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, 1996
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 30, 1996)
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).
<PAGE>
CONSOLIDATED RAIL CORPORATION
INDEX
Page Number
PART I. FINANCIAL INFORMATION -----------
Item 1. Financial Statements:
Condensed Consolidated Statements
of Income - Quarters ended
March 31, 1996 and 1995 3
Condensed Consolidated Balance
Sheets - March 31, 1996 and
December 31, 1995 4
Condensed Consolidated Statements
of Cash Flows - Quarters ended
March 31, 1996 and 1995 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
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<PAGE>
PART I. FINANCIAL INFORMATION
CONSOLIDATED RAIL CORPORATION
Item 1. Financial Statements.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
[CAPTION]
($ In Millions)
Quarters ended
March 31,
---------------
1996 1995
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[S] [C] [C]
Revenues $ 884 $ 885
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Operating expenses
Way and structures 140 134
Equipment 219 202
Transportation 358 340
General and administrative 99 96
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Total operating expenses 816 772
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Income from operations 68 113
Interest expense (44) (46)
Other income, net 23 25
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Income before income taxes 47 92
Income taxes 18 39
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Net income $ 29 $ 53
===== =====
Ratio of earnings to fixed charges 1.73x 2.45x
See accompanying notes.
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<PAGE>
CONSOLIDATED RAIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
[CAPTION]
($ In Millions) March 31, December 31,
1996 1995
--------- ------------
[S] [C] [C]
ASSETS
Current assets
Cash and cash equivalents $ 13 $ 58
Accounts receivable 680 624
Deferred tax assets 327 325
Material and supplies 157 158
Other current assets 28 26
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Total current assets 1,205 1,191
Property and equipment, net 6,383 6,408
Other assets 813 788
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Total assets $8,401 $8,387
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Short-term borrowings 134 89
Current maturities of long-term debt 150 181
Accounts payable 190 126
Wages and employee benefits 172 182
Casualty reserves 108 107
Accrued and other current liabilities 512 492
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Total current liabilities 1,266 1,177
Long-term debt 1,873 1,911
Casualty reserves 215 217
Deferred income taxes 1,436 1,401
Special income tax obligation 417 440
Other liabilities 295 312
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Total liabilities 5,502 5,458
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Stockholder's equity
Preferred stock
Common stock
Additional paid-in capital 2,132 2,130
Note receivable from ESOP (304) (305)
Retained earnings 1,071 1,104
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Total stockholder's equity 2,899 2,929
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Total liabilities and
stockholder's equity $8,401 $8,387
====== ======
See accompanying notes.
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<PAGE>
CONSOLIDATED RAIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
[CAPTION]
(Unaudited)
($ In Millions)
Quarters ended
March 31,
---------------
1996 1995
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[S] [C] [C]
Cash flows from operating activities $ 99 $ 112
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Cash flows from investing activities
Property and equipment acquisitions (18) (85)
Other (17) (40)
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Net cash used in investing activities (35) (125)
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Cash flows from financing activities
Net proceeds from short-term borrowings 45 67
Payment of long-term debt (97) (22)
Dividends paid on common stock (62) (50)
Other 5 10
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Net cash provided by (used in) financing
activities (109) 5
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Decrease in cash and cash equivalents (45) (8)
Cash and cash equivalents
Beginning of period 58 31
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End of period $ 13 $ 23
===== =====
See accompanying notes.
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<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, 1996 and
December 31, 1995, and the consolidated results of operations
and cash flows for the three-month periods ended March 31, 1996
and 1995. 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, 1995, presented in the
Company's Annual Report on Form 10-K.
2. On February 21, 1996, the Board of Directors approved a
voluntary early retirement program and voluntary separation
program for eligible members of the non-union workforce.
Eligible employees had until April 23, 1996 to apply for the
programs. A total of 879 applications have been accepted
under both programs. The Company estimates that the costs of
the programs will be approximately $100 million and will be
recorded in the second quarter of 1996. The majority of the
costs of these programs will be paid from the Company's
overfunded pension plan.
3. Information regarding contingent liabilities and litigation
was included in Note 13 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, 1995. There
have been no material developments with respect to these matters
during the first three months of 1996, except as disclosed in
the Annual Report on Form 10-K or elsewhere herein.
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<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, 1996 and the related condensed
consolidated statements of income and cash flows for the three
months ended March 31, 1996 and March 31, 1995. 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, 1995, 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 22, 1996, except as to paragraphs five and six of Note
13 to the consolidated financial statements which are as of
February 21, 1996, 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, 1995, 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 17, 1996
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<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 1996 compared with First Quarter 1995
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Net income for the first quarter of 1996 was $29 million
compared with net income for the first quarter of 1995 of $53
million.
Operating revenues (primarily freight and line-haul revenues,
but also including switching, demurrage and incidental revenues)
decreased $1 million, or .1%, from $885 million in the first
quarter of 1995 to $884 million in the first quarter of 1996. A
2.7% decrease in traffic volume in units (freight cars and
intermodal trailers and containers) resulted in a $23 million
decrease in revenues. Average revenue per unit increased for
the quarter, resulting from increases in average rates, $22
million, partially offset by an unfavorable traffic mix, $6
million. Other revenues increased $6 million.
Operating expenses increased $44 million, or 5.7%, from $772
million in the first quarter of 1995 to $816 million in the
first quarter of 1996. The following table sets forth the
operating expenses for the two periods:
First Quarter
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Increase
($ In Millions) 1996 1995 (Decrease)
---- ---- ----------
Compensation and benefits $343 $332 $11
Fuel 50 46 4
Material and supplies 60 56 4
Equipment rents 98 85 13
Depreciation and amortization 71 73 (2)
Casualties and insurance 48 40 8
Other 146 140 6
---- ---- ---
$816 $772 $44
==== ==== ===
Compensation and benefits as a percent of revenues was 38.8% in
the first quarter of 1996 as compared with 37.5% in the first
quarter of 1995. The increased labor costs of $11 million, or
3.3%, were primarily a result of increased wage rates, increased
train crew costs and the overtime caused by the adverse weather
conditions experienced during the quarter, which were partially
offset by fewer employees in the first quarter of 1996.
Fuel costs increased $4 million, or 8.7%, as a result of higher
average fuel prices during the first quarter of 1996 as compared
with the same quarter of 1995, and these higher prices are
expected to continue in 1996.
The increase of $13 million, or 15.3%, in equipment rents was
primarily caused by the declines in equipment utilization
reflecting the adverse weather conditions experienced during the
quarter, as well as a decrease in locomotives temporarily leased
to other railroads.
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<PAGE>
Casualties and insurance costs increased $8 million, or 20.0%,
primarily due to an increase in the cost and number of
occupational health claims and to damage to equipment and
property owned by others resulting from several derailments
during the quarter. Employee injuries were about the same in
both quarters.
The Company's operating ratio (operating expenses as a percent of
revenues) was 92.3% for the first quarter of 1996 compared with
87.2% for the first quarter of 1995.
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<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
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<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/ Timothy T. O'Toole
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Timothy T. O'Toole
Senior Vice President - Finance
(Principal Financial Officer)
Date: May 13, 1996
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<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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CONSOLIDATED RAIL CORPORATION
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COMPUTATIONS OF THE RATIO OF EARNINGS TO FIXED CHARGES
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[CAPTION]
($ IN MILLIONS)
QUARTERS ENDED
MARCH 31,
---------------
1996 1995
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[S] [C] [C]
EARNINGS
--------
PRE-TAX INCOME $ 47 $92
ADD:
INTEREST EXPENSE 44 46
RENTAL EXPENSE INTEREST FACTOR 15 14
LESS EQUITY IN UNDISTRIBUTED EARNINGS
OF 20-50% OWNED COMPANIES (4) (5)
---- ----
EARNINGS AVAILABLE FOR FIXED CHARGES 102 147
==== ====
FIXED CHARGES
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INTEREST EXPENSE 44 46
RENTAL EXPENSE INTEREST FACTOR 15 14
---- ----
FIXED CHARGES $ 59 $ 60
==== ====
RATIO OF EARNINGS TO FIXED CHARGES 1.73X 2.45X
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.
<PAGE>
Exhibit 15
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May 13, 1996
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 17,
1996 (issued pursuant to the provisions of Statement on
Auditing Standards No. 71) in the Prospectus
constituting part of the:
* 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 17, 1996 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.
Yours very truly,
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, PA 19103
<PAGE>
<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.
<S> <C>
<MULTIPLIER> 1,000,000
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<PERIOD-TYPE> 3-MOS
<CASH> 13
<SECURITIES> 0
<RECEIVABLES> 680
<ALLOWANCES> 0
<INVENTORY> 157
<CURRENT-ASSETS> 1,205
<PP&E> 6,383
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,401
<CURRENT-LIABILITIES> 1,266
<BONDS> 1,873
0
0
<COMMON> 0
<OTHER-SE> 2,899
<TOTAL-LIABILITY-AND-EQUITY> 8,401
<SALES> 0
<TOTAL-REVENUES> 884
<CGS> 0
<TOTAL-COSTS> 816
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44
<INCOME-PRETAX> 47
<INCOME-TAX> 18
<INCOME-CONTINUING> 29
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<PAGE>
</TABLE>
