UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

For the fiscal year ended December 31, 2004

OR

Commission File Number 1-3359

CSX TRANSPORTATION, INC.

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

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

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

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 þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 126-2).Yes o No þ

State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value of the voting stock at June 25, 2004 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, 2005.

1

CSX TRANSPORTATION, INC.

10-K

Table of Contents

2

CSX TRANSPORTATION, INC.

ITEMS 1. & 2. Business and Properties

General

     CSX Transportation, Inc. (“CSXT” or the “Company”) operates one of the largest rail networks in the United States, and provides rail freight transportation over a network of more than 22,000 route miles in 23 states, the District of Columbia, and two Canadian provinces. Headquartered in Jacksonville, Florida, CSXT conducts railroad operations in its own name and through railroad subsidiaries.

     CSXT employed an average of 32,074 employees during 2004. The Company considers employee relations to be good. Most of CSXT’s employees are represented by labor unions and are covered by collective bargaining agreements. Some of these agreements are scheduled to expire in 2005. CSXT is in the process of renegotiating most of these agreements, but the outcome of these negotiations is uncertain at this time. These negotiations have generally taken place over a number of years and have previously not resulted in any extended work stoppages. The existing agreements have remained in effect and will continue to remain in effect until new agreements are reached or the Railway Labor Act’s procedures (which include mediation, cooling-off periods, and the possibility of Presidential intervention) are exhausted.

     CSXT is a wholly-owned subsidiary of CSX Corporation (“CSX”), with headquarters at 500 Water Street, 15th Floor, Jacksonville, Florida 32202. The Company makes available free of charge through its website at www.csx.com, its annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and all amendments thereto, as soon as reasonably practicable after such reports are filed with or furnished to the Securities and Exchange Commission.

Rail Lines

     On December 31, 2004, CSXT’s consolidated railroad system consisted of 38,732 miles of track consisting of the following. Included in the below are the following arrangements for use of track not owned by CSXT.

3

CSX TRANSPORTATION, INC.
PART I

ITEMS 1. & 2. Business and Properties, Continued

Equipment

     On December 31, 2004, CSXT and subsidiaries owned or leased the following:

ITEM 3. Legal Proceedings

     CSXT is involved in routine litigation incidental to its business and is a party to a number of legal actions and claims, various governmental proceedings and private civil lawsuits, including those related to environmental matters, Federal Employers’ Liability Act claims by employees, other personal injury claims, and disputes and complaints involving certain transportation rates and charges. Some of the legal proceedings include claims for compensatory as well as punitive damages, and others purport to be class actions. While the final outcome of these matters cannot be predicted with certainty, considering among other things the meritorious legal defenses available and liabilities that have been recorded along with applicable insurance, it is the opinion of CSXT management that none of these items will have a material adverse effect on the income statement, balance sheet or liquidity of CSXT. However, an unexpected adverse resolution of one or more of these items could have a material adverse effect on the results of operations in a particular quarter or fiscal year. The Company is also a party to a number of actions, the resolution of which could result in gain realization in amounts that could be material to results of operations in the quarters received.

     In further response to this Item, see the information set forth in Footnote 15, Commitments and Contingencies.

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

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

4

CSX TRANSPORTATION, INC.

ITEM 5. Market for Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities

     CSXT is a wholly-owned subsidiary of CSX, and accordingly, there is no market for its common stock. During the years 2004, 2003 and 2002, CSXT paid dividends to CSX on its common stock of $190 million, $230 million and $200 million, respectively.

ITEM 6. Selected Financial Data

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

5

CSX TRANSPORTATION, INC.
PART II

ITEM 7. Management’s Discussion and Analysis

     Information omitted in accordance with General Instruction I(2)(a). However, in compliance with said Instruction, see “Management’s Narrative Analysis of the Results of Operations” on the following pages.

Management’s Narrative Analysis of the Results of Operations

Financial Results of Operations

     CSXT follows a 52/53-week fiscal reporting calendar. Fiscal year 2004 consisted of 53 weeks ending on December 31, 2004. Fiscal year 2003 consisted of 52 weeks ending on December 26, 2003.

2004 vs. 2003

Operating Revenue

     CSXT categorizes revenues in three main areas: merchandise, automotive and coal, coke and iron ore. Overall revenues were up $512 million to $6.7 billion in 2004 from $6.2 billion in 2003.

Merchandise Revenue

     Merchandise showed strength during 2004 with revenue up 8% on 3% volume growth. All markets showed year-over-year revenue improvement due to pricing, yield management strategies and the Company’s fuel surcharge program. All markets, except agricultural products, experienced increased volumes. Metals realized the most improvement, with 17% revenue growth on 9% volume growth. Strong demand existed across all steel commodity lines as steel production and mill utilization rates were at high levels. Forest products revenue grew 9% on 1% volume growth as a result of strength in panel and lumber markets driven by strong residential construction. Food and consumer revenues grew 7% on 1% volume growth. Food and consumer and forest products volumes were favorable year-over-year primarily due to the 53 week fiscal reporting calendar in 2004. Chemicals revenue grew 8% on 4% volume growth driven by strong customer demand and a rebound in U.S. chemical exports. Emerging markets revenues grew 7% on 6% volume growth, largely driven by strength in aggregates, cement, lime and fly ash. New industrial development is helping serve off-rail markets. Phosphate and fertilizer revenues grew 4% on 2% volume growth. Fertilizer production levels were mixed as high fertilizer prices and hurricane disruptions caused curtailments in production. Although ethanol shipments contributed to growth in agricultural products, revenue increased 3% on declining volume due to a decline in export and bean markets.

Automotive Revenue

     Volumes declined largely due to a 100,000 unit year-over-year decrease in North American light vehicle production. Downtime at CSXT-served plants also contributed to volume weakness. Price increases drove improvements in revenue-per-car.

Coal, Coke and Iron Ore Revenue

     Coal, coke and iron ore revenue increased 11% on 6% volume growth. All lines of business reflect year-over-year revenue-per-car improvements. Volume growth was driven by gains in export, metallurgical and utility markets. Strength in exports was due to high demand primarily related to Asia steel market needs.

6

CSX TRANSPORTATION, INC.
PART II
ITEM 7. MANAGEMENT’S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS

Other

     Other revenue for the fiscal year 2004 includes $63 million for FRT, a short-line railroad consolidated in 2004 pursuant to Financial Accounting Standards Board (“FASB”) Interpretation No. 46, “Consolidation of Variable Interest Entities”. Prior to 2004, FRT was accounted for under the equity method.

Carload and revenue data by service group and commodity is as follows:

Fiscal Years Ended December 31, 2004, December 26, 2003 and December 27, 2002

7

CSX TRANSPORTATION, INC.
PART II
ITEM 7. MANAGEMENT’S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS

Operating Expense

     Total operating expenses increased $199 million to $6.1 billion, or 3% in 2004 as compared to operating expenses of $5.9 million in 2003.

     Labor and fringe expense increased $147 million or 6% compared to the prior year primarily attributable to the effects of inflation, consolidation of FRT and increases in the Company’s incentive compensation plan and pension costs. These costs were partially offset by benefits realized from reduced staffing levels.

     Materials, supplies and other expenses increased $163 million, or 14%, year-over-year primarily due to increased maintenance and crew travel costs, property and sales taxes, coupled with higher track, locomotive, car repair and other costs. Additionally, due to the adoption of SFAS 143, “Accounting for Asset Retirement Obligations,” as discussed in Note 1, Nature of Operations and Significant Accounting Policies, depreciation expense has been decreased and materials, supplies and other expense increased to account for the discontinuation of the accrual of cross-tie removal as a component of depreciation expense.

     Conrail rents, fees and services expense decreased $77 million or 22% in 2004 as compared to the prior year, as a result of the Conrail spin-off transaction, which decreased rents paid to Conrail as assets previously leased from Conrail are now owned directly by CSXT. (See Note 2, Investment In and Integrated Rail Operations with Conrail.)

     Related party service fees decreased $25 million or 14% year-over-year as a result of the decrease in service fees paid by the CSX Technology subsidiary and an increase in the CSX Intermodal credit.

     Building and equipment rent remained relatively consistent year-over-year with the slight increase in 2004 resulting from unfavorable asset utilization.

     Depreciation increased $84 million or 15% compared to the prior year primarily attributable to the Conrail spin-off transaction and the rail segment had property additions of approximately $1 billion, Additionally, due to the adoption of SFAS 143, “Accounting for Asset Retirement Obligations,” as discussed in Note 1. Nature of Operations and Significant Accounting Policies, depreciation expense has been decreased and materials, supplies and other expense increased to account for the discontinuation of the accrual of cross-tie removal as a component of depreciation expense.

     Fuel expense increased $90 million or 16% in 2004, net of $63 million of fuel hedging benefits, compared to the prior year primarily due to fuel price increases, while increased volumes were also a factor. The average price per gallon of diesel fuel, including benefits from CSX’s fuel hedging program, was $1.0950 in 2004 versus $0.9564 in 2003. In addition, the fuel surcharge programs and contractual cost escalation clauses used in most multi-year customer contracts partially offset fuel cost increases.

     For the fiscal year ended December 31, 2004, the Company recorded expense of $50 million for separation expense, pension and post-retirement benefit curtailment charges, stock compensation expense and other related expenses. (See Note 3, Management Restructuring.)

     Operating expense for the fiscal year ended December 26, 2003, included a charge of $229 million recorded in conjunction with the Company’s change in estimate for its casualty reserves to include an estimate of incurred but not reported claims for asbestos and other occupational injuries that could be received over the next seven years. This charge is reflected as “Provision for Casualty Claims” in the operating expense detail in the Income Statement. (See Note 10, Casualty, Environmental and Other Reserves.)

8

CSX TRANSPORTATION, INC.
PART II
ITEM 7. MANAGEMENT’S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS

Operating Income

     Operating income increased $313 million to $602 million in 2004, compared to $289 million in 2003 primarily due to an 8% increase in revenue coupled with the absence of $229 million provision for casualty claims, offset by $50 million of management restructuring charges and other expense increases as previously discussed.

Other Income

     Other income remained consistent with the prior year.

Interest Expense

     Interest expense increased by $11 million in 2004, as compared to 2003, due to the exchange of Conrail debt resulting from the Conrail spin-off transaction.

Net Earnings

     The Company reported net earnings for 2004 of $330 million compared to $196 million in 2003. The year ended December 26, 2003 included an after-tax cumulative effect of accounting change benefit of $57 million related to the adoption of Statement of Financial Accounting Standard (“SFAS”) 143, “Accounting for Asset Retirement Obligations.” Earnings before the cumulative effect of accounting change were $139 million in 2003. The $134 million year-over-year increase in net earnings primarily results from increased revenues, partially offset by increased expenses.

9

CSX TRANSPORTATION, INC.
PART II

     CSXT addresses the risk of volatility in its fuel costs through the use of derivative financial instruments. The Company does not hold or issue derivative financial instruments for trading purposes.

     During 2003, the Company began a program to hedge its exposure to fuel price volatility through swap transactions. As of December 31, 2004, CSX had hedged approximately 48%, and 9% of fuel purchases for 2005 and 2006, respectively. At December 31, 2004, a 1% change in fuel prices would result in an increase or decrease in the asset related to the swaps of approximately $4 million. The Company’s average annual fuel consumption is approximately 615 million gallons. A one-cent change in the price per gallon of fuel would affect fuel expense by approximately $5 million annually.

     The Company is exposed to loss in the event of non-performance by any counter-party to the fuel hedging agreements. The Company does not anticipate non-performance by such counter-parties, and no material loss would be expected from non-performance.

     CSXT had approximately $60 million of floating rate debt outstanding at December 31, 2004. A 1% variance in interest rates would on average affect annual interest expense by approximately $1 million.

10

CSX TRANSPORTATION, INC.
PART II
INDEX

Index to Consolidated Financial Statements

CSX Transportation, Inc.

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

	•	December 31, 2004
	•	December 26, 2003
	•	December 27, 2002

	•	December 31, 2004
	•	December 26, 2003

	•	December 31, 2004
	•	December 26, 2003
	•	December 27, 2002

	•	December 31, 2004
	•	December 26, 2003
	•	December 27, 2002

11

CSX TRANSPORTATION, INC.
PART II

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated Balance Sheets of CSX Transportation, Inc. as of December 31, 2004 and December 26, 2003, and the related consolidated statements of income, cash flows, and changes in shareholder’s equity for each of the three fiscal years in the period ended December 31, 2004. These consolidated 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 the standards of the Public Company Accounting Oversight Board (United States). 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 present fairly, in all material respects, the consolidated financial position of CSX Transportation, Inc. at December 31, 2004 and December 26, 2003, and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States.

As discussed in Note 1 to the Consolidated Financial Statements, in 2003 the Company changed its method of accounting for railroad tie removal costs and stock-based compensation.

/s/ Ernst & Young LLP

Jacksonville, Florida
March 2, 2005

12

CSX TRANSPORTATION, INC.
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

CONSOLIDATED INCOME STATEMENTS

See Accompanying Notes to Consolidated Financial Statements.

13

CSX TRANSPORTATION, INC.
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

CONSOLIDATED BALANCE SHEETS

See Accompanying Notes to Consolidated Financial Statements.

14

CSX TRANSPORTATION, INC.
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

CONSOLIDATED CASH FLOW STATEMENTS