FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For Transition Period from _________________ to ____________________
Commission File No. 1-9064
CONSOLIDATED RAIL CORPORATION
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(Exact name of registrant as specified in its charter)
Pennsylvania 23 1989084
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(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
2001 Market Street, Two Commerce Square
Philadelphia, Pennsylvania 19101-1417
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 209-4000
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Securities registered pursuant to Section 12(b) of the Act: NONE
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
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Aggregate market value of voting stock held by non-affiliates of the
Registrant (as of March 3, 1995): $0.
Shares of Common Stock Outstanding (as of March 3, 1995): 100 Shares, all
of which are held by the parent of the Registrant
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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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TABLE OF CONTENTS
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Item Page
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Part I 1. Business...................................... 1
2. Properties.................................... 3
3. Legal Proceedings............................. 4
4. Submission of Matters to a Vote of Security
Holders.................................... 11
Part II 5. Market for Registrant's Common Equity and
Related Stockholder Matters................. 11
6. Selected Financial Data........................ 11
7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 11
8. Financial Statements and Supplementary Data.... 14
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure...... 43
Part III 10. Directors and Executive Officers of the
Registrant.................................. 43
11. Executive Compensation......................... 43
12. Security Ownership of Certain Beneficial
Owners and Management....................... 43
13. Certain Relationships and Related Transactions. 43
Part IV 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K......................... 44
Power of Attorney............................................. 48
Signatures.................................................... 48
Exhibit Index................................................. 50
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PART I
Item 1. Business.
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GENERAL. Consolidated Rail Corporation ("the Company") is a
Pennsylvania corporation incorporated on February 10, 1976 to acquire,
pursuant to the Regional Rail Reorganization Act of 1973, the rail
properties of many of the railroads in the northeast and midwest region of
the United States which had gone bankrupt during the early 1970's, the
largest of which was the Penn Central Transportation Company.
On July 1, 1993 Conrail Inc. ("Conrail") became the holding company of
the Company. The Company is Conrail Inc.'s only significant subsidiary and
primary asset. Conrail Inc.'s common stock is listed on the New York and
Philadelphia Stock Exchanges.
Reports on Form 10-K for years prior to 1993 were filed by
Consolidated Rail Corporation, and historic data presented herein and
therein reflect the results of Consolidated Rail Corporation for those time
periods.
RAIL OPERATIONS. The Company provides freight transportation services
within the northeast and midwest United States. The Company interchanges
freight with other United States and Canadian railroads for transport to
destinations within and outside the Company's service region. The Company
operates no significant line of business other than the freight railroad
business and does not provide common carrier passenger or commuter train
service.
The Company serves a heavily industrial region that is marked by dense
population centers which constitute a substantial market for consumer
durable and non-durable goods, and a market for raw materials used in
manufacturing and by electric utilities. The Company's traffic levels are
substantially affected by its ability to compete with trucks, the economic
strength of the industries and metropolitan areas that produce and consume
the freight the Company hauls, and the traffic generated by the Company's
connecting railroads. The Company remains dependent on non-bulk traffic,
which tends to generate higher revenues than bulk commodities, but also
involves higher costs and is more vulnerable to truck competition.
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THE SERVICE GROUP SYSTEM. Beginning in 1994, the Company reorganized
its Marketing and Sales Department and certain segments of its Operating
Department into four service groups: CORE Service, Intermodal Service, Unit
Train Service and Automotive Service. Petrochemicals and waste products,
food and agriculture products, metals and forest and manufactured products
are handled by the CORE Service Group. The Intermodal Service Group handles
intermodal trailers and containers. The Unit Train Service Group handles
coal and ore traffic. The Automotive Service Group handles automotive parts
and finished vehicles. Each of these groups controls the integrated
planning, pricing and operating functions that will enable them to tailor
services, develop products and make capital investments directed toward the
special requirements of their respective customers.
GOVERNMENT REGULATION. The Company is subject to environmental,
safety, and other regulations generally applicable to all businesses, and
its rail operations are also regulated by the Interstate Commerce
Commission ("ICC"), the Federal Railroad Administration ("FRA"), state
Departments of Transportation and some state and local regulatory agencies.
The ICC has jurisdiction over, among other things, rates charged for
certain traffic movements, service levels, freight car rents, and issuance
or guarantee of railroad securities. It also has jurisdiction over the
situations and terms under which one railroad may gain access to another
railroad's traffic or facilities, extension or abandonment of rail lines,
consolidation, merger, or acquisition of control of rail common carriers
and of other carriers by rail common carriers, and labor protection
provisions in connection with the foregoing.
Under the Staggers Rail Act of 1980, federal regulation of rates and
services has been reduced. The ICC has deregulated rates for intermodal
traffic, most boxcar traffic and a series of miscellaneous commodities,
including steel and automobiles. In addition, railroads are free to
negotiate contracts with shippers setting rates, service standards and the
terms for movements of other kinds of traffic. As a result, railroads have
greater flexibility in adjusting rates and services to meet revenue needs
and competitive conditions. Congress is currently reviewing whether the
ICC will continue to regulate railroads and the nature and extent of that
regulation. It is widely anticipated that in 1995 legislation will be
enacted either eliminating the ICC immediately or phasing it out over the
next one to two years. Congress is also debating which, if any, of the
ICC's functions should be retained and who should be given the authority to
enforce them. While the outcome of this debate cannot be predicted with
certainty, it seems highly likely that a significant amount of the current
regulatory system will be repealed. Should any functions remain, they
would likely be enforced at the Department of Transportation or, in the
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case of mergers and related matters, at the Department of Justice.
The Company believes that the repeal of some or all of the regulatory
provisions of the Interstate Commerce Act applicable to railroads would be
likely to result in an increase in railroads' ability to compete
effectively by providing additional opportunities for productivity gains
and cost-cutting.
The FRA has jurisdiction over safety and railroad equipment standards.
The Company's rail operations are also subject to a variety of
governmental laws and regulations relating to the protection of the
environment. In addition to being involved as a potentially responsible
party at numerous Superfund sites (see Item 3 - "Legal Proceedings"), the
Company is subject to increasing regulation of the transportation and
handling of certain hazardous and nonhazardous commodities and waste which
has resulted in additional administrative and operating costs. Also, in
1995, the United States Environmental Protection Agency must issue
regulations applicable to new locomotive emissions. Locomotive engines
(other than those defined as new or remanufactured) may be regulated by the
states. Additional investments will likely be required to bring other
than new locomotives into compliance, although the timing and amount of the
investments will not be determinable until the legislation is adopted.
Except as it relates to a 1991 special charge, compliance with existing
laws and regulations relating to the protection of the environment has not
had a material effect on the Company's capital expenditures, earnings or
competitive condition. (See Note 12 to the Consolidated Financial
Statements elsewhere in this Annual Report.)
Item 2. Properties.
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As of December 31, 1994, the Company (excluding its subsidiaries)
maintained 18,951 miles of track including track for crossovers, turnouts,
second main, other main, passing and switch track, on its 11,349 mile route
system. Of total route miles, 9,453 are owned, 98 are leased or operated
under contract and 1,798 are operated under trackage rights, including
approximately 300 miles operated pursuant to an easement over Amtrak's
Northeast Corridor. As of December 31, 1994, virtually all track over
which at least 10 million gross tons moved annually (6,135 track miles) was
heavy-weight rail of at least 127 pounds per yard, and approximately 99% of
such track had continuous welded rail. Continuous welded rail reduces
track maintenance costs and, in general, permits trains to travel at higher
speeds. As of December 31, 1994, the Company had 9,352 miles of continuous
welded rail on track it maintained.
As of December 31, 1994, all of the 5,647 track miles maintained for
fast freight traffic had a maximum operating speed of 50 MPH or more, and
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33% had a maximum operating speed of at least 70 MPH. As of December 31,
1994, approximately 96% of the track over which at least 10 million gross
tons moved annually was governed by automatic signal systems. In all, as
of December 31, 1994, 7,656 miles of track were controlled by automatic
signal systems.
As a result of the strategic planning process, certain under-utilized
rail lines and other facilities were identified for disposal in order to
avoid future capital costs and to improve the Company's return on assets.
The expected losses upon disposition of such assets were included in a 1991
special charge. The Service Groups are involved in an ongoing process to
identify additional assets not required to support their service.
The Company owns (or uses subject to capitalized leases) 2,147
locomotives with an average age of 16.7 years and 56,391 freight cars of
various types (including 17,865 freight cars under operating leases) with
an average age of 21 years.
Item 3. Legal Proceedings.
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Occupational Disease Litigation. The Company has been named as a
defendant in lawsuits filed pursuant to the provisions of the Federal
Employers' Liability Act ("FELA") by persons alleging (1) personal injury
or death caused by exposure to asbestos in connection with railroad
employment; (2) complete or partial loss of hearing caused by exposure to
excessive noise in the course of railroad employment; (3) repetitive motion
injury in connection with railroad employment; and (4) personal injury or
death caused by exposure to deleterious substances (mixed dusts, fumes,
chemicals, etc.) As of December 31, 1994, the Company is a defendant in
391 pending asbestosis suits, 853 pending hearing loss suits, 34 pending
repetitive motion injury suits and 424 pending deleterious substance suits,
and had notice of 963 potential asbestosis claims, 4,558 potential hearing
loss claims, 2,354 potential repetitive motion injury claims and 47
deleterious substance claims.
The Company expects to be named as a defendant in a significant number
of occupational disease cases in the future.
Structure and Crossing Removal Disputes in Connection With Lines
Abandoned Under NERSA. The Company may be responsible, in whole or in
part, for the costs of removal of several hundred overhead and underpass
crossings located on railroad lines it has abandoned under the Northeast
Rail Service Act of 1981 ("NERSA") (and, in some instances, responsible for
the removal of the lines of railroad themselves as well as appurtenant
structures). The Company's liability for the removal of such lines,
crossings and structures will be determined on a case-by-case basis. Some
states have imposed upon the Company the obligation to remove certain
crossings.
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In 1989, an organization of interests that own property under and
adjacent to Conrail's elevated West 30th Street rail line running along the
west side of lower Manhattan filed a petition with the ICC seeking to force
Conrail to abandon the line and finance its removal, which could have cost
in excess of $30 million. In January 1992, the ICC voted to grant the
petition, subject to the owners posting a bond indemnifying Conrail for
demolition costs exceeding $7 million. The property owners refused to post
the bond. The parties appealed to the U.S. Court of Appeals for the
District of Columbia, which upheld the ICC's order, including the bond
requirement. No appeal was taken. No abandonment certificate will be
issued unless the property owners post a bond, which they have not done.
Conrail's Withdrawal from RCAF Master Tariff. The Rail Cost
Adjustment Factor ("RCAF") is an index of rail costs issued by the ICC
according to which railroads may adjust their regulated rates for inflation
and cost increases free of regulatory interference. In March 1989, the ICC
decided to offset the quarterly RCAF by the entirety of the average rail
industry productivity gain.
On January 1, 1990, the Company ceased applying RCAF increases to its
regulated rates, by ending its participation in the RCAF master tariff.
Effective July 1, 1990, the Company published a series of independent rate
increases approximately equal to its increases in costs as reflected by the
RCAF. The Company's action was contested, but was upheld by the ICC.
Since July 1, 1990, the Company has continued to make independent selective
increases to its regulated rates. These regulated rates will continue to
be subject to individual challenge to the extent the levels of the
increases exceed those previously permitted pursuant to the RCAF and no
other statutory provisions bar ICC jurisdiction.
In January 1991, the ICC commenced a proceeding at the request of a
shippers' organization to clarify the legal effect of the Company's (and
other railroads') withdrawal from the RCAF master tariff, including the
shippers' assertion that railroads thereby lose protection from challenge
for rates previously adjusted under these procedures. In April 1991, the
Company individually opposed and participated in the rail industry's
opposition to the petition. The ICC has taken no action on the matter
since that time.
Engelhart v. Consolidated Rail Corp. In connection with the Special
Voluntary Retirement Program offered to certain employees in late 1989 and
early 1990, the Company used surplus funds in its overfunded Supplemental
Pension Plan ("Plan") to fund certain aspects of that program. In December
1992, certain former Company employees brought suit in the U.S. District
Court for the Eastern District of Pennsylvania challenging the use of
surplus Plan funds (i) to pay administrative Plan expenses previously paid
by the Company, (ii) to fund the Special Voluntary Retirement Program, and
(iii) to pay life insurance and medical insurance premiums of former
employees as improper and unlawful, and alleging that employees who have
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made contributions to the Plan or its predecessor plans are entitled to
share in the surplus assets of the Plan. In August 1993, the federal
district court granted the Company's Motion to Dismiss the majority of
counts in the complaint, but declined to dismiss the issue of the Company's
use of Plan assets to pay administrative expenses of the Plan, which are
estimated to be approximately $29 million as of December 31, 1994.
However, the Company believes that the use of surplus Plan assets for this
purpose is lawful and proper. The Company uses surplus Plan assets in a
similar manner in connection with its 1994 early retirement program.
Environmental Litigation. The Company is subject to various federal,
state and local laws and regulations regarding environmental matters. In
certain instances, the Company has received notices of violations of such
laws and regulations and either has taken or plans to take appropriate
steps to address the problems cited or to contest the allegations of
violation. As of December 31, 1994, the Company had received inquiries
from governmental agencies or had been identified, together with other
companies, as a potentially responsible party for cleanup and/or removal
costs due to its status as an alleged transporter, generator or property
owner at 128 locations throughout the country. However, the Company,
through its own investigations and assessments, believes it may have some
potential responsibility at only 53 of these sites. The amounts the
Company has accrued with respect to the proceedings listed below are
included in its $74 million accrual for estimated future environmental
expenses. (See Note 12 to the Consolidated Financial Statements included
elsewhere in this Annual Report.) The significant environmental
proceedings, including Superfund sites, are discussed below.
United States v. Southeastern Pennsylvania Transportation Authority
("SEPTA"), National Railroad Passenger Corporation ("Amtrak"), and
Consolidated Rail Corporation. In March 1986, the United States
Environmental Protection Agency ("EPA") filed an action in the United
States District Court for the Eastern District of Pennsylvania for cost
recovery, injunctive relief, and a declaratory judgment against the
Company, Southeastern Pennsylvania Transportation Authority ("SEPTA") and
National Railroad Passenger Corp. ("Amtrak") under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"
or "Superfund Law"), as amended. In 1990, the Pennsylvania Department of
Environmental Resources ("PADER") intervened as a plaintiff. Suit is based
on the release or threatened release at the Paoli Railroad Yard, Paoli,
Chester County, Pennsylvania, of polychlorinated biphenyls ("PCBs"), a
listed hazardous substance under CERCLA. The Company is sued in its
capacity as the operator of the rail yard from April 1, 1976 through
December 31, 1982, under an agreement with SEPTA to provide commuter rail
service. In March 1992, Penn Central brought suit before the Special Court
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arguing that the terms of the transfer of its properties to the Company did
not contemplate environmental liability for conditions existing at the time
of the transfer. On August 23, 1994, the Special Court held that the
reorganization did not prevent the government from pursuing its CERCLA
claims against Penn Central. The Court also granted the Company's Motion
for Summary Judgment against Penn Central, finding that the Company's
liability for contamination to former Penn Central property was limited to
only the post-April 1, 1976 period. Notwithstanding this finding, the
Special Court declined to preclude federal courts from applying principles
of joint and several liability and holding the Company liable for pre-April
1,1976 contamination in instances where contamination of the property was
not divisible.
The Company also awaits the Special Court's decision in a related
action in which the Company seeks a declaration against the Reading Company
similar to that granted with respect to Penn Central, as well as a
declaration that the Company is entitled to indemnification from SEPTA
and/or the federal government for environmental liability resulting from
its statutorily mandated provision of commuter rail service. Oral argument
in that matter was held October 24, 1994.
Motions and cross-motions for summary judgment by the parties are
pending.
Pursuant to a series of partial preliminary consent decrees,
defendants have performed a series of cleanup actions both on and off-site
and have conducted a Remedial Investigation/Feasibility Study ("RI/FS").
As of December 31, 1994, the cost of the RI/FS and of the interim cleanup
measures performed by the three defendants is approximately $9 million.
Those costs have been shared equally among the three defendants but are
subject to reallocation. All work done to date has been performed subject
to a denial of liability and without waiving any defense to the
governmental claim for cleanup costs or other relief.
EPA has now requested that the parties submit a remediation plan that
includes participation by Penn Central. Settlement negotiations with EPA
continue.
United States v. Consolidated Rail Corp, et al. The EPA has listed
the Company's Elkhart Yard in Indiana on the National Priorities List. The
EPA contends that chemicals have migrated from the yard and contaminated
drinking wells in the area. On February 14, 1990, the EPA filed a civil
action against the Company in the U.S. District Court for the Northern
District of Indiana seeking recovery of approximately $345,000 for costs
incurred in protecting the water supply. In addition, the EPA seeks a
declaratory judgment against the Company for all future costs incurred in
responding to the release or threatened release of hazardous substances
from the site. The Company believes it is not the sole source and may not
be a contributing source to the contamination alleged by the EPA.
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The Company filed a third-party action joining Penn Central as a defendant,
to which Penn Central responded by filing a declaratory judgment action in
Special Court. As a result of the Special Court decision in August 1994,
the Company and Penn Central have negotiated an interim cost-sharing
arrangement for costs in implementing the EPA's 1992 interim Record of
Decision, which the Company had undertaken alone. (See previous discussion
regarding the Special Court under "United States v. SEPTA, et al"). EPA has
recently issued a second Record of Decision in draft form that, if
finalized, would require the parties to install a public water supply
system for up to 700 additional homes.
United States v. Consolidated Rail Corp, et al. The Company has been
identified as the fifth largest generator of waste oil at the Berks
Associates Superfund site in Douglasville, Pennsylvania. In addition, the
Company has become aware that it and its predecessor, Penn Central, owned a
small portion of land that was leased to the operator of the Berks site.
As such, the Company's liability could increase due to its questionable
status as both an owner and a generator. In August 1991, the EPA issued an
administrative order against the Company and thirty-five other entities
mandating the implementation of an approximately $2 million partial remedy
and filed a complaint in the U.S. District Court for Eastern District of
Pennsylvania for the recovery of approximately $8 million in costs incurred
by the government. The parties have negotiated an administrative order
with the EPA and have filed an answer to the civil action. A group of
potentially responsible parties (including the Company) undertook
compliance with the administrative order. The Company and the 35 other
defendants have filed a third-party complaint against approximately 630
entities seeking contribution for the costs of the remedy and government
costs. The Company, along with other defendants, is negotiating a
settlement with the EPA. On June 30, 1993, the EPA issued another
administrative order against the Company and 33 other entities, mandating
the remediation of the southern portion of the site. The effective date of
the order has been delayed in light of the negotiations.
The most expensive aspect of the remediation of the site is the
cleanup of Source Area 2, which the government estimates at between $45 and
$55 million. This Source Area was closed prior to the Company's
incorporation, and therefore the Company has maintained that it is not
liable for the cost of remediating Source Area 2. In addition, PADER has
filed a complaint with the court for the recovery of natural resource
damages.
United States v. Consolidated Rail Corp, et al. The Company is a
potentially responsible party ("PRP"), along with more than 50 other
parties, in the United Scrap Lead federal Superfund action in Troy, Ohio,
where substantial quantities of batteries were disposed of over a period of
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several years. The EPA sued the Company and nine other parties in August
1991 in the Southern District of Ohio for the recovery of approximately $2
million in past costs. The Company and other PRP's have commissioned
treatability studies. The court has imposed a stay to discuss whether this
matter can be settled. EPA has selected a remedy for the site with an
estimated cost of approximately $33 million, which the PRP's are
challenging. The Company estimates its share of the liability at 8%.
Commonwealth of Massachusetts v. Consolidated Rail Corporation. On
April 21, 1992, the Massachusetts Attorney General filed suit in Superior
Court of Massachusetts alleging the Company's violation of the
Massachusetts Clean Air Act and its implementing regulations by allowing
diesel engines to idle unnecessarily and/or in excess of thirty minutes. On
May 4, 1992, the court entered a preliminary injunction, the terms of which
are substantially consistent with the Company's existing idling policy.
The Attorney General subsequently filed a complaint alleging the Company's
violation of the preliminary injunction. On February 2, 1993, the parties
entered into a partial settlement agreement; however, the Attorney General
has alleged that the Company has failed to comply with certain provisions
of the settlement. The Company is negotiating the terms of a settlement
with the Attorney General's office.
United States v. Consolidated Rail Corporation, The Monongahela
Railway Company, et al. On September 30, 1992, Region VIII of the EPA
filed an administrative action for civil penalties against the Company and
its former wholly-owned subsidiary, The Monongahela Railway Company (now
merged into the Company), under the Toxic Substances Control Act for
allegedly improper handling of a shipment of PCB contaminated soil. The
other railroads in the movement and the shipper were served with similar
complaints. The Company entered into a de minimus settlement with EPA
which was effective October 31, 1994.
New York State Department of Environmental Conservation Order On
Consent. On February 18, 1993, the New York State Department of
Environmental Conservation ("NYSDEC") served the Company with a draft Order
on Consent requiring the payment of civil fines in connection with its
inspection of Selkirk Yard. The order also seeks compensation for the
hiring of three full-time NYSDEC employees to monitor the Company's
compliance at Selkirk and two other rail yards in New York. The Company is
negotiating the terms of the Order with NYSDEC.
United States v. Consolidated Rail Corporation, et al. On March 17,
1994, the United States Department of Justice ("DOJ") served notice that it
had filed a complaint in the Federal District Court for the Eastern
District of Pennsylvania against Consolidated Rail Corporation and two
other parties citing various violations of the Clean Air Act ("CAA") and
the National Emission Standard for Hazardous Air Pollutants ("NESHAP") in
connection with the alleged release of asbestos during the renovation of a
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grain storage facility. DOJ seeks civil penalties and injunctive relief
against further violations of CAA and NESHAP. The Company has initiated
settlement discussions with DOJ, as a result of which the litigation has
been stayed.
New York State Department of Environmental Conservation Order on
Consent. On November 3, 1994, NYSDEC served the Company with an Order on
Consent requiring the payment of civil fines in connection with the alleged
discharge of waste water from DeWitt Yard in Onondaga County, New York into
New York State waters. The Company is negotiating the terms of the Order
with NYSDEC.
In the matter of Consolidated Rail Corporation, Ashtabala, OH. On
September 21, 1994, the EPA filed an Administrative Complaint against the
Company seeking civil penalties for certain alleged violations of its
National Pollutants Discharge Emissions System permit. The Company filed
its answer on November 30, 1994, and is negotiating with the EPA to settle
this matter.
Conway Yard, Pittsburgh. In 1991, the Company received Notices of
Violation ("NOV") from PADER alleging violations of the Clean Streams Act
for discharges of oil into the Ohio River. In September 1993, PADER sent
to the Company a draft Consent Order and Agreement requiring a
comprehensive site remediation for soil, ground water, surface waters and
sediments at the Conway rail yard and requiring the payment of civil fines
in connection with violations at the yard, including continuing ground
water contamination. The Company and PADER continue to negotiate the
extent of the investigation and remediation to be undertaken at the yard
and the amount of the fines.
Beacon Park, Massachusetts. Massachusetts and federal officials are
currently investigating an alleged unlawful discharge of oil by the Company
into the Charles River. The investigation could result in the assessment
of fines or other penalties against the Company.
Other. In addition to the above proceedings, the Company has been
named in various legal proceedings arising out of its activities as an
employer and as an operator of a freight railroad, including personal
injury actions brought by its employees under FELA, as well as
administrative proceedings with and investigation by government agencies.
In view of the inherent difficulty of predicting the outcome of legal
proceedings, particularly in certain matters described above in which
substantial damages are or may be sought, the Company cannot state what the
eventual outcomes of such legal proceedings will be. Certain of these
matters, if determined adversely to the Company, could result in the
imposition of substantial damage awards against, or increased costs to, the
Company that could have a material adverse effect on the Company's results
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of operations and financial position. The Company's management believes,
however, based on current knowledge, that such legal proceedings will not
have a material adverse effect on the Company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders.
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Information omitted in accordance with General Instruction J(2)(c).
PART II
Item 5. Market for Registrant's Common Equity
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and Related Stockholder Matters.
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All of the common stock of the Company is held by Conrail.
Accordingly, there is no market for the Company's common stock. See Note 4
to the Consolidated Financial Statements elsewhere in this Annual Report
for information with respect to dividends paid by the Company.
Item 6. Selected Financial Data.
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Information omitted in accordance with General Instruction J(2)(a).
Item 7. Management's Discussion and Analysis of Financial Condition and
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Results of Operations.
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See General Instruction J(2)(a).
Results of Operations
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1994 Compared with 1993
Net income for 1994 was $319 million compared with 1993 net income of
$164 million. Results for 1994 include a one-time charge of $51 million
(net of tax benefits of $33 million) relating to a non-union voluntary
early retirement program and related costs recorded in the first quarter
(see Note 3 to the Consolidated Financial Statements elsewhere in this
Annual Report). The 1993 results include one-time after-tax charges of $70
million for the adoption of required changes in accounting for income taxes
and postretirement benefits other than pensions; the reserve for
intercompany receivables related to the planned disposition of Concord
Resources Group, Inc., ("Concord"), a subsidiary of Conrail Inc., $58
million (net of estimated income tax benefits of $31 million); and the one-
time effects on deferred taxes of the increase in the federal tax rate, $34
million (see Notes 1, 4, 8 and 9 to the Consolidated Financial Statements
elsewhere in this Annual Report). Absent the one-time charges, the
Company's net income for 1994 and 1993 would have been $370 million and
$326 million, respectively.
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In the first quarter of 1994, the Company's results were adversely
affected by difficult operating conditions caused by severe winter weather
and by greater than anticipated traffic volumes, the combination of which
created a shortage of crews and locomotives. At the same time, the Company
reorganized its marketing department and certain of its operating functions
into four service groups: CORE, Unit Train, Intermodal and Automotive.
These factors in combination created service disruptions and increased
operating expenses in the first quarter. Nevertheless, a strong economy
throughout the year resulted in increases in both revenue and traffic
volume for 1994. Despite increased traffic volume, the Company's continued
cost reduction and containment programs in the last three quarters enabled
the Company to limit the increase in its operating expenses (excluding the
early retirement program charge) to 6.5% over 1993.
Operating revenues (primarily freight line haul revenues, but also
including switching, demurrage and incidental revenues) increased $278
million, or 8.1%, from $3,438 million in 1993 to $3,716 million in 1994.
An 8.3% increase in traffic volume in units (freight cars and intermodal
trailers and containers), primarily a result of a strong economy throughout
the year, resulted in a $274 million increase in revenues that was
partially offset by a slight decrease in average revenue per unit which
reduced revenues by $8 million. The decrease in average revenue per unit
was caused by an unfavorable traffic mix which reduced revenues by $46
million, substantially offset by increases in average rates which increased
revenues by $38 million. Traffic volume increases were experienced by each
of the four service groups: Intermodal, 17.3%; Automotive, 10.0%; Unit
Train, 3.9%; and CORE, 1.5%. Within the CORE Service Group, Metals
increased 4.5%, Forest and Manufactured Products increased 3.1%,
Petrochemicals and Waste increased .5%, and Food and Agriculture Products
decreased 2.0%. Switching, demurrage and incidental revenues increased $12
million.
Operating expenses increased $268 million, or 9.4%, from $2,845
million in 1993 to $3,113 million in 1994. The following table sets forth
the operating expenses for the two years:
<TABLE>
<CAPTION>
Increase
(In Millions) 1994 1993 (Decrease)
------ ------ ----------
<S> <C> <C> <C>
Compensation and benefits $1,259 $1,228 $ 31
Fuel 188 178 10
Material and supplies 203 194 9
Equipment rents 381 305 76
Depreciation and amortization 278 282 (4)
Casualties and insurance 187 134 53
Other 533 524 9
Early retirement program 84 84
------ ------ ----
$3,113 $2,845 $268
====== ====== ====
</TABLE>
12
<PAGE>
Compensation and benefits costs increased $31 million, or 2.5%,
primarily due to increased wage rates which were partially offset by
reduced fringe benefits costs and lower employment levels. Compensation
and benefits as a percent of revenues was 33.9% in 1994 compared with 35.7%
in 1993.
The increase of $76 million, or 24.9%, in equipment rents reflects the
effects of increased traffic volume and new operating leases, as well as
the effects of crowded serving yards and train delays experienced primarily
in the first half of 1994.
Casualties and insurance costs increased $53 million, or 39.6%. While
the number of injuries for the year was about the same as in 1993, the cost
per claim to settle injuries has continued to escalate. The costs related
to occupational claims and the number of those claims also increased.
In the first quarter of 1994, the Company incurred a one-time pre-tax
charge of $84 million for the non-union voluntary early retirement program
and related costs (see Note 3 to the Consolidated Financial Statements
elsewhere in this Annual Report).
The Company's operating ratio (operating expenses as a percent of
revenues) was 83.8% for 1994, compared with 82.8% for 1993. Without the
$84 million one-time charge for the early retirement program, the operating
ratio for 1994 would have been 81.5%.
13
<PAGE>
Item 8. Financial Statements and Supplementary Data.
- ------ -------------------------------------------
Report of Independent Accountants
The Shareholder and Board of Directors of
Consolidated Rail Corporation
In our opinion, the consolidated financial statements listed in the
index appearing under Item 14(a) 1. and 2. present fairly, in all material
respects, the financial position of Consolidated Rail Corporation and
subsidiaries at December 31, 1994, and the results of their operations and
their cash flows for the year ended December 31, 1994, in conformity with
generally accepted accounting principles. 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 audit. We
conducted our audit of these statements in accordance with generally
accepted auditing standards which 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, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable
basis for the opinion expressed above. The consolidated financial
statements of Consolidated Rail Corporation and subsidiaries for the years
ended December 31, 1993 and 1992 were audited by other independent
accountants whose report dated January 24, 1994 expressed an unqualified
opinion on those statements.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its methods for accounting for income taxes and
postretirement benefits other than pension in 1993.
Price Waterhouse LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
January 23, 1995
14
<PAGE>
Report of Independent Accountants
The Stockholder and Board of Directors
Consolidated Rail Corporation
We have audited the 1993 and 1992 consolidated financial statements
and the financial statement schedule of Consolidated Rail Corporation and
subsidiaries listed in Item 14(a) of this Form 10-K. These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule 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 referred to above present
fairly, in all material respects, the consolidated financial position of
Consolidated Rail Corporation and subsidiaries as of December 31, 1993, and
the consolidated results of their operations and their cash flows for each
of the two years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its methods for accounting for income taxes and
postretirement benefits other than pensions in 1993.
COOPERS & LYBRAND
2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 24, 1994
15
<PAGE>
<TABLE>
CONSOLIDATED RAIL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Years ended December 31,
-------------------------
($ In Millions Except Per Share Data) 1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Revenues $3,716 $3,438 $3,345
Operating expenses ------ ------ ------
Way and structures 500 491 465
Equipment 816 703 692
Transportation 1,366 1,273 1,306
General and administrative 347 378 348
Early retirement program (Note 3) 84
------ ------ ------
Total operating expenses 3,113 2,845 2,811
------ ------ ------
Income from operations 603 593 534
Interest expense (178) (177) (172)
Reserve of intercompany receivables
(Note 4) (89)
Other income, net (Note 11) 101 114 98
Income before income taxes and the ------ ------ ------
cumulative effect of changes in
accounting principles 526 441 460
Income taxes (Note 8) 207 207 178
Income before the cumulative effect of ------ ------ ------
changes in accounting principles 319 234 282
Cumulative effect of changes in accounting
principles (Notes 1, 8 and 9) (70)
------ ------ ------
Net income $ 319 $ 164 $ 282
Net income per common share ====== ====== ======
(Notes 1 and 2)
Primary $ 3.28
Fully diluted 2.99
Ratio of earnings to fixed charges
(Note 1) 3.29x 3.00x 3.33x
See accompanying notes.
</TABLE>
16
<PAGE>
<TABLE>
CONSOLIDATED RAIL CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION> December 31,
-----------------
($ In Millions) 1994 1993
------- -------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 31 $ 26
Accounts receivable 650 649
Deferred tax assets (Note 8) 241 218
Material and supplies 164 132
Other current assets 23 20
------ ------
Total current assets 1,109 1,045
Property and equipment, net (Note 5) 6,498 6,313
Other assets 676 552
------ ------
Total assets $8,283 $7,910
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Short-term borrowings 112 79
Current maturities of long-term debt (Note 7) 130 146
Accounts payable 122 84
Wages and employee benefits 169 185
Casualty reserves 103 93
Accrued and other current liabilities (Note 6) 549 487
------ ------
Total current liabilities 1,185 1,074
Long-term debt (Note 7) 1,940 1,959
Casualty reserves 212 132
Deferred income taxes (Note 8) 1,212 1,084
Special income tax obligation (Note 8) 513 575
Other liabilities 328 343
------ ------
Total liabilities 5,390 5,167
------ ------
Commitments and contingencies (Note 12)
Stockholder's equity (Notes 2 and 10)
Preferred stock (no par value; 25,000,000 shares
authorized; no shares issued)
Common stock ($1 par value; 250,000,000 shares
authorized; 100 shares issued and outstanding)
Additional paid-in capital 2,128 2,123
Note receivable from ESOP (312) (308)
Retained earnings 1,077 928
------ ------
Total stockholder's equity 2,893 2,743
------ ------
Total liabilities and stockholder's equity $8,283 $7,910
====== ======
See accompanying notes.
</TABLE>
17
<PAGE>
<TABLE>
CONSOLIDATED RAIL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<CAPTION>
Series A Unearned Additional Note
Preferred ESOP Common Paid-In Receivable Retained Treasury
($ In Millions Except Per Share Data) Stock Compensation Stock Capital From ESOP Earnings Stock
--------- ------------ ------ ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1992 $288 $(273) $ 41 $1,909 $ 715 $ (19)
Amortization 10
Net income 282
Common dividends, $1.00 per (81)
share
Preferred dividends, $2.165 per
share (21)
Common stock split (Note 2) 42 (42)
Common shares acquired (131)
Exercise of stock options 12
Other (1) 9 8
----- ----- ----- ------ ------ ----- -----
Balance, December 31, 1992 287 (263) 83 1,888 903 (150)
Amortization 5
Net income 164
Common dividends (Note 4) (131)
Preferred dividends, $1.0825 per
share (11)
Common shares acquired (32)
Exercise of stock options 1 6
Common shares reclassified as
unissued (1) (1) 2
Corporate reorganization (Note 2) (287) 258 (84) 226 $(307) 180
Other 4 (1) 4
----- ----- ----- ----- ----- ----- -----
Balance, December 31, 1993 - - - 2,123 (308) 928 -
Net income 319
Common dividends, (Note 4) (170)
Other 5 (4)
----- ----- ----- ------ ----- ------ -----
Balance, December 31, 1994 $ - $ - $ - $2,128 $(312) $1,077 $ -
==== ===== ==== ====== ===== ====== =====
</TABLE>
See accompanying notes.
18
<PAGE>
<TABLE>
CONSOLIDATED RAIL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
------------------------
($ In Millions) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 319 $ 164 $ 282
Adjustments to reconcile net income to net
cash provided by operating activities:
Early retirement program 84
Reserve of intercompany receivables 89
Cumulative effect of accounting changes 70
Depreciation and amortization 278 282 295
Deferred income taxes 150 224 208
Special income tax obligation (62) (50) (58)
Gains from sales of property (18) (20) (6)
Pension credit (46) (43) (42)
Changes in:
Accounts receivable 1 (57) (5)
Accounts and wages payable 22 7 (153)
Settlement of tax audit (51)
Other (94) (120) (25)
----- ----- -----
Net cash provided by operating activities 634 495 496
----- ----- -----
Cash flows from investing activities
Property and equipment acquisitions (490) (566) (466)
Proceeds from disposals of properties 32 23 25
Other (18) (45) (18)
----- ----- -----
Net cash used in investing activities (476) (588) (459)
----- ----- -----
Cash flows from financing activities
Repurchase of common stock (32) (131)
Net proceeds from short-term borrowings 33 (48) 177
Payment of capital lease and equipment
obligations (96) (109) (113)
Proceeds from long-term debt 114 485 80
Payment of long-term debt (62) (86) (53)
Dividends on common stock (170) (131) (81)
Dividends on preferred stock (11) (21)
Other 28 11 12
----- ----- -----
Net cash provided by (used in) financing
activities (153) 79 (130)
----- ----- -----
Increase (decrease) in cash and cash equivalents 5 (14) (93)
Cash and cash equivalents
Beginning of year 26 40 133
----- ----- -----
End of year $ 31 $ 26 $ 40
===== ===== =====
See accompanying notes.
</TABLE>
19
<PAGE>
1. Summary of Significant Accounting Policies
------------------------------------------
Industry
--------
Consolidated Rail Corporation (the "Company") operates a freight
railroad system within the northeast and midwest United States and the
Province of Quebec.
Principles of Consolidation
---------------------------
The consolidated financial statements include the Company and majority-
owned subsidiaries. Investments in 20% to 50% owned companies are
accounted for by the equity method.
Cash Equivalents
----------------
Cash equivalents consist of commercial paper, certificates of deposit
and other liquid securities purchased with a maturity of three months
or less, and are stated at cost which approximates market value.
Material and Supplies
---------------------
Material and supplies consist mainly of fuel oil and items for
maintenance of property and equipment, and are valued at the lower of
cost, principally weighted average, or market.
Property and Equipment
----------------------
Property and equipment are recorded at cost. Depreciation is provided
using the composite straight-line method. The cost (net of salvage)
of depreciable property retired or replaced in the ordinary course of
business is charged to accumulated depreciation and no gain or loss is
recognized.
Revenue Recognition
-------------------
Revenue is recognized proportionally as a shipment moves on the
Company's system from origin to destination.
20
<PAGE>
Earnings Per Share
------------------
Earnings per share amounts are not presented for 1994 and 1993 as the
Company became a wholly-owned subsidiary of Conrail Inc. on July 1,
1993 (Note 2). For 1992, primary earnings per share are based on net
income adjusted for the effects of preferred dividends net of income
tax benefits, divided by the weighted average number of shares
outstanding during the period including the dilutive effect of stock
options. Fully diluted earnings per share assume conversion of the
convertible preferred stock ("ESOP Stock") held by the Non-union
Employee Stock Ownership Plan (the "Non-union ESOP") into common
stock. Net income applicable to fully diluted earnings per share has
been adjusted by the increase, net of income tax benefits, in ESOP-
related expenses assuming conversion of all ESOP Stock to common
stock. The weighted average numbers of shares of common stock
outstanding during the year ended December 31, 1992 were 81,743,648
and 91,856,193 primary and fully diluted, respectively.
Ratio of Earnings to Fixed Charges
----------------------------------
Earnings used in computing the ratio of earnings to fixed charges
represent income before income taxes plus fixed charges, less equity
in undistributed earnings of 20% to 50% owned companies. Fixed
charges represent interest expense together with interest capitalized
and a portion of rent under long-term operating leases representative
of an interest factor.
New Accounting Standards
------------------------
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS 106") (Note 9) and
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109") (Note 8). As a result, the Company
recorded cumulative after tax charges of $22 million and $48 million
for SFAS 106 and SFAS 109, respectively.
2. Corporate Reorganization and Presentation
-----------------------------------------
In May 1993, the shareholders of the Company approved a plan for the
adoption of a holding company structure. Under the Plan, each share
of the Company's common stock which was issued and outstanding or held
in the treasury of the Company, and each share of the Company's
convertible preferred stock, all of which were held by the Non-union
21
<PAGE>
ESOP, were automatically converted into one share of common stock and
one share of preferred stock, respectively, of a newly created holding
company, Conrail Inc. As a result, Conrail Inc. became the publicly
held entity and the Company became a wholly-owned subsidiary of
Conrail Inc. effective July 1, 1993.
The promissory note receivable, plus accrued interest, which the
Company received in 1990 from the Non-union ESOP in exchange for its
preferred shares remained with the Company and is recorded in the
stockholder's equity section of its balance sheet.
As part of the establishment of the holding company, a wholly-owned
subsidiary of the Company was transferred to Conrail Inc. The
financial position and results of operations of this subsidiary were
not material to the accompanying consolidated financial statements.
In 1992, the Company's Board of Directors authorized a two-for-one
common stock split which was effected in the form of a common stock
dividend. An amount equal to the par value of the common shares
issued was transferred from additional paid-in capital to the common
stock account. In addition, a stock dividend on the ESOP Stock in the
amount of one share of ESOP Stock for each share of ESOP Stock
outstanding was also distributed.
All reference in the financial statements with regard to the number of
shares, and related dividends and per share amounts for both common
stock (including treasury shares) and ESOP Stock have been restated to
reflect the stock split. Stock compensation and other plans that
provide for the issuance of common stock, ESOP Stock, or an amount
equivalent to their respective fair market values, have also been
amended to reflect the stock split.
3. 1994 Early Retirement Program
-----------------------------
During the first quarter of 1994, the Company recorded a charge of $51
million (after tax benefits of $33 million) for a non-union employee
voluntary early retirement program and related costs. The majority of
the cost of the early retirement program will be paid from the
Company's overfunded pension plan.
4. Related Party Transactions
--------------------------
The Company engages in various transactions with Conrail Inc. The
Company funds the cash requirements of Conrail Inc. primarily through
cash dividends, which totaled $170 million and $87 million (excluding
22
<PAGE>
$44 million paid to shareholders prior to July 1, 1993) in 1994 and
1993, respectively. The Company is obligated to pay a management fee
to Conrail Inc. equal to the amount of preferred dividends declared by
Conrail Inc. in connection with the Non-union ESOP, which totaled $21
million and $11 million in 1994 and 1993, respectively, and is
recorded in "Other income, net" on the consolidated statement of
income (Notes 9 and 11). Advances between the two companies accrue
interest at the Federal Reserve Bank's 30-day average interest rate.
The resulting interest income and interest expense on advances to and
from Conrail Inc. were immaterial to the Company's financial
statements. A summary of the Company's transactions with Conrail Inc.
are as follows:
<TABLE>
<CAPTION>
December 31,
--------------
1994 1993
---- ----
(In Millions)
<S> <C> <C>
Short-term receivable $12 $9
Short-term payable 9 21
</TABLE>
In September 1993, the Company recorded a reserve of $89 million
relating to advances made to Concord Resources Group, Inc.
("Concord"), a subsidiary of Conrail Inc.
5. Property and Equipment
----------------------
<TABLE>
December 31,
----------------
<CAPTION>
1994 1993
------ ------
(In Millions)
<S> <C> <C>
Roadway $ 6,764 $ 6,547
Equipment 1,169 1,101
Less: Accumulated depreciation (1,570) (1,521)
Allowance for disposition (241) (255)
------- -------
6,122 5,872
------- -------
Capital leases (primarily equipment) 988 1,104
Accumulated amortization (612) (663)
------- -------
376 441
------- -------
$ 6,498 $ 6,313
======= =======
</TABLE>
23
<PAGE>
The Company acquired equipment and incurred related long-term debt
under various capital leases of $8 million in 1994, $75 million in
1993 and $13 million in 1992. As part of a 1991 special charge, the
Company recorded an allowance for disposition for the sale or
abandonment of certain under-utilized rail lines and other facilities.
6. Accrued and Other Current Liabilities
-------------------------------------
<TABLE>
December 31,
-------------
<CAPTION>
1994 1993
---- ----
(In Millions)
<S> <C> <C>
Freight settlements due others $ 51 $ 62
Equipment rents (primarily car hire) 76 79
Unearned freight revenue 74 79
Property and corporate taxes 77 85
Other 271 182
---- ----
$549 $487
==== ====
</TABLE>
7. Long-Term Debt
--------------
Long-term debt outstanding, including the weighted average interest
rates at December 31, 1994, is composed of the following:
<TABLE>
December 31,
-------------
<CAPTION>
1994 1993
---- ----
(In Millions)
<S> <C> <C>
Capital leases $ 488 $ 561
Medium-term notes payable,
6.31%, due 1995 to 1998 228 225
Notes payable, 9.75%, due 2000 250 250
Debentures payable, 7.88%, due 2043 250 250
Debentures payable, 9.75%, due 2020 544 544
Equipment and other obligations, 6.23% 210 175
Commercial paper, 4.35% 100 100
------ ------
2,070 2,105
Less current portion (130) (146)
------ ------
$1,940 $1,959
====== ======
</TABLE>
24
<PAGE>
Using current market prices when available, or a valuation based on
the yield to maturity of comparable debt instruments having similar
characteristics, credit rating and maturity, the total fair value of
the Company's long-term debt, including the current portion, but
excluding capital leases, is $1,601 million and $1,782 million at
December 31, 1994 and 1993, respectively, compared with carrying
values of $1,582 million and $1,544 million at December 31, 1994 and
1993, respectively.
The Company's noncancelable long-term leases generally include options
to purchase at fair value and to extend the terms. Capital leases
have been discounted at rates which average 7.69% and are
collateralized by assets with a net book value of $375 million at
December 31, 1994.
Minimum commitments, exclusive of executory costs borne by the
Company, are:
<TABLE>
Capital Operating
Leases Leases
------- ---------
(In Millions)
<S> <C> <C>
1995 $ 98 $ 116
1996 97 120
1997 84 98
1998 78 93
1999 68 77
2000 - 2017 251 676
---- ------
Total 676 $1,180
======
Less interest portion (188)
----
Present value $488
====
</TABLE>
Operating lease rent expense was $118 million in 1994, $88 million in
1993 and $71 million in 1992.
In June 1993, the Company and Conrail Inc. filed a shelf registration
statement on Form S-3 to enable the Company to issue up to $500
million in debt securities or Conrail Inc. to issue up to $500 million
in convertible debt or equity securities. The remaining balance under
this shelf registration was $342 million at December 31, 1994.
25
<PAGE>
During 1994, the Company issued $65 million of Medium-Term Notes with
interest rates ranging from 5.70% to 6.33%, maturing over various
periods through 1997, pursuant to the registration statement on Form
S-3.
In July 1994, the Company issued $49 million of 1994 Equipment Trust
Certificates, Series A, with interest rates ranging from 5.5% to 7.6%,
maturing annually from 1995 to 2009. The certificates were used to
finance approximately 85% of the total purchase price of 36
locomotives.
Equipment and other obligations mature in 1995 through 2013 and are
collateralized by assets with a net book value of $229 million at
December 31, 1994. Maturities of long-term debt other than capital
leases and commercial paper are $65 million in 1995, $108 million in
1996, $67 million in 1997, $43 million in 1998, $13 million in 1999 and
$1,186 million in total from 2000 through 2043.
In December 1994, the Company issued $30 million of 8.45% Pass Through
Certificates, Series 1994-A due 2014. The certificates will be used
to finance equipment which the Company will use under an operating
lease, and while such certificates are not direct obligations of, or
guaranteed by the Company, the amounts paid under the lease will be
sufficient to pay principal and interest on the certificates.
The Company had $212 million of commercial paper outstanding at
December 31, 1994. Of the total amount outstanding, $100 million is
classified as long-term since it is expected to be refinanced through
subsequent issuances of commercial paper and is supported by the long-
term credit facility mentioned below.
In April 1994, the Company entered into a $500 million
uncollateralized bank credit agreement with a group of banks to
replace the $300 million credit facility that would have expired in
the first quarter of 1995. The new credit agreement, which is used
for general corporate purposes and to support the Company's commercial
paper program, provides for a $350 million revolving credit facility
with a five year maturity and a $150 million revolving credit facility
with a one year maturity. Both credit facilities require interest to
be paid on amounts borrowed at rates based on various defined short-
term rates and an annual maximum fee of .125% of the facility amounts.
26
<PAGE>
The agreement contains, among other conditions, restrictive covenants
relating to a debt ratio and consolidated tangible net worth.
Interest payments were $174 million in 1994, $164 million in 1993 and
$162 million in 1992.
27
<PAGE>
8. Income Taxes
------------
The provisions for income taxes are composed of the following:
<TABLE>
1994 1993 1992
---- ---- ----
(In Millions)
<S> <C> <C> <C>
Current
Federal $104 $ 24 $ 21
State 15 9 7
---- ---- ----
119 33 28
---- ---- ----
Deferred
Federal 125 192 179
State 25 32 29
---- ---- ----
150 224 208
---- ---- ----
Special income tax obligation
Federal (53) (42) (50)
State (9) (8) (8)
---- ---- -----
(62) (50) (58)
---- ---- -----
$207 $207 $178
==== ==== ====
</TABLE>
Effective January 1, 1993, the Company adopted the provisions of
SFAS 109 which requires a liability approach for measuring deferred
tax assets and liabilities based on differences between the financial
statement and tax bases of assets and liabilities at each balance
sheet date using enacted tax rates in effect when those differences
are expected to reverse. As a result, the Company recorded a
cumulative adjustment of $48 million. Prior years' financial
statements were not restated.
In conjunction with the public sale in 1987 of the 85% of the
Company's common stock owned by the U.S. Government, federal
legislation was enacted which resulted in a reduction of the tax basis
of certain of the Company's assets, particularly property and
equipment, thereby substantially decreasing tax depreciation
deductions and increasing future federal income tax payments. Also,
net operating loss and investment tax credit carryforwards were
cancelled. As a result of the sale-related transactions, a special
28
<PAGE>
income tax obligation was recorded in 1987 based on an estimated
effective federal and state income tax rate of 37.0%.
As a result of the increase in the federal corporate income tax rate
from 34% to 35% enacted August 10, 1993, and effective January 1,
1993, income tax expense for 1993 was increased by $38 million, of
which $34 million related to the effects of adjusting deferred income
taxes and the special income tax obligation for the rate increase.
The Company and its subsidiaries will be included in the consolidated
federal income tax return filed by Conrail Inc. for periods subsequent
to July 1, 1993. The consolidated federal income tax expense or
benefit will be allocated to the Company and its subsidiaries as though
the Company filed a separate consolidated tax return.
During 1993, the Company reached a settlement with the Internal Revenue
Service ("IRS") related to the audit of the Company's consolidated federal
income tax returns for the fiscal years 1987 through 1989. Under the
settlement, the Company paid $51 million, including interest, all of which
had been previously provided for in years prior to 1993. The Company's
consolidated federal income tax returns for the fiscal years 1990 through
1992 are currently being examined by the IRS. Federal and state income
tax payments were $80 million in 1994, $39 million in 1993 (excluding tax
settlement) and $31 million in 1992.
29
<PAGE>
Significant components of the Company's special income tax obligation and
deferred income tax liabilities and (assets) are as follows:
<TABLE>
December 31,
----------------
<CAPTION>
1994 1993
------ ------
(In Millions)
<S> <C> <C>
Current assets (primarily accounts
receivable) $ (33) $ (23)
Current liabilities (primarily accrued
liabilities and casualty reserves) (175) (163)
Reserve of intercompany receivables (31) (31)
Miscellaneous (2) (1)
------ ------
Current deferred tax asset, net $ (241) $ (218)
====== ======
Noncurrent liabilities:
Property and equipment 1,923 1,875
Other long-term assets (primarily prepaid
pension asset) 62 74
Miscellaneous 50 16
------ ------
2,035 1,965
------ ------
Noncurrent assets:
Nondeductible reserves and other
liabilities (139) (125)
Equipment obligations (12) (44)
Tax benefit transfer receivable (38) (42)
Alternative minimum tax credits (75) (77)
Miscellaneous (46) (18)
------ ------
(310) (306)
------ ------
Special income tax obligation and
deferred income tax liabilities, net $1,725 $1,659
====== ======
</TABLE>
30
<PAGE>
The tax effects of each source of deferred income taxes and special
income tax obligation for 1992 (disclosure for 1994 and 1993 is not
required nor applicable under SFAS 109) are as follows:
<TABLE>
<CAPTION>
(In Millions)
<S> <C>
Deferred taxes
Tax depreciation over book $ 84
Other property transactions 80
Casualty, wage and other accruals 78
Alternative minimum tax (40)
Other 6
----
$208
====
Special income tax obligation
Reduced tax basis depreciation (31)
Other property transactions (27)
----
$(58)
====
</TABLE>
As of December 31, 1994, the Company has approximately $75 million of
alternative minimum tax credits available to offset future U.S.
federal income taxes on an indefinite carryforward basis.
Reconciliations of the U.S. statutory tax rates with the effective tax
rates follow:
1994 1993 1992
---- ---- ----
Statutory tax rate 35.0% 35.0% 34.0%
State income taxes,
net of federal benefit 3.9 5.1 3.9
Effect of federal tax increase
on deferred taxes 7.7
Other .5 (0.9) .8
---- ---- ----
Effective tax rate 39.4% 46.9% 38.7%
==== ==== ====
31
<PAGE>
9. Employee Benefits
-----------------
Pension Plans
-------------
The Company and certain subsidiaries maintain defined benefit
pension plans which are noncontributory for all non-union employees
and generally contributory for participating union employees.
Benefits are based primarily on credited years of service and the
level of compensation near retirement. Funding is based on the
minimum amount required by the Employee Retirement Income Security
Act of 1974.
Pension credits include the following components:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
(In Millions)
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 8 $ 8 $ 7
Interest cost on projected benefit obligation 48 46 45
Return on plan assets - actual (10) (124) (66)
- deferred (77) 42 (13)
Net amortization and deferral (15) (15) (15)
----- ----- ----
$ (46) $ (43) $(42)
===== ===== ====
</TABLE>
The funded status of the pension plans and the amounts reflected in the
balance sheets are as follows:
<TABLE>
1994 1993
------ ------
(In Millions)
<S> <C> <C>
Accumulated benefit obligation ($526 million
and $532 million vested, respectively) $ 530 $ 537
====== ======
Market value of plan assets 982 1,043
Projected benefit obligation (594) (632)
------ -----
Plan assets in excess of projected
benefit obligation 388 411
Unrecognized prior service cost 44 43
Unrecognized transition net asset (139) (159)
Unrecognized net gain (117) (101)
------ ------
Net prepaid pension cost $ 176 $ 194
====== ======
</TABLE>
32
<PAGE>
The assumed weighted average discount rates used in 1994 and 1993 are
8.50% and 7.25%, respectively, and the rate of increase in future
compensation levels used in determining the actuarial present value of
the projected benefit obligation as of December 31, 1994 and 1993 is
6.0%. The expected long-term rate of return on plan assets (primarily
equity securities) in 1994 and 1993 is 9.0%.
Savings Plans
-------------
The Company and certain subsidiaries provide 401(k) savings plans for
union and non-union employees. Under the Non-union ESOP, 100% of
employee contributions are matched in the form of ESOP Stock (Note 2)
for the first 6% of a participating employee's base pay. There is no
Company match provision under the union employee plan. Savings plan
expense was $5 million in 1994 and 1993 and $4 million in 1992.
In connection with the Non-union ESOP, the Company issued 9,979,562
of the authorized 10 million shares of its ESOP Stock to the Non-
union ESOP in exchange for a 20 year promissory note with interest at
9.55% from the Non-union ESOP in the principal amount of
$288 million. In addition, unearned ESOP compensation of
$288 million was recognized as a charge to stockholders' equity
coincident with the Non-union ESOP's issuance of its $288 million
promissory note to the Company. The debt of the Non-union ESOP was
recorded by the Company and offset against the promissory note from
the Non-union ESOP. Prior to the corporate reorganization (Note 2),
unearned ESOP compensation was charged to expense as shares of ESOP
Stock were allocated to participants. An amount equivalent to the
preferred dividends declared on the ESOP Stock partially offset
compensation and interest expense related to the Non-union ESOP.
In conjunction with the formation of the holding company on July 1,
1993 (Note 2), each share of the Company's preferred stock, all of
which were held by the Non-union ESOP, was automatically converted
into one share of preferred stock of Conrail Inc. and the debt of the
Non-union ESOP and the unearned ESOP compensation accounts were
transferred to Conrail Inc. The promissory note receivable from the
Non-union ESOP plus the accrued interest were reclassified by the
Company to the stockholder's equity section of its balance sheet.
Unearned ESOP compensation is now amortized and charged to the
Company by Conrail Inc. as shares of ESOP Stock are allocated to
participants. The number of allocated ESOP shares outstanding at
33
<PAGE>
December 31, 1994 was approximately 1.5 million shares. An amount
equivalent to the preferred dividends declared on the ESOP Stock
proportionally offsets compensation expense of the Company and
interest expense of Conrail Inc. related to the Non-union ESOP.
Conrail Inc. makes dividend payments at a rate of 7.51% on the ESOP
Stock and the Company makes additional contributions in an aggregate
amount sufficient to enable the Non-union ESOP to make the required
interest and principal payments on its note.
Effective October 1, 1994, the ESOP's promissory note to the Company
was refinanced. As part of the refinancing, the interest rate was
decreased to 8.0%, from the original 9.55% interest rate, and accrued
interest of $21 million was capitalized as part of the principal
balance of the promissory note. This refinancing will not have a
material effect on the Company's financial statements.
Interest expense incurred by the Non-union ESOP on its debt to the
Company before the corporate reorganization on July 1, 1993 (Note 2)
was $15 million in 1993 and $28 million in 1992. Compensation
expense related to the Non-union ESOP was $10 million in 1994 and
1993 and $9 million in 1992. Preferred dividends paid to the Non-
union ESOP by the Company prior to the corporate reorganization
(Note 2) were $11 million in 1993 and $21 million in 1992. The
Company received debt service payments from the Non-union ESOP of $21
million in 1994, $26 million in 1993 and $21 million in 1992.
Postretirement Benefits Other Than Pensions
-------------------------------------------
The Company provides health and life insurance benefits to certain
retired non-union employees. Certain non-union employees are eligible
for retiree medical benefits, while substantially all non-union
employees are eligible for retiree life insurance benefits. Generally,
company-provided health care benefits terminate when individuals reach
age 65.
Retiree life insurance plan assets consist of a retiree life insurance
reserve held in the Company's group life insurance policy. There are no
plan assets for the retiree health benefits plan.
Effective January 1, 1993, the Company adopted SFAS 106, which requires
that the cost of retiree benefits other than pensions be accrued during
34
<PAGE>
the period of employment rather than when benefits are paid. The Company
elected the immediate recognition method allowed under the statement and
accordingly recorded a cumulative, one-time charge of $22 million (net of
tax benefits of $14 million). This accrual was in addition to the
remaining balance of $21 million which had been accrued for
postretirement health benefits for employees who participated in the
Company's 1989 non-union voluntary retirement program.
The following sets forth the plans' funded status reconciled with amounts
reported in the Company's balance sheets:
<TABLE>
1994 1993
---------------- -----------------
<CAPTION>
Life Life
Medical Insurance Medical Insurance
Plan Plan Plan Plan
------- --------- ------- ---------
(In Millions)
<S> <C> <C> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $38 $15 $31 $16
Fully eligible active plan
participants 3 1 9 1
Other active plan participants 1 4 2 6
--- --- --- ---
Accumulated benefit obligation 42 20 42 23
Market value of plan assets (6) (6)
Accumulated benefit obligation in --- --- --- ---
excess of plan assets 42 14 42 17
Unrecognized gains and (losses) 1 3 (3) (2)
Accrued benefit cost recognized --- --- --- ---
in the Consolidated Balance
Sheet $43 $17 $39 $15
=== === === ===
Net periodic postretirement
benefit cost, primarily interest
cost $ 4 $ 1 $ 3 $ 1
=== === === ===
</TABLE>
An 11 percent rate of increase in per capita costs of covered health
care benefits was assumed for 1995, gradually decreasing to 6 percent by
the year 2008. Increasing the assumed health care cost trend rates by
one percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1994 by $5 million
and would have an immaterial effect on the service cost and interest
cost components of net periodic postretirement benefit cost for 1994.
Discount rates of 8.5% and 7.0% were used to determine the accumulated
postretirement benefit obligations for both the medical and life
insurance plans in 1994 and 1993, respectively. The assumed rate of
compensation increase was 5.0% in both 1994 and 1993.
35
<PAGE>
Retiree medical benefits are funded by a combination of Company and
retiree contributions. Retiree life insurance benefits are provided by
insurance companies whose premiums are based on claims paid during the
year.
Prior to the adoption of SFAS 106, the cost of medical benefits provided
by the Company as self-insurer was recognized as claims and
administrative expenses were paid. The cost of retiree life insurance
benefits was previously recognized as the annual insurance premium. The
expense of providing both non-union retiree medical and life insurance
benefits for 1992 was $5 million.
10.Capital Stock
-------------
The Company is authorized to issue 25 million shares of preferred
stock with no par value. The Board of Directors has the authority to
divide the preferred stock into series and to determine the rights
and preferences of each.
As a result of the holding company structure that became effective on
July 1, 1993 (Note 2), each share of the Company's common stock which
was issued and outstanding or held in the treasury of the Company was
automatically converted into one share of Conrail Inc. common stock.
Subsequent to July 1, 1993, the Company had 100 shares of common
stock outstanding, all held by Conrail Inc. All of the long-term
incentive plans of the Company were amended to reflect the use of
Conrail Inc.'s common stock.
The activity and status of treasury stock follow:
1993 1992
----------- -----------
Shares, beginning of year 3,690,002 546,400
Acquired 611,182 3,143,602
Reclassified as authorized
but unissued (43,800)
Corporate reorganization
(Note 2) (4,257,384)
---------- -----------
Shares, end of year - 3,690,002
========== ===========
36
<PAGE>
Conrail Inc.'s 1987 and 1991 Long-Term Incentive Plans authorize the
granting to the Company's officers and key employees of up to
4 million and 3.2 million shares of Conrail Inc. common stock,
respectively, through stock options, stock appreciation rights, and
awards of restricted or performance shares. A stock option is
exercisable for a specified term commencing after grant at a price
not less than the fair market value of the stock on the date of
grant. The vesting of awards made pursuant to these plans is
contingent upon one or more of the following: continued employment,
passage of time or financial and other performance goals.
Conrail Inc. has granted 283,664 shares of restricted stock under the
incentive plans through December 31, 1994.
The activity and status of stock options under the incentive
plans follow:
37
<PAGE>
<TABLE>
Non-qualified Stock Options
---------------------------------
<CAPTION>
Option Price Shares
Per Share Under Option
----------------- ------------
<S> <C> <C>
Balance, January 1, 1992 $14.000 - $36.595 2,165,680
Granted $42.625 - $45.125 1,383,600
Exercised $14.000 - $25.063 (674,652)
Canceled $42.625 (3,750)
---------
Balance, December 31, 1992 $14.000 - $45.125 2,870,878
Granted $49.375 - $60.500 73,027
Exercised $14.000 - $53.875 (928,822)
Canceled $31.813 - $45.125 (48,762)
---------
Balance, December 31, 1993 $14.000 - $60.500 1,966,321
Granted $52.188 - $66.938 23,988
Exercised $14.000 - $51.375 (507,450)
Canceled $42.625 - $60.500 (118,904)
---------
Balance, December 31, 1994 $14.000 - $66.938 1,363,955
=========
Exercisable, December 31, 1994 $14.000 - $53.875 740,974
=========
Available for future grants
December 31, 1993 1,698,036
=========
December 31, 1994 1,678,293
</TABLE> =========
11.Other Income, Net
-----------------
1994 1993 1992
---- ---- ----
(In Millions)
Interest income $ 34 $ 40 $ 40
Rental income 53 56 60
Property sales 18 20 6
Management fee (21) (11)
Other, net 17 9 (8)
---- ---- ----
$101 $114 $ 98
==== ==== ====
38
<PAGE>
12.Commitments and Contingencies
-----------------------------
Environmental
-------------
The Company is subject to various federal, state and local laws and
regulations regarding environmental matters. The Company is a party to
various proceedings brought by both regulatory agencies and private
parties under federal, state and local laws, including Superfund laws,
and has also received inquiries from governmental agencies with respect
to other potential environmental issues. At December 31, 1994, the
Company has received, together with other companies, notices of its
involvement as a potentially responsible party or requests for
information under the Superfund laws with respect to cleanup and/or
removal costs due to its status as an alleged transporter, generator or
property owner at 128 locations. However, based on currently available
information, the Company believes that it may have some potential
responsibility at only 53 of these sites. Due to the number of parties
involved at many of these sites, the wide range of costs of possible
remediation alternatives, the changing technology and the length of time
over which these matters develop, it is often not possible to estimate
the Company's liability for the costs associated with the assessment and
remediation of contaminated sites. Although the Company's operating
results and liquidity could be significantly affected in any quarterly or
annual reporting period if it were held principally liable in certain of
these actions, at December 31, 1994, the Company had accrued $74 million,
an amount it believes is sufficient to cover the probable liability and
remediation costs that will be incurred at Superfund sites and other
sites based on known information and using various estimating techniques.
The Company believes the ultimate liability for these matters will not
materially affect its consolidated financial condition.
The Company spent $8 million in 1994 and $7 million in each of 1993
and 1992 for environmental remediation and anticipates spending in
1995, an amount comparable to that spent in each of the last three
years. In addition, the Company's capital expenditures for
environmental control and abatement projects were approximately $5
million in 1994 and $2 million in 1993, and are anticipated to be
approximately $9 million in 1995.
The Environmental Quality Department of the Company is charged with
promoting the Company's compliance with laws and regulations
affecting the environment and instituting environmentally sound
39
<PAGE>
operating practices. The department monitors the status of the
sites where the Company is alleged to have liability and continually
reviews the information available and assesses the adequacy of the
recorded liability.
Other
-----
The Company is involved in various legal actions, principally relating
to occupational health claims, personal injuries, casualties, property
damage and loss and damage. The Company has recorded liabilities on
its balance sheet for amounts sufficient to cover the expected
payments for such actions. At December 31, 1993 these liabilities are
presented net of estimated insurance recoveries of approximately $80
million. At December 31, 1994, estimated insurance recoveries are
included in "Other assets."
The Company may be contingently liable for approximately $88 million
at December 31, 1994 under indemnification provisions related to sales
of tax benefits.
In October 1994, Locomotive Management Services, a general partnership
of which the Company holds a fifty percent interest, issued
approximately $96 million of Equipment Trust Certificates to fund 100%
of the purchase price of 60 new locomotives. While the principal and
interest payments on the certificates will be fully guaranteed by the
Company, through a sharing agreement with its partner, the Company's
portion of the guarantee was reduced to approximately $80 million.
40
<PAGE>
13.Condensed Quarterly Data (Unaudited)
------------------------------------
<TABLE>
First Second Third Fourth
----------- ----------- ---------- ----------
1994 1993 1994 1993 1994 1993 1994 1993
---- ---- ---- ---- ---- ---- ---- ----
<CAPTION> ($ In Millions Except Per Share)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $843 $816 $949 $873 $943 $842 $981 $907
Income (loss) from
operations (33) 85 189 158 192 159 255 191
Income (loss) before
the cumulative effect
of changes in
accounting principles (33) 46 101 85 104 4 147 99
Net income (loss) (33) (28) 101 85 104 8 147 99
Income per common share
before the cumulative
effect of changes in
accounting principles:
Primary - .52 - 1.01 - - - -
Fully diluted - .52 - .92 - - - -
Net income (loss) per
common share:
Primary - (.39) - 1.01 - - - -
Fully diluted - (.39) - .92 - - - -
Ratio of earnings to
fixed charges - 2.25x 4.04x 3.65x 4.13x 2.13x 4.76x 3.82x
Dividends per common
share - .275 - .275 - - - -
Market prices per
common share
(New York Stock Exchange)
High - 60 1/2 - 59 7/8 - - - -
Low - 47 1/2 - 50 - - - -
</TABLE>
Due to the formation of the holding company (Note 2), earnings,
dividends, and market price per share amounts are not presented for
periods subsequent to July 1, 1993.
During the first quarter of 1994, the Company recorded a charge of $51
million (after tax benefits of $33 million) for a non-union employee
voluntary retirement program and related costs (Note 3). After this one-
time charge, earnings were insufficient by $55 million to cover fixed
charges for the quarter.
Effective January 1, 1993, the Company adopted SFAS 106 and SFAS 109,
related to the accounting for postretirement benefits other than
pensions and for income taxes, respectively. As a result, the Company
recorded cumulative after tax charges totaling $74 million in the first
quarter of 1993. The cumulative after tax charges were reduced to $70
41
<PAGE>
million as a result of the transfer of a wholly-owned subsidiary to
Conrail Inc. (Notes 1, 8 and 9).
During the third quarter of 1993, the Company recorded a reserve of $89
million relating to advances made to Concord (Note 4). Also, in the
third quarter, as a result of the increase in the federal corporate
income tax rate enacted August 10, 1993 and effective January 1, 1993,
income tax expense for the third quarter of 1993, includes a charge of
$36 million, primarily related to the adjustment of deferred taxes and
the special income tax obligation as required by SFAS 109 (Note 8).
42
<PAGE>
Item 9. Changes in and Disagreements with Accountants
- ------ ---------------------------------------------
on Accounting and Financial Disclosure.
--------------------------------------
Previously reported in the Company's Current Report on Form 8-K,
filed February 18, 1994.
PART III
Item 10. Directors and Executive Officers 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).
and
Item 13. Certain Relationships and Related Transactions.
- ------- ----------------------------------------------
Information omitted in accordance with General Instruction
J(2)(c).
43
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement
- ------- -----------------------------
Schedules, and Reports on Form 8-K.
----------------------------------
(a) The following documents are filed as a part of this report:
1. Financial Statements: Page
Reports of Independent Accountants..................... 14
Consolidated Statements of Income for each of the
three years in the period ended December 31, 1994. 16
Consolidated Balance Sheets at December 31, 1994
and 1993 ......................................... 17
Consolidated Statements of Stockholder's
Equity for each of the three years in the
period ended December 31, 1994.................... 18
Consolidated Statements of Cash Flows for each of
the three years in the period ended
December 31, 1994 .............................. 19
Notes to Consolidated Financial Statements............. 20
2. Financial Statement Schedules:
The following financial statement schedules should be read in
connection with the financial statements listed in Item 14(a)1
above.
Index to Financial Statement Schedules
--------------------------------------
Page
Schedule I - Valuation and Qualifying Accounts S-1
Schedules other than those listed above are omitted for reasons
that they are not required, are not applicable, or the
information is included in the financial statements or related
notes.
44
<PAGE>
3. Exhibits:
Exhibit No.
----------
2 Agreement and Plan of Merger among Consolidated Rail
Corporation, Conrail Inc. and Conrail Subsidiary Corporation,
dated as of February 17, 1993, filed as Appendix A to the
Proxy Statement of the Registrant, dated April 16, 1993 and
incorporated herein by reference.
3.1 Amended and Restated Articles of Incorporation of the
Registrant as amended through March 7, 1994.
3.2 Bylaws of the Registrant, filed as Exhibit 3.2 to the
Registrant's Report on Form 10-K for the year ended December
31, 1993 and incorporated herein by reference.
3.3 Amendment to Bylaws of the Registrant, as of March 15, 1995.
4.1 Articles of Incorporation of the Registrant filed as Exhibit
3.1 to the Registrant's Report on Form 10-K for the year
ended December 31, 1992 and incorporated herein by reference.
4.2 Form of Certificate of Common Stock, par value $1.00 per
share, of the Registrant, filed as Exhibit 4.7 to the
Registrant's Registration Statement on Form S-8 (No. 33-
19155) and incorporated herein by reference.
4.3 Form of Indenture between the Registrant and The First
National Bank of Chicago, as Trustee, with respect to the
issuance of up to $1.25 billion aggregate principal amount of
the Registrant's debt securities, filed as Exhibit 4 to the
Registrant's Registration Statement on Form S-3 (Registration
No. 33-34040) and incorporated herein by reference.
In accordance with Item 601(b)(4)(iii) of Regulation S-K,
copies of instruments of the Registrant with respect to the
rights of holders of certain long-term debt are not filed
herewith, or incorporated by reference, but will be furnished
to the Commission upon request.
10.1 Second Amended and Restated Northeast Corridor Freight
Operating Agreement dated October 1, 1986 between
National Railroad Passenger Corporation and Consolidated Rail
Corporation, filed as Exhibit 10.1 to the Registrant's
45
<PAGE>
Registration Statement on Form S-1 (Registration
No. 33-11995) and incorporated herein by reference.
10.2 Letter agreements dated September 30, 1982 and July 19, 1986
between Consolidated Rail Corporation and The Penn Central
Corporation, filed as Exhibit 10.5 to the Registrant's
Registration Statement on Form S-1 (Registration
No. 33-11995) and incorporated herein by reference.
10.3 Letter agreement dated March 16, 1988 between Consolidated
Rail Corporation and Penn Central Corporation relating to
hearing loss litigation, filed as Exhibit 19.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1988 and incorporated herein by reference.
11 Statement of earnings per share computations.
12 Computation of the ratio of earnings to fixed charges.
23.1 Consent of Independent Accountants.
23.2 Consent of Independent Accountants.
24 Each of the officers and directors signing this Annual
Report on Form 10-K has signed a power of attorney, contained
on page 48 hereof, with respect to amendments to this Annual
Report.
27 Financial Data Schedule.
46
<PAGE>
(b) Reports on Form 8-K.
-------------------
Current Report on Form 8-K dated December 31, 1994, filed in
connection with the Registrant's issuance of $29,738,000 of 8.45%
1994-A Pass Through Trust Certificates Due 2014 pursuant to its
current Registration Statement on Form S-3 (No. 33-64670).
(c) Exhibits.
--------
The Exhibits required by Item 601 of Regulation S-K as listed in
Item 14(a)3 are filed herewith or incorporated herein by
reference.
(d) Financial Statement Schedules.
-----------------------------
Financial statement schedules and separate financial statements
specified by this Item are included in Item 14(a)2 or are
otherwise omitted for reasons that they are not required or are
not applicable.
47
<PAGE>
POWER OF ATTORNEY
-----------------
Each person whose signature appears below under
"SIGNATURES" hereby authorizes H. William Brown and Bruce B.
Wilson, or either of them, to execute in the name of each
such person, and to file, any amendment to this report and
hereby appoints H. William Brown and Bruce B. Wilson, or
either of them, as attorneys-in-fact to sign on his or her
behalf, individually and in each capacity stated below, and
to file any and all amendments to this report.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act 1934, Consolidated Rail
Corporation has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CONSOLIDATED RAIL CORPORATION
Date: March 15, 1995
By /s/ James A. Hagen
------------------------
James A. Hagen
Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below on this 15th
day of March, 1994, by the following persons on behalf of
Conrail Inc. and in the capacities indicated.
Signature Title
/s/ James A. Hagen
- --------------------------- Chairman and Chief Executive
James A. Hagen Officer and Director
(Principal Executive Officer)
/s/ H. William Brown
- --------------------------- Senior Vice President - Finance
H. William Brown and Administration
(Principal Financial Officer)
48
<PAGE>
/s/ Donald W. Mattson
- --------------------------- Vice President - Controller
Donald W. Mattson (Principal Accounting Officer)
/s/ H. Furlong Baldwin
- --------------------------- Director
H. Furlong Baldwin
/s/ Claude S. Brinegar
- --------------------------- Director
Claude S. Brinegar
/s/ Kathleen Foley Feldstein
- ---------------------------- Director
Kathleen Foley Feldstein
/s/ Roger S. Hillas
- --------------------------- Director
Roger S. Hillas
/s/ E. Bradley Jones
- --------------------------- Director
E. Bradley Jones
/s/ David M. LeVan
- --------------------------- Director
David M. LeVan
/s/ David B. Lewis
- --------------------------- Director
David B. Lewis
/s/ John C. Marous
- --------------------------- Director
John C. Marous
/s/ Raymond T. Schuler
- --------------------------- Director
Raymond T. Schuler
49
<PAGE>
E-1
EXHIBIT INDEX
Exhibit No.
- ----------
3.1 Amended and Restated Articles of Incorporation of the Registrant
3.3 Amendment to the Bylaws of the Registrant dated as of March 15,
1995
11 Statement of earnings per share computations
12 Computation of the ratio of earnings to fixed charges
23.1 Consent of Independent Accountants
23.2 Consent of Independent Accountants
27 Financial Data Schedule
Exhibits 2, 3.2, 4.1, 4.2, 4.3, 10.1, 10.2 and 10.3 are incorporated herein
by reference. Powers of attorney with respect to amendments to this Annual
Report are contained on page 48.
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
CONSOLIDATED RAIL CORPORATION
ARTICLE ONE
The name of the Corporation is Consolidated Rail Corporation.
ARTICLE TWO
The location and post office address of the Corporation's registered
office in the Commonwealth of Pennsylvania are 6 Penn Center Plaza,
Philadelphia, Pennsylvania 19103.
ARTICLE THREE
1. The purpose or purposes of the Corporation are to engage in and
do any lawful act concerning any or all lawful business for which
corporations may be incorporated under the provisions of the Pennsylvania
Business Corporation Law, Act of May 5, 1933 (P.L. 364), as amended, under
which the Corporation is incorporated, and the Corporation shall have
unlimited power to engage in and do any such lawful act.
2. It shall be a fundamental purpose of the Corporation to maintain
continued rail service in its service area.
ARTICLE FOUR
The term of the Corporation's existence is perpetual.
1
<PAGE>
ARTICLE FIVE
1. The total number of shares of capital stock which the Corporation
shall have authority to issue is two hundred and seventy-five million
(275,000,000) shares, of which two hundred fifty million (250,000,000)
shares shall be Common Stock, par value $1 per share, and twenty-five
million (25,000,000) shares shall be preferred stock, no par value.
2. The Board of Directors shall have the authority to divide the
preferred stock into series and to fix and determine the relative rights
and preferences of any series so established, including without limitation
rates of dividends and whether fixed or not and whether cumulative or non-
cumulative, conversion rights, if any, and conversion prices, preferences
upon liquidation, redemption rights, if any, and redemption prices, and
voting rights; provided, however, that the affirmative vote of the holders
of any class or series of preferred stock, as a class or series, shall not
be required for any merger or other transaction involving a change in
control of the Corporation, nor shall any share of preferred stock entitle
the holder thereof to more than one vote with respect to any merger or such
other transaction or in the election of directors of the Corporation. The
Board of Directors shall have the authority to provide for the issuance of
any such class or series of preferred stock.
3. The holders of the Common Stock shall be entitled to receive
dividends in such amounts and when, as and if lawfully declared by the
Board of Directors from time to time.
2
<PAGE>
4. The holders of the Common Stock shall be entitled to receive in
voluntary or involuntary liquidation of the Corporation all assets of the
Corporation after payment or satisfaction of any preferences in liquidation
on any outstanding preferred stock of the Corporation and all debts and
obligations of the Corporation, including costs of liquidation.
5. No holder of any class or series of the Corporation's capital
stock, now or hereafter authorized, shall have any preemptive rights to
purchase or receive any shares of any class or series of capital stock, or
any securities convertible into or exchangeable for such shares, or any
rights, warrants or options to subscribe for, purchase or receive such
shares or convertible or exchangeable securities, which may at any time be
issued, sold or offered for sale by the Corporation.
6. Except as otherwise required by the Conrail Privatization Act
(P.L. 99-509), holders of the Common Stock shall be entitled to cast one
vote for each share held on all matters presented upon which the holders
are entitled to vote. Until such time as all of the government's interest
in the Corporation's Common Stock is sold, the United States Secretary of
Transportation shall be entitled to appoint three members of the
Corporation's Board of Directors. No holder of any class or series of the
Corporation's capital stock, now or hereafter authorized, shall be entitled
to vote cumulatively in the election of directors.
3
<PAGE>
ARTICLE SIX
Except as otherwise required by the Conrail Privatization Act (P.L. 99-
509), the number of directors of the Corporation shall be as stated in the
Bylaws of the Corporation.
ARTICLE SEVEN
The Bylaws of the Corporation may be amended or repealed by a majority
vote of the shareholders entitled to vote thereon at any regular or special
meeting duly convened after notice to such holders of that purpose. The
Bylaws of the Corporation may also be amended or repealed by a majority of
the members of the Board of Directors at any regular or special meeting
duly convened, subject always to the power of the shareholders to change
such action.
ARTICLE EIGHT
From time to time any provision of these Amended and Restated Articles
of Incorporation may be amended or repealed, or any provision may be added
to or inserted in these Articles, provided that such amendment, repeal,
addition or insertion is consistent with law and is accomplished in the
manner prescribed by law and these Articles, and all rights at any time
conferred upon the shareholders of the Corporation are granted subject to
the provisions of this Article.
Amended May 17, 1989
4
<PAGE>
STATEMENT WITH RESPECT TO
CONTINUATION OF PROCEDURE
-------------------------
1. The name of the Corporation is Consolidated Rail Corporation.
2. The entire board of directors, or a class of the board, where the
Board is classified with respect to the power to elect directors, or any
individual director may be removed form office without assigning any cause
by the vote of shareholders entitled to cast at least a majority of the
votes which all shareholders would be entitled to cast at any annual
election of directors or of such class of directors. The preceding
sentence shall be interpreted in the same manner as the first sentence of
section 405 of the act of May 5, 1933 (P.L. 364, No. 106), known as the
Business Corporation Law of 1933, as amended by the act of July 20, 1968
(P.L. 459, No. 216).
3. The filing of this Statement with Respect to Continuation of
Procedure was authorized by the Board of Directors of Consolidated Rail
Corporation.
CONSOLIDATED RAIL CORPORATION
By: /s/ James A. Hagen
---------------------------
James A. Hagen
Chairman of the Board,
President and Chief
Executive Officer
Dated: 9/25/89 Filed in the Dept. of State on
September 29, 1989
No. 89681495
5
<PAGE>
CONSOLIDATED RAIL CORPORATION
BOARD OF DIRECTORS
SEPTEMBER 20, 1989
STATEMENT WITH RESPECT TO
CONTINUATION OF PROCEDURE
Effective October 1, 1989, the recodification and amendment of
Pennsylvania's Business Corporation Law will become effective. As
indicated earlier the statutory change may necessitate amendments to the
Corporation's Articles and Bylaws. Legal counsel is continuing to review
the new law to determine if changes are desirable. Because the law is
still subject to technical amendment, a final review of its impact should
take place after its effective date. Once this process is complete and if
changes are necessary, materials will be prepared for Board consideration.
One particular provision, however, must be considered by the Board
prior to October 1, 1989 because the Board's options are limited after that
date.
Under the existing Pennsylvania law, a member of the Board of
Directors of a Pennsylvania corporation may be removed without cause by
vote of a majority of the outstanding voting shares. Under the new
Pennsylvania corporation law referred to above, a member of the Board of
Directors may be removed without cause by a vote of a majority of the votes
cast at a shareholders meeting, which is generally a much smaller number.
The new law will not apply in two circumstances:
6
<PAGE>
- shareholders approve a bylaw that provides otherwise (the
Corporation's shareholders have not done so, but could anytime in the
future);
- pursuant to the Board's approval, the Chairman, President and
Chief Executive Officer files on behalf of the Corporation a "Statement
With Respect to Continuation of Procedure", prior to October 1, 1989, which
will have the effect of preserving the minimum vote required under existing
law, i.e., a director may be removed without cause by a vote of the
majority of all outstanding voting shares.
Management recommends that the Board authorize the filing of such a
statement to preserve the higher threshold.
7
<PAGE>
CONSOLIDATED RAIL CORPORATION
UNANIMOUS WRITTEN CONSENT OF DIRECTORS
IN LIEU OF A MEETING OF THE BOARD OF DIRECTORS
The undersigned, being all the Directors of Consolidated Rail
Corporation, hereby waive notice and the holding of a meeting of the Board
of Directors and pursuant to Section 402(f) of the Pennsylvania Business
Corporation Law hereby consent to the adoption of the following resolution:
RESOLVED, that the Chairman, President and Chief Executive Officer be,
and hereby is, authorized in the name and on behalf of the Corporation to
file and execute a copy of the attached Statement With Respect to
Continuation of Procedure with the Commonwealth of Pennsylvania and to take
such further action as may be necessary or appropriate to ensure the
effectiveness of such Statement.
This Unanimous Written Consent of Directors may be executed in one or
more counterparts and shall be valid and effective if and when all the
Directors have executed at least one counterpart and all counterparts have
been filed with the Corporate Secretary.
IN WITNESS WHEREOF, the undersigned have caused this document to be
signed this _________ day of September, 1989.
_________________________________ ________________________________
H. Furlong Baldwin Stanley E. G. Hillman
_________________________________ ________________________________
Daniel B. Burke E. Bradley Jones
_________________________________ ________________________________
Robert K. Campbell David B. Lewis
_________________________________ ________________________________
Ann F. Friedlaender William G. Milliken
_________________________________ ________________________________
James A. Hagen Raymond T. Schuler
_________________________________ ________________________________
Roger S. Hillas David H. Swanson
8
<PAGE>
Microfilm Number Filed with the Department of State on March 23, 1990
----- --------------
Entity Number /s/ C.A. Lewis, Secretary of the Commonwealth
--------- ----------------------------------------------
STATEMENT WITH RESPECT TO SHARES-DOMESTIC BUSINESS CORPORATION
DSCS:15-1522 (Rev. 89)
In compliance with the requirements of 15 Pa.C.S.1522(b) (relating
to statement with respect to shares), the undersigned corporation, desiring
to state the designation and voting rights, preferences, limitations, and
special rights, if any, of a class or series of its shares, hereby states
that:
1. The name of the corporation is: Consolidated Rail Corporation
-----------------------------
2. (Check and complete one of the following):
The resolution amending the Articles under 15 Pa.C.S.
1522(b) (relating to divisions and determinations by the board),
set forth in full, is as follows:
X The resolution amending the Articles under 15 Pa.C.S.
--- 1522(b) is set forth in full in Exhibit A attached hereto
and made a part hereof.
3. ___ The aggregate number of shares of such class or series
established and designated by (a) such resolution, (b)
all prior statements, if any, filed under 15 Pa.C.S. 1522
or corresponding provisions of prior law with respect
thereto, and (c) any other provision of the Articles
is 7,500,000 shares.
---------
4. ___ The resolution was adopted by the Board of Directors or an
authorized committee thereof on March 22, 1990.
--------------
5. (Check, and if appropriate complete, one of the following):
X The resolution shall be effective upon filing this statement
--- with respect to shares in the Department of State.
The resolution shall be effective on
--- -------------------
IN TESTIMONY WHEREOF, the undersigned corporation has caused this
statement to be signed by a duly authorized officer thereof
this 22 day of March, 1990.
---- ----- ----
CONSOLIDATED RAIL CORPORATION
-----------------------------
(Name of Corporation)
9
<PAGE>
BY: /s/ T.O'Toole
--------------------------------------
(Signature)
TITLE: Vice President and General Counsel
-----------------------------------
10
<PAGE>
Microfilm Number Filed with the Department of State on August 5, 1992
----- --------------
Entity Number
-------- ----------------------------------------------
STATEMENT WITH RESPECT TO SHARES-DOMESTIC BUSINESS CORPORATION
DSCS:15-1522 (Rev. 89)
In compliance with the requirements of 15 Pa.C.S.1522(b) (relating
to statement with respect to shares), the undersigned corporation, desiring
to state the designation and voting rights, preferences, limitations, and
special rights, if any, of a class or series of its shares, hereby states
that:
1. The name of the corporation is: Consolidated Rail Corporation
-----------------------------
2. (Check and complete one of the following):
The resolution amending the Articles under 15 Pa.C.S.
1522(b) (relating to divisions and determinations by the board),
set forth in full, is as follows:
X The resolution amending the Articles under 15 Pa.C.S.
--- 1522(b) is set forth in full in Exhibit A attached hereto
and made a part hereof.
3. ___ The aggregate number of shares of such class or series
established and designated by (a) such resolution, (b)
all prior statements, if any, filed under 15 Pa.C.S. 1522
or corresponding provisions of prior law with respect
thereto, and (c) any other provision of the Articles
is 10,000,000 shares.
----------
4. ___ The resolution was adopted by the Board of Directors or an
authorized committee thereof on July 15, 1992.
--------------
5. (Check, and if appropriate complete, one of the following):
The resolution shall be effective upon filing this statement
--- with respect to shares in the Department of State.
X The resolution shall be effective on September 14, 1992 at
--- 5:00 p.m. Eastern Daylight Time. ------------------
-------------------------------
IN TESTIMONY WHEREOF, the undersigned corporation has caused this
statement to be signed by a duly authorized officer thereof
this 03 day of August, 1992.
---- ------ ----
CONSOLIDATED RAIL CORPORATION
-----------------------------
(Name of Corporation)
11
<PAGE>
BY: /s/ H.W. Brown
--------------------------------------
(Signature)
TITLE: Vice President-Finance and Administration
------------------------------------------
12
<PAGE>
EXHIBIT A
RESOLVED, that the Chairman, President and Chief Executive Officer,
the Senior Vice President - Finance and Administration and the Senior Vice
President - Law of the Corporation be, and each of them hereby is,
authorized and directed to file, in the name and on behalf of the
Corporation, with the Commonwealth of Pennsylvania pursuant to section 1522
of the Pennsylvania Business Corporation Law, an amendment to the Statement
with Respect to Shares relating to the Series A ESOP Convertible Junior
Preferred Stock (the "ESOP Stock") increasing the number of shares of ESOP
Stock thereunder from 7,500,000 to 10,000,000 shares and making such other
changes in, and adjustments pursuant to, such Statement as any of such
officers shall deem appropriate in order to carry out the intention of
these resolutions; and be it
FURTHER RESOLVED, that pursuant to the Statement with Respect to
Shares, subject to its amendment in accordance with the preceding
resolution, the Corporation hereby declares a stock dividend on its ESOP
Stock outstanding as of the close of business on the Record Date, payable
September 15, 1992 to each holder of record of ESOP Stock as of the close
business on the Record Date, in the amount of one share of ESOP Stock for
each share of ESOP Stock outstanding as of the close of business on the
Record Date, and the Corporation be, and it hereby is, authorized and
directed to issue the shares of ESOP Stock constituting such dividend on
September 15, 1992.
13
<PAGE>
Pursuant to the authority delegated to and vested I me
by the Board of Directors of Consolidated Rail Corporation on July 15, 1992
in accordance with the foregoing resolutions, the Statement With Respect
to Shares filed with the Department of Statement of the Commonwealth of
Pennsylvania on March 23, 1990 (the "Statement With Respect to Shares") is
hereby amended, effective 5:00 p.m., Eastern Daylight Time, on September 14,
1992, as follows:
1. The first sentence of Section 1(A) of Exhibit A to
the Statement With Respect to Shares is hereby amended to read as follows:
The shares of such series shall be designated as "Series A ESOP
Convertible Junior Preferred Stock" (the "Series A Preferred
Stock") and the number of shares constituting the Series A
Preferred Stock shall be 10,000,000.
2. The first sentence of Section 2(A) of Exhibit A to
the Statement With Respect to Shares is hereby amended to read as follows:
Subject to the rights of the holders of any shares of
any series of Preferred Stock (or any similar stock) ranking prior
and superior to the Series A Preferred Stock with respect
to dividends, the holders of shares of Series A Preferred
Stock, in preference to the holders of Common Stock and of any
other Junior Stock (as defined in Section 2(D) hereof), shall be
entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available for the purpose, cumulative
cash dividends payable in an amount equal to $2.165 per
share per annum and no more (such amount beg referred to herein
as the "Dividend Amount"), payable quarterly in arrears, one-
quarter on the last day of each March, June, September and
December in each year commencing June 30, 1990 (each such date being
referred to herein as a "Dividend Payment Date"), commencing on the
first Dividend Payment Date after the first issuance of a
share of Series A Preferred Stock.
3. The first sentence of Section 4(A) of Exhibit A to
the Statement
With Respect to Shares is hereby amend to read as follows:
Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (I) to the
holders of shares of stock ranking junior with respect to rights
to receive distributions upon liquidation, dissolution or winding
up to the Series A Preferred Stock unless, prior thereto, the
holders of shares of Series A Preferred Stock shall have received
an amount in cash of $28.84375 per share (such amount being
14
<PAGE>
referred to herein as the "Liquidation Preference"), plus an amount
in cash equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, up to the date of such
payment, or (ii) to the holders of shares of stock to receive
distributions upon liquidation, Preferred Stock, except distributions
made ratably on the Series A Preferred Stock and all such parity
stock in proportion to the total amount to which the holders of
all such shares are entitled upon such liquidation, dissolution
or winding up.
/s/ H.W. Brown
--------------------------
H. William Brown
Senior Vice President -
Finance and Administration
15
<PAGE>
(CHANGES) BUREAU USE ONLY:
Docketing Statement DSCB:15-134B (Rev. 90) ___ Revenue ___ Labor & Industry
___ Other________________________
Filing Fee: None File Code________________________
Filed Date_______________________
Microfilm Number_________________
This form (file in triplicate) and all accompanying documents shall be
mailed to:
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
CORPORATION BUREAU
308 NORTH OFFICE BUILDING
HARRISBURG, PA 17120-0029
Part I. COMPLETE FOR EACH FILING:
Current name of entity or registrant affected by the submittal to
which this statement relates: (survivor or new corporation if
merger or consolidation) Consolidated Rail Corporation
-----------------------------
Entity number, if known:_______________NOTE: ENTITY NUMBER is the
computer index number assigned to an entity upon initial filing in
the Department of State.
Incorporation/qualification date in Pa.: Feb. 10, 1976 State of
-------------
Incorporation: Pennsylvania
------------
Specified effective date, if any: See Part III, below
-------------------
Part II. COMPLETE FOR EACH FILING: This statement is being submitted
with (check proper box):
* Articles of Amendment: complete Section A only/Amended
--- Statement w/Respect to Shares
___ Amended Certificate of Authority: complete Section A only
___ Articles of Merger: complete Section B
___ Articles of Consolidation: complete Section C
___ Articles of Division: complete Section D
___ Articles of Conversion: complete Section A and E only
___ Statement of Merger, Consolidation or Division: complete Section
B, C or D
___ Statement of Correction: complete Section A only
___ Statement of Termination: complete Section H
___ Statement of Revival: complete Section G
16
<PAGE>
___ Dissolution by Shareholders or Incorporators before Commencement
of Business: complete Section F only
___ Amendment of Certificate of Limited Partnership: complete
Section A only
Part III. COMPLETE IF APPROPRIATE: The delayed effective date of the
accompanying submittal is:
September 14, 1992 5:00 p.m.
------------------------------
(PA. - 336 - 9/12/91) month day year hour,if any
18
<PAGE>
DSCB:15-134B (Rev. 90)-2
Section A. CHANGES TO BE MADE TO THE ENTITY NAMED IN PART 1:
(Check box/boxes which pertain)
Name: Consolidated Rail Corporation
-----------------------------
Registered Office: Six Penn Center, Philadelphia, PA 19103
---------------------------------------
Number & street/RD number & box number City State Zip Country
Purpose: increase authorized number of Series A Preferred from 7.5 to
-------------------------------------------------------------
10 million shares 275 million shares: 250 million common; 25
-------------------------------------------------------------
million preferred
-----------------
Stock: aggregate number of shares authorized _______ (attach
additional provisions, if any)
Term of Existence: Perpetual
---------
Other:______________________________________________________________
Section B. MERGER (Complete Section A if any changes to survivor
corporation):
MERGING CORPORATIONS ARE: (List only the merging corporations -
SURVIVOR IS LISTED IN PART 1)
1. Name:_____________________________________________________________
Entity Number, if known:________Inc./qual. date in Pa____________
State of Incorporation__________________
2. Name:_______________________________________________________
Entity Number, if known:________Inc./qual. date in Pa____________
State of Incorporation__________________
Attach sheet containing above corporate information if there are
additional merging corporations.
Section C. CONSOLIDATION (NEW corporation information should be
completed in Part 1. Also, complete and attach DOCKETING
STATEMENT DSCB:15-134A for the NEW corporation formed.)
CONSOLIDATING CORPORATIONS ARE:
1. Name:_______________________________________________________
Entity Number, if known:________Inc./qual. date in Pa____________
State of Incorporation__________________
18
<PAGE>
2. Name:____________________________________________
Entity Number, if known:________Inc./qual. date in Pa____________
State of Incorporation__________________
Attach sheet containing above corporate information if there are
additional consolidating corporations.
(PA. - 336)
19
<PAGE>
Microfilm Number Filed with the Department of State on March 7, 1994
------ -------------
Entity Number 627003 __/s/___________________________________________
------ Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 90)
In compliance with the requirements of 15 Pa. C.S.1915 (relating to
articles of amendment), the undersigned business corporation, desiring to
amend its Articles, hereby states that:
1. The name of the corporation is: CONSOLIDATED RAIL CORPORATION
2. The (a) address of this corporation's current registered office
in this Commonwealth or (b) name of its commercial registered office
provider and the county of venue is (the Department is hereby
authorized to correct the following information to conform to
the records of the Department):
(a) 2001 Market Street Philadelphia PA 19101
---------------------------------------------------
Number and Street City State ZIP County
(b) c/o:____________________________________________________
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office
provider, the county in (b) shall be deemed the county in which the
corporation is located for venue and official publication purposes.
3. The statute by or under which it was incorporated is:
Pennsylvania Business Corporation Law
-------------------------------------
4. The date of its incorporation is: February 10, 1976
-----------------
5. (Check, and if appropriate complete, one of the following):
X The amendment shall be effective upon filing these Articles
--- of Amendment in the Department of State.
--- The amendment shall be effective on Feb. 28, 1994 at 11:59 p.m.
------------------------------
(for accounting purposes only) Date Hour
------------------------------
6. (Check one of the following):
___ The amendment was adopted by the shareholders (or members)
pursuant to 15 Pa. C.S. 1914(a) and (b).
X The amendment was adopted by the boardof directors
--- pursuant to 15 Pa. C.S. 1914(c).
7. (Check, and if appropriate complete, one of the following):
20
<PAGE>
X The amendment adopted by the corporation, set forth in full,
--- is as follows:
The March 22, 1990 Statement With Respect to Shares Is
Deleted.
21
<PAGE>
Exhibit 3.3
Amendment to the Bylaws of Consolidated Rail Corporation.
Effective March 15, 1995, Section 3.11 of the Bylaws of the
Corporation is amended to read in its entirety as follows:
Section 3.11. Organization. The Secretary, or in his
absence, an Assistant Secretary of the Corporation, or
in the absence of the Secretary and all Assistant
Secretaries, a person whom the chairman of such meeting
shall appoint, shall act as secretary of such meeting
and keep the minutes thereof.
<TABLE>
Exhibit 11
----------
CONSOLIDATED RAIL CORPORATION
-----------------------------
EARNINGS PER SHARE COMPUTATIONS (1)
-------------------------------
($ In Millions Except Per Share)
<CAPTION>
Year ended
December 31, 1992
<S> -----------------
Primary <C>
- -------
Net income $282
Dividends declared on Series A ESOP
convertible junior preferred stock
(ESOP Stock), net of tax benefits (14)
----
$268
====
Fully Diluted
- ------------
Net income 282
Nondiscretionary adjustment (2) (7)
----
$275
====
Weighted average number of shares (3)
- ---------------------------------
Primary
Weighted average number of common
shares outstanding 80,823,000
Effect of shares issuable under stock
option plans 920,648
----------
81,743,648
Fully diluted ==========
Weighted average number of common
shares outstanding 80,823,000
ESOP Stock 9,966,200
Effect of shares issuable under stock
option plans 1,066,993
----------
91,856,193
==========
Income per common share (3)
- -----------------------
Primary $3.28
Fully diluted 2.99
Page 1 of 2
</TABLE>
<PAGE>
Exhibit 11
----------
CONSOLIDATED RAIL CORPORATION
-------------------------------
EARNINGS PER SHARE COMPUTATIONS
-------------------------------
Notes: 1. Earnings per share computations are not presented for
1994 and 1993 since Consolidated Rail Corporation
became a wholly-owned subsidiary of Conrail Inc. on
July 1, 1993, at which time Conrail Inc. became the
publicly held entity.
2. Represents the increase, net of income tax benefits,
in ESOP-related expenses assuming conversion of all
ESOP Stock to common stock.
3. The Company's Board of Directors authorized a two-
for-one common stock split which was effected in the
form of a stock dividend distributed on September 15,
1992. The Board of Directors also declared a stock
dividend on the ESOP Stock in the amount of one share
of ESOP Stock for each share of ESOP Stock
outstanding as of August 31, 1992 and which was
distributed on September 15, 1992. All references
with regard to the number of shares for common stock,
ESOP Stock, and shares issuable under stock option
plans and per share amounts have been restated to
reflect the stock splits.
Page 2 of 2
<TABLE>
Exhibit 12
----------
CONSOLIDATED RAIL CORPORATION
-----------------------------
COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
-----------------------------------------------------
($ In Millions)
<CAPTION>
Quarters Ended Quarters Ended Quarters Ended Quarters Ended Years Ended
March 31, June 30, September 30, December 31, December 31,
-------------- -------------- -------------- -------------- -----------------
1994(1) 1993 1994 1993 1994 1993 1994 1993 1994 1993 1992
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Earnings
--------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pre-tax income (loss) $(51) $ 73 $166 $137 $ 171 $ 70 $240 $161 $526 $441 $460
Add:
Interest expense 44 44 44 46 45 43 45 44 178 177 172
Rental expense
interest factor 9 7 9 5 7 5 17 12 42 29 26
Less equity in
undistributed
earnings of 20-50%
owned companies (3) (9) (5) 2 (4) (16) (7) (3) (20) (26) 4
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Earnings available for
fixed charges (loss) $ (2) $115 $214 $190 $219 $102 $295 $214 $726 $621 $662
==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ====
Fixed Charges
-------------
Interest expense 44 44 44 46 45 43 45 44 178 177 172
Rental expense interest
factor 9 7 9 5 7 5 17 12 42 29 26
Capitalized interest 1 1 1 1 1
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Fixed charges $ 53 $ 51 $ 53 $ 52 $ 53 $ 48 $ 62 $ 56 $221 $207 $199
==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ====
Ratio of earnings to
fixed charges - 2.25x 4.04x 3.65x 4.13x 2.13x 4.76x 3.82x 3.29X 3.00x 3.33x
==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ====
<FN>
Note: For the purpose of computing the ratio of earnings to fixed charges, earnings represent income
before income taxes plus fixed charges, less equity in undistributed earnings of 20% to 50% owned
companies. Fixed charges represent interest expense together with interest capitalized and a
portion of rent under long-term operating leases representative of an interest factor.
(1) During the first quarter of 1994, the Company recorded a charge of $51 million (after tax
benefits of $33 million) for a non-union employee voluntary retirement program and related
costs. After this one-time charge, earnings were insufficient by $55 million to cover
fixed charges for the quarter.
</FN>
</TABLE>
Exhibit 23.1
------------
Consent of Independent Accountants
We hereby consent to the incorporation by reference in
the Registration Statements on Form S-3 (Nos. 33-34040
and 33-64670) of Consolidated Rail Corporation and
subsidiaries of our report dated January 23, 1995
included in this Form 10-K.
PRICE WATERHOUSE LLP
30 South Seventeenth Street
Philadelphia, Pennsylvania 19103
March 27, 1995
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the
registration statements of Consolidated Rail Corporation
and subsidiaries on Forms S-3 (File Nos. 33-34040 and 33-
64670) of our report dated January 24, 1994 on our
audits of the consolidated financial statements and
financial statement schedule of Consolidated Rail
Corporation and subsidiaries as of December 31, 1993
and for each of the two years in the period ended
December 31, 1993, which report is included in this
Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 27, 1995
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
Exhibit 27
----------
CONSOLIDATED RAIL CORPORATION
-----------------------------
FINANCIAL DATA SCHEDULE
-----------------------
($ In Millions Except Per Share)
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM FORM
10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-K.
<MULTIPLIER> 1,000,000
<S> <C>
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-START> Jan-01-1994
<PERIOD-END> Dec-31-1994
<PERIOD-TYPE> 12-MOS
<CASH> 31
<SECURITIES> 0
<RECEIVABLES> 650
<ALLOWANCES> 0
<INVENTORY> 164
<CURRENT-ASSETS> 1,109
<PP&E> 6,498
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,283
<CURRENT-LIABILITIES> 1,185
<BONDS> 1,940
0
0
<COMMON> 0
<OTHER-SE> 2,893
<TOTAL-LIABILITY-AND-EQUITY> 8,283
<SALES> 0
<TOTAL-REVENUES> 3,716
<CGS> 0
<TOTAL-COSTS> 3,113
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 178
<INCOME-PRETAX> 526
<INCOME-TAX> 207
<INCOME-CONTINUING> 319
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 319
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
Schedule I
<TABLE>
CONSOLIDATED RAIL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31,
(In Millions)
<CAPTION>
Additions
------------------
Balance at Charged to Charged Balance
Beginning Costs and to Other At End
Description of Period Expenses Accounts Deductions of Period
- ----------- ---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
(1)
1992
Casualty reserves
Current $112 $ 2 (2) $110
Noncurrent 168 $122 $11 148 (3) 153
Allowance for
disposition of property
and equipment (4) 321 44 277
1993
Casualty reserves
Current 110 17 (2) 93
Noncurrent 153 122 11 154 (3) 132
Allowance for
disposition of property
and equipment (4) 277 21 256
1994
Casualty reserves
Current 93 (10) (2) 103
Noncurrent 132 175 12 107 (3) 212
Allowance for
disposition of property
and equipment (4) 256 15 241
<FN>
(1) Charges to property accounts in connection with construction projects.
(2) Includes net transfers from noncurrent.
(3) Transfers to current.
(4) Deductions of $27 million, $21 million and $15 million in 1992, 1993 and
1994, respectively, represent net losses on asset dispositions. The
remaining $17 million deduction in 1992 represents a net reduction in
disposition requirements as a result of the decision to retain certain
rail lines.
S-1
</FN>
</TABLE>
