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 September 30, 1997
------------------
or
( ) Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
----- ------
Commission file number 1-9064
------
CONSOLIDATED RAIL CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1989084
- ----------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 Market Street, Philadelphia, Pennsylvania 19101
- -----------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(215) 209-4000
- ----------------------------------------------------------------------
(Registrant's telephone number, including area code)
- ----------------------------------------------------------------------
(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 October 31, 1997)
100
<PAGE>
CONSOLIDATED RAIL CORPORATION
INDEX
Page Number
------------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Statements
of Income - Quarters and nine months
ended September 30, 1997 and 1996 3
Condensed Consolidated Balance
Sheets - September 30, 1997 and
December 31, 1996 4
Condensed Consolidated Statements
of Cash Flows - Nine months ended
September 30, 1997 and 1996 5
Notes to Condensed Consolidated
Financial Statements 6
Report of Independent Accountants 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
2
<PAGE>
PART I. FINANCIAL INFORMATION
CONSOLIDATED RAIL CORPORATION
Item 1. Financial Statements.
--------------------
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
($ In Millions)
<CAPTION>
Quarters Ended Nine Months Ended
September 30, September 30,
------------- ----------------
1997 1996 1997 1996
---- ---- ------ ------
<S> <C> <C> <C> <C>
Revenues $935 $923 $2,764 $2,750
Operating expenses
Way and structures 107 106 344 365
Equipment 182 195 583 614
Transportation 334 323 1,016 1,031
General and administrative 72 65 236 249
ESOP termination charge - - 221 -
Merger-related compensation costs 21 - 201 -
Merger costs 2 - 63 -
Voluntary separation programs - - - 135
---- ---- ------ ------
Total operating expenses 718 689 2,664 2,394
---- ---- ------ ------
Income from operations 217 234 100 356
Interest expense (41) (43) (125) (131)
Other income, net 22 21 69 68
---- ---- ------ ------
Income before income taxes 198 212 44 293
Income taxes 97 75 157 104
---- ---- ------ ------
Net income (loss) $101 $137 $ (113) $ 189
==== ==== ====== ======
Ratio of earnings to fixed charges 4.78x 4.76x 1.17x 2.64x
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
CONSOLIDATED RAIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
($ In Millions) September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 21 $ 17
Accounts receivable 664 629
Deferred tax assets 293 285
Material and supplies 111 139
Other current assets 31 22
------ ------
Total current assets 1,120 1,092
Property and equipment, net 6,770 6,590
Other assets 692 671
------ ------
Total assets $8,582 $8,353
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Short-term borrowings 19 99
Current maturities of long-term debt 109 130
Accounts payable 198 160
Wages and employee benefits 330 143
Casualty reserves 133 138
Accrued and other current liabilities 491 445
------ ------
Total current liabilities 1,280 1,115
Long-term debt 1,767 1,876
Casualty reserves 195 190
Deferred income taxes 1,622 1,484
Special income tax obligation 299 346
Other liabilities 518 307
------ ------
Total liabilities 5,681 5,318
------ ------
Stockholder's equity
Preferred stock
Common stock
Additional paid-in capital 1,864 2,151
Note receivable from ESOP - (294)
Retained earnings 1,037 1,178
------ ------
Total stockholder's equity 2,901 3,035
------ ------
Total liabilities and
stockholder's equity $8,582 $8,353
====== ======
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
CONSOLIDATED RAIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ In Millions)
<CAPTION>
Nine Months Ended
September 30,
----------------
1997 1996
----- -----
<S> <C> <C>
Cash flows from operating activities $ 628 $ 502
----- -----
Cash flows from investing activities
Property and equipment acquisitions (309) (233)
Payments for capital lease buyouts - (20)
Other (6) (10)
----- -----
Net cash used in investing activities (315) (263)
----- -----
Cash flows from financing activities
Net reduction in short-term borrowings (80) (24)
Loans from and redemptions of insurance policies - 95
Proceeds from long-term debt - 26
Payment of long-term debt (209) (153)
Dividends paid on common stock (27) (241)
Other 7 20
----- -----
Net cash used in financing activities (309) (277)
----- -----
Increase (decrease) in cash and cash equivalents 4 (38)
Cash and cash equivalents
Beginning of period 17 58
----- -----
End of period $ 21 $ 20
===== =====
</TABLE>
See accompanying notes.
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 September 30, 1997 and December 31, 1996, the
consolidated results of operations for the three and nine-month periods
ending September 30, 1997 and 1996 and the consolidated cash flows for
the nine-month periods ended September 30, 1997 and 1996. In the
opinion of management, these financial statements include all
adjustments, consisting of normal recurring adjustments and those
mentioned in Notes 2, 3, 4, 5, 6 and 7, 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, 1996, presented in
the Company's Annual Report on Form 10-K.
2. A tax law was enacted during the third quarter of 1997 by a state
in which the Company operates which changed the Company's method of
computing taxes and resulted in a tax rate increase. Income tax
expense for the third quarter includes a one-time charge of $22
million representing the effects of adjusting deferred income taxes
and the special income tax obligation for the rate increase as
required by Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes".
3. During the third quarter of 1997, the Company recorded a charge of
$21 million ($14 million after income taxes) representing a portion of
an amount to be paid to certain non-union employees as an incentive to
continue their employment with the Company through the effective date
of the requisite Surface Transportation Board ("STB") approval of the
joint acquisition of Conrail Inc. ("Conrail"), the Company's parent,
by CSX Corporation ("CSX") and Norfolk Southern Corporation ("NSC"),
and subsequent transition period. The Company has recorded a charge
of $28 million ($18 million after income taxes) related to these
incentive payments through the first nine months of 1997. The total
amount of such payments is expected to be approximately $125 million
and will continue to be accrued ratably through the fourth quarter of
1998, the expected end of the transition period.
During the second quarter of 1997, the Company recorded a charge of
$110 million ($103 million after income taxes) in connection with
employment agreements with certain executives, which became operative
upon a change in control as defined in such agreements. As a result
of the acquisition of Conrail by CSX and NSC, benefits under these
agreements will be paid upon the earlier of the STB's approval or
disapproval of the transaction or May 31, 1998. Severance benefits to
be paid to other Company employees will be determined and accrued when
6
<PAGE>
the employees adversely affected by the transaction are identified,
which is expected to occur near the time of the STB decision.
4. Merger costs of $2 million and $63 million ($39 million after
income taxes) for the three and nine months ended September 30, 1997,
respectively, primarily include costs for investment banking, legal
and consulting services related to the acquisition of Conrail by CSX
and NSC.
5. In the second quarter of 1997, the Company recorded a charge of
$221 million (no related income tax effect) related to the termination
of its Non-union Employee Stock Ownership Plan ("ESOP") as a result of
the repayment of the ESOP note payable of $291 million to the Company.
6. In connection with the joint acquisition of Conrail by CSX and NSC,
all outstanding performance shares and all outstanding unvested stock
options, restricted shares and phantom shares vested during the second
quarter of 1997. The Company paid all of the amounts due employees
under these arrangements and recorded a $63 million charge ($39 million
after income taxes).
7. During the second quarter of 1996, the Company recorded a charge
of $135 million (before tax benefits of $52 million) consisting of
$102 million in termination benefits to be paid to non-union employees
participating in the voluntary retirement and separation programs
("voluntary separation programs") and losses of $33 million on non-
cancelable leases for office space no longer required as a result of
the reductions in the Company's workforce. Over 840 applications were
accepted from eligible employees under both programs. Approximately
$90 million of the termination benefits are being paid from the
Company's overfunded pension plan.
8. Information regarding contingent liabilities and litigation was
included in Note 14 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, 1996. Material developments with
respect to these and other matters are discussed in Part II, Item I -
Legal Proceedings in this Form 10-Q.
7
<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 September 30, 1997 and the related condensed consolidated statements
of income for the three and nine months ended September 30, 1997 and
September 30, 1996 and the condensed consolidated statements of cash
flows for the nine months ended September 30, 1997 and September 30,
1996. 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, 1996, 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 21, 1997, except as to Note 2 to the
consolidated financial statements, which is as of March 7, 1997, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1996, 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
October 15, 1997
8
<PAGE>
CONSOLIDATED RAIL CORPORATION
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations.
-----------------------------------
Overview
- --------
Net income for Consolidated Rail Corporation, ("CRC" or the "Company") was
$101 million for the third quarter of 1997 as compared with $137 million
for the third quarter of 1996. The results for the third quarter of 1997
include recognition of a one-time $22 million increase in income tax
expense related to an increase in a state income tax rate enacted during
the quarter and merger-related costs of $23 million ($16 million after
income taxes) resulting from the acquisition of the Company's parent,
Conrail Inc., (see Notes 2, 3 and 4 to the Condensed Consolidated Financial
Statements). Without the income tax increase and merger-related costs,
CRC's net income for the third quarter of 1997 would have been $139
million.
CRC incurred a net loss of $113 million for the nine months ending
September 30, 1997 as compared with net income of $189 million for the
comparable period of 1996. The results for the first nine months of 1997
include the aforementioned tax charge of $22 million, an ESOP termination
charge of $221 million (no related income tax effect), merger-related
compensation costs of $201 million ($160 million after income taxes) and
merger costs of $63 million ($39 million after income taxes), (see Notes 2,
3, 4, 5 and 6 to the Condensed Consolidated Financial Statements). Results
for the first nine months of 1996 include a one-time charge of $135 million
($83 million after income taxes) related to voluntary separation programs
and related costs (see Note 7 to the Consolidated Financial Statements).
Without the aforementioned items, CRC's net income for the first nine
months of 1997 and 1996 would have been $329 million and $272 million,
respectively.
The Company's continuing efforts in cost reduction and increased
productivity have been primarily responsible for its operating ratio
(operating expenses as a percent of revenues, excluding one-time charges)
improvements in both the third quarter and first nine months of 1997 as
compared with the comparable periods of 1996. The Company achieved
operating ratios of 74.3% and 78.8%, excluding merger-related costs, for
the third quarter and first nine months of 1997, respectively, as
compared with 74.6% for the third quarter of 1996 and 82.1%, excluding
the voluntary separation programs charge, for the first nine months of
1996. Increases in operating revenues of $12 million and $14 million
were also experienced in the third quarter and first nine months of 1997,
respectively, compared with the same periods of 1996.
Acquisition of Conrail Inc.
- --------------------------
On May 23, 1997, the CSX-NSC joint tender offer for the remaining
outstanding shares of Conrail Inc.'s common and ESOP stock was concluded,
with 53.4 million shares having been tendered. On June 2, 1997, Conrail
became the surviving corporation in a merger with Green Acquisition Corp., a
jointly-owned, indirect subsidiary of CSX and NSC, as a result of which the
remaining outstanding capital stock of Conrail was acquired by NSC and CSX.
The Company remains a wholly-owned subsidiary of Conrail.
9
<PAGE>
Simultaneous with the merger, Conrail's common stock was delisted from the
New York Stock Exchange and, through the filing of a Form 15, deregistered
with the Securities and Exchange Commission. The Conrail stock acquired by
NSC and CSX is being held in a voting trust pending approval of the joint
acquisition by the Surface Transportation Board, which is expected to occur
in the third quarter of 1998.
Results of Operations
- ---------------------
Third Quarter 1997 compared with Third Quarter 1996
- ---------------------------------------------------
Net income for the third quarter of 1997 was $101 million after merger-
related costs and the one-time tax charge (see Notes 2, 3 and 4 to the
Condensed Consolidated Financial Statements) compared with net income of
$137 million for the third quarter of 1996.
Operating revenues (primarily freight and line-haul revenues, but also
including switching, demurrage and incidental revenues) increased $12
million, or 1.3%, from $923 million in the third quarter of 1996 to $935
million in the third quarter of 1997. A 4.4% increase in traffic volume
in units (freight cars and intermodal trailers and containers) resulted
in a $39 million increase in revenues. However, a decline in average
revenue per unit decreased revenues by $21 million for the quarter, due
to decreases in average rates, $12 million, and an unfavorable traffic
mix, $9 million. Other revenues declined by $6 million.
Operating expenses increased $29 million, or 4.2%, from $689 million in
the third quarter of 1996 to $718 million in the third quarter of 1997.
The following table sets forth the operating expenses for the two
periods:
Third Quarter
--------------
Increase
($ In Millions) 1997 1996 (Decrease)
---- ---- ----------
Compensation and benefits $303 $286 $ 17
Fuel 44 44 -
Material and supplies 38 38 -
Equipment rents 92 94 (2)
Depreciation and amortization 74 71 3
Casualties and insurance 32 43 (11)
Other 112 113 (1)
Merger-related compensation 21 21
Merger costs 2 2
---- ---- ----
$718 $689 $ 29
==== ==== ====
Compensation and benefits increased $17 million, or 5.9%, primarily as a
result of increased wage rates that became effective during the quarter
and increases in other employee-related costs, including incentive
compensation, partially offset by reductions in employment levels.
Compensation and benefits as a percent of revenues was 32.4% in the third
quarter of 1997 as compared with 31.0% in the third quarter of 1996.
10
<PAGE>
Casualties and insurance costs decreased $11 million, or 25.6%, primarily
due to reductions in the number and costs of employee injuries.
The Company recorded $23 million of merger-related costs (see Notes 3 and
4 to the Condensed Consolidated Financial Statements) in the third
quarter of 1997.
The Company's operating ratio (operating expenses as a percent of
revenues) was 76.8% for the third quarter of 1997 compared with 74.6% for
the third quarter of 1996. Excluding the merger-related costs, the
operating ratio would have been 74.3% for the third quarter of 1997.
The significant difference between the effective tax rates for the third
quarter of 1997 as compared with the third quarter of 1996 primarily
results from the one-time $22 million increase in income tax expense
related to an increase in a state income tax rate enacted during the
quarter (see Note 2 to the Condensed Consolidated Financial Statements).
First Nine Months of 1997 compared with First Nine Months of 1996
- -----------------------------------------------------------------
The net loss for the first nine months of 1997 was $113 million which
includes merger-related costs and a one-time tax charge (see Notes 2, 3,
4, 5 and 6 to the Condensed Consolidated Financial Statements). Net
income for the first nine months of 1996 was $189 million which included
the effects of the voluntary separation programs charge (see Note 7 to
the Condensed Consolidated Financial Statements).
Operating revenues increased $14 million, or .5%, to $2,764 million for the
first nine months of 1997 from $2,750 million for the first nine months of
1996. A 4.5% increase in traffic volume resulted in a $118 million increase
in revenues. A decrease in average rates and an unfavorable traffic mix
reduced revenues by $42 million and $37 million, respectively. Other
revenues decreased by $25 million.
Operating expenses increased $270 million, or 11.3%, to $2,664 million
in the first nine months of 1997, from $2,394 million in the first
nine months of 1996. The following table sets forth the operating
expenses for the two periods:
11
<PAGE>
First Nine Months
-----------------
Increase
($ In Millions) 1997 1996 (Decrease)
------ ------ --------
Compensation and benefits $ 915 $ 938 $ (23)
Fuel 148 146 2
Material and supplies 133 144 (11)
Equipment rents 276 287 (11)
Depreciation and amortization 219 212 7
Casualties and insurance 107 137 (30)
Other 381 395 (14)
ESOP termination charge 221 221
Merger-related compensation 201 201
Merger costs 63 63
Voluntary separation programs 135 (135)
------ ------ -----
$2,664 $2,394 $ 270
====== ====== =====
Compensation and benefits decreased $23 million, or 2.5%, primarily as a
result of reductions in employment levels and less weather-related overtime
costs occurring during the first quarter of 1997 as compared with the same
period of 1996. These decreases were partially offset by increases in other
employee-related costs, including incentive compensation, and wage rate
increases that became effective during the third quarter of 1997.
Compensation and benefits as a percent of revenues was 33.1% in the first
nine months of 1997 as compared with 34.1% in the first nine months of 1996.
Casualties and insurance costs decreased $30 million, or 21.9%, primarily
due to reductions in the number and costs of employee injuries.
The Company's operating ratio was 96.4% for the first nine months of 1997,
compared with 87.1% for the first nine months of 1996. Without the merger-
related costs and voluntary separation programs charge, the operating ratio
would have been 78.8% and 82.1% for the first nine months of 1997 and 1996,
respectively.
The significant difference between the effective tax rates for the first
nine months of 1997 as compared with the same period of 1996 results from
the nondeductibility for income tax purposes of the ESOP termination
charge and certain merger-related compensation costs as well as the
aforementioned $22 million increase in income tax expense related to an
increase in a state income tax rate enacted during the quarter (see Note
2 to the Condensed Consolidated Financial Statements).
Liquidity and Capital Resources
- -------------------------------
The Company's cash and cash equivalents increased $4 million in the first
nine months of 1997, from $17 million at December 31, 1996 to $21
million at September 30, 1997. Cash generated from operations has been
the Company's principal source of liquidity and is used primarily for
capital expenditures, debt service and dividends. In the first nine
months of 1997, operating activities provided cash of $628 million.
12
<PAGE>
The principal uses of cash were for: property and equipment acquisitions,
$309 million; payment of long-term debt, $209 million; net repayment of
short-term borrowings, $80 million; and cash dividends on common stock,
$27 million.
A working capital (current assets less current liabilities) deficit of
$160 million existed at September 30, 1997 as compared with a $23 million
deficit at December 31, 1996. Management believes that the Company's
financial position allows it sufficient access to credit sources on
investment grade terms.
The Company has recorded a $138 million short-term liability and a $221
million long-term liability for certain merger-related costs, neither of
which are expected to require the future use of the Company's cash for
settlement.
During the first nine months of 1997, CRC issued $124 million of
commercial paper and repaid $304 million, which included $100 million of
commercial paper previously classified as long-term debt. At September
30, 1997, $19 million of commercial paper remained outstanding, all of
which is classified as short-term borrowings.
Other Matters
- -------------
Except for the historical information contained herein, the matters
discussed in this report are forward-looking statements that involve
risks and uncertainties that may cause actual results to differ,
including but not limited to the effect of economic conditions,
competition, regulation and weather on Conrail's operations,
customers, service and prices, and other factors discussed elsewhere
in this report and, from time to time, in other reports filed with the
Securities and Exchange Commission.
13
<PAGE>
PART II. OTHER INFORMATION
CONSOLIDATED RAIL CORPORATION
Item 1. Legal Proceedings.
-----------------
Englehart v. Consolidated Rail Corporation.
- ------------------------------------------
On August 6, 1997, the Third Circuit Court of Appeals affirmed the U.S.
District Court's grant of the Company's Motion for Summary Judgment with
respect to all but one individual participant claim, and has subsequently
denied plaintiffs' request for a rehearing en banc.
This matter was last reported in Consolidated Rail Corporation's ("CRC")
report on Form 10-K for the year ended December 31, 1996.
Ohio Crossing Accident Punitive Damage Awards.
- ---------------------------------------------
The Ohio intermediate appellate court has affirmed the respective trial
court's awards of punitive damages in Moore v. Consolidated Rail Corp. and
Wightman v. Consolidated Rail Corp. CRC believes the punitive damage awards
are improper and that it has meritorious defenses. Appeals from these
decisions are currently pending before the Ohio Supreme Court. The Company
is not presently able to reasonably estimate the ultimate outcome of these
cases, and accordingly, no expense for the punitive damage awards has been
recorded as of September 30, 1997.
These matters were last reported in CRC's report on Form 10-Q for the period
ended June 30, 1997.
Bennett, et al. vs. Conrail Matched Savings Plan, Kelly, et al. vs.
- -------------------------------------------------------------------
Conrail Matched Savings Plan, Gale, et al. vs. Conrail Matched Savings
- ----------------------------------------------------------------------
Plan, and Bunnion, et al. vs. Conrail Matched Savings Plan.
- ----------------------------------------------------------
In August 1997, four putative class action lawsuits were filed in the United
States District Court for the Eastern District of Pennsylvania by former CRC
non-agreement employees alleging various violations of ERISA in connection
with the Company's announced plans to distribute surplus ESOP
assets. In addition, the Bunnion complaint alleges that the Company
unlawfully discriminated on the basis of age and coerced employees in
connection with CRC's voluntary separation programs and that
former employees who returned to the Company as independent contractors are
being denied the benefits afforded CRC employees. On October 30, 1997, the
District Court granted CRC's Motion to Dismiss the Bennett, Kelly and Gale
complaints. A Motion to Dismiss portions of the Bunnion complaint is
pending before the court.
14
<PAGE>
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
15
<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/ Timothy T. O'Toole
---------------------------
Timothy T. O'Toole
Senior Vice President - Law
and Government Affairs
/s/ John A. McKelvey
---------------------------
John A. McKelvey
Senior Vice President - Finance
(Principal Financial Officer)
Date: November 12, 1997
16
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
No.
- -------
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
----------
<TABLE>
CONSOLIDATED RAIL CORPORATION
-----------------------------
COMPUTATIONS OF THE RATIO OF EARNINGS TO FIXED CHARGES
------------------------------------------------------
($ In Millions)
<CAPTION>
Quarters Ended Nine Months Ended
September 30, September 30,
-------------- -----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings
- --------
Pre-tax income $198 $212 $ 44 $293
Add:
Interest expense 41 43 125 131
Rental expense interest factor 10 12 37 40
Less equity in undistributed
earnings of 20%-50% owned companies (5) (5) (17) (12)
---- ---- ---- ----
Earnings available for fixed charges $244 $262 $189 $452
==== ==== ==== ====
Fixed charges
- -------------
Interest expense 41 43 125 131
Rental expense interest factor 10 12 37 40
---- ---- ---- ----
Fixed charges $ 51 $ 55 $162 $171
==== ==== ==== ====
Ratio of earnings to fixed charges 4.78x 4.76x 1.17x 2.64x
</TABLE>
For purposes of computing the ratio of earning to fixed charges, earnings
represent income before income taxes plus fixed charges, less equity in
undistributed earnings of 20% to 50% owned companies. Fixed charges
represent interest expense together with any interest capitalized and a
portion of rent under long-term operating leases representative of an
interest factor.
<PAGE>
Exhibit 15
----------
November 12, 1997
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Dear Sirs:
We are aware that Consolidated Rail Corporation has
incorporated by reference our report dated October 15, 1997
(issued pursuant to the provisions of Statement on Auditing
Standards No. 71) in the Prospectus constituting part of the:
Registration Statement on Form S-3 No. 33-34040
Registration Statement on Form S-3 No. 33-64670.
We are also aware of our responsibilities under the Securities
Act of 1933 and that pursuant to Rule 436(c) our report dated
October 15, 1997 shall not be considered part of a registration
statement prepared or certified by us or a report prepared or
certified by us within the meaning of Sections 7 and 11 of the
Securities Act of 1933.
Yours very truly,
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, PA 19103
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27
----------
CONSOLIDATED RAIL CORPORATION
FINANCIAL DATA SCHEDULE
($ In Millions Except Per Share)
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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
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0
0
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<PAGE>
</TABLE>
