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 quarterly period ended September 30, 1995
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 0-17604
PROVIDENCE AND WORCESTER RAILROAD COMPANY
_________________________________________________________________________
(Exact name of registrant as specified in its charter)
_________________________________________________________________________
Rhode Island 05-0344399
_________________________________ _____________________________
(State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization)
75 Hammond Street, Worcester, Massachusetts 01610
_________________________________ _____________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 755-4000
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.
As of November 10, 1995, the registrant has 2,054,620 shares of common
stock, par value $.50 per share, outstanding.
<PAGE>
<TABLE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
<CAPTION>
ASSETS SEPTEMBER 30, DECEMBER 31,
1995 1994
(UNAUDITED)
____________ ____________
<S> <C> <C>
Current assets:
Cash and equivalents................ $ 482,000 $ 595,000
Accounts receivable, net of
allowance for doubtful accounts of
$125,000 (Note 3).................. 2,467,000 1,791,000
Materials and supplies (Note 4)..... 835,000 663,000
Prepaid expenses and other.......... 97,000 127,000
Deferred income taxes............... 872,000 893,000
_________ _________
Total current assets.............. 4,753,000 4,069,000
_________ _________
Properties (Note 4):
Land and land improvements.......... 8,547,000 8,520,000
Deep-water pier project............. 9,944,000 9,091,000
Track structure..................... 43,832,000 42,550,000
Buildings and other structures...... 5,665,000 5,531,000
Equipment........................... 14,012,000 13,393,000
__________ __________
82,000,000 79,085,000
Less accumulated depreciation....... 22,712,000 21,658,000
__________ __________
Total properties, net............. 59,288,000 57,427,000
__________ __________
$64,041,000 $61,496,000
__________ __________
__________ __________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Notes payable, bank (Note 3)........ $ 700,000 $ 120,000
Current portion of long-term debt
(Note 4)........................... 871,000 638,000
Accounts payable.................... 3,749,000 2,904,000
Accrued expenses.................... 1,469,000 1,774,000
_________ _________
Total current liabilities......... 6,789,000 5,436,000
_________ _________
Long-term debt, less current portion
(Note 4).............................. 9,737,000 10,485,000
_________ _________
Deferred grant income................. 4,668,000 4,371,000
_________ _________
Deferred income taxes................. 8,569,000 8,290,000
_________ _________
Contingencies (Note 8)................
Shareholders' equity (Notes 2 and 6):
Preferred stock, 10% noncumulative,
$50 par; authorized, issued and
outstanding 653 shares............. 33,000 33,000
Common stock, $.50 par; authorized
2,273,436 shares; issued and
outstanding 2,053,692 shares in
1995 and 2,010,061 shares in
1994 .............................. 1,027,000 1,005,000
Capital in excess of par............ 5,376,000 5,046,000
Retained earnings................... 27,842,000 26,830,000
__________ __________
Total shareholders' equity........ 34,278,000 32,914,000
__________ __________
$64,041,000 $61,496,000
__________ __________
__________ __________
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
__________________ _____________________
1995 1994 1995 1994
________ ________ __________ _________
<S> <C> <C> <C> <C>
Income:
Operating revenues, freight
and other.................. $5,079,000 $5,509,000 $15,215,000 $15,264,000
Other income (Note 5)...... 188,000 788,000 508,000 1,055,000
_________ _________ __________ __________
5,267,000 6,297,000 15,723,000 16,319,000
_________ _________ __________ __________
Expenses:
Operating:
Maintenance of way and
structures................. 760,000 1,022,000 2,778,000 2,839,000
Maintenance of equipment.. 575,000 574,000 1,720,000 1,623,000
Transportation............ 1,179,000 1,179,000 3,388,000 3,344,000
General................... 1,050,000 1,170,000 3,072,000 3,093,000
Taxes, other than income.. 503,000 478,000 1,551,000 1,485,000
Car hire, net............. 186,000 193,000 543,000 430,000
_________ _________ __________ __________
4,253,000 4,616,000 13,052,000 12,814,000
Interest................... 286,000 322,000 893,000 983,000
_________ _________ __________ __________
4,539,000 4,938,000 13,945,000 13,797,000
_________ _________ __________ __________
Income before income taxes.. 728,000 1,359,000 1,778,000 2,522,000
_________ _________ __________ __________
Income taxes:
Current.................... 135,000 290,000 360,000 560,000
Deferred................... 130,000 175,000 300,000 340,000
________ ________ _________ _________
265,000 465,000 660,000 900,000
________ ________ _________ _________
Net income.................. $ 463,000 $ 894,000 $ 1,118,000 $ 1,622,000
________ ________ _________ _________
________ ________ _________ _________
Earnings per common and
common equivalent share
outstanding,
(Note 6)................... $ .22 $ .43 $ .53 $ .78
________ ________ _________ _________
________ ________ _________ _________
Dividends per share:
New preferred.............. $ -0- $ -0- $ 5.00 $ -0-
________ ________ _________ _________
________ ________ _________ _________
Old preferred.............. $ -0- $ -0- $ -0- $ .05
________ ________ _________ _________
________ ________ _________ _________
Common..................... $ -0- $ -0- $ .05 $ .05
________ ________ _________ _________
________ ________ _________ _________
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 and 1994
(Unaudited)
<CAPTION>
INCREASE (DECREASE) IN CASH
1995 1994
_________ _________
<S> <C> <C>
Cash flows provided by (used in)
operating activities:
Net income........................... $1,118,000 $1,622,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation....................... 1,305,000 1,214,000
Amortization of deferred grant
income............................ (85,000) (72,000)
Gain from sales of properties and
easements......................... (106,000) (720,000)
Deferred income taxes.............. 300,000 340,000
Changes in assets and liabilities:
Accounts receivable............... (399,000) (24,000)
Materials and supplies............ (172,000)
Prepaid expenses and other........ 30,000 125,000
Accounts payable.................. 777,000 (938,000)
Accrued expenses.................. 30,000 308,000
Income taxes...................... 105,000
__________ __________
Net cash provided by operations...... 2,798,000 1,960,000
__________ __________
Cash flows provided by (used in)
investing activities:
Purchase of properties and
equipment........................... (3,098,000) (1,997,000)
Proceeds from:
Sales of properties and easements... 106,000 951,000
Deferred grant income............... 105,000 539,000
__________ __________
Net cash used in investing
activities.......................... (2,887,000) (507,000)
__________ __________
Cash flows provided by (used in)
financing activities:
Net borrowings under line of credit.. 580,000 (1,000,000)
Repurchase of preferred stock........ (3,000)
Payments of:
Long-term debt...................... (2,315,000) (652,000)
Dividends........................... (106,000) (103,000)
Proceeds from:
Long-term debt...................... 1,800,000
Issuance of common shares for stock
options exercised.................. 17,000 9,000
__________ __________
Net cash used in financing
activities.......................... (24,000) (1,749,000)
__________ __________
Increase (decrease) in cash............ (113,000) (296,000)
Cash, beginning of period.............. 595,000 574,000
__________ __________
Cash, end of period.................... $ 482,000 $ 278,000
__________ __________
__________ __________
Supplemental disclosures:
Cash paid during the period for:
Interest............................. $ 919,000 $1,056,000
__________ __________
__________ __________
Income taxes......................... $ 293,000 $ 455,000
__________ __________
__________ __________
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
1. In the opinion of management, the accompanying interim financial
statements contain all adjustments (consisting solely of normal
recurring adjustments) necessary to present fairly the financial
position as of September 30, 1995, the results of operations for the
three and nine months ended September 30, 1995 and 1994, and cash
flows for the nine months ended September 30, 1995 and 1994. Results
for interim periods may not be necessarily indicative of the results
to be expected for the year.
2. Changes in shareholders' equity:
<TABLE>
Capital in
Preferred Common excess of Retained
Stock Stock par Earnings
________ ________ ________ _________
<S> <C> <C> <C> <C>
Balance Dec. 31, 1994.... $33,000 $1,005,000 $5,046,000 $26,830,000
Issuance of 40,606 common
shares to fund the
Company's 1994 profit
sharing plan
contribution............. 20,000 315,000
Issuance of 3,025 common
shares for stock options
exercised................ 2,000 15,000
Dividends:
New preferred stock,
$5.00 per share.......... (3,000)
Common stock, $.05 per
share.................... (103,000)
Net income for the
period................... 1,118,000
________ ________ ________ _________
Balance September 30,
1995..................... $ 33,000 $1,027,000 $5,376,000 $27,842,000
________ _________ _________ __________
________ _________ _________ __________
</TABLE>
3. Notes payable, bank:
In August 1995 the Company obtained an increase in its revolving line
of credit from its principal bank from $1,250,000 to $1,500,000.
Amounts outstanding under this line of credit are due on demand, bear
interest at the bank's prime rate plus 1/2% (9 1/4% at September 30,
1995) and are secured by the Company's accounts receivable. In
addition, the Company pays the bank a commitment fee on the unused
portion of the line of credit at the rate of 1/2% per year. Loans in
the amount of $700,000 under this line were outstanding as of
September 30, 1995.
4. Long-term debt:
In August 1995 the Company concluded an agreement with its principal
bank for a five year senior term loan in the amount of $1,800,000.
The loan is payable in monthly installments of principal of $21,000
plus interest at prime plus 3/4% (9 1/2 % as of September 30, 1995)
beginning September 30, 1995, with the remaining principal balance
being payable at the end of the five year term. The loan is
collateralized by a mortgage on the Company's corporate headquarters
building in Worcester, Mass., as well as liens on its inventory of
materials and supplies and certain of its track structure. The loan
agreement contains various covenants which, among other things, limit
the Company's annual acquisitions of for property and equipment and
require the Company to maintain a minimum tangible net worth and
certain ratios of leverage and cash flow to debt service.
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
4. Long-term debt (cont.):
All of the proceeds from this loan were applied against the
outstanding principal balance of the Company's long-term mortgage
note payable to Capital Properties, Inc. ("CPI"), with which the
Company has a common controlling shareholder. The payment of
$1,800,000 reduced the outstanding principal balance on the CPI
mortgage note to $4,662,000 as of September 30, 1995. Upon receipt
of this principal prepayment CPI reduced the annual interest rate on
this indebtedness from 12% to 10%. The CPI note is now payable in
monthly installments of principal and interest of $55,000 through
December 2007.
<TABLE>
5. Other income:
Three Months Ended Nine Months Ended
September 30 September 30
__________________ ____________________
1995 1994 1995 1994
________ ________ ________ ________
<S> <C> <C> <C> <C>
Gain from sales of
properties and
easements, net........... $ 48,000 $681,000 $106,000 $ 720,000
Rentals................... 136,000 105,000 389,000 331,000
Interest.................. 4,000 2,000 13,000 4,000
________ ________ ________ ________
$188,000 $788,000 $508,000 $1,055,000
________ ________ ________ ________
________ ________ ________ ________
</TABLE>
<TABLE>
6. Earnings per share:
Weighted average common and common equivalent shares outstanding used
in computing earnings per share:
1995 1994
__________ __________
<S> <C> <C>
Three months ended September 30 2,118,412 2,075,116
__________ __________
__________ __________
Nine months ended September 30 2,100,391 2,067,631
__________ __________
__________ __________
</TABLE>
The Company considers its $50 par "New Preferred Stock", each share
of which is convertible into 100 shares of common stock, to be common
equivalent shares for purposes of computing earnings per share. New
Preferred Stock was issued in September 1994 in accordance with terms
of a plan of recapitalization which called for conversion of the
Company's $.50 par "Old Preferred Stock" into New Preferred in a
ratio of one share of New Preferred Stock for one hundred shares of
Old Preferred Stock.
The Company has not given effect to the outstanding options to
purchase its common stock in calculating earnings per share since the
effect of such options is not material.
7. Dividends:
On October 25, 1995, the Company declared a dividend of $.05 per
share on its outstanding Common Stock payable November 24, 1995 to
shareholders of record November 9, 1995.
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
8. Contingencies:
A number of lawsuits relating to casualty losses are pending against
the Company, many of which are covered by insurance subject to a
deductible. The Company has provided for its estimate of exposure to
such claims and in management's opinion additional liability, if any,
will not be material to the operations or financial position of the
Company.
The Company owns a site which is contaminated with petroleum
products. It is currently productive as a part of the Company's
double-stack intermodal yard. The site is not the subject of any
agency proceedings. Environmental specialists have indicated that
natural biodegradation of the contamination is occurring. It is not
anticipated that the costs of remediating the site would have a
materially adverse effect upon the Company.
The Company has been notified by CPC International, Inc. ("CPC") and
the United States Environmental Protection Agency ("EPA") that the
Company is alleged to be a potentially responsible party for a
portion of the costs of remediation of a Superfund site, reportedly
due to the impact of a 1974 incident involving a rail car. The EPA's
preliminary estimate of the total cost of the clean-up alternative it
has recommended is approximately $7 million. The Company has no
ownership interest in the site. The Company has denied
responsibility to both parties. No formal claims or proceedings
against the Company have been initiated in this matter. The Company
believes it has strong defenses in the event any such claim or
proceeding is forthcoming. CPC and other private parties have
executed a Consent Decree with EPA pursuant to which CPC has agreed
to perform the required remediation and reimburse EPA for past and
future response costs. The Consent Decree has been filed in the
United States District Court and is expected to be approved by the
Court. The Company is not a party to this Consent Decree. The
Company is continuing negotiations with CPC to resolve CPC's
potential claims against the Company to recover some or all of the
costs of response and remediation.
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
As detailed in the accompanying statements of cash flows, the Company
generated $2,798,000 of cash from operations during the nine months
ended September 30, 1995. On an overall basis, however, the Company's
total cash decreased by $113,000 during the nine month period. The
principal uses of cash during the period were for additions to
properties and equipment, principal payments on long term debt, and
payment of dividends. Deferred grant income of $382,000, recorded
during the period, was utilized to fund certain of the additions to
properties. Expenditures for properties and equipment include $779,000
for the Company's deep-water pier project, $1,282,000 of capitalized
track structure improvements, $878,000 of equipment additions and
$159,000 of land and building improvements.
As disclosed in Note 3 to the accompanying financial statements the
Company obtained an increase in its revolving line of credit from its
principal bank, from $1,250,000 to $1,500,000, in August 1995. The
interest rate on loans outstanding under this line was reduced from
prime plus 3/4% to prime plus 1/2%. The effect of this increase was to
increase the Company's working capital availability by $250,000 and to
decrease its incremental, short-term borrowing cost by 1/4%. Loans are
drawn against this line and payments of principal are made from time to
time depending upon current cash balances and requirements. Loans in
the amount of $700,000 were outstanding under this line as of
September 30, 1995.
As disclosed more fully in Note 4 to the accompanying financial
statements, the Company obtained a five year senior term loan in the
amount of $1,800,000 from its principal bank in August 1995. The
proceeds from this loan were utilized to prepay a portion of the
outstanding principal balance of the Company's 12% long-term mortgage
note payable to Capital Properties, Inc. ("CPI"). The Company and CPI
have a common, controlling shareholder. Upon receipt of the $1,800,000
principal prepayment CPI reduced the interest rate on the remaining
balance of its long-term mortgage note ($4,662,000 as of September 30,
1995) to 10% per year. The effect of this refinancing for the
remainder of 1995 will be to reduce the Company's interest expense by
$47,000 and to increase the cash outlay required for payment of
interest and principal on long-term debt by $26,000. The anticipated
impact upon the Company for 1996 will be to reduce interest expense by
approximately $150,000 and to increase its cash outlay for debt service
by approximately $62,000.
In management's opinion, the Company will be able to generate
sufficient cash from operations during the remainder of the year to
enable it to meet its operating expense, debt service and capital
expenditure requirements.
Results of Operations
Operating revenues for the nine months ended September 30, 1995
decreased by $49,000 (less than one percent) from 1994. Conventional
traffic volume increased by 7% between periods but this increase was
offset by the combination of a 5% decrease in the average revenue
received per conventional carload handled and a 30% decrease in net
revenue from containers on flatcars, which revenue decreased from
$1,653,000 in 1994 to $1,154,000 in 1995. The volume of containers
handled decreased by 11% between periods and the average net revenue
received per container decreased by 22%.
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating revenues for the quarter ended September 30, 1995 decreased
by $430,000 (8%) from the third quarter of 1994. This decrease is the
combined result of a 2% decrease in conventional traffic, a 5% decrease
in the average revenue received per conventional carload handled and a
23% decrease in net container on flatcar revenue from $543,000 in 1994
to $419,000 in 1995. The volume of containers handled decreased by 1%
between periods and the average net revenue received per container
decreased by 22%.
The relatively small increase in conventional traffic volume for the
nine month period and the decrease for the quarter are largely
attributable to a general softening in economic conditions which was
evident in the third quarter of 1995. Traffic volumes for certain of
the Company's manufacturing customers declined somewhat during the
quarter as these customers sought to reduce excessive inventory levels.
It is anticipated that these traffic reductions are of a temporary
nature for the most part. While overall conventional traffic volume
has been sluggish the volume of construction aggregate traffic has
increased rather significantly. Since this commodity commands a
relatively low revenue the resulting change in commodity mix has led to
the decrease in the average revenue received per conventional carload.
The decrease in the volume of containers handled during the nine month
period is largely attributable to the loss of the Company's largest
containership line customer in July 1994. The relatively small
decrease in container volume experienced during the third quarter of
1995, compared with 1994, is attributable to the softening of general
economic conditions as previously discussed. The decrease in the net
revenue received per container, between periods, is attributable to
rate adjustments necessitated by competitive factors within the
industry.
Total operating expenses for the nine months ended September 30, 1995
increased by 2% from 1994. Total operating expenses for the third
quarter of 1995 decreased by 8% from the third quarter of 1994. Total
operating expenses expressed as a percentage of operating revenues
increased from 84% to 86% for the nine month period. Total operating
expenses amounted to 84% of operating revenues for the third quarters
of 1994 and 1995.
The decrease in total operating expenses in the third quarter and the
small increase for the nine month period in 1995 as compared with 1994
are explained by the fact that a larger portion of maintenance of way
payroll and overhead costs were capitalized in connection with capital
improvements to the Company's track structure or were reimbursed
through government grants for grade crossing improvements in 1995 than
in 1994. Total capitalized track expenses and recovered costs for the
nine month period ended September 30, 1995 amounted to $1,282,000 and
$689,000, respectively, compared with $938,000 and $97,000 in 1994.
Capitalized track expenses and recovered costs for the third quarter of
1995 amounted to $563,000 and $573,000, respectively compared with
$390,000 and $26,000 in 1994.
Other income decreased by $547,000 and $600,000 respectively during the
nine and three month periods ended September 30, 1995 from the
comparable 1994 periods. These decreases are the result of reductions
in net gains realized from the sales of properties and easements.
Income of this type has historically been subject to significant
fluctuations among periods.
Interest expense for the nine and three month periods in 1995 decreased
by 9% and 11% respectively from the comparable periods in 1994. These
decreases result from lower levels of long term borrowings and from the
reduction in interest rates which resulted from the debt refinancing,
as disclosed in Note 4 to the accompanying financial statements, which
took place in August 1995.
<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K
(b) No reports on Form 8-K were filed by the registrant during
the quarter ended September 30, 1995.
<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.
PROVIDENCE AND WORCESTER
RAILROAD COMPANY
By:Orville R. Harrold, President
Orville R. Harrold, President
By:Robert J. Easton
Robert J. Easton
Treasurer and Principal
Financial Officer
DATED: November 13, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 482
<SECURITIES> 0
<RECEIVABLES> 2592
<ALLOWANCES> 125
<INVENTORY> 835
<CURRENT-ASSETS> 4753
<PP&E> 82000
<DEPRECIATION> 22712
<TOTAL-ASSETS> 64041
<CURRENT-LIABILITIES> 6789
<BONDS> 9737
<COMMON> 1027
0
33
<OTHER-SE> 33218
<TOTAL-LIABILITY-AND-EQUITY> 64041
<SALES> 0
<TOTAL-REVENUES> 15723
<CGS> 0
<TOTAL-COSTS> 13052
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 893
<INCOME-PRETAX> 1778
<INCOME-TAX> 660
<INCOME-CONTINUING> 1118
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1118
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
</TABLE>
