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, 1998
-------------
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, 1998)
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, 1998 and 1997 3
Condensed Consolidated Balance
Sheets - June 30, 1998 and
December 31, 1997 4
Condensed Consolidated Statements
of Cash Flows - Six months ended
June 30, 1998 and 1997 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 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
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,
-------------- ----------------
1998 1997 1998 1997
------ ----- ------ ------
<S> <C> <C> <C> <C>
Revenues $977 $ 931 $1,898 $1,829
Operating expenses
Way and structures 119 113 243 237
Equipment 191 199 378 401
Transportation 344 334 694 682
General and administrative 75 77 146 164
ESOP termination charge - 221 - 221
Merger-related compensation costs 25 180 50 180
Merger costs 18 39 22 61
---- ------ ------ ------
Total operating expenses 772 1,163 1,533 1,946
---- ------ ------ ------
Income (loss) from operations 205 (232) 365 (117)
Interest expense (38) (42) (79) (84)
Other income, net 19 24 37 47
---- ------ ------ ------
Income (loss) before income taxes 186 (250) 323 (154)
Income taxes 71 24 123 60
---- ------ ------ ------
Net income (loss) $115 $ (274) $ 200 $ (214)
==== ====== ====== ======
Ratio of earnings to fixed charges 4.53x - 3.97x -
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
CONSOLIDATED RAIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
($ In Millions) June 30, December 31,
<CAPTION> 1998 1997
-------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 55 $ 87
Accounts receivable 622 649
Deferred tax assets 107 107
Material and supplies 122 104
Other current assets 13 12
------ ------
Total current assets 919 959
Property and equipment, net 6,940 6,829
Other assets 706 676
------ ------
Total assets $8,565 $8,464
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Current maturities of long-term debt 121 112
Accounts payable 234 161
Wages and employee benefits 336 366
Casualty reserves 138 139
Accrued and other current liabilities 434 479
------ ------
Total current liabilities 1,263 1,257
Long-term debt 1,655 1,732
Casualty reserves 165 198
Deferred income taxes 1,506 1,462
Special income tax obligation 253 283
Other liabilities 502 511
------ ------
Total liabilities 5,344 5,443
------ ------
Stockholder's equity
Preferred stock
Common stock
Additional paid-in capital 1,864 1,864
Retained earnings 1,357 1,157
------ ------
Total stockholder's equity 3,221 3,021
------ ------
Total liabilities and
stockholder's equity $8,565 $8,464
====== ======
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
CONSOLIDATED RAIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ In Millions)
<CAPTION>
Six Months Ended
June 30,
----------------
1998 1997
----- -----
<S> <C> <C>
Cash flows from operating activities $ 281 $ 313
----- -----
Cash flows from investing activities
Property and equipment acquisitions (242) (147)
Other (7) (6)
----- -----
Net cash used in investing activities (249) (153)
----- -----
Cash flows from financing activities
Net reduction in short-term borrowings - (44)
Payment of long-term debt (64) (86)
Dividends paid on common stock - (27)
Other - 7
----- -----
Net cash used in financing activities (64) (150)
----- -----
Increase (decrease) in cash and cash equivalents (32) 10
Cash and cash equivalents
Beginning of period 87 17
----- -----
End of period $ 55 $ 27
===== =====
</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"), a wholly-owned subsidiary of Conrail Inc. ("Conrail"), as
of June 30, 1998 and December 31, 1997, the consolidated results of
operations for the three and six-month periods ending June 30, 1998
and 1997 and the consolidated cash flows for the six-month periods
ended June 30, 1998 and 1997. In the opinion of management, these
financial statements include all adjustments, consisting of normal
recurring adjustments and those mentioned in Notes 2 through 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, 1997, presented in the Company's Annual Report on
Form 10-K.
2. During the second quarters of 1998 and 1997, the Company
recorded charges of $21 million ($12 million after income taxes)
and $7 million ($4 million after income taxes), respectively,
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 by CSX Corporation ("CSX") and Norfolk Southern Corporation
("NSC"), and subsequent transition period. The Company has
recorded charges of $42 million ($26 million after income taxes)
and $7 million ($4 million after income taxes) for the six months
ended June 30, 1998 and 1997, respectively, related to these
incentive payments. 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 Company has also recorded merger-related compensation costs of
$4 million ($3 million after income taxes) and $8 million ($5
million after income taxes) for the quarter and six months ended
June 30, 1998, respectively, representing payments made to certain
middle management employees as provided in the amended merger
agreement.
3. Merger costs of $18 million ($12 million after income taxes)
and $39 million ($24 million after income taxes) were recorded
during the second quarters of 1998 and 1997, respectively. Such
costs amounted to $22 million ($14 million after income taxes) and
$61 million ($38 million after income taxes) for the first six
months of 1998 and 1997, respectively. In 1997, this amount
primarily includes costs for investment banking, legal and
6
<PAGE>
consulting services related to the acquisition of Conrail by CSX
and NSC, and in 1998, includes costs to facilitate the
merger of the Company's activities into those of CSX and NSC,
principally computer systems integration.
4. In the second quarter of 1997, the Company recorded a charge of
$221 million (no related income tax effect) for 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.
5. In 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, a
result of the acquisition of Conrail by CSX and NSC. As required
by the agreements, a portion of the benefits under these
agreements, $35 million, was paid on May 31, 1998, from the Conrail
employee benefits trust. 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 should
occur subsequent to August 22, 1998, the effective date of the STB
decision.
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) in that quarter.
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, 1997. There have been no
material developments with respect to these matters during the first
six months of 1998, except as disclosed in the Annual Report on Form
10-K or elsewhere herein.
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, 1998 and the related condensed consolidated
statements of income for the three and six months ended June 30, 1998
and June 30, 1997 and the condensed consolidated statements of cash
flows for the six months ended June 30, 1998 and June 30, 1997. 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, 1997, 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 19, 1998, 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, 1997, is fairly stated in all
material respects in relation to the consolidated balance sheet from
which it has been derived.
PricewaterhouseCoopers LLP
Thirty South Seventeenth Street
Philadelphia, PA 19103
July 15, 1998
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 (the "Company") was $115
million for the second quarter of 1998 as compared with a net loss of
$274 million for the second quarter of 1997. The results for the
second quarter of 1998 include merger-related costs of $43 million ($27
million after income taxes). The second quarter 1997 net loss includes
an ESOP termination charge of $221 million (no related income tax
effect) and merger-related costs of $219 million ($170 million after
income taxes). The merger-related costs in both quarters result from
the acquisition of the Company's parent, Conrail, (see Notes 2 through
6 to the Condensed Consolidated Financial Statements). Without the
merger-related costs and ESOP termination charge, the Company's net
income would have been $142 million and $117 million for the second
quarters of 1998 and 1997, respectively.
Net income for the first six months of 1998 was $200 million as
compared with a net loss of $214 million for the first six months of
1997. The results for the first half of 1998 include merger-related
costs of $72 million ($45 million after income taxes). The results for
the first half of 1997 include the aforementioned ESOP termination
charge and merger-related costs of $241 million ($184 million after
income taxes). Without the merger-related costs and ESOP termination
charge, the Company's net income would have been $245 million and $191
million for the first six months of 1998 and 1997, respectively.
Increases in traffic volume and operating revenues were the primary
contributors to the more favorable operating results for the second
quarter and first six months of 1998 as compared with the same
periods of 1997. However, the 1998 first half rate of growth in line
haul revenue is not expected to continue into the second half of
1998.
Acquisition of Conrail Inc.
- --------------------------
On June 8, 1998, the STB approved the application of CSX and NSC to
control Conrail. On July 23, 1998, the STB issued a written opinion
that permits those companies to exercise operating control of Conrail
beginning August 22, 1998, unless such decision is stayed or appealed.
Results of Operations
- ---------------------
Second Quarter 1998 compared with Second Quarter 1997
- -----------------------------------------------------
The net income for the second quarter of 1998 was $115 million
compared with a net loss for the second quarter of 1997 of $274
million after merger-related costs recorded in both quarters (see
Notes 2 through 6 to the Condensed Consolidated Financial
Statements).
9
<PAGE>
Operating revenues (primarily freight and line-haul revenues, but
also including switching, demurrage and incidental revenues)
increased $46 million, or 4.9%, from $931 million in the second
quarter of 1997 to $977 million in the second quarter of 1998. A 5.3%
increase in traffic volume in units (freight cars and intermodal
trailers and containers) resulted in a $47 million increase in
revenues. Average revenue per unit decreased revenues by $8 million
for the period, with an unfavorable traffic mix causing a $14 million
decrease while higher average rates increased revenues by $6 million.
Other revenues increased by $7 million.
Operating expenses decreased $391 million, or 33.6%, from $1,163
million in the second quarter of 1997 to $772 million in the second
quarter of 1998. The following table sets forth the operating
expenses for the two periods:
Second Quarter
--------------
Increase
($ In Millions) 1998 1997 (Decrease)
----- ------ ----------
Compensation and benefits $321 $ 299 $ 22
Fuel 42 47 (5)
Material and supplies 45 46 (1)
Equipment rents 89 92 (3)
Depreciation and amortization 76 72 4
Casualties and insurance 28 36 (8)
Other 128 131 (3)
ESOP termination charge 221 (221)
Merger-related compensation 25 180 (155)
Merger costs 18 39 (21)
----- ------- -----
$772 $1,163 $(391)
===== ======= =====
Compensation and benefits increased $22 million, or 7.4%, primarily
as a result of higher wage rates that became effective during the
third quarter of 1997 and increases in other employee-related costs,
including incentive compensation. Higher traffic volume also
contributed to increased compensation costs for employees providing
transportation services. Compensation and benefits as a percent of
revenues was 32.9% in the second quarter of 1998 as compared with
32.1% in the second quarter of 1997.
Casualties and insurance costs decreased $8 million, or 22.2%,
primarily due to reductions in both the number of and costs
associated with employee injuries.
The Company recorded $43 million and $440 million of merger-related
costs during the second quarters of 1998 and 1997, respectively, (see
Notes 2 through 6 to the Condensed Consolidated Financial
Statements).
The Company's operating ratio (operating expenses as a percent of
revenues) was 79.0% for the second quarter of 1998 compared with
124.9% for the second quarter of 1997. Excluding the merger-related
costs and ESOP termination charge, the operating ratios would have
been 74.6% and 77.7% for the second quarters of 1998 and 1997,
respectively.
10
<PAGE>
The significant difference between the effective tax rates for the
second quarter of 1998 as compared with the second quarter of 1997
results from the nondeductibility for income tax purposes of the ESOP
termination charge and certain merger-related compensation costs
recorded in the second quarter of 1997.
First Six Months of 1998 compared with First Six Months of 1997
- ---------------------------------------------------------------
The net income for the first six months of 1998 was $200 million
compared with a net loss for the first six months of 1997 of $214
million after merger-related costs recorded in both periods (see
Notes 2 through 6 to the Condensed Consolidated Financial
Statements).
Operating revenues increased $69 million, or 3.8%, to $1,898 million for
the first six months of 1998 from $1,829 million for the first six
months of 1997. A 5.5% increase in traffic volume resulted in a $96
million increase in revenues. An unfavorable traffic mix and a decrease
in average rates reduced revenues by $24 million and $8 million,
respectively. Other revenues increased by $5 million.
Operating expenses decreased $413 million, or 21.2%, to $1,533
million in the first six months of 1998, from $1,946 million in
the first six months of 1997. The following table sets forth the
operating expenses for the two periods:
First Six Months
----------------
Increase
($ In Millions) 1998 1997 (Decrease)
------ ------ --------
Compensation and benefits $ 643 $ 612 $ 31
Fuel 86 104 (18)
Material and supplies 89 95 (6)
Equipment rents 171 184 (13)
Depreciation and amortization 152 145 7
Casualties and insurance 63 75 (12)
Other 257 269 (12)
ESOP termination charge 221 (221)
Merger-related compensation 50 180 (130)
Merger-related costs 22 61 (39)
------ ------ -----
$1,533 $1,946 $(413)
====== ====== =====
Compensation and benefits increased $31 million, or 5.1%, primarily as a
result of increased wage rates that became effective during the third
quarter of 1997 and increases in other employee-related costs, including
incentive compensation. Higher traffic volume also contributed to
increased compensation costs for employees providing transportation
services. These increases were partially offset by increases in
capitalized labor for the first half of 1998, compared with the first
half of 1997. Compensation and benefits as a percent of revenues was
33.9% in the first six months of 1998 as compared with 33.5% in the
first six months of 1997.
11
<PAGE>
Fuel costs decreased $18 million, or 17.3%, mainly as a result of
lower average fuel prices during the first six months of 1998 as
compared with the same period of 1997.
The decline in equipment rents of $13 million, or 7.1%, was
attributable mostly to lower than previously estimated car hire
settlement costs for prior periods and higher off-line income from
use of the Company's cars by other railroads.
Casualties and insurance costs decreased $12 million, or 16.0%,
primarily due to reductions in both the number of and costs
associated with employee injuries.
The Company's operating ratio was 80.8% for the first six months of
1998, compared with 106.4% for the first six months of 1997. Without the
merger-related costs and ESOP termination charge, the operating ratio
would have been 77.0% and 81.1% for the first six months of 1998 and
1997, respectively.
The significant difference between the effective tax rates for the
first half of 1998 as compared with the same period of 1997
results from the nondeductibility for income tax purposes of the
ESOP termination charge and certain merger-related compensation
costs incurred during the first six months of 1997.
Liquidity and Capital Resources
- -------------------------------
The Company's cash and cash equivalents decreased $32 million in the
first six months of 1998, from $87 million at December 31, 1997 to
$55 million at June 30, 1998. Cash generated from operations has
been the Company's principal source of liquidity. In the first six
months of 1998, operating activities provided cash of $281 million.
The principal uses of cash were for property and equipment
acquisitions, $242 million, and payment of long-term debt, $64
million.
A working capital (current assets less current liabilities) deficit
of $344 million existed at June 30, 1998, compared with a $298
million deficit at December 31, 1997. Management believes that the
Company's financial position allows it sufficient access to credit
sources on investment grade terms.
In 1997, the Company recorded $159 million of short-term liabilities
and a $221 million long-term liability, and in 1998, the Company has
recorded an additional $42 million short-term liability for certain
merger-related costs. None of the liabilities is expected to require
the future use of the Company's cash for settlement.
Other Matters
- -------------
While the Company is implementing procedures to resolve anticipated year
2000 issues related to certain of its computer systems, it has not taken
action on all of its computer systems since it believes that such issues
will be resolved in connection with the proposed integration of its
systems with those of CSX and NSC as a result of the Conrail
acquisition. In the event this integration is not successful or
completed in a timely manner, the Company believes such an event could
12
<PAGE>
result in a material financial risk and serious disruption in its
operations.
Forward-Looking Statements
- --------------------------
Except for the historical information contained herein, the matters
discussed in this report are forward-looking statements that involve
risks and uncertainties that cannot be predicted accurately; that may be
beyond the Company's control and that may cause actual results to
differ. Certain of these risks and uncertainties include, but are not
limited to, the effect of economic conditions, competition, regulation
and weather on the Company's operations, customers, service and prices;
the effect of the Conrail acquisition on the Company's operations and
business and other factors discussed elsewhere in this report and, from
time to time, in other reports filed with the Securities and Exchange
Commission.
The forward-looking statements embodied in this report speak only as of
the date of its filing, and the Company disclaims any obligation or
undertaking to disseminate updates or revisions to such statements to
reflect changes in management's expectations or any changes in events,
conditions or circumstances on which such statements are based.
13
<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 PricewaterhouseCoopers LLP.
27 Financial data schedule.
(b) Reports on Form 8-K
None
14
<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
President
(Principal Legal Officer)
/s/ John A. McKelvey
---------------------------
John A. McKelvey
Senior Vice President - Finance
(Principal Financial Officer)
Date: August 12, 1998
15
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
No.
- -------
12 Computations of the ratio of earnings to
fixed charges.
15 Letter re unaudited interim financial
information from PricewaterhouseCoopers LLP.
27 Financial data schedule.
<PAGE>
<TABLE>
Exhibit 12
----------
CONSOLIDATED RAIL CORPORATION
-----------------------------
COMPUTATIONS OF THE RATIO OF EARNINGS TO FIXED CHARGES
------------------------------------------------------
($ In Millions)
<CAPTION>
Quarters Ended Six Months Ended
June 30, June 30,
-------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings
- --------
Pre-tax income (loss) $186 $(250) $323 $(154)
Add:
Interest expense 38 42 79 84
Rental expense interest factor 13 11 26 27
Less equity in undistributed
losses of 20%-50% owned companies (6) (7) (11) (12)
---- ----- ---- -----
Earnings available for fixed charges (loss) $231 $(204) $417 $ (55)
==== ===== ==== =====
Fixed charges
- -------------
Interest expense 38 42 79 84
Rental expense interest factor 13 11 26 27
---- ----- ---- -----
Fixed charges $ 51 $ 53 $105 $ 111
==== ===== ==== =====
Ratio of earnings to fixed charges 4.53x - 3.97x -
</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 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 $166 million in the quarter and six
months ended June 30, 1997, respectively.
<PAGE>
Exhibit 15
----------
August 12, 1998
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Dear Sirs:
We are aware that Consolidated Rail Corporation has
incorporated by reference our report dated July 15, 1998
(issued pursuant to the provisions of Statement on Auditing
Standards No. 71) in the Prospectus constituting part of the:
* Registration Statement on Form S-3 No. 33-34040
* Registration Statement on Form S-3 No. 33-64670.
We are also aware of our responsibilities under the
Securities Act of 1933 and that pursuant to Rule 436(c) our
report dated July 15, 1998 shall not be considered part of a
registration statement prepared or certified by us or a
report prepared or certified by us within the meaning of
Sections 7 and 11 of the Securities Act of 1933.
Yours very truly,
PricewaterhouseCoopers LLP
Thirty South Seventeenth Street
Philadelphia, PA 19103
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27
----------
CONSOLIDATED RAIL CORPORATION
FINANCIAL DATA SCHEDULE
($ In Millions Except Per Share)
<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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<PERIOD-TYPE> 6-MOS
<CASH> 55
<SECURITIES> 0
<RECEIVABLES> 622
<ALLOWANCES> 0
<INVENTORY> 122
<CURRENT-ASSETS> 919
<PP&E> 6,940
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,565
<CURRENT-LIABILITIES> 1,263
<BONDS> 1,655
0
0
<COMMON> 0
<OTHER-SE> 3,221
<TOTAL-LIABILITY-AND-EQUITY> 8,565
<SALES> 0
<TOTAL-REVENUES> 1,898
<CGS> 0
<TOTAL-COSTS> 1,533
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 79
<INCOME-PRETAX> 323
<INCOME-TAX> 123
<INCOME-CONTINUING> 200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 200
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<PAGE>
</TABLE>
