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, 1996
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 0-16704
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 8, 1996, the registrant has 2,188,021 shares of common
stock, par value $.50 per share, outstanding.
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED)
__________ __________
<S> <C> <C>
Current assets:
Cash and equivalents $ 1,359,000 $ 2,012,000
Accounts receivable, net of allowance
for doubtful accounts of $125,000 2,434,000 2,834,000
Materials and supplies 996,000 731,000
Prepaid expenses and other 79,000 139,000
Deferred income taxes 400,000 767,000
__________ __________
Total current assets 5,268,000 6,483,000
__________ __________
Properties:
Land and improvements 8,736,000 8,614,000
Deep-water pier project 10,892,000 10,419,000
Track structure 45,267,000 44,390,000
Buildings and other structures 5,894,000 5,853,000
Equipment 15,763,000 15,156,000
__________ __________
86,552,000 84,432,000
Less accumulated depreciation 24,076,000 22,903,000
__________ __________
Total properties, net 62,476,000 61,529,000
__________ __________
$ 67,744,000 $ 68,012,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, bank $ 1,500,000 $ -
Current portion of long-term debt 662,000 612,000
Accounts payable 3,647,000 4,907,000
Accrued expenses 834,000 1,642,000
__________ __________
Total current liabilities 6,643,000 7,161,000
__________ __________
Long-term debt, less current portion 12,266,000 12,977,000
__________ __________
Deferred grant income 5,417,000 5,035,000
__________ __________
Deferred income taxes 8,147,000 8,384,000
__________ __________
Contingencies (Note 5)
Shareholders' equity (Notes 2 and 4):
Preferred stock, 10% noncumulative,
$50 par; authorized, issued and
outstanding 653 shares 33,000 33,000
Common stock, $.50 par; authorized
3,023,436 shares; issued and
outstanding 2,186,410 shares in 1996
and 2,110,041 shares in 1995 1,093,000 1,055,000
Capital in excess of par 6,353,000 5,828,000
Retained earnings 27,792,000 27,539,000
__________ __________
Total shareholders' equity 35,271,000 34,455,000
__________ __________
$ 67,744,000 $ 68,012,000
========== ==========
<FN>
See notes to financial statements
</TABLE>
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
_____________________ ________________________
1996 1995 1996 1995
__________ __________ __________ ___________
<S> <C> <C> <C> <C>
Income:
Operating revenues,
freight and other $5,227,000 $5,079,000 $14,321,000 $15,215,000
Other income (Note 3) 100,000 188,000 507,000 508,000
_________ _________ __________ __________
5,327,000 5,267,000 14,828,000 15,723,000
_________ _________ __________ __________
Expenses:
Operating:
Maintenance of way
and structures 1,166,000 760,000 3,108,000 2,778,000
Maintenance of
equipment 609,000 575,000 1,818,000 1,720,000
Transportation 1,153,000 1,179,000 3,521,000 3,388,000
General 979,000 1,050,000 2,780,000 3,072,000
Taxes, other than
income 499,000 503,000 1,544,000 1,551,000
Car hire, net 170,000 186,000 463,000 543,000
_________ _________ __________ __________
4,576,000 4,253,000 13,234,000 13,052,000
Interest 346,000 286,000 1,029,000 893,000
_________ _________ __________ __________
4,922,000 4,539,000 14,263,000 13,945,000
_________ _________ __________ __________
Income before income
taxes 405,000 728,000 565,000 1,778,000
_________ _________ __________ __________
Income taxes:
Current 80,000 135,000 70,000 360,000
Deferred 60,000 130,000 130,000 300,000
_________ _________ __________ __________
140,000 265,000 200,000 660,000
_________ _________ __________ __________
Net income $ 265,000 $ 463,000 $ 365,000 $1,118,000
========= ========= ========== ==========
Earnings per weighted
average common and
common equivalent
share outstanding,
(Note 4) $ .12 $ .22 $ .16 $ .53
========= ========= ========== ==========
Dividends per share:
Preferred $ -0- $ -0- $ 5.00 $ 5.00
========= ========= ========== ==========
Common $ -0- $ -0- $ .05 $ .05
========= ========= ========== ==========
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH
1996 1995
__________ __________
<C> <C> <C>
Cash flows provided by (used in)
operating activities:
Net income $ 365,000 $ 1,118,000
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation 1,424,000 1,305,000
Amortization of deferred grant
income (96,000) (85,000)
Gain from sales and disposals of
properties and easements, net (61,000) (106,000)
Deferred income taxes 130,000 300,000
Changes in assets and liabilities:
Accounts receivable 356,000 (399,000)
Materials and supplies (265,000) (172,000)
Prepaid expenses and other 60,000 30,000
Accounts payable 123,000 777,000
Accrued expenses (262,000) 30,000
__________ __________
Net cash provided by operations 1,774,000 2,798,000
__________ __________
Cash flows provided by (used in)
investing activities:
Purchase of properties and equipment (3,913,000) (3,098,000)
Proceeds from:
Sales of properties and easements 223,000 106,000
Deferred grant income 521,000 105,000
__________ __________
Net cash used in investing activities (3,169,000) (2,887,000)
__________ __________
Cash flows provided by (used in)
financing activities:
Net borrowings under line of credit 1,500,000 580,000
Payments of:
Long-term debt (661,000) (2,315,000)
Dividends (112,000) (106,000)
Proceeds from:
Long-term debt 1,800,000
Issuance of common shares for stock
options exercised 15,000 17,000
__________ __________
Net cash provided by (used in)
financing activities 742,000 (24,000)
__________ __________
Decrease in cash (653,000) (113,000)
Cash, beginning of period 2,012,000 595,000
__________ __________
Cash, end of period $ 1,359,000 $ 482,000
========== ==========
Supplemental disclosures:
Cash paid during the period for:
Interest $ 981,000 $ 919,000
========== ==========
Income taxes $ 10,000 $ 293,000
========== ==========
<FN>
See notes to financial statements
</TABLE>
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(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, 1996, the results of operations for
the three and nine months ended September 30, 1996 and 1995, and
cash flows for the nine months ended September 30, 1996 and 1995.
Results for interim periods may not be necessarily indicative of
the results to be expected for the year. These interim financial
statements should be read in conjunction with the Company's annual
report on Form 10-K for the year ended December 31, 1995 filed
with the Securities and Exchange Commission.
2. Changes in shareholders' equity:
<TABLE>
<CAPTION>
Capital in
Preferred Common excess of Retained
Stock Stock par Earnings
________ ________ ________ _________
<S> <C> <C> <C> <C>
Balance December
31, 1995 $ 33,000 $1,055,000 $5,828,000 $27,539,000
Issuance of 53,155
common shares in
payment of an
environmental
claim 27,000 352,000
Issuance of 20,925
common shares to
fund the
Company's 1995
profit sharing
plan
contribution 10,000 157,000
Issuance of 2,289
common shares for
stock options
exercised and
under an employee
incentive program 1,000 16,000
Dividends:
Preferred stock,
$5.00 per share (3,000)
Common stock,
$.05 per share (109,000)
Net income for the
period 365,000
________ ________ ________ _________
Balance
September 30,
1996 $ 33,000 $1,093,000 $6,353,000 $27,792,000
======== ========= ========= ==========
</TABLE>
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
3. Other income:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
________________ _________________
1996 1995 1996 1995
________ ________ ________ _________
<S> <C> <C> <C> <C>
Gain (loss) from
sales and
disposals of
properties and
easements, net $ (33,000) $ 48,000 $ 61,000 $ 106,000
Rentals 119,000 136,000 393,000 389,000
Interest 14,000 4,000 53,000 13,000
________ ________ ________ _________
$ 100,000 $ 188,000 $ 507,000 $ 508,000
======== ======== ======== =========
</TABLE>
4. Earnings per share:
Weighted average common and common equivalent shares outstanding
used in computing earnings per share:
<TABLE>
<CAPTION>
1996 1995
__________ __________
<S> <C> <C>
Three months ended September 30 2,251,140 2,118,412
========== ==========
Nine months ended September 30 2,240,450 2,100,391
========== ==========
</TABLE>
The Company considers its $50 par 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.
Unexercised stock options and warrants have not been considered in
the calculation of earnings per share since their effect is not
material.
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
5. 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, financial position or liquidity 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 remediation, if any, would be
material to the operations, financial position or liquidity of the
Company.
6. Adoption of new accounting pronouncements:
Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" ("Statement 123"). The Company has continued
to account for its stock-based transactions to employees in
accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" !nd will include the
pro forma disclosures required by Statement 123, if mateial, in
its annual financial statements for 1996. For stock option grants
to non-employees, the Company follows the provisions of Statement
123, calculates compensation expense using 1 fair value-based
method and amortizes compensation expense over the vesting period.
Also, effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-lived Assets and for Long-Lived Assets to be
Disposed Of" ("Statement 121"). Statement 121 requires that long-
lived assets held and used by an entity be reviewed for impairment
whenever circumstances indicate that the carrying amount of an
asset may not be recoverable. It also requires that long-lived
assets to be disposed of be reported at the lower of the carrying
amount or fair value less the cost to sell. The adoption of
Statement 121 did not have a material effect on the Company's
financial position or results of operations for the three and nine
months ended September 30, 1996.
<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 $1,774,000 of cash from operations during the nine months
ended September 30, 1996. On an overall basis, however, the Company's
total cash decreased by $653,000 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,
reduction of current liabilities and payment of dividends. Deferred
grant income of $478,000, recorded during the period, was utilized to
fund certain of the additions to properties. Expenditures for
properties and equipment include $1,056,000 for the Company's deep-
water pier project, $1,115,000 of capitalized track structure and
bridge improvements, $1,439,000 of equipment additions and $303,000 of
building and land improvements. Management expects that total
expenditures for plant and equipment additions in 1996 will approximate
those made in 1995 when such expenditures amounted to $4,490,000.
In May 1996 the Company made an additional principal payment of
$200,000 on its 10% mortgage note payable to Capital Properties, Inc.,
a company with which it has a common controlling shareholder. The
outstanding principal balance of this note has been reduced to
$4,263,000 as of September 30, 1996 and the monthly payments of
principal and interest have been reduced from $55,000 to $53,000
through December 2007.
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, 1996
decreased by 6% from 1995. This decrease is the result of an 11%
decline in conventional carloadings offset, in part, by a 4% increase
in the average revenue received per conventional carload and a 4%
decrease in net revenue from containers on flatcars from $1,154,000 in
1996 to $1,103,000 in 1995. The volume of containers handled decreased
by 6% between periods whereas the average net revenue received per
container increased by 2%.
Operating revenues for the third quarter of 1996 increased by 3% from
the third quarter of 1995. This increase is the result of a 4%
increase in the average revenue received per conventional carloading
offset, in part, by a 1% decrease in conventional traffic volume and a
3% decrease in net revenue from containers on flatcars from $419,000 in
the third quarter of 1995 to $408,000 in 1996. The volume of
containers handled decreased by 3% between quarters, whereas the
average net revenue received per container was virtually unchanged.
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Construction aggregate traffic volume declined by 7% for the nine month
period and increased by 7% for the third quarter. The volume of all
other commodities of conventional traffic declined by 12% for the nine
month period and 6% for the quarter. Since construction aggregate
traffic typically generates lower revenues per carload than most other
commodities hauled by the Company, the reduction in the traffic volume
of this commodity had a greater impact upon the average revenue
received per conventional carload during the nine month period than
during the third quarter. The decrease in both conventional and
container traffic volume experienced by the Company for the nine month
period and the quarter is chiefly attributable to an economic slowdown
which first became apparent late in the third quarter of 1995. In
addition, adverse weather conditions during the first quarter of 1996
contributed to the significant decline in the volume of construction
aggregates hauled during that period. During the third quarter of 1996
volumes of both conventional carload and container traffic improved to
the point that they began to approach 1995 levels.
Total operating expenses for the nine months ended September 30, 1996
increased by 1% from 1995. Total operating expenses for the third
quarter of 1996 increased by 8% over the third quarter of 1995. Total
operating expenses expressed as a percentage of operating revenues
increased from 86% to 92% for the nine month period and from 84% to 88%
for the third quarter.
The increase in total operating expenses for the third quarter of 1996
from the third quarter of 1995 and the small increase for the nine
month period result, to a large degree, from the fact that a smaller
portion of maintenance of way payroll and overhead costs were
capitalized in connection with capital improvements to the Company's
track structure and bridges or were reimbursed through government
grants for grade crossing improvements in 1996 than was the case in
1995. Total capitalized track expenses and recovered costs for the
nine month period ended September 30, 1996 amounted to $1,380,000
compared with $1,971,000 in 1995, a decrease of $591,000. Capitalized
track expenses and recovered costs for the third quarter of 1996
amounted to $370,000 compared with $1,136,000 in 1995, a decrease of
$766,000. The expense increases resulting from these reductions were
offset, to a degree, by management's efforts to minimize expenses
during periods of reduced freight traffic. Many of the Company's
operating expenses are relatively fixed in nature and, therefore, do
not increase or decrease proportionally with increases or decreases in
operating revenue.
Interest expense increased by 15% during the nine month period and by
21% during the third quarter of 1996 from 1995. These increases are
attributable to higher levels of long and short term borrowings
partially offset by lower interest rates.
<PAGE>
PART II
Item 6.Exhibits and Reports on Form 8-K
(b)No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
<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
______________________________
Orville R. Harrold, President
By: Robert J. Easton
_____________________________
Robert J. Easton
Treasurer and Principal
Financial Officer
DATED: November 13, 1996
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<S> <C>
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<PERIOD-END> SEP-30-1996
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0
33
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</TABLE>
