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 June 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 July 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 six months
ended June 30, 1997 and 1996 3
Condensed Consolidated Balance
Sheets - June 30, 1997 and
December 31, 1996 4
Condensed Consolidated Statements
of Cash Flows - Six months ended
June 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 Six Months Ended
June 30, June 30,
-------------- ----------------
1997 1996 1997 1996
------ ---- ------ ------
<S> <C> <C> <C> <C>
Revenues $ 931 $943 $1,829 $1,827
Operating expenses
Way and structures 113 119 237 259
Equipment 199 200 401 419
Transportation 334 350 682 708
General and administrative 77 85 164 184
ESOP termination charge 221 - 221 -
Merger-related compensation costs 180 - 180 -
Merger costs 39 - 61 -
Voluntary separation programs - 135 - 135
----- ---- ----- ------
Total operating expenses 1,163 889 1,946 1,705
----- ---- ----- ------
Income (loss) from operations (232) 54 (117) 122
Interest expense (42) (44) (84) (88)
Other income, net 24 24 47 47
----- ---- ----- ------
Income (loss) before income taxes (250) 34 (154) 81
Income taxes 24 11 60 29
----- ---- ----- ------
Net income (loss) $(274) $ 23 $(214) $ 52
===== ==== ===== ======
Ratio of earnings to fixed charges - 1.54x - 1.64x
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
CONSOLIDATED RAIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
($ In Millions) June 30, December 31,
1997 1996
-------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 27 $ 17
Accounts receivable 662 629
Deferred tax assets 292 285
Material and supplies 134 139
Other current assets 24 22
------ ------
Total current assets 1,139 1,092
Property and equipment, net 6,668 6,590
Other assets 709 671
------ ------
Total assets $8,516 $8,353
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Short-term borrowings 55 99
Current maturities of long-term debt 111 130
Accounts payable 180 160
Wages and employee benefits 304 143
Casualty reserves 136 138
Accrued and other current liabilities 479 445
------ ------
Total current liabilities 1,265 1,115
Long-term debt 1,879 1,876
Casualty reserves 194 190
Deferred income taxes 1,546 1,484
Special income tax obligation 314 346
Other liabilities 518 307
------ ------
Total liabilities 5,716 5,318
------ ------
Stockholder's equity
Preferred stock
Common stock
Additional paid-in capital 1,864 2,151
Note receivable from ESOP - (294)
Retained earnings 936 1,178
------ ------
Total stockholder's equity 2,800 3,035
------ ------
Total liabilities and
stockholder's equity $8,516 $8,353
====== ======
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
CONSOLIDATED RAIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ In Millions)
<CAPTION>
Six Months Ended
June 30,
----------------
1997 1996
----- -----
<S> <C> <C>
Cash flows from operating activities $ 313 $ 305
----- -----
Cash flows from investing activities
Property and equipment acquisitions (147) (117)
Payments for capital lease buyouts - (17)
Other (6) (11)
----- -----
Net cash used in investing activities (153) (145)
----- -----
Cash flows from financing activities
Net reduction in short-term borrowings (44) (54)
Loans from and redemptions of insurance policies - 95
Payment of long-term debt (86) (109)
Dividends paid on common stock (27) (141)
Other 7 6
----- -----
Net cash used in financing activities (150) (203)
----- -----
Increase (decrease) in cash and cash equivalents 10 (43)
Cash and cash equivalents
Beginning of period 17 58
----- -----
End of period $ 27 $ 15
===== =====
</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 June 30, 1997 and December 31, 1996, the
consolidated results of operations for the three and six-month
periods ending June 30, 1997 and 1996 and the consolidated cash flows
for the six-month periods ended June 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 and 6, 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. 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.
3. In connection with the joint acquisition of Conrail Inc.
("Conrail"), the Company's parent, by CSX Corporation ("CSX") and
Norfolk Southern Corporation ("NSC"), all outstanding performance
shares and all outstanding unvested stock options, restricted shares
and phantom shares vested during the quarter. The Company paid all
of the amounts due employees under these arrangements and recorded a
$63 million charge ($39 million after income taxes).
4. 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 Surface Transportation Board's ("STB")
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 the employees adversely affected by the
transaction are identified, which is expected to occur near the
time of the STB decision.
The Company also recorded a charge of $7 million ($4 million after
income taxes) representing a portion of an amount to be paid to
certain non-agreement employees as an incentive to continue their
employment with the Company through the effective date of the
requisite STB approval of the transaction and subsequent transition
period. The total amount of these incentive payments is expected
6
<PAGE>
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.
5. Merger costs of $39 million ($24 million after income taxes)
and $61 million ($38 million after income taxes) for the three and
six months ended June 30, 1997, respectively, primarily include
costs for investment banking, legal and consulting services related
to the acquisition of Conrail by CSX and NSC.
6. 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.
7. 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 June 30, 1997 and the related condensed consolidated
statements of income for the three and six months ended June 30, 1997
and June 30, 1996 and the condensed consolidated statements of cash
flows for the six months ended June 30, 1997 and June 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
July 16, 1997
8
<PAGE>
CONSOLIDATED RAIL CORPORATION
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations.
-----------------------------------
Overview
- --------
Consolidated Rail Corporation, ("CRC" or the "Company") incurred a net
loss of $274 million for the second quarter of 1997 as compared with
net income of $23 million for the second quarter of 1996. The second
quarter 1997 net loss includes an ESOP termination charge of $221
million (no related income tax effect), merger-related compensation
costs of $180 million ($146 million after income taxes) and merger
costs of $39 million ($24 million after income taxes) resulting from
the acquisition of the Company's parent, Conrail, (see Notes 2, 3, 4
and 5 to the Condensed Consolidated Financial Statements). Without the
merger-related costs, CRC's net income for the second quarter of 1997
would have been $117 million. Net income for the second quarter of
1996 includes a one-time charge of $135 million ($83 million after
income taxes) related to voluntary separation programs and related
costs (see Note 6 to the Condensed Consolidated Financial Statements).
Without this one-time charge, CRC's net income for the second quarter
of 1996 would have been $106 million.
CRC incurred a net loss of $214 million for the first six months of
1997 as compared with net income of $52 million for the first six
months of 1996. The results for the first half of 1997 include the
ESOP termination charge of $221 million (no related income tax effect),
the merger-related compensation costs of $180 million ($146 million
after income taxes) and merger costs of $61 million ($38 million after
income taxes). Without the merger-related costs and voluntary
separation programs charge, CRC's net income for the first six months
of 1997 and 1996 would have been $191 million and $135 million,
respectively.
The Company achieved operating ratios (operating expenses as a
percent of revenues) of 77.7% and 81.1%, excluding merger-related
costs, for the second quarter and first six months of 1997,
respectively, as compared with 80.0% and 85.9%, excluding the
voluntary separation programs charge, for the comparable periods of
1996. These results were achieved despite an operating revenue
decline of $12 million in the second quarter of 1997, compared with
the second quarter of 1996, and essentially the same operating
revenues for the first six months of 1997, compared with first half
of 1996. Reductions in operating expenses (other than the merger-
related costs) in both the three and six-month periods of 1997 were
primarily responsible for the operating ratio improvements.
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
9
<PAGE>
was acquired by NSC and CSX. The Company remains a wholly-owned
subsidiary of Conrail. 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 mid-1998.
Results of Operations
- ---------------------
Second Quarter 1997 compared with Second Quarter 1996
- -----------------------------------------------------
The net loss for the second quarter of 1997 was $274 million after
merger-related costs (see Notes 2, 3, 4 and 5 to the Condensed
Consolidated Financial Statements). Net income for the second
quarter of 1996 was $23 million which included the effects of the
voluntary separation programs charge (see Note 6 to the Condensed
Consolidated Financial Statements).
Operating revenues (primarily freight and line-haul revenues, but
also including switching, demurrage and incidental revenues)
decreased $12 million, or 1.3%, from $943 million in the second
quarter of 1996 to $931 million in the second quarter of 1997. A 4.3%
increase in traffic volume in units (freight cars and intermodal
trailers and containers) resulted in a $38 million increase in
revenues. However, a decline in average revenue per unit decreased
revenues by $35 million for the quarter, due to decreases in average
rates, $16 million, and an unfavorable traffic mix, $19 million.
Other revenues declined by $15 million.
Operating expenses increased $274 million, or 30.8%, from $889
million in the second quarter of 1996 to $1,163 million in the second
quarter of 1997. The following table sets forth the operating
expenses for the two periods:
Second Quarter
--------------
Increase
($ In Millions) 1997 1996 (Decrease)
------ ---- ----------
Compensation and benefits $ 299 $309 $(10)
Fuel 47 52 (5)
Material and supplies 46 46 -
Equipment rents 92 95 (3)
Depreciation and amortization 72 70 2
Casualties and insurance 36 46 (10)
Other 131 136 (5)
ESOP termination charge 221 221
Merger-related compensation 180 180
Merger costs 39 39
Voluntary separation programs 135 (135)
------ ---- ----
$1,163 $889 $274
====== ==== ====
Compensation and benefits decreased $10 million, or 3.2%, primarily
as a result of reductions in employment levels. Compensation and
10
<PAGE>
benefits as a percent of revenues was 32.1% in the second quarter of
1997 as compared with 32.8% in the second quarter of 1996.
Casualties and insurance costs decreased $10 million, or 21.7%,
primarily due to reductions in employee injuries.
The Company recorded $440 million of merger-related costs (see Notes
2, 3, 4 and 5 to the Condensed Consolidated Financial Statements) and
a one-time charge of $135 million for the voluntary separation
programs and related costs (see Note 6 to the Condensed Consolidated
Financial Statements) in the second quarters of 1997 and 1996,
respectively.
The Company's operating ratio (operating expenses as a percent of
revenues) was 124.9% for the second quarter of 1997 compared with
94.3% for the second quarter of 1996. Excluding the merger-related
costs and the voluntary separation programs charge, the operating
ratios would have been 77.7% and 80.0% for the second quarters of
1997 and 1996, respectively.
The significant difference between the effective tax rates for the
second quarter of 1997 as compared with the second quarter of 1996
results from the nondeductibility for income tax purposes of the ESOP
termination charge and certain merger-related compensation costs.
First Six Months of 1997 compared with First Six Months of 1996
- ---------------------------------------------------------------
The net loss for the first six months of 1997 was $214 million which
includes merger-related costs (see Notes 2, 3, 4 and 5 to the
Condensed Consolidated Financial Statements). Net income for the
first six months of 1996 was $52 million which included the effects
of the voluntary separation programs charge (see Note 6 to the
Condensed Consolidated Financial Statements).
Operating revenues increased $2 million, or .1%, to $1,829 million for
the first six months of 1997 from $1,827 million for the first six
months of 1996. A 4.6% increase in traffic volume resulted in a $79
million increase in revenues. A decrease in average rates and an
unfavorable traffic mix reduced revenues by $31 million and $27 million,
respectively. Other revenues decreased by $19 million.
Operating expenses increased $241 million, or 14.1%, to $1,946
million in the first six months of 1997, from $1,705 million in
the first six months of 1996. The following table sets forth the
operating expenses for the two periods:
11
<PAGE>
First Six Months
----------------
Increase
($ In Millions) 1997 1996 (Decrease)
------ ------ --------
Compensation and benefits $ 612 $ 652 $ (40)
Fuel 104 102 2
Material and supplies 95 106 (11)
Equipment rents 184 193 (9)
Depreciation and amortization 145 141 4
Casualties and insurance 75 94 (19)
Other 269 282 (13)
ESOP termination charge 221 221
Merger-related compensation 180 180
Merger costs 61 61
Voluntary separation programs 135 (135)
------ ------ -----
$1,946 $1,705 $ 241
====== ====== =====
Compensation and benefits decreased $40 million, or 6.1%, primarily as a
result of reductions in employment levels and other employee-related
costs, as well as lower accruals for wage increases and less weather-
related overtime costs occurring during the first quarter of 1997 as
compared with the same period of 1996. Compensation and benefits as a
percent of revenues was 33.5% in the first six months of 1997 as
compared with 35.7% in the first six months of 1996.
The decline in material and supplies costs of $11 million, or 10.4%,
was mostly attributable to a higher level of expenditures for repairs
and maintenance of locomotives and freight cars in the first quarter
of 1996 due to adverse weather conditions and an increase in the
allocation of material used in capital vs. maintenance projects in
the first quarter of 1997.
Casualties and insurance costs decreased $19 million, or 20.2%,
primarily due to reductions in employee injuries.
The Company's operating ratio was 106.4% for the first six months of
1997, compared with 93.3% for the first six months of 1996. Without the
merger-related costs and voluntary separation programs charge, the
operating ratio would have been 81.1% and 85.9% for the first six months
of 1997 and 1996, respectively.
The significant difference between the effective tax rates for the
first half 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.
Liquidity and Capital Resources
- -------------------------------
The Company's cash and cash equivalents increased $10 million in the
first six months of 1997, from $17 million at December 31, 1996 to
$27 million at June 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
12
<PAGE>
the first six months of 1997, operating activities provided cash of
$313 million.
The principal uses of cash during the quarter were for: property and
equipment acquisitions, $147 million; payment of long-term debt, $86
million; net repayment of short-term borrowings, $44 million; and
cash dividends on common stock, $27 million.
A working capital (current assets less current liabilities) deficit
of $126 million existed at June 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.
During the first six months of 1997, CRC issued $100 million of
commercial paper and repaid $144 million. At June 30, 1997, $155
million of commercial paper remained outstanding, of which $100
million is classified as long-term debt since it is expected to be
refinanced through subsequent issuances of commercial paper and is
supported by a long-term credit facility.
The Company has recorded a $117 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.
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.
-----------------
New York Cross Harbor Railroad Terminal Corporation v. Consolidated Rail
- ------------------------------------------------------------------------
Corporation.
- -----------
On June 5, 1997, plaintiff filed a complaint against CRC in the United
States District Court for the Eastern District of New York seeking a
total of $900 million in compensatory, punitive and treble damages under
Section 2 of the Sherman Antitrust Act. Plaintiff alleges that CRC
engaged in anticompetitive and other unlawful acts harming plaintiff's
rail car float operation in New York Harbor between Brooklyn, NY and
Conrail's Greenville Yard in Jersey City, NJ. CRC believes plaintiff's
legal claims to be without merit.
Hollidaysburg Environmental Investigation.
- -----------------------------------------
On June 23, 1997, the Pennsylvania Attorney General's office executed a
search warrant at CRC's Hollidaysburg Reclamation Plant near Altoona, PA
searching for evidence of alleged illegal solid waste disposal. Since
that time, the Pennsylvania Department of Environmental Protection has
ordered the Company to address conditions discovered at the site and has
initiated inspections at numerous other CRC facilities in Pennsylvania.
The Company is complying with the terms of the order and is cooperating
with and awaiting the results of these inspections.
Ohio Crossing Accident Punitive Damage Awards.
- ---------------------------------------------
These matters were reported in CRC's report on Form 10-K for the year
ended December 31, 1996.
In June, 1997, the intermediate Appellate Court affirmed the trial
court's award of punitive damages against the Company in Garrett v.
Gollihue. An appeal is currently pending with the Ohio Supreme 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: August 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 Six Months Ended
June 30, June 30,
-------------- -----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings
- --------
Pre-tax income $(250) $34 $(154) $ 81
Add:
Interest expense 42 44 84 88
Rental expense interest factor 11 13 27 28
Less equity in undistributed
losses of 20%-50% owned companies (7) (3) (12) (7)
---- ---- ---- ----
Earnings available for fixed charges (loss) $(204) $88 $ (55) $190
==== === ==== ====
Fixed charges
- -------------
Interest expense 42 44 84 88
Rental expense interest factor 11 13 27 28
---- ---- ---- ----
Fixed charges $ 53 $57 $ 111 $116
==== === ==== ====
Ratio of earnings to fixed charges - 1.54x - 1.64x
</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. After the merger-related costs
recognized during the second quarter of 1997, earnings available for
fixed charges were inadequate by $257 million and $166 million in the
quarter and six months ended June 30, 1997, respectively.
<PAGE>
Exhibit 15
----------
August 12, 1997
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Dear Sirs:
We are aware that Consolidated Rail Corporation has
incorporated by reference our report dated July 16, 1997
(issued pursuant to the provisions of Statement on Auditing
Standards No. 71) in the Prospectus constituting part of the:
Registration Statement on Form S-3 No. 33-34040
Registration Statement on Form S-3 No. 33-64670.
We are also aware of our responsibilities under the
Securities Act of 1933 and that pursuant to Rule 436(c) our
report dated July 16, 1997 shall not be considered part of a
registration statement prepared or certified by us or a
report prepared or certified by us within the meaning of
Sections 7 and 11 of the Securities Act of 1933.
Yours very truly,
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, PA 19103
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27
----------
CONSOLIDATED RAIL CORPORATION
FINANCIAL DATA SCHEDULE
($ 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> JUN-30-1997
<PERIOD-TYPE> 6-MOS
<CASH> 27
<SECURITIES> 0
<RECEIVABLES> 662
<ALLOWANCES> 0
<INVENTORY> 134
<CURRENT-ASSETS> 1,139
<PP&E> 6,668
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,516
<CURRENT-LIABILITIES> 1,265
<BONDS> 1,879
0
0
<COMMON> 0
<OTHER-SE> 2,800
<TOTAL-LIABILITY-AND-EQUITY> 8,516
<SALES> 0
<TOTAL-REVENUES> 1,829
<CGS> 0
<TOTAL-COSTS> 1,946
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<INTEREST-EXPENSE> 84
<INCOME-PRETAX> (154)
<INCOME-TAX> 60
<INCOME-CONTINUING> (214)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (214)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<PAGE>
</TABLE>
