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 JUNE 30, 1997
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 August 1, 1997, the registrant has 2,216,506 shares of common
stock, par value $.50 per share, outstanding.
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
(UNAUDITED)
__________ __________
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 616,000 $ 686,000
Accounts receivable, net of allowance
for doubtful accounts of $125,000
(Note 3) 2,855,000 2,537,000
Materials and supplies 1,398,000 1,021,000
Prepaid expenses and other 90,000 121,000
Deferred income taxes 400,000 400,000
__________ __________
Total current assets 5,359,000 4,765,000
__________ __________
Properties:
Land and land improvements 9,057,000 9,020,000
Deep-water pier project 11,369,000 11,339,000
Track structure 46,739,000 45,833,000
Buildings and other structures 5,087,000 5,955,000
Equipment 16,909,000 15,991,000
__________ __________
89,161,000 88,138,000
Less accumulated depreciation 24,495,000 24,412,000
__________ __________
Total properties, net 64,666,000 63,726,000
__________ __________
$ 70,025,000 $ 68,491,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, bank (Note 3) $ 1,355,000 $ 1,440,000
Current portion of long-term debt
(Note 4) 720,000 677,000
Accounts payable 2,775,000 2,861,000
Accrued expenses 1,049,000 1,133,000
__________ __________
Total current liabilities 5,899,000 6,111,000
__________ __________
Long-term debt, less current portion
(Note 4) 12,389,000 12,131,000
__________ __________
Deferred grant income 6,274,000 5,571,000
__________ __________
Deferred income taxes 8,752,000 8,617,000
__________ __________
Contingencies (Note 7)
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
3,023,436 shares; issued and
outstanding 2,216,284 shares in 1997
and 2,188,244 shares in 1996 1,108,000 1,094,000
Capital in excess of par 6,615,000 6,365,000
Retained earnings 28,955,000 28,569,000
__________ __________
Total shareholders' equity 36,711,000 36,061,000
__________ __________
$ 70,025,000 $ 68,491,000
========== ==========
<FN>
See notes to financial statements
</TABLE>
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
____________________ ______________________
1997 1996 1997 1996
_________ _________ __________ __________
<S> <C> <C> <C> <C>
Income:
Operating revenues,
freight and other $5,596,000 $4,909,000 $10,278,000 $ 9,094,000
Other income (Note 5) 250,000 232,000 415,000 407,000
_________ _________ __________ __________
5,846,000 5,141,000 10,693,000 9,501,000
_________ _________ __________ __________
Expenses:
Operating:
Maintenance of way
and structures 1,164,000 777,000 2,181,000 1,942,000
Maintenance of
equipment 713,000 610,000 1,387,000 1,209,000
Transportation 1,228,000 1,237,000 2,377,000 2,368,000
General 963,000 984,000 1,798,000 1,801,000
Taxes, other than
income 549,000 516,000 1,119,000 1,045,000
Car hire, net 156,000 144,000 318,000 293,000
_________ ________ _________ _________
4,773,000 4,268,000 9,180,000 8,658,000
Interest 346,000 346,000 681,000 683,000
_________ _________ _________ _________
5,119,000 4,614,000 9,861,000 9,341,000
_________ _________ _________ _________
Income before income
taxes 727,000 527,000 832,000 160,000
_________ _________ _________ _________
Income taxes (benefit):
Current 151,000 130,000 175,000 (10,000)
Deferred 117,000 70,000 135,000 70,000
_________ _________ _________ _________
268,000 200,000 310,000 60,000
_________ _________ _________ _________
Net income $ 459,000 $ 327,000 $522,000 $ 100,000
========= ========= ========= =========
Earnings per common and
common equivalent
share $ .20 $ .15 $ .23 $ .04
========= ========= ========= =========
Weighted average common
and common equivalent
shares outstanding
(Note 6) 2,273,387 2,243,053 2,264,066 2,235,046
========= ========= ========= =========
Dividends per share:
Preferred $ -0- $ 5.00 $ 5.00 $ 5.00
========= ========= ======== =========
Common $ .06 $ .05 $ .06 $ .05
========= ========= ======== =========
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH
1997 1996
__________ __________
<S> <C> <C>
Cash flows provided by (used in)
operating activities:
Net income $ 522,000 $ 100,000
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation 999,000 941,000
Amortization of deferred grant
income (72,000) (64,000)
Gain from sales of properties and
easements (150,000) (94,000)
Deferred income taxes 135,000 70,000
Changes in assets and liabilities:
Accounts receivable 159,000 275,000
Materials and supplies (377,000) (54,000)
Prepaid expenses and other 31,000 35,000
Accounts payable 490,000 (243,000)
Accrued expenses 141,000 (164,000)
__________ __________
Net cash provided by operations 1,878,000 802,000
__________ __________
Cash flows provided by (used in)
investing activities:
Purchase of properties and equipment (2,573,000) (2,859,000)
Proceeds from:
Sales of properties and easements 184,000 217,000
Deferred grant income 329,000 407,000
__________ __________
Net cash used in investing activities (2,060,000) (2,235,000)
__________ __________
Cash flows provided by (used in)
financing activities:
Net borrowings (payments) under line
of credit (85,000) 1,110,000
Payments of:
Long-term debt (353,000) (478,000)
Dividends (136,000) (112,000)
Proceeds from:
Long-term debt 654,000
Issuance of common shares for stock
options exercised and employee stock
purchases 32,000 3,000
__________ __________
Net cash provided by financing
activities 112,000 523,000
__________ __________
Decrease in cash (70,000) (910,000)
Cash, beginning of period 686,000 2,012,000
__________ __________
Cash, end of period $ 616,000 $ 1,102,000
========== ==========
Supplemental disclosures:
Cash paid during the period for:
Interest $ 672,000 $ 639,000
========== ==========
Income taxes $ 78,000 $ 9,000
========== ==========
<FN>
See notes to financial statements
</TABLE>
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(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 June 30, 1997, the results of operations for the
three and six months ended June 30, 1997 and 1996, and cash flows
for the six months ended June 30, 1997 and 1996. 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, 1996 filed with the
Securities and Exchange Commission.
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, 1996 $33,000 $1,094,000 $6,365,000 $28,569,000
Issuance of 22,550 common
shares to fund the
Company's 1996 profit
sharing plan
contribution 11,000 215,000
Issuance of 5,490 common
shares for stock options
exercised, employee
stock purchases and
other 3,000 35,000
Dividends:
Preferred stock, $5.00
per share (3,000)
Common stock, $.06 per
share (133,000)
Net income for the period 522,000
________ _________ _________ __________
Balance June 30, 1997 $33,000 $1,108,000 $6,615,000 $28,955,000
======== ========= ========= ==========
</TABLE>
3. Notes payable, bank:
In June 1997 the Company's principal bank renewed its revolving
line of credit and increased the maximum borrowing under the line
from $1,500,000 to $1,750,000. Borrowings under the line continue
to bear interest at prime plus 1/2%, are due on demand and are
secured by the Company's accounts receivable.
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
4. Long-term debt:
In April 1997 the Company finalized an agreement with a commercial
lender to borrow up to $750,000 for the acquisition and renovation
of three used locomotives. The terms of the loan agreement call
for level payments of principal and interest over a five year
term. The interest rate, which is variable, is set at 2.35% over
the 30 day Commercial Paper rate (8.0% as of June 30, 1997). The
Company has the option of converting to a fixed rate of interest
set at 2.1% over the then current weekly average rate of 3 year
U.S. Treasury Constant Maturities. Funds in the total amount of
$654,000 have been advanced under this agreement as of June 30,
1997 and are included in Long-term debt on the accompanying
balance sheet ($111,000 of this amount has been classified as
current portion of long-term debt). During July 1997 the project
was completed at a total cost of $730,000 and the Company took
possession of the three locomotives.
<TABLE>
5. Other income:
Three Months Ended Six Months Ended
June 30 June 30
___________________ _____________________
1997 1996 1997 1996
________ ________ ________ ________
<S> <C> <C> <C> <C>
Gain from sales of
properties and
easements, net $ 131,000 $ 94,000 $ 150,000 $ 94,000
Rentals 117,000 119,000 260,000 274,000
Interest 2,000 19,000 5,000 39,000
________ ________ ________ ________
$ 250,000 $ 232,000 $ 415,000 $ 407,000
======== ======== ======== =========
</TABLE>
6. Earnings per share.
Earnings per common and common equivalent share are computed using
the weighted average number of common and dilutive common
equivalent shares outstanding during the period, using the
provisions of Accounting Principles Board Opinion No. 15 "Earnings
per Share".
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
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
7. 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.
8. New accounting pronouncements:
In February 1997 the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128, "Earnings per Share" and SFAS No. 129
"Disclosure of Information about Capital Structure". SAFS 128
establishes standards for computing and presenting earnings per
share and applies to entities with publicly held common stock or
potential common stock. SFAS 129 establishes standards for
disclosing information about an entity's capital structure and
applies to all entities. The Company will adopt both SAFS 128 and
SAFS 129 in the fourth quarter of fiscal 1997. The implementation
of these standards is not expected to have a material effect on
its financial position and results of operations.
In June 1997 the FASB issued SFAS No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". SAFS 130
establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses)
in a full set of general purpose financial statements. SFAS 131
establishes standards for the way that public business enterprises
report information about operating segments in annual financial
statements and requires that those enterprises report selected
information about operating segments in interim financial reports.
It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Both
standards will be adopted by the Company during the first quarter
of fiscal 1998 and are not expected to have a material effect on
its financial position and results of operations.
<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 $1,878,000 of cash from operations during the six months
ended June 30, 1997. On an overall basis, however, the Company's total
cash decreased by $70,000 during the six month period. The principal
uses of cash during the period were for additions to properties and
equipment, debt principal payments and the payment of dividends.
Deferred grant income receipts of $329,000 were utilized to fund
certain of the capitalized improvements to the Company's track
structure.
Expenditures for property and equipment during the six month period
include $340,000 for the Company's deep-water pier project, $906,000 of
capitalized track structure and bridge improvements, $1,197,000 of
equipment additions and $130,000 of land and building improvements.
Management expects that total expenditures for plant and equipment
additions in 1997 will approximate those made in 1996 when such
expenditures amounted to $5,465,000.
As discussed more fully in Note 4 to the accompanying financial
statements the Company is in the process of acquiring and renovating
three used locomotives, at a total cost of approximately $730,000,
financed through long term borrowings from a commercial lender.
Expenditures in the total amount of $654,000 were incurred on this
project through June 30, 1997 and are included as expenditures for
equipment additions in the accompanying statements of cash flows.
As disclosed in Note 3 to the accompanying financial statements the
Company's principal bank renewed its revolving line of credit during
June 1997 and increased the maximum borrowings allowed from $1,500,000
to $1,750,000. The effect of this change is to increase the Company's
working capital availability by $250,000. Loans in the amount of
$1,355,000 were outstanding under this line as of June 30, 1997.
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 six months ended June 30, 1997 increased by
13% from 1996. This increase results from a 15% increase in the volume
of conventional freight cars and a 6% increase in volume of containers
handled, a 2% increase in the average net revenue received per
container and an increase in other operating revenues, partially offset
by a 5% decrease in the average revenue received per conventional
carload. Net container revenue increased from $695,000 in 1996 to
$750,000 in 1997 and other operating revenues increased from $117,000
to $484,000.
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating revenues for the second quarter of 1997 increased by 14% from
the second quarter of 1996. This increase results from a 13% increase
in the volume of conventional freight cars and an 11% increase in the
volume of containers handled and an increase in other operating
revenue, partially offset by a 3% decrease in the average revenue
received per conventional carload. The average net revenue received
per container increased by less than 1% between quarters. Net
container revenue increased from $344,000 in 1996 to $383,000 in 1997
and other operating revenue increased from $62,000 to $279,000.
Construction aggregate traffic volume increased by 21% for the six
month period and 14% for the quarter, whereas the volume of all other
commodities of conventional traffic increased by 13% for both the six
month period and the quarter. Since construction aggregate traffic
typically produces lower revenues per carload than most other
commodities hauled by the Company, the fact that increases in the
volume of this commodity were greater than its proportion of the total
traffic mix accounts for much of the decrease in the average revenue
per conventional carload. The increased traffic volume for the six
month period and for the quarter is attributable to improving economic
conditions which first became evident late in the third quarter of
1996.
Other operating revenues consist primarily of reimbursements the
Company receives from freight customers and other third parties for
work performed by its Maintenance of Way and Equipment Departments.
The amount of such revenues can vary significantly from period to
period.
Total operating expenses for the six month period and for the quarter
increased by 6% and 12% respectively from the comparable 1996 periods.
Many of the Company's expenses are of a relatively fixed nature and,
therefore, do not increase proportionally with changes in operating
revenue. Profit sharing expense in the amount of $93,000 is included
in General expense for both the six month period and second quarter of
1997. No profit sharing expense was accrued in the comparable 1996
periods. In addition, a portion of the increase of Maintenance of Way
and Maintenance of Equipment expenses in 1997 is attributable to the
higher levels of other operating revenue previously discussed.
Interest expense was virtually unchanged between periods, due to the
fact that lower levels of long term debt outstanding during the six
month period and second quarter of 1997 were largely offset by
increased levels of short term borrowings.
Recent Accounting Pronouncements
In February 1997 the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128, "Earnings per Share" and SFAS No. 129 "Disclosure
of Information about Capital Structure". SAFS 128 establishes standards
for computing and presenting earnings per share and applies to entities
with publicly held common stock or potential common stock. SFAS 129
establishes standards for disclosing information about an entity's
capital structure and applies to all entities. The Company will adopt
both SAFS 128 and SAFS 129 in the fourth quarter of fiscal 1997. The
implementation of these standards is not expected to have a material
effect on its financial position and results of operations.
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In June 1997 the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information". SAFS 130 establishes standards for reporting
and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general purpose financial
statements. SFAS 131 establishes standards for the way that public
business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial
reports. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Both
standards will be adopted by the Company during the first quarter of
fiscal 1998 and are not expected to have a material effect on its
financial position and results of operations.
The statements contained in Management's Discussion and Analysis of
Financial Condition and Results of Operations ("MDA") which are not
historical are "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. These forward-
looking statements represent the Company's present expectations or
beliefs concerning future events. The Company cautions, however, that
actual results could differ materially from those indicated in MDA.
<PAGE>
PART II
Item 4.Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on April 30, 1997.
Of the 2,189,799 shares of common stock entitled to vote,
1,691,350 shares were present, in person or by proxy. Of the
653 shares of preferred stock entitled to vote, 506 shares were
present, in person or by proxy.
All directors of the Company are elected on an annual basis and
the following were so elected at this Annual Meeting:
Ronald P. Chrzanowski, Robert H. Eder, William J. LeDoux, and
Charles M. McCollam, Jr. were elected Common Stock Directors.
Each director received 1,689,149 affirmative votes and 2,201
negative votes of common shares.
Frank W. Barrett, Phillip D. Brown, John H. Cronin, Robert J.
Easton, J. Joseph Garrahy, Orville R. Harrold and John J. Healy
were elected Preferred Stock Directors. Each director received
506 affirmative votes and no negative votes of preferred
shares.
A resolution was presented for the appointment of Deloitte &
Touche LLP as independent auditors of the accounts of the
Company for 1997. The resolution received 1,671,838
affirmative votes and 18,992 negative votes of common shares
with 520 common shares abstaining. The resolution received 506
affirmative votes and no negative votes of preferred shares.
A resolution was presented to approve the Company's Employee
Stock Purchase Plan. The resolution received 1,414,051
affirmative votes and 10,821 negative votes of common shares
with 266,478 common shares abstaining. The resolution received
505 affirmative votes and no negative votes of preferred shares
with 1 preferred share abstaining.
Item 6.Exhibits and Reports on Form 8-K
(b)No reports on Form 8-K were filed during the quarter ended
June 30, 1997.
<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:
/S/ Orville R. Harrold
Orville R. Harrold, President
By:
/S/ Robert J. Easton
Robert J. Easton
Treasurer and Principal
Financial Officer
DATED: August 11, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 616
<SECURITIES> 0
<RECEIVABLES> 2980
<ALLOWANCES> 125
<INVENTORY> 1398
<CURRENT-ASSETS> 5359
<PP&E> 89161
<DEPRECIATION> 24495
<TOTAL-ASSETS> 70025
<CURRENT-LIABILITIES> 5899
<BONDS> 12389
0
33
<COMMON> 1108
<OTHER-SE> 35570
<TOTAL-LIABILITY-AND-EQUITY> 70025
<SALES> 0
<TOTAL-REVENUES> 10693
<CGS> 0
<TOTAL-COSTS> 9180
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 681
<INCOME-PRETAX> 832
<INCOME-TAX> 310
<INCOME-CONTINUING> 522
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 522
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
