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 1-1543
------
DAYTON AND MICHIGAN RAILROAD COMPANY
(Exact name of registrant as specified in its charter)
Ohio 31-6005583
(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
Title of each class which registered
- ------------------------------------ --------------------------
Preferred - par $50, 8%, guaranteed Cincinnati Stock Exchange
Common - par $50, 3-1/2%, guaranteed Cincinnati Stock Exchange
Securities registered pursuant to Section 12(a) 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 18,
1994, was $184,547, excluding the voting stock held by an affiliate 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
48,066.18 shares of common stock, par value $50.00, outstanding at March 18,
1994.
The following listed document has been incorporated herein by reference:
Proxy Statement to be filed prior to April 30, 1994 - Part III
- 1 -
PAGE 2
PART I
Item 1. Business.
and
Item 2. Properties.
Dayton and Michigan Railroad Company (the "Company") is a railroad
incorporated in the State of Ohio on March 5, 1851. It owns a line of
railroad 141 miles long which lies between Dayton and Toledo, Ohio. Under the
terms of a perpetual lease dated May 1, 1863, CSX Transportation, Inc.
("CSXT"), as successor by merger, operates the property of the Company, paying
rental charges measured principally by the annual dividend requirements of the
Company's outstanding shares of capital stock; consisting of two classes,
preferred and common. The Company's preferred stock ($50 par value) pays
guaranteed dividends of 8%, and its common stock ($50 par value) pays
guaranteed dividends of 3-1/2%. The lease excludes from the measure of the
rental charges the dividend requirements on the Company's shares owned by
CSXT. As of December 31, 1993, CSXT owned 66.28% of the Company's preferred
stock and 80.17% of its common stock.
In addition to the rental charges paid by CSXT to the Company for the
payment of the Company's dividends, CSXT directly assumes and pays all the
operating expenses of and reimburses all taxes assessed against the Company.
Since the dividends on the Company's preferred and common stock are
paid from monies obtained from CSXT pursuant to a lease to CSXT, reference is
made to CSXT's Form 10-K for the fiscal year ended December 31, 1993, a copy
of which is available from Patricia J. Aftoora, Vice President and Corporate
Secretary of CSXT, S/C J-160, 500 Water Street, Jacksonville, FL 32202.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.
The Company's common stock is listed on the Cincinnati Stock
Exchange. From a known market maker in the Company's common stock, as of
March 18, 1994, a price of $19.375 per share was bid but there were no sales.
As of March 18, 1994, there were approximately 78 common shareholders of
record.
The principal source of quotations, The National Quotation Bureau,
Inc. indicates no bid and ask quotations for the Company's common and
preferred stocks during the two year period of 1993 and 1992.
Dividends on the Company's preferred and common stocks are guaranteed
at 8% on the preferred stock and 3-1/2% on the common stock pursuant to a
perpetual lease agreement dated May 1, 1863, as amended, between the Company
and CSXT, more specifically referred to in Items 1 and 2, Business and
Properties.
- 2 -
PAGE 3
Item 6. Selected Financial Data.
and
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Five year selected data:
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
Income $ 147,795 $ 114,035 $ 154,661 $ 253,657 $ 158,042
Expense --- --- --- --- ---
Income Tax Expense 38,317 28,934 31,344 74,071 40,460
---------- ---------- ---------- ---------- ----------
Net Earnings 109,478 85,101 123,317 179,586 117,582
Dividends on
Preferred Stock 32,672 32,550 33,240 33,240 33,240
---------- ---------- ---------- ---------- ----------
Earnings Available
to Common Stock $ 76,806 $ 52,551 $ 90,077 $ 146,346 $ 84,342
========== ========== ========== ========== ==========
Weighted Average
Number of Common
Shares (a) 9,525 9,533 9,645 9,645 9,645
========== ========== ========== ========== ==========
Earnings Per Common
Share (a) $ 8.06 $ 5.51 $ 9.34 $ 15.17 $ 8.74
========== ========== ========== ========== ==========
Dividends Per
Common Share (a) $ 1.75 $ 1.75 $ 1.75 $ 1.75 $ 1.75
========== ========== ========== ========== ==========
Total Assets $1,738,573 $1,678,436 $1,642,571 $1,569,373 $1,439,906
========== ========== ========== ========== ==========
(a) This does not include shares held by CSX Transportation, Inc.
See Note 2 to the Financial Statements.
Net earnings for 1993 totaled $109,478, an increase of $24,377 from
1992 and a decrease of $13,839 from 1991. The 1993 increase in net earnings
compared to 1992 resulted from higher rental income and gains on property
sales offset by lower interest income. The 1993 decrease in net earnings
compared to 1991 resulted from lower interest income offset by higher rental
income and gains on property sales.
Item 8. Financial Statements and Supplementary Data.
The financial statements and notes thereto required in response to
this item are included herein on pages 11 to 15. (See Index to Financial
Statements on page 9).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
- 3 -
PAGE 4
PART III
Item 10. Directors and Officers of the Registrant.
Directors
The information concerning directors is incorporated herein by
reference to Registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission prior to April 30, 1994.
Executive Officers
The following sets forth certain information relating to the
Company's executive officers as of March 18, 1994. Officers are elected
annually at the annual meeting of the Board and hold office until the next
annual meeting of the Board or until their successors are elected. There are
no arrangements or understanding between any director or executive officer and
any other person pursuant to which the director or officer was selected.
Patricia J. Aftoora and Albert B. Aftoora are married. There are no other
family relationships among these officers and directors.
Name, Age, Present
Position with the Business Experience during last 5 Years,
Company Company Directorships in Public Corporations
- ------------------ --------------------------------------------
JERRY R. DAVIS, 55 President of the Company since March 1990.
President and Director From July 1989 to July 1991, Mr. Davis served as
President-CSX Rail Transport of CSXT; from July
1991 to January 1992, he was Executive Vice
President-Operations and from January 1992 to
present he serves as Executive Vice President
and Chief Operating Officer of CSXT. From 1986
to 1989, Mr. Davis served as Executive Vice
President of Operations for the Union Pacific
Railroad.
PAUL R. GOODWIN, 51 Executive Vice President of the Company since
Executive Vice President March 1990. During the past five years, Mr.
and Director Goodwin has served as an executive officer of
certain CSXT affiliates and is currently Senior
Vice President-Finance of CSXT.
P. MICHAEL GIFTOS, 47 Senior Vice President of the Company since
Senior Vice President October 1990. During the past five years, Mr.
and Director Giftos has served as an officer of CSX
Corporation ("CSX") and certain CSX affiliates
and is currently Senior Vice President and
General Counsel of CSXT.
GERALD L. NICHOLS, 58 Senior Vice President of the Company since
Senior Vice President June 1985. Mr. Nichols has served in
and Director various executive capacities for certain
CSXT affiliates during the past five years
and is currently Senior Vice President-
Administration of CSXT.
- 4 -
PAGE 5
Name, Age, Present
Position with the Business Experience during last 5 Years,
Company Company Directorships in Public Corporations
- ------------------ -------------------------------------------
PATRICIA J. AFTOORA, 54 Vice President of the Company since March
Vice President, and Corporate Secretary of the Company since
Corporate Secretary December 1980. Mrs. Aftoora has served
and Director as an officer of CSX and certain CSX
affiliates during the past five years and is
currently Vice President and Corporate
Secretary of CSXT.
EARL J. CURRIE, 54 Vice President of the Company since June,
Vice President and Director 1992. From 1989 to January 1, 1992, Mr.
Currie served as Vice President -
Engineering of CSXT and from January 1, 1992
to the present, he serves as Vice President
and Chief Transportation Officer of CSXT.
From 1986 to 1989 Mr. Currie was Executive
Vice President - Operations of the Soo Line
Railroad.
FREDERICK J. FAVORITE, JR., 40 Vice President of the Company since October
Vice President and Director 1990. During the past five years, Mr.
Favorite has served as an officer of certain
CSXT affiliates and is currently Vice
President and Controller of CSXT.
ALBERT B. AFTOORA, 54 Assistant Vice President and Treasurer of
Assistant Vice President, the Company since October 1990 and Treasurer
Treasurer and Director prior thereto. Mr. Aftoora has served as an
officer of certain CSXT affiliates during
the past five years and is currently
Assistant Vice President and Treasurer of
CSXT.
THOMAS P. SCHMIDT, 46 Vice President of the Company since June,
Vice President and Director 1992. Mr. Schmidt has served as an officer
of certain CSXT affiliates during the past
five years and is currently Vice President -
Engineering of CSXT.
There have been no events under any bankruptcy act, no criminal
proceedings, orders, judgments, decrees or injunctions material to the
evaluation of the ability and integrity of any director or executive officer
during the past five years.
Item 11. Executive Compensation
Prior to April 30, 1994, the Registrant will file with the Securities
and Exchange Commission, pursuant to Regulation 14A, a definitive proxy
statement, and said document is incorporated herein by reference.
- 5 -
PAGE 6
Item 12. Security Ownership of Certain Beneficial Owners and Management
Prior to April 30, 1994, the Registrant will file with the Securities
and Exchange Commission, pursuant to Regulation 14A, a definitive proxy
statement, and said document is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Prior to April 30, 1994, the Registrant will file with the Securities
and Exchange Commission, pursuant to Regulation 14A, a definitive proxy
statement, and said document is incorporated herein by reference.
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 9.
2. Financial Statement Schedules
None.
3. Exhibits
(3.1) Articles of Incorporation incorporated herein by
reference to Registrant's Form 12 Application for
Registration, filed on March 24, 1935.
(3.2) Code of Regulations incorporated herein by reference
to Registrant's report on Form 8-K filed June 3,
1966.
(10) Material Contracts
Lease Agreement dated May 1, 1863, as amended
between the Registrant and CSX Transportation, Inc.
(successor to The Cincinnati, Hamilton and Dayton
Railroad Company) incorporated herein by reference
to Registrant's Form 12 Application for
Registration, filed on March 24, 1935.
Supplemental Agreement modifying original lease
agreement dated December 23, 1944, incorporated
herein by reference to Registrant's report on
Form 8-K filed on July 1, 1954.
(b) No reports on Form 8-K were filed for the fourth quarter
of the year ended December 31, 1993.
- 6 -
PAGE 7
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 30th day
of March, 1994.
DAYTON AND MICHIGAN RAILROAD COMPANY
/s/ GREGORY R. WEBER
------------------------------------
Gregory R. Weber
(Principal Accounting Officer)
March 30, 1994
- 7 -
PAGE 8
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.
/s/Jerry R. Davis President and Director
- ------------------------ (Principal Executive Officer)
Jerry R. Davis*
/s/Paul R. Goodwin Senior Vice President and Director
- ------------------------ (Principal Finance Officer)
Paul R. Goodwin*
/s/P. Michael Giftos Senior Vice President, General Counsel
- ----------------------- and Director
P. Michael Giftos*
/s/Gerald L. Nichols Senior Vice President and Director
- ------------------------
Gerald L. Nichols*
/s/Patricia J. Aftoora Vice President, Corporate Secretary
- ------------------------ and Director
Patricia J. Aftoora*
/s/Earl J. Currie Vice President and Director
- -----------------
Earl J. Currie*
/s/Frederick J. Favorite, Jr. Vice President, Controller and Director
- -----------------------------
Frederick J. Favorite, Jr.*
/s/Albert B. Aftoora Assistant Vice President,
- ------------------------ Treasurer and Director
Albert B. Aftoora*
/s/Thomas P. Schmidt Vice President and Director
- ------------------------
Thomas P. Schmidt*
Patricia J. Aftoora, by signing her name hereto, does hereby sign and
execute this report on behalf of each of the above-named officers and
directors of Dayton and Michigan Railroad Company pursuant to powers of
attorney executed by each of such officers and directors and filed with the
Securities and Exchange Commission as an exhibit to this report.
/s/ PATRICIA J. AFTOORA
- ------------------------
Patricia J. Aftoora March 30, 1994
*(Attorney-in-Fact)
- 8 -
PAGE 9
DAYTON AND MICHIGAN RAILROAD COMPANY
Index to Financial Statements
Page
----
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . 10
Financial Statements and Notes to Financial
Statements Submitted Herewith:
Statements of Earnings - Years Ended
December 31, 1993, 1992 and 1991. . . . . . . . . . . . . . . . 11
Statements of Cash Flows - Years Ended
December 31, 1993, 1992 and 1991. . . . . . . . . . . . . . . . 12
Statements of Financial Position - December 31, 1993 and 1992 . . 13
Statements of Retained Earnings (Deficit) -
Years Ended December 31, 1993, 1992 and 1991. . . . . . . . . . 14
Notes to Financial Statements . . . . . . . . . . . . . . . . . . 15
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.
- 9 -
PAGE 10
REPORT OF INDEPENDENT AUDITORS
The Shareholders and Board of Directors
Dayton and Michigan Railroad Company
We have audited the financial statements of Dayton and Michigan
Railroad Company listed in the accompanying index to financial statements
(Item 14(a)). 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 financial statements listed in the accompanying
index to financial statements (Item 14(a)) present fairly, in all material
respects, the financial position of Dayton and Michigan Railroad Company at
December 31, 1993 and 1992, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1993 in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG
Richmond, Virginia ----------------------
January 28, 1994 Ernst & Young
- 10 -
PAGE 11
DAYTON AND MICHIGAN RAILROAD COMPANY
STATEMENTS OF EARNINGS
Years Ended December 31,
------------------------------
1993 1992 1991
-------- -------- --------
INCOME
Rental Income $ 87,606 $ 78,118 $ 81,463
Interest Income 33,362 35,917 53,180
Gain on Disposition of Properties 26,827 --- 20,018
-------- -------- --------
EARNINGS BEFORE INCOME TAXES 147,795 114,035 154,661
INCOME TAX EXPENSE 38,317 28,934 31,344
-------- -------- --------
NET EARNINGS $109,478 $ 85,101 $123,317
======== ======== ========
EARNINGS PER COMMON SHARE $ 8.06 $ 5.51 $ 9.34
======== ======== ========
See accompanying Notes to Financial Statements.
- 11 -
PAGE 12
DAYTON AND MICHIGAN RAILROAD COMPANY
STATEMENTS OF CASH FLOWS
Years Ended December 31,
-------------------------------
1993 1992 1991
-------- -------- --------
OPERATING ACTIVITIES
Net Earnings $109,478 $ 85,101 $123,317
Gain on Disposition of Properties (26,827) --- (20,018)
-------- -------- --------
Cash Provided by Operating Activities 82,651 85,101 103,299
-------- -------- --------
INVESTING ACTIVITIES
Proceeds from Property Dispositions 26,827 --- 21,658
Advances to CSXT, Net (60,137) (35,865) (74,838)
-------- -------- --------
Cash Used by Investing Activities (33,310) (35,865) (53,180)
-------- -------- --------
FINANCING ACTIVITIES
Cash Dividends Paid - Preferred (32,672) (32,550) (33,240)
- Common (16,669) (16,686) (16,879)
-------- -------- --------
Cash Used by Financing Activities (49,341) (49,236) (50,119)
-------- -------- --------
CASH AND CASH EQUIVALENTS
Change in Cash and Cash Equivalents --- --- ---
Cash and Cash Equivalents
at Beginning of Year --- --- ---
-------- -------- --------
Cash and Cash Equivalents
at End of Year $ --- $ --- $ ---
======== ======== ========
See accompanying Notes to Financial Statements.
- 12 -
PAGE 13
DAYTON AND MICHIGAN RAILROAD COMPANY
STATEMENTS OF FINANCIAL POSITION
December 31,
-----------------------------
1993 1992
----------- -----------
ASSETS
Land and Improvements $ 688,830 $ 693,455
Advances to CSXT 1,049,743 984,981
----------- -----------
Total Assets $ 1,738,573 $ 1,678,436
=========== ===========
SHAREHOLDERS' EQUITY
Preferred Stock, Non Voting Par
Value $50; Authorized 74,000 Shares;
Issued and Outstanding
24,225 Shares $ 1,211,250 $ 1,211,250
Common Stock, Par Value $50;
Authorized 60,000 Shares; Issued
and Outstanding 48,066.18 Shares 2,403,309 2,403,309
Retained Deficit (1,875,986) (1,936,123)
----------- -----------
Total Shareholders' Equity $ 1,738,573 $ 1,678,436
=========== ===========
See accompanying Notes to Financial Statements.
- 13 -
PAGE 14
DAYTON AND MICHIGAN RAILROAD COMPANY
STATEMENTS OF RETAINED EARNINGS (DEFICIT)
1993 1992 1991
--------- --------- ---------
BALANCE, JANUARY 1 $(1,936,123) $(1,971,988) $(2,045,186)
Net Earnings 109,478 85,101 123,317
Dividends
Preferred Stock--$4.00 Per Share (32,672) (32,550) (33,240)
Common Stock--$1.75 Per Share (16,669) (16,686) (16,879)
----------- ----------- -----------
BALANCE, DECEMBER 31 $(1,875,986) $(1,936,123) $(1,971,988)
=========== =========== ===========
See accompanying Notes to Financial Statements.
- 14 -
PAGE 15
DAYTON AND MICHIGAN RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1. CAPITAL STOCK AND PRINCIPAL STOCKHOLDER.
CSX Transportation, Inc. (CSXT) owns 66.28% of the Company's
preferred stock and 80.17% of its common stock at December 31, 1993.
Dividends paid and rental income on the accompanying financial statements
exclude amounts related to shares held by CSXT. 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.
NOTE 2. LEASE AGREEMENT.
The Company has no operations. Its property is leased in perpetuity
to CSXT and is maintained and operated by, for and in the name of CSXT. As
rent, CSXT pays the Company's income taxes, administrative expenses and
guaranteed dividends on the Company's 3-1/2% common and 8% preferred stocks on
shares held by other than CSXT. All operating expenses of the Company are
paid directly by CSXT and are not shown in the accompanying financial
statements. Interest income is earned on amounts due from CSXT based on
interest rates earned by CSX on its short-term investment portfolio.
NOTE 3. INCOME TAXES.
The income tax provision, reconciled to the tax computed at statutory
rates was:
1993 1992 1991
-------- --------- --------
Tax at statutory rate $ 51,728 $ 38,772 $ 52,585
Income tax reimbursement effect (13,411) (9,838) (10,657)
Surtax exemption --- --- (10,584)
-------- -------- --------
Income taxes $ 38,317 $ 28,934 $ 31,344
======== ======== ========
NOTE 4. EARNINGS PER SHARE.
Earnings per common share are computed after giving effect to
preferred stock dividend requirements and are based on the weighted average
number of common shares outstanding, excluding shares held by CSXT.
NOTE 5. PROPERTIES.
Properties are carried principally at cost. Additions, retirements
and depreciation are charged directly to amounts due from CSXT. There was no
significant change in properties during 1993. In 1992, there was a $178,925
net change in the detailed property records for abandonment corrections and
other adjustments from prior years which were charged to amounts due from
CSXT.
NOTE 6. CASH AND CASH EQUIVALENTS.
All of the Company's cash has been advanced to CSXT for investment
purposes. Future cash requirements of the Company will be funded by CSXT.
- 15 -
