 80% of NS' average monthly fuel consumption will be hedged for each month within any thirty-six month period.

NS' management has designated these derivative instruments as cash-flow hedges of the exposure to variability in expected future cash flows attributable to fluctuations in diesel fuel prices. During third quarter 2002 NS entered into 72 fuel swaps for approximately 97 million gallons at an average price of approximately $0.69 per gallon of Nymex No. 2 heating oil. As of Sept. 30, 2002, outstanding swaps covered approximately 62%, 51%, and 12% of estimated fuel purchases for the remainder of 2002 and for the years 2003 and 2004, respectively.

NS' fuel hedging activity resulted in a net decrease in diesel fuel expense of $5 million for third quarter 2002 and a net increase in diesel fuel expense of $2 million for third quarter 2001. For the first nine months, NS' fuel hedging activity resulted in a net decrease in diesel fuel expense of $2 million for 2002 and a net increase of $2 million for 2001. Ineffectiveness, or the extent to which changes in the fair values of derivative instruments do not offset changes in the fair values of the hedged items, was less than $1 million for the third quarter and first nine months of 2002 and 2001.

Item 1. Financial Statements. (continued)

Interest Rate Hedging

NS manages its overall exposure to fluctuations in interest rates by issuing both fixed and floating-rate debt instruments, and by entering into interest rate hedging transactions. NS had $227 million, or 3.3%, and $251 million, or 3.5%, of its fixed rate debt portfolio hedged at Sept. 30, 2002, and Dec. 31, 2001, respectively, using interest rate swaps that qualify for and are designated as fair-value hedge transactions. These swaps have been effective in hedging the changes in fair value of the related debt arising from changes in interest rates, and accordingly, there has been no impact on earnings resulting from ineffectiveness associated with these derivative transactions.

Fair Values

The fair values of NS' diesel fuel derivative instruments at Sept. 30, 2002 and Dec. 31, 2001, were determined based upon current fair market values as quoted by third party dealers. Fair values of interest rate swaps were determined based upon the present value of expected future cash flows discounted at the appropriate implied spot rate from the spot rate yield curve. Fair value adjustments are non-cash transactions, and accordingly, are excluded from the

Consolidated Statement of Cash Flows. "Accumulated other comprehensive loss," a component of "Stockholders' equity," includes $24 million (pretax) of unrealized gains at Sept. 30, 2002, and $15 million (pretax) of unrealized losses at Dec. 31, 2001, related to the fair value of derivative fuel hedging transactions that will terminate within twelve months of the respective dates.

The asset and liability positions of NS' outstanding derivative financial instruments at Sept. 30, 2002 and Dec. 31, 2001 were as follows:

	Sept. 30,		Dec. 31,
	2002		2001
	($ in millions)
*Interest rate hedges*
Gross fair market asset position	$	24	$	12
Gross fair market (liability) position		--		--
*Fuel hedges*
Gross fair market asset position		28		--
Gross fair market (liability) position		(1)		(19)
Total net asset (liability) position	$	51	$	(7)

8. Earnings Per Share

The following table sets forth the reconciliation of the number of weighted-average shares outstanding used in the calculations of basic and diluted earnings per share:

	Three Months Ended				Nine Months Ended
	Sept. 30,				Sept. 30,
	2002		2001		2002		2001
	(in millions)

Weighted-average shares outstanding		388.6		385.4		388.0		385.0
Dilutive effect of outstanding options
and performance share units (as
determined by the application of
the treasury stock method)		2.1		1.7		2.4		1.3

Diluted weighted-average shares outstanding		390.7		387.1		390.4		386.3

Item 1. Financial Statements. (continued)

The calculations exclude options on shares whose exercise price exceeded the average market price of Common Stock for the period as follows: in 2002, 25 million in the third quarter and 24 million in the second and first quarters; and in 2001, 19 million in each of the third and second quarters, and 28 million in the first quarter. There are no adjustments to "Net income" for the diluted earnings per share computations.

9. Comprehensive Income

NS' total comprehensive income was as follows:

	Three Months Ended				Nine Months Ended
	Sept. 30,				Sept. 30,
	2002		2001		2002		2001
	($ in millions)

Net income	$	126	$	79	$	331	$	260
Other comprehensive
income (loss)		8		(4)		22		(8)

Total comprehensive
Income	$	134	$

Virginia

Norfolk, Virginia

No Change

Class

Outstanding as of September 30, 2002