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, 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 October 31, 1997, the registrant has 2,220,172 shares of common
stock, par value $.50 per share, outstanding.
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, DECEMBER 31,
1997 1996
(UNAUDITED)
<S> <C> <C>
__________ __________
Current assets:
Cash and equivalents $ 553,000 $ 686,000
Accounts receivable, net of allowance
for doubtful accounts of $125,000
(Note 3) 3,194,000 2,537,000
Materials and supplies 1,831,000 1,021,000
Prepaid expenses and other 136,000 121,000
Deferred income taxes 400,000 400,000
__________ __________
Total current assets 6,114,000 4,765,000
__________ __________
Properties:
Land and improvements 9,124,000 9,020,000
Deep-water pier project 11,455,000 11,339,000
Track structure 47,766,000 45,833,000
Buildings and other structures 5,172,000 5,955,000
Equipment (Note 4) 17,093,000 15,991,000
__________ __________
90,610,000 88,138,000
Less accumulated depreciation 25,012,000 24,412,000
_________ __________
Total properties, net 65,598,000 63,726,000
__________ __________
$ 71,712,000 $ 68,491,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, bank (Note 3) $ 1,095,000 $ 1,440,000
Current portion of long-term debt
(Note 4) 850,000 677,000
Accounts payable 3,072,000 2,861,000
Accrued expenses 1,495,000 1,133,000
__________ __________
Total current liabilities 6,512,000 6,111,000
__________ __________
Long-term debt, less current portion
(Note 4) 12,196,000 12,131,000
__________ __________
Deferred grant income 6,390,000 5,571,000
__________ __________
Deferred income taxes 8,917,000 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 2,219,369 shares in 1997
and 2,188,244 shares in 1996 1,109,000 1,094,000
Capital in excess of par 6,641,000 6,365,000
Retained earnings 29,914,000 28,569,000
__________ __________
Total shareholders' equity 37,697,000 36,061,000
__________ __________
$ 71,712,000 $ 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 Nine Months Ended
September 30 September 30
________________ _________________
1997 1996 1997 1996
_________ _________ _________ __________
<S> <C> <C> <C> <C>
Income:
Operating revenues,
freight and other $5,947,000 $5,227,000 $16,225,000 $14,321,000
Other income (Note 5) 108,000 100,000 523,000 507,000
_________ _________ __________ __________
6,055,000 5,327,000 16,748,000 14,828,000
_________ _________ __________ __________
Expenses:
Operating:
Maintenance of way
and structures 521,000 1,166,000 2,702,000 3,108,000
Maintenance of
equipment 726,000 609,000 2,113,000 1,818,000
Transportation 1,329,000 1,153,000 3,706,000 3,521,000
General 966,000 979,000 2,764,000 2,780,000
Taxes, other than
income 535,000 499,000 1,654,000 1,544,000
Car hire, net 149,000 170,000 467,000 463,000
_________ _________ __________ __________
4,226,000 4,576,000 13,406,000 13,234,000
Interest 340,000 346,000 1,021,000 1,029,000
_________ _________ __________ __________
4,566,000 4,922,000 14,427,000 14,263,000
_________ _________ __________ __________
Income before income
taxes 1,489,000 405,000 2,321,000 565,000
_________ _________ __________ __________
Income taxes:
Current 365,000 80,000 540,000 70,000
Deferred 165,000 60,000 300,000 130,000
_________ _________ __________ __________
530,000 140,000 840,000 200,000
_________ _________ __________ __________
Net income $ 959,000 $ 265,000 $1,481,000 $ 365,000
========= ========= ========== ==========
Earnings per common and
common equivalent
share $ .42 $ .12 $ .65 $ .16
========= ========= ========== ==========
Weighted average common
and common equivalent
shares outstanding
(Note 6) 2,282,639 2,251,140 2,270,325 2,240,450
========= ========= ========= =========
Dividends per share:
Preferred $ -0- $ -0- $ 5.00 $ 5.00
========= ========= ========== ==========
Common $ -0- $ -0- $ .06 $ .05
========= ========= ========== ==========
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 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 $ 1,481,000 $ 365,000
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation 1,518,000 1,424,000
Amortization of deferred grant
income (108,000) (96,000)
Gain from sales and disposals of
properties and easements, net (150,000) (61,000)
Deferred income taxes 300,000 130,000
Changes in assets and liabilities:
Accounts receivable (408,000) 356,000
Materials and supplies (810,000) (265,000)
Prepaid expenses and other (15,000) 60,000
Accounts payable 995,000 123,000
Accrued expenses 588,000 (262,000)
__________ __________
Net cash provided by operations 3,391,000 1,774,000
__________ __________
Cash flows provided by (used in)
investing activities:
Purchase of properties and equipment (4,230,000) (3,913,000)
Proceeds from:
Sales of properties and easements 210,000 223,000
Deferred grant income 679,000 521,000
__________ __________
Net cash used in investing activities (3,341,000) (3,169,000)
__________ __________
Cash flows provided by (used in)
financing activities:
Net borrowings (payments) under line
of credit (345,000) 1,500,000
Payments of:
Long-term debt (492,000) (661,000)
Dividends (136,000) (112,000)
Proceeds from:
Long-term debt 730,000
Issuance of common shares for stock
options exercised and employee stock
purchases 60,000 15,000
__________ __________
Net cash provided by (used in)
financing activities (183,000) 742,000
__________ __________
Decrease in cash (133,000) (653,000)
Cash, beginning of period 686,000 2,012,000
_________ __________
Cash, end of period $ 553,000 $ 1,359,000
========== ==========
Supplemental disclosures:
Cash paid during the period for:
Interest $ 1,051,000 $ 981,000
========== ==========
Income taxes $ 228,000 $ 10,000
========== ==========
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 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 September 30, 1997, the results of operations for
the three and nine months ended September 30, 1997 and 1996, and
cash flows for the nine months ended September 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>
Balance December 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 8,575 common
shares for stock options
exercised, employee
stock purchases and
other 4,000 61,000
Dividends:
Preferred stock, $5.00
per share (3,000)
Common stock, $.06 per
share (133,000)
Net income for the period 1,481,000
________ ________ ________ _________
Balance September 30,
1997 $33,000 $1,109,000 $ 6,641,000 $29,914,000
======== ========== =========== ===========
</TABLE>
3. Notes payable, bank:
In June 1997 the Company's principal bank renewed the Company's
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.
4. Long-term debt:
In July 1997 the Company completed the acquisition and renovation
of three used locomotives at a total cost of $730,000 financed
through long-term borrowings from a commercial lender. Terms of
the loan agreement call for monthly payments of principal and
interest in the amount of $15,000
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
4. Long-term debt (continued):
through August 2002. The interest rate, which is variable, is set
at 2.35% over the 30 day Commercial Paper rate (7.9% as of
September 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. The
outstanding principal balance on this indebtedness at September
30, 1997 is $720.000 of which $125,000 has been classified as a
current liability. The amount of the monthly payments will be
adjusted annually in August to reflect the effects of the variable
interest rates in effect during the previous year. The debt is
collateralized by the three locomotives acquired.
5. Other income:
<TABLE>
Three Months Ended Nine Months Ended
September 30 September 30
_____________________ _______________________
1997 1996 1997 1996
________ ________ ________ _________
<S> <C> <C> <C> <C>
Gain (loss) from
sales and
disposals of
properties and
easements, net $ -0- $ (33,000) $ 150,000 $ 61,000
Rentals 105,000 119,000 365,000 393,000
Interest 3,000 14,000 8,000 53,000
--------- --------- --------- ----------
$ 108,000 $ 100,000 $ 523,000 $ 507,000
======== ======== ======== =========
</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.
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.
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
The Company owns a site which is contaminated with petroleum
products and is currently productive as a part of the Company's
double-stack intermodal yard. The Company has now concluded
further assessment of the site, including a risk assessment. The
studies conclude that the site poses no significant risk to health
or the environment. The Company imposed an activity and use
limitation on the site to restrict future uses of the property to
industrial and transportation activities. No further action or
remediation is required for this site.
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.
9. Subsequent event:
In October 1997 the Company's Board of Directors approved an
agreement to purchase all of the outstanding common stock of
Connecticut Central Railroad Company ("CCCL") for 20,000 shares of
newly issued common stock of the Company. If certain financial
and other conditions are met, CCCL's shareholders will receive an
additional 7,500 shares of the Company's common stock one year
from the date of the closing. The transaction is expected to be
completed in the second quarter of 1998 following approval or
exemption of the United States Surface Transportation Board. Upon
completion of the acquisition of CCCL, which conducts rail freight
operations on approximately 17 miles of rail lines connecting to
the Company's Middletown Secondary branch line, it is anticipated
that it will be merged into the Company's rail freight operations
and will cease to exist as a separate entity.
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION 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.
Liquidity and Capital Resources
As detailed in the accompanying statements of cash flows, the Company
generated $3,391,000 of cash from operations during the nine months
ended September 30, 1997. On an overall basis, however, the Company's
total cash decreased by $133,000 during the nine 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 $679,000 were utilized to
fund certain of the capitalized improvements to the Company's track
structure.
Expenditures for property and equipment during the nine month period
include $410,000 for the Company's deep-water pier project, $1,934,000
of capitalized track structure and bridge improvements, $1,603,000 of
equipment additions and $283,000 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 acquired and renovated three used locomotives
during the second quarter of 1997 at a total cost of $730,000, financed
through long term borrowings from a commercial lender. Expenditures
incurred on this project 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 the Company's revolving line of credit
in June 1997 and increased the maximum borrowings allowed from
$1,500,000 to $1,750,000. Loans in the amount of $1,095,000 were
outstanding under this line as of September 30, 1997.
As discussed more fully in Note 9 to the accompanying financial
statements, the Company concluded an agreement in October 1997 to
acquire all of the outstanding stock of Connecticut Central Railroad
Company ("CCCL") effective during the second quarter of 1998.
Management is not able to predict the total impact of this acquisition
upon future operations but it is estimated that rail freight revenues
from existing customers of CCCL will amount to approximately $500,000
per year at current levels of operations. In addition, management
intends to pursue whatever additional growth opportunities may be
available on the acquired lines.
In management's opinion, the Company will be able to generate
sufficient cash from operations during the remainder of 1997 to enable
it to meet its operating expense, debt service and capital expenditure
requirements.
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Operating revenues for the nine months ended September 30, 1997
increased by 13% from 1996. This increase results from a 15% increase
in the volume of conventional freight cars and a 9% increase in volume
of containers handled, a 3% increase in the average net revenue
received per container and an increase in other operating revenues,
partially offset by a 4% decrease in the average revenue received per
conventional carload. Net container revenue increased from $1,103,000
in 1996 to $1,236,000 in 1997 and other operating revenues increased
from $268,000 to $635,000.
Operating revenues for the third quarter of 1997 increased by 14% from
the third quarter of 1996. This increase results from a 16% increase
in the volume of conventional freight cars and an 15% increase in the
volume of containers handled and a 4% increase in the average revenue
received per container, partially offset by a 2% decrease in the
average revenue received per conventional carload. Net container
revenue increased from $408,000 in 1996 to $486,000 in 1997. Other
operating revenue amounted to $151,000 in both years.
Construction aggregate traffic volume increased by 23% for the nine
month period and 26% for the quarter, whereas the volume of all other
commodities of conventional traffic increased by 12% for the nine month
period and 9% for 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 nine
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 nine month period increased by 1% and
for the quarter decreased by 8% 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. The decrease in total operating expenses for the third
quarter of 1997 from the third quarter of 1996 and the small increase
for the nine month period result, to a large degree, from 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 and bridges or were reimbursed through government
grants for grade crossing improvements in 1997 than in 1996. Total
capitalized track expenses and recovered costs for the nine month
period ended September 30, 1997 amounted to $2,685,000 compared with
$1,350,000 in 1996, an increase of $1,335,000. Capitalized track
expenses and recovered costs for the third quarter of 1997 amounted to
$1,372,000 compared with $340,000 in 1996, an increase of $1,032,000.
Interest expense was virtually unchanged between periods, due to the
fact that lower levels of long term debt outstanding during the nine
month period and third quarter of 1997 were largely offset by increased
levels of short term borrowings.
<PAGE>
PROVIDENCE AND WORCESTER RAILROAD COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
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>
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, 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: November 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 553
<SECURITIES> 0
<RECEIVABLES> 3319
<ALLOWANCES> 125
<INVENTORY> 1831
<CURRENT-ASSETS> 6114
<PP&E> 90610
<DEPRECIATION> 25012
<TOTAL-ASSETS> 71712
<CURRENT-LIABILITIES> 6512
<BONDS> 12196
0
33
<COMMON> 1109
<OTHER-SE> 36555
<TOTAL-LIABILITY-AND-EQUITY> 71712
<SALES> 0
<TOTAL-REVENUES> 16748
<CGS> 0
<TOTAL-COSTS> 13406
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1021
<INCOME-PRETAX> 2321
<INCOME-TAX> 840
<INCOME-CONTINUING> 1481
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<NET-INCOME> 1481
<EPS-PRIMARY> .65
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</TABLE>
