SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended
March 31, 1995
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or
( ) Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from to
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Commission file number 1-9064
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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 of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 Market Street, Philadelphia, Pennsylvania 19101
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(Address of principal executive offices)
(Zip Code)
(215) 209-4000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of shares of common stock outstanding (as of April 28, 1995)
100*
Registrant meets the conditions set forth in general instructions
H(1)(a) and (b) of Form 10-Q and is therefore filing this form
with the reduced disclosure format.
* Consolidated Rail Corporation is a wholly-owned subsidiary of
Conrail Inc. (CRR).
1
<PAGE>
CONSOLIDATED RAIL CORPORATION
INDEX
Page Number
PART I. FINANCIAL INFORMATION -----------
Item 1. Financial Statements:
Condensed Consolidated Statements
of Income - Quarters ended
March 31, 1995 and 1994 3
Condensed Consolidated Balance
Sheets - March 31, 1995 and
December 31, 1994 4
Condensed Consolidated Statements
of Cash Flows - Quarters ended
March 31, 1995 and 1994 5
Notes to Condensed Consolidated
Financial Statements 6
Report of Independent Accountants 7
Item 2. Management's Analysis of Results
of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
2
<PAGE>
PART I. FINANCIAL INFORMATION
CONSOLIDATED RAIL CORPORATION
Item 1. Financial Statements.
--------------------
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
($ In Millions)
Quarters ended
March 31,
--------------
1995 1994
---- ----
<S> <C> <C>
Revenues $885 $843
---- ----
Operating expenses
Way and structures 134 144
Equipment 202 211
Transportation 340 348
General and administrative 96 89
Early retirement program 84
---- ----
Total operating expenses 772 876
---- ----
Income (loss) from operations 113 (33)
Interest expense (46) (44)
Other income, net 25 26
---- ----
Income (loss) before income taxes 92 (51)
Income taxes (benefits) 39 (18)
---- ----
Net income (loss) $ 53 $(33)
==== ====
Ratio of earnings to fixed charges 2.45x -
See accompanying notes.
</TABLE>
3
<PAGE>
<TABLE>
CONSOLIDATED RAIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
($ In Millions) March 31, December 31,
1995 1994
--------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 23 $ 31
Accounts receivable 651 650
Deferred tax assets 241 241
Material and supplies 177 164
Other current assets 20 23
------ ------
Total current assets 1,112 1,109
Property and equipment, net 6,564 6,498
Other assets 729 676
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Total assets $8,405 $8,283
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Short-term borrowings 179 112
Current maturities of long-term debt 128 130
Accounts payable 158 122
Wages and employee benefits 153 169
Casualty reserves 96 103
Accrued and other current liabilities 537 549
------ ------
Total current liabilities 1,251 1,185
Long-term debt 1,977 1,940
Casualty reserves 210 212
Deferred income taxes 1,248 1,212
Special income tax obligation 495 513
Other liabilities 322 328
------ ------
Total liabilities 5,503 5,390
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Stockholder's equity
Common stock
Additional paid-in capital 2,129 2,128
Note receivable from ESOP (307) (312)
Retained earnings 1,080 1,077
------ ------
Total stockholder's equity 2,902 2,893
------ ------
Total liabilities and
stockholder's equity $8,405 $8,283
====== ======
See accompanying notes.
</TABLE>
4
<PAGE>
<TABLE>
CONSOLIDATED RAIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
($ In Millions)
Quarters ended
March 31,
--------------
1995 1994
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<S> <C> <C>
Cash flows from operating activities $ 112 $ 29
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Cash flows from investing activities
Property and equipment acquisitions (85) (68)
Other (40) 2
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Net cash used in investing activities (125) (66)
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Cash flows from financing activities
Net proceeds from short-term borrowings 67 33
Payment of capital lease and equipment obligations (17) (18)
Proceeds from medium-term notes 50
Payment of medium-term notes (5) (5)
Dividends paid on common stock (50) (26)
Other 10 9
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Net cash from financing activities 5 43
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Increase (decrease) in cash and cash equivalents (8) 6
Cash and cash equivalents
Beginning of period 31 26
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End of period $ 23 $ 32
===== =====
See accompanying notes.
</TABLE>
5
<PAGE>
CONSOLIDATED RAIL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The unaudited financial statements contained herein
present the consolidated financial position of Consolidated
Rail Corporation (the "Company") as of March 31, 1995 and
December 31, 1994, and the consolidated results of
operations and cash flows for the quarters ended March 31,
1995 and 1994. In the opinion of management, these
financial statements include all adjustments, consisting of
normal recurring adjustments necessary to present fairly
the results for the interim periods included.
The rules and regulations of the Securities and Exchange
Commission permit certain information and footnote
disclosures, ordinarily required by generally accepted
accounting principles, to be condensed or omitted from
interim financial reports. Accordingly, the financial
statements included herein should be read in conjunction
with the audited financial statements and notes for the
year ended December 31, 1994, presented in the Company's
Annual Report on Form 10-K.
2. 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.
3. Information regarding contingent liabilities and
litigation was included in Note 12 to Consolidated
Financial Statements and Part I, Item 3 - Legal Proceedings
in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994. There have been no material
developments with respect to these matters during the first
three months of 1995, except as disclosed in the Annual
Report on Form 10-K.
6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Stockholder and Board of Directors of
Consolidated Rail Corporation
We have reviewed the accompanying condensed consolidated
balance sheet of Consolidated Rail Corporation and its
subsidiaries (the "Company") as of March 31, 1995 and the
related condensed consolidated statements of income and
cash flows for the three months ended March 31, 1995 and
March 31, 1994. This financial information is the
responsibility of the Company's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information
consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying
interim financial information for it to be in conformity
with generally accepted accounting principles.
We previously audited in accordance with generally accepted
auditing standards, the consolidated balance sheet as of
December 31, 1994, and the related consolidated statements
of income, of stockholder's equity and of cash flows for
the year then ended (not presented herein), and in our
report dated January 23, 1995 we expressed an unqualified
opinion on those consolidated financial statements and
included an explanatory paragraph describing the Company's
change in methods of accounting for income taxes and
postretirement benefits other than pensions in 1993. In
our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31,
1994, is fairly stated in all material respects in relation
to the consolidated balance sheet from which it has been
derived.
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, PA 19103
April 19, 1995
7
<PAGE>
CONSOLIDATED RAIL CORPORATION
Item 2. Management's Analysis of Results of Operations
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Results of Operations
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First Quarter 1995 compared with First Quarter 1994
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Net income for the first quarter of 1995 was $53 million
compared with a net loss for the first quarter of 1994 of
$33 million, after the effects of the one-time charge of
$51 million for the early retirement program (See Note 2 to
the Condensed Consolidated Financial Statements).
Operating revenues (primarily freight and line-haul
revenues, but also including switching, demurrage and
incidental revenues) increased $42 million, or 5.0%, from
$843 million in the first quarter of 1994 to $885 million in
the first quarter of 1995. A 1.6% increase in traffic
volume in units (freight cars and intermodal trailers and
containers) resulted in a $13 million increase in revenues.
Average revenue per unit also increased for the quarter,
resulting from increases in average rates, $27 million,
partially offset by an unfavorable traffic mix and other
miscellaneous factors $5 million. Switching, demurrage and
incidental revenues increased $7 million.
The Company's operating expenses for the first quarter of
1994 were unfavorably affected by difficult operating
conditions primarily caused by adverse weather coincident
with the Company's marketing department and certain of its
operating functions being reorganized into four service
groups.
Operating expenses decreased $104 million, or 11.9%, from
$876 million in the first quarter of 1994, which included
the $84 million charge related to the non-union voluntary
early retirement program and related costs, to $772 million
in the first quarter of 1995. The following table sets
forth the operating expenses for the two periods:
8
<PAGE>
First Quarter
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Increase
($ In Millions) 1995 1994 (Decrease)
---- ---- ----------
Compensation and benefits $332 $341 $ (9)
Fuel 46 47 (1)
Material and supplies 56 62 (6)
Equipment rents 85 91 (6)
Depreciation and amortization 73 70 3
Casualties and insurance 40 45 (5)
Other 140 136 4
Early retirement program 84 (84)
---- ---- -----
$772 $876 $(104)
==== ==== =====
Compensation and benefits as a percent of revenues was
37.5% in the first quarter of 1995 as compared with 40.5%
in the first quarter of 1994. The decrease in labor costs
of $9 million, or 2.6%, was primarily due to savings from
lower employment levels and a decrease in payroll taxes,
partially offset by increases in fringe benefit costs.
The decrease of $6 million, or 9.7%, in material and
supplies cost was mostly attributable to a lower level of
expenditures for repairs and maintenance of locomotives.
Equipment rents decreased $6 million, or 6.6%, principally
as a result of improvements in equipment utilization.
Casualties and insurance costs decreased by $5 million, or
11.1%, primarily due to a lower frequency of employee
injuries.
In the first quarter of 1994, the Company incurred a one-
time charge of $84 million for the non-union voluntary
early retirement program and related costs (see Note 2 to
the Condensed Consolidated Financial Statements).
The Company's operating ratio (operating expenses as a
percent of revenues) was 87.2% for the first quarter of
1995 compared with 103.9% for the first quarter of 1994.
Without the one-time charge for the early retirement
program, the operating ratio for the first quarter of 1994
would have been 94.0%.
9
<PAGE>
PART II. OTHER INFORMATION
CONSOLIDATED RAIL CORPORATION
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
12 Computations of the ratio of
earnings to fixed charges.
15 Letter re unaudited interim
financial information from Price
Waterhouse LLP.
27 Financial data schedule.
(b) Reports on Form 8-K
None
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
CONSOLIDATED RAIL CORPORATION
Registrant
/s/ Bruce B. Wilson
------------------------------
Bruce B. Wilson
Senior Vice President - Law
/s/ H. W. Brown
-----------------------------
H. W. Brown
Senior Vice President -
Finance and Administration
(Principal Financial Officer)
Date: May 11, 1995
11
<PAGE>
EXHIBIT INDEX
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Exhibit
No.
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12 Computations of the ratio of earnings to fixed
charges.
15 Letter re unaudited interim financial information
from Price Waterhouse LLP.
27 Financial data schedule.
<PAGE>
Exhibit 12
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<TABLE>
CONSOLIDATED RAIL CORPORATION
-----------------------------
COMPUTATIONS OF THE RATIO OF EARNINGS TO FIXED CHARGES
------------------------------------------------------
($ In Millions)
<CAPTION>
Quarters ended
March 31,
--------------
1995 1994
---- ----
<S> <C> <C>
Earnings
--------
Pre-tax income (loss) $ 92 $(51)
Add:
Interest expense 46 44
Rental expense interest factor 14 9
Less equity in undistributed earnings
of 20-50% owned companies (5) (4)
---- ----
Earnings available for fixed charges 147 (2)
==== ====
Fixed charges
-------------
Interest expense 46 44
Rental expense interest factor 14 9
---- ----
Fixed charges $ 60 $ 53
==== ====
Ratio of earnings to fixed charges 2.45x -
<FN>
For purposes 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.
After the one-time charge in the first quarter of 1994, earnings
were insufficient by $55 million to cover fixed charges for the
quarter.
</FN>
</TABLE>
<PAGE>
Exhibit 15
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May 11, 1995
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Dear Sirs:
We are aware that Consolidated Rail Corporation
has incorporated by reference our report dated
April 19, 1995 (issued pursuant to the provisions
of Statement on Auditing Standards No. 71) in the
following registration statements:
* Registration Statement on Form S-3 No. 33-34040
* Registration Statement on Form S-3 No. 33-64670.
We are also aware of our responsibilities under
the Securities Act of 1933 and that pursuant to
Rule 436(c) our report dated April 19, 1995 shall
not be considered part of a registration
statement prepared or certified by us or a report
prepared or certified by us within the meaning of
Sections 7 and 11 of the Securities Act of 1933.
Very truly yours,
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, Pa 19103
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27
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CONSOLIDATED RAIL CORPORATION
FINANCIAL DATA SCHEDULE
($ In Millions Except Per Share)
<CAPTION>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM
FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FORM 10-Q.
<MULTIPLIER> 1,000,000
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Mar-31-1995
<PERIOD-TYPE> 3-MOS
<S> <C>
<CASH> 23
<SECURITIES> 0
<RECEIVABLES> 651
<ALLOWANCES> 0
<INVENTORY> 177
<CURRENT-ASSETS> 1,112
<PP&E> 6,564
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,405
<CURRENT-LIABILITIES> 1,251
<BONDS> 1,977
0
0
<COMMON> 0
<OTHER-SE> 2,902
<TOTAL-LIABILITY-AND-EQUITY> 8,405
<SALES> 0
<TOTAL-REVENUES> 885
<CGS> 0
<TOTAL-COSTS> 772
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> 92
<INCOME-TAX> 39
<INCOME-CONTINUING> 53
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<PAGE>
</TABLE>
