UNITED STATES
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 period ended March 31, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Act of 1934
For the transition period from __________ to __________
Commission file number 0-15768
NORTH CAROLINA RAILROAD COMPANY
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-6003280
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
234 Fayetteville Street Mall, Suite 600
P. O. Box 2248, Raleigh, North Carolina 27602
(Address of principal executive offices) (Zip Code)
(919) 829-7355
(Registrant's telephone number, including area code)
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
practical date.
Common Stock, $.50 par Value--4,283,470 shares as of
March 31, 1995.
The total number of pages contained in this document is 16
pages.
1
<PAGE>
INDEX
NORTH CAROLINA RAILROAD COMPANY
PART I. FINANCIAL INFORMATION
Item l. Financial Statements (Unaudited)
Balance Sheets - March 31, 1995 and
December 31, 1994 . . . . . . . . . . . . . . . . . 3
Statements of Income - Three months ended March 31,
1995 and March 31, 1994 . . . . . . . . . . . . . . 4
Statements of Shareholders' Equity -
Three months ended March 31, 1995
and March 31, 1994 . . . . . . . . . . . . . . . . . 5
Statements of Cash Flows -
Three months ended March 31, 1995 and
March 31, 1994 . . . . . . . . . . . . . . . . . . . 6
Notes to financial statements -
March 31, 1995 . . . . . . . . . . . . . . . . . . . 7
Item 2. The Registrant's Discussion and Analysis of
Financial Condition and Results of Operations. . . . 10
PART II. OTHER INFORMATION
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 15
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>
BALANCE SHEETS (Unaudited)
NORTH CAROLINA RAILROAD COMPANY
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $1,578,190 $1,615,284
Rent receivable 132,688 246,030
Interest receivable and other assets 77,759 65,400
Income taxes recoverable 16,130 -0-
----------- -----------
TOTAL CURRENT ASSETS 1,804,767 1,926,714
PROPERTIES
Roadway and land--Note B 7,848,842 7,848,842
Buildings and equipment 236,369 236,369
Less accumulated depreciation (294,186) (292,395)
----------- -----------
7,791,025 7,792,816
OTHER ASSETS
Lease negotiation costs 421,523 365,267
------------ ------------
$10,017,315 $10,084,897
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses and accounts payable $ 424,392 $ 421,026
Dividends paid -0- 128,504
Unearned rental income 61,000 -0-
----------- -----------
TOTAL CURRENT LIABILITIES 485,392 549,530
DEFERRED INCOME TAXES 1,217,051 1,214,451
SHAREHOLDERS' EQUITY
Common stock, par value $0.05 per share--
10,000,000 shares authorized, 4,283,470
shares issued and outstanding 2,141,735 2,141,735
Additional paid-in capital 3,588,455 3,588,455
Retained earnings
2,584,682 2,590,626
----------- -----------
8,314,872 8,320,816
----------- -----------
COMMITMENTS AND CONTINGENCIES--Note C
$10,017,315 $10,084,797
============ ============
</TABLE>
See notes to financial statements.
3
<PAGE>
STATEMENTS OF INCOME (Unaudited)
NORTH CAROLINA RAILROAD COMPANY
<TABLE>
<CAPTION>
Three Months Ended
March 31
1995 1994
------------------------------
<S> <C> <C>
Revenues:
Lease of roadway and land $ 168,569 $ 160,703
Interest income 31,504 18,575
Rental income 3,150 1,080
Other 30,234 10,787
---------- ---------
233,457 191,145
Expenses:
Salaries and administrative 61,106 61,477
Professional fees 116,229 89,074
Insurance and taxes 16,332 11,763
Depreciation 1,791 1,796
Other 41,343 20,767
---------- ---------
236,801 184,877
---------- ---------
INCOME BEFORE INCOME TAXES (3,344) 6,268
Income taxes:
Current -0- -0-
Deferred 2,600 2,600
---------- ---------
2,600 2,600
---------- ---------
NET (LOSS) INCOME (5,944) 3,668
========== =========
Earnings per share: $ 0.00 $ 0.00
============== ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
NORTH CAROLINA RAILROAD COMPANY
<TABLE>
<CAPTION>
Additional
Common Paid-In
Retained Earnings Shareholder's
Shares Capital Restricted Unrestricted
Equity
--------- ---------- ------------------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $2,141,735 $3,588,455 $ 509,778 $2,102,207 $8,342,175
Net income (loss) 4,041 (373) 3,668
---------- ---------- ---------- ----------- -----------
Balance at March 31, 1994 $2,141,735 $3,588,455 $ 513,819 $2,093,804 $8,345,843
========== ========== ========== =========== ===========
Balance at January 1, 1995 $2,141,735 $3,588,455 $ -0- $2,590,626 $8,320,816
Net (loss) -0- (5,944) (5,944)
---------- ---------- ---------- ----------- -----------
Balance at March 31, 1995 $2,141,735 $3,588,455 $ -0- $2,584,682 $8,314,872
========== ========== ========== ========== ===========
</TABLE>
See notes to financial statements.
5
<PAGE>
STATEMENTS OF CASH FLOWS
NORTH CAROLINA RAILROAD COMPANY
<TABLE>
<CAPTION>
Three Months Ended
March 31
1995 1994
---------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $ (5,944) $ 3,668
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes 2,600 2,600
Depreciation 1,791 1,796
Change in operating assets and liabilities:
Rent receivable 113,342 233,111
Interest receivable and other assets (12,359) ( 5,071)
Income taxes recoverable (16,130) -0-
Accrued expenses 3,366 19,145
Unearned rental income 61,000 61,000
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 147,666 316,249
INVESTING ACTIVITIES
Increase in restricted assets -0- (4,041)
Purchase of equipment -0- (1,487)
Lease negotiation costs (56,256) -0-
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (56,256) (5,528)
FINANCING ACTIVITIES
Dividends paid (128,504) -0-
---------- ---------
NET CASH USED IN FINANCING ACTIVITIES (128,504) -0-
(DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS (37,094) 310,721
Cash and cash equivalents at beginning of period 1,615,284 912,655
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,578,190 $1,223,376
=========== ===========
</TABLE>
See notes to financial statements.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NORTH CAROLINA RAILROAD COMPANY
March 31, 1995
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly,
they do not include all the information and footnotes required
by generally accepted accounting principles for complete
financial statements.
In the opinion of management, the financial statements
contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial
position and results of operations of the North Carolina
Railroad Company (the "Company" or "NCRR") as of and for each
of the periods presented. These financial statements should
be read in conjunction with the financial statements and notes
included in the Company's audited financial statements for
1994.
PROPERTIES: Buildings and equipment are reported at
cost. Depreciation is computed on the straight-line method
over the estimated useful lives of the assets.
Properties in the roadway and land account are carried at
an amount which approximates the 1916 valuation by the
Interstate Commerce Commission. All the property in the
roadway and land account is leased either to the Norfolk
Southern Railway Company ("Norfolk Southern Railway") or the
Atlantic and East Carolina Railway Company ("AECR") (See Note
B). Norfolk Southern Railway is a subsidiary of Norfolk
Southern Corporation. AECR is a subsidiary of Norfolk
Southern Railway. These properties are not depreciated
because they represent fully depreciated roadway or
non-depreciable land. However, a rehabilitation project of
$200,000 was amortized over a five-year period during the
1940's.
REVENUE RECOGNITION: Revenue is reflected in the
statements of income when earned in accordance with the
Company's lease arrangements on the accrual method. Excess
lease revenue related to the 1939 lease with AECR is estimated
and recognized based upon the previous quarter's billed
traffic.
INCOME TAXES: Income tax expense is disproportionate to
income before income taxes because the lessee of certain of
the properties, pursuant to the terms of the lease, pays all
taxes attributable to the lease arrangement. The Company
considers the lessee's share of the amortization of roadway
costs to be a permanent difference and no deferred taxes are
provided thereon.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents
include investments in high quality commercial paper and U.S.
Treasury Bills with maturities not exceeding nine months.
LEASE/TRANSACTION COSTS: Certain lease negotiation
costs have been capitalized and will be amortized over the
life of any lease extension agreements, if consummated.
RESTRICTED RETAINED EARNINGS: Under terms of its lease
agreement with AECR, the Company had maintained a restricted
cash account. All restrictions expired on December 31, 1994,
and the assets became the property of the Company.
Accordingly, these assets are no longer classified as
restricted.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
NORTH CAROLINA RAILROAD COMPANY
NOTE B--LEASES ON ROADWAY AND LAND
The Company leases it roadway and land under two leases
to Norfolk Southern Railway and one lease to AECR.
The first lease to Norfolk Southern Railway (the "1895
Lease") expired on January 1, 1995, and provided for an annual
lease rental of $286,000. Under the terms of the lease, all
income, property and franchise taxes are paid by the lessee.
The Company leased additional roadway and land to AECR
(the "1939 Lease") under the terms of an original lease dated
August 30, 1939 between Atlantic and North Carolina Railroad
Company and AECR. The original lease was amended on August
29, 1954, and provided for an expiration date of December 31,
1994. The lessee is responsible for all state and federal
taxes imposed upon the lessee on account of the operation of
the railroad. The lessor is responsible for certain ad
valorem property taxes, income taxes assessed against it, and
payroll taxes on account of it employees. Under the terms of
this lease, AECR pays an annual fixed lease rental of $60,500
plus annual excess lease rentals based upon operating revenues
in excess of $475,000. The Company and Norfolk Southern
Railway have conducted intensive negotiations over the terms
of a definitive agreement to extend the 1895 and 1939 Leases.
Thus far, the negotiations have not successfully produced a
definitive agreement satisfactory to the Company and Norfolk
Southern Railway, but negotiations are continuing.
The second lease to Norfolk Southern Railway expires on
December 31, 2067, and provides for an annual lease rental of
$81,319 through December 31, 2017. Beginning January 1, 2018,
6% of the appraised value of the property will be the annual
lease for the remainder of the lease. Under the terms of the
lease, all taxes connected with the property, except income
taxes, are paid by the lessee.
NOTE C--COMMITMENTS AND CONTINGENCIES
During the fourth quarter of 1989, the Company was
notified by the North Carolina Department of Environment,
Health and Natural Resources ("DEHNR") of a possible abandoned
pesticide disposal site on property owned by the Company in
Johnston County, North Carolina. It is believed that the site
was used by a predecessor owner to burn and/or bury surplus
pesticides from the predecessor's business, which was not
located at the site. In January, 1994, DEHNR initiated a
lawsuit against the Company and other parties seeking
reimbursement of $84,354 in response costs incurred by DEHNR
and remediation of the site. On February 1, 1995, the Court
granted partial summary judgment holding all of the
defendants, including the Company, jointly and severally
liable for the site. The Court has not yet ruled on
apportionment of liability or cost sharing among the
defendants. According to a preliminary study conducted by the
Company, the estimated costs of remediation range between
$500,000 to in excess of $2,000,000. The Company will
vigorously defend the action brought by DEHNR and will
aggressively pursue any other parties who may be liable for
any remediation, removal, or clean-up. The ultimate costs of
any remediation, removal, or clean-up are not known. However,
if such costs are not paid by other parties, the financial
position of the Company would be materially adversely
affected.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
NORTH CAROLINA RAILROAD COMPANY
NOTE C--COMMITMENTS AND CONTINGENCIES (continued)
Four shareholder derivative actions were filed in the
United States District Court for the Eastern District of North
Carolina during December 1994 and January and February 1995 by
shareholders of the Company. The complaints name the
directors of the Company as defendants and the Company as
"nominal defendant." Two of the actions seek to enjoin a
purported lease between the Company and Norfolk Southern
Railway and seek to recover for the Company unspecified
damages and other relief from the directors. Two other
actions seek similar relief and also name the State of North
Carolina, the Governor of North Carolina, and Norfolk Southern
Railway as defendants. The Company's officers and directors
are indemnified in the bylaws of the Company for certain
claims and liabilities alleged in the actions, including the
defense costs and expenses. The Company notified its
directors and officers insurance carrier of claims as a result
of the actions, which claims have been acknowledged by the
insurance carrier. The directors and officers insurance
policy has an aggregate limit of $5,000,000 and a $75,000
aggregate retention.
9
<PAGE>
Item 2. The Registrant's Discussion and Analysis of Financial
Condition and Results of Operations
There was little change in the liquidity, capital
resources, or financial position of the Registrant for the
three month period ended March 31, 1995 as compared with the
year ended December 31, 1994 or the three month period ended
March 31, 1994.
Financial Condition
A majority of the Registrant's assets are subject to
two railroad operating leases dating to 1895 and 1939.
Information about the leases has been disclosed by the
Registrant in prior quarterly and annual reports to the
Securities and Exchange Commission. There was little change
in liquidity, capital resources, or asset position from the
end of the fiscal year 1994 to March 31, 1995. The
Registrant's lessees pay for maintenance and all operating
railroad equipment. Therefore, the Registrant does not
anticipate any need for substantial capital expenditures
unless the 1895 and 1939 Leases are not extended. The
Registrant is negotiating for extension of the leases. (See
Note B to the financial statements and Item 5, Other
Information below.) The Registrant does not foresee any need
for funds during 1995 which cannot be met primarily from its
income from leases or in part from available cash in the
regular course of business, except that (1) in the event the
Registrant and Norfolk Southern litigate issues before the
Interstate Commerce Commission ("ICC"), claims under the
1895 and 1939 Leases, or other matters, the Registrant may
be required to finance part of the litigation expenses, and
(2) if the Registrant seeks qualification as a Real Estate
Investment Trust ("REIT") for income tax purposes, the
Registrant may be required to finance a portion of
accumulated earnings and profits required to be distributed
to the Registrant's shareholders in the first year of REIT
status.
Results of Operations
Total revenues increased from $191,145 for the first
quarter of 1994 as compared to $233,457 for the first
quarter of 1995.
Revenues from leases of roadway and land increased
from $160,703 for the three month period ended March 31,
1994 to $168,569 for the same period ended March 31, 1995.
The slight increase in revenues from leases of roadway and
land were attributable to estimated increases in excess
rental revenues from the 1939 Lease. The 1939 Lease rental
estimate is based upon AECR previous quarter's billed
traffic, plus or minus adjustment to actual revenues as the
amounts are determined during the year. AECR revenue
estimates are furnished by Norfolk Southern Corporation.
See Note B to the financial statements.
10
<PAGE>
Interest income increased from $18,575 for the three
month period ended March 31, 1994 to $31,504 for the same
period ended March 31, 1995. The increase in interest
income is attributable to increases in yields on invested
cash.
Other income increased from $10,787 for the three
month period ended March 31, 1994 to $30,234 for the same
period ended March 31, 1995. The Registrant's other income
is derived primarily from proceeds of condemnations of the
Registrant's properties.
Salary and administrative expenses remained relatively
constant at $61,477 for the first quarter of 1994 as
compared to $61,106 for the first quarter of 1995.
Professional fees increased from $89,074 for the first
quarter of 1994 to $116,229 for the first quarter of 1995.
The increase in professional fees are attributable to
increases in fees and expenses associated with the
Registrant's renegotiation of its leases with Norfolk
Southern Railway, attorneys' fees in litigation matters, and
evaluation of REIT qualification. The Registrant expects to
continue to incur substantially greater professional and
investment banking fees and expenses in future periods until
resolution of matters related to current and future leases
or other transactions. The majority of such fees are
currently being capitalized for income tax purposes.
Insurance and taxes increased from $11,763 for the
first quarter of 1994 to $16,332 for the first quarter of
1995. The Registrant expects to incur higher property tax
expense in future periods if any properties are excluded
from a lease extension agreement and separately managed by
the Registrant.
Other expenses increased from $20,767 for the first
quarter of 1994 to $41,343 for the first quarter of 1995.
The increases in other expenses are attributable to
increases in outside consultants' fees and other expenses
associated with the termination of the 1895 and 1939 Leases
and negotiations with Norfolk Southern Railway. The
Registrant expects to continue to incur substantial
consultants' fees and other expenses in future periods at
least until the resolution of all matters related to current
and future leases or other transactions.
Current income taxes were constant at $-0- for the
first quarter of 1994 and the first quarter of 1995.
Deferred income taxes also remained constant at $2,600.
Under the 1895 Lease, all taxes attributable to the 1895
Lease, including income taxes, are paid by Norfolk Southern
Railway as lessee.
The Registrant and its lessees are responsible for
compliance with state, federal, local or other provisions
relating to discharge of materials or the protection of the
environment. The risk of incurring environmental liability is
11
<PAGE>
inherent in conducting railroad operations. Some of the
commodities which are transported over the Registrant's
railroad lines are classified as hazardous materials. The
1895 and 1939 Leases did not make provision for the lessees
to disclose environmental problems affecting the
Registrant's properties. Environmental problems may exist
on properties owned by the Registrant which are known to the
lessees but have not been disclosed to the Registrant or
which are unknown to the lessee or the Registrant. State
and federal environmental provisions may impose joint and
several liability upon the Registrant and its lessees and
sublessees for environmental damage or clean up (or
associated costs) of any real properties owned by the
Registrant and adjoining properties if the source of any
problem is the property of the Registrant. The Registrant
believes that damage or clean up (or the associated costs)
would be the responsibility of the lessees and any
sublessees or other parties who may have created any
actionable environmental condition. However, if such
parties are not able to meet their responsibilities, under
certain statutes, regulations, and rules, the Registrant
could ultimately be held responsible for any remediation,
removal, or cleanup of the property it owns.
The status of one such site is disclosed in Item 3
"Legal Proceedings." According to a preliminary study
conducted by the Registrant, the estimated costs of
remediation range between $500,000 to in excess of
$2,000,000. At this time, the Registrant does not know the
total amount of its financial exposure, the timing of the
resolution of the matter, or the extent to which the
Registrant's potential exposure may be reduced by
contribution or indemnification from other parties. The
Registrant does not have insurance to minimize its potential
exposure. Legal expenses and the costs of remediation,
removal, or cleanup represent a possible substantial future
drain on the financial resources of the Registrant which
cannot be quantified at this time. Any future remediation,
removal, or cleanup at the site should have no effect upon
railroad operations.
Inflation affects the Registrant primarily through
increased salary, administrative, property tax, and
insurance expenses. The Registrant's primary sources of
revenue are increased only to the extent changes in the
general inflation rate increase the excess rental payments
under the 1939 Lease, which are based on a percentage of the
lessee's operating revenues. Revenues from the 1895 Lease do
not increase or decrease with changes in the inflation rate.
The Registrant expects to offset any negative effects of
inflation not offset by increased excess rental payments by
controlling current expenses. The Registrant is also
seeking inflation protection provisions in connection with
its negotiations for a lease extension agreement.
12
<PAGE>
PART II. OTHER INFORMATION
Item 3. Legal Proceedings
Except as described below, there are no legal
proceedings pending to which the Registrant is a party that
are material to the operation of the Registrant.
Peele Site
During the fourth quarter of 1989, the Registrant was
notified by the North Carolina Department of Environment,
Health, and Natural Resources ("DEHNR") that DEHNR had been
notified of a possible abandoned pesticide disposal site on
property owned by the Registrant in Johnston County, North
Carolina. Information about the Site has been disclosed by
the Registrant in prior quarterly and annual reports to the
Securities and Exchange Commission. In February 1991, the
Registrant received notice from DEHNR that the site had been
included in the North Carolina Inactive Hazardous Waste
Sites Priority List. The sites on the Priority List are
ranked in decreasing order of danger to the public health
and environment based on a ranking system administered by
DEHNR. In February 1995, the site ranked 98 out of a total
of 158 sites on the Priority List.
In January, 1994, DEHNR initiated a lawsuit against
the Registrant and other parties seeking reimbursement of
$84,354 in response costs incurred by DEHNR and remediation
of the site. On February 1, 1995, the Court granted partial
summary judgement holding all of the defendants, including
the Registrant, jointly and severally liable. The Court has
not yet ruled on apportionment of liability or cost sharing
among the defendants. According to a preliminary study
conducted by the Registrant, the estimated costs of
remediation range between $500,000 to in excess of
$2,000,000. The Registrant will vigorously defend the
action by DEHNR, and will aggressively pursue any other
parties who may be liable for any remediation, removal, or
clean-up. The ultimate costs of any remediation, removal, or
clean-up are not known. However, if such costs are not paid
by other parties, the financial position of the Registrant
would be materially adversely affected.
13
<PAGE>
Charlotte Convention Center Litigation
On December 10, 1991, the Registrant initiated a
lawsuit in the Mecklenburg County, North Carolina, Superior
Court regarding its railroad corridor through downtown
Charlotte. The Registrant alleged that both the City of
Charlotte and Norfolk Southern Railway have breached
contract obligations and obligations based on real property
rights to the Registrant. The litigation has been disclosed
by the Registrant in prior quarterly and annual reports to
the Securities and Exchange Commission.
On December 7, 1993, the North Carolina Court of
Appeals ruled against the defendants' appeal and against the
Registrant's cross-appeal. Norfolk Southern Railway then
petitioned the Supreme Court of North Carolina to review the
decision of the North Carolina Court of Appeals, which
petition was denied. In September, 1994, Norfolk Southern
Railway petitioned the United States Supreme Court for
review. The United States Supreme Court has not yet ruled
on the petition.
Shareholder Litigation
Four shareholder derivative actions were filed in the
United States District Court for the Eastern District of
North Carolina during December 1994 and January and February
1995 by shareholders of the Registrant. The complaints name
the directors of the Registrant as defendants and the
Registrant as "nominal defendant". Two of the actions, Kahn
v. North Carolina Railroad Co., et al. ("Kahn"), Civil
Action No. 5:94-CV-936-F(2) and Norberg v. North Carolina
Railroad Co., et al. ("Norberg"), Civil Action No. 5-95-CV-
96-F(2) seek to enjoin a purported lease between the
Registrant and Norfolk Southern Railway and to recover for
the Registrant unspecified damages and other relief from the
directors. Two other actions, Werner, et al. v. North
Carolina Railroad Co., et al. ("Werner"), Civil Action No.
5:94-CV-943-F(1) and Taran v. North Carolina Railroad Co.,
et al. ("Taran"), Civil Action No. 5:95-CV-17-F(1), seek
similar relief and also name the State of North Carolina,
the Governor of North Carolina, and Norfolk Southern Railway
as defendants. On March 30, 1995, the court consolidated
the actions into one proceeding.
The Kahn and Norberg actions allege misconduct by the
directors of the Registrant, including breach of fiduciary
duty, mismanagement, and waste of corporate assets. The
Werner and Taran actions assert similar claims, allege
collusion between the State of North Carolina and Norfolk
Southern Railway producing a below-market lease rental rate,
and assert that the State of North Carolina has condemned
the Registrant's properties for public uses for the benefit
of the State. The Registrant's officers and directors are
indemnified in the bylaws of the
14
<PAGE>
Registrant for certain claims and liabilities alleged in
the actions, including the defense costs and expenses.
The Registrant notified its directors and officers insurance
carrier of claims as a result of the actions, which claims
have been acknowledged by the insurance carrier. The directors
and officers insurance policy has an aggregate limit of $5,000,000
and a $75,000 aggregate retention. The Registrant also notified
its general liability insurance carrier of claims as a
result of the shareholder actions, which claims were denied.
The Registrant will oppose the actions brought by the
plaintiffs to the extent the actions seek to enjoin any
lease arrangement or seek recovery against the Registrant or
seek any remedy against the best interests of Registrant or
its shareholders.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
There are no changes to exhibits from the
Registrant's Form 10-K for the period ended March 31, 1995.
(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.
NORTH CAROLINA RAILROAD COMPANY
DATE: May 11, 1995 /s/ John F. McNair, III
John F. McNair, III
President
DATE: May 11, 1995 /s/ Lynn T. McConnell
Lynn T. McConnell, Treasurer and
Principal Financial Officer
16
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000813794
<NAME> NCRR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,578,190
<SECURITIES> 0
<RECEIVABLES> 226,577
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,804,767
<PP&E> 8,085,211
<DEPRECIATION> (294,186)
<TOTAL-ASSETS> 10,017,315
<CURRENT-LIABILITIES> 485,392
<BONDS> 0
<COMMON> 2,141,735
0
0
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<INCOME-PRETAX> (3,344)
<INCOME-TAX> 2,600
<INCOME-CONTINUING> (5,944)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,944)
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</TABLE>
