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 March 31, 2000
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 May 1, 2000, the registrant has 4,284,859 shares of common stock, par
value $.50 per share, outstanding.
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2
PROVIDENCE AND WORCESTER RAILROAD COMPANY
Index
Part I - Financial Information
Item 1 - Financial Statements:
Balance Sheets - March 31, 2000 and December 31, 1999 ..... 3
Statements of Income - Three Months Ended
March 31, 2000 and 1999 ................................... 4
Statements of Cash Flows - Three Months
Ended March 31, 2000 and 1999 ............................. 5
Notes to Financial Statements ............................. 6-7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations ............. 8-10
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 10
Part II - Other Information:
Item 6 Exhibits and Reports on Form 8-K .......................... 11
Signatures ........................................................... 12
<PAGE>
3
Item 1. Financial Statements
PROVIDENCE AND WORCESTER RAILROAD COMPANY
BALANCE SHEETS
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
ASSETS
MARCH 31,DECEMBER 31,
2000 1999
(Unaudited)
------- -------
<S> <C> <C>
Current Assets:
Cash and equivalents ................................ $ 4,546 $ 4,626
Accounts receivable, net of allowance for
doubtful accounts of $125 in 2000 and 1999 ......... 2,696 3,251
Materials and supplies .............................. 1,884 2,107
Prepaid expenses and other .......................... 136 181
Deferred income taxes ............................... 57 58
------- -------
Total Current Assets ............................... 9,319 10,223
Property and Equipment, net .......................... 64,501 64,156
Land Held for Development ............................ 11,851 11,851
Goodwill, net ........................................ 117 141
------- -------
Total Assets ......................................... $85,788 $86,371
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable .................................... $ 2,085 $ 2,347
Accrued expenses .................................... 538 650
------- -------
Total Current Liabilities .......................... 2,623 2,997
------- -------
Profit-Sharing Plan Contribution ..................... 400 400
------- -------
Deferred Grant Income ................................ 7,377 7,421
------- -------
Deferred Income Taxes ................................ 8,843 8,870
------- -------
Commitments and Contingent Liabilities
Shareholders' Equity:
Preferred stock, 10% noncumulative, $50 par
value; authorized, issued and outstanding
647 shares ......................................... 32 32
Common stock, $.50 par value; authorized
15,000,000 shares; issued and outstanding
4,284,859 shares in 2000 and 4,281,280
shares in 1999 ..................................... 2,142 2,141
Additional paid-in capital .......................... 28,540 28,519
Retained earnings ................................... 35,831 35,991
------- -------
Total Shareholders' Equity ......................... 66,545 66,683
------- -------
Total Liabilities and Shareholders' Equity ........... $85,788 $86,371
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
4
PROVIDENCE AND WORCESTER RAILROAD COMPANY
STATEMENTS OF INCOME (Unaudited)
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
Three Months Ended March 31
2000 1999
------- -------
<S> <C> <C>
Operating Revenues - Freight and Non-Freight ........ $ 5,266 $ 4,926
------- -------
Operating Expenses:
Maintenance of way and structures .................. 955 720
Maintenance of equipment ........................... 625 541
Transportation ..................................... 1,477 1,275
General and administrative ......................... 951 903
Depreciation ....................................... 633 564
Taxes, other than income taxes ..................... 624 620
Car hire, net ...................................... 185 167
------- -------
Total Operating Expenses .......................... 5,450 4,790
------- -------
Income (Loss) from Operations ....................... (184) 136
Other Income ........................................ 221 269
------- -------
Income before Income Taxes .......................... 37 405
------- -------
Provision for Income Taxes:
Current ............................................ 49 95
Deferred ........................................... (26) 50
------- -------
Total Provision for Income Taxes .................. 23 145
======= =======
Net Income .......................................... $ 14 $ 260
Preferred Stock Dividends ........................... 3 3
------- -------
Net Income Available to Common Shareholders ......... $ 11 $ 257
======= =======
Basic Income Per Common Share ....................... $ -- $ .06
======= =======
Diluted Income Per Common Share ..................... $ -- $ .06
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
5
PROVIDENCE AND WORCESTER RAILROAD COMPANY
STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in Thousands)
<TABLE>
Three Months Ended March 31
2000 1999
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................... $ 14 $ 260
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization ....................... 656 581
Amortization of deferred grant income ............... (44) (41)
Gains from sale and disposal of properties,
equipment and easements, net ....................... (32) (63)
Deferred income taxes (benefit) ..................... (26) 50
Increase (decrease) in cash from:
Accounts receivable ................................ 256 (108)
Materials and supplies ............................. 223 (159)
Prepaid expenses and other ......................... 45 97
Accounts payable and accrued expenses .............. (191) (179)
------- -------
Net cash flows from operating activities ............. 901 438
------- -------
Cash flows from Investing Activities:
Purchase of property and equipment ................... (1,177) (3,670)
Proceeds from sale of properties, equipment
and easements ....................................... 60 78
Proceeds from deferred grant income .................. 290 144
------- -------
Net cash flows used by investing activities .......... (827) (3,448)
------- -------
Cash Flows from Financing Activities:
Dividends paid ....................................... (174) (130)
Issuance of common shares for stock options
exercised and employee stock purchases .............. 20 32
------- -------
Net cash flows used by financing activities .......... (154) (98)
------- -------
Decrease in Cash and Equivalents ..................... (80) (3,108)
Cash and Equivalents, Beginning of Period ............ 4,626 7,294
------- -------
Cash and Equivalents, End of Period .................. $ 4,546 $ 4,186
======= =======
Supplemental disclosures:
Cash paid during the period for Income taxes ......... $ -- $ 53
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
6
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS (Unaudited)
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Dollars in Thousands Except Per Share Amounts)
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 March 31, 2000 and
the results of operations and cash flows for the three months ended March
31, 2000 and 1999. 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 1999
Annual Report on Form 10-K for the year ended December 31, 1999 filed with
the Securities and Exchange Commission.
2. Changes in Shareholders' Equity:
<TABLE>
Total
Additional Share
Preferred Common Paid-in Retained holders'
Stock Stock Capital Earnings Equity
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31,1999 .. $ 32 $ 2,141 $28,519 $35,991 $66,683
Issuance of 3,579
common shares for
employee stock
purchases and other ...... 1 21 22
Dividends:
Preferred stock,
$5.00 per share .......... (3) (3)
Common stock, $.04
per share ................ (171) (171)
Net income for the
period ................... 14 14
------- ------- ------- ------- -------
Balance March 31, 2000 .... $ 32 $ 2,142 $28,540 $35,831 $66,545
======= ======= ======= ======= =======
</TABLE>
3. Other Income:
<TABLE>
2000 1999
------ ------
<S> <C> <C>
Gains from sale and disposal of properties,
equipment and easements, net ...................... $ 32 $ 63
Rentals ............................................ 122 148
Interest ........................................... 67 58
---- ----
$221 $269
==== ====
</TABLE>
4. Income per Share:
Basic income per common share is computed using the weighted average number
of common shares outstanding during each year. Diluted income per common
share reflects the effect of the Company's outstanding convertible
preferred stock, options and warrants except where such items would be
antidilutive.
<PAGE>
7
A reconciliation of weighted average shares used for the basic computation
and that used for the diluted computation is as follows:
<TABLE>
2000 1999
--------- ---------
<S> <C> <C>
Weighted average shares for basic .............. 4,281,394 4,230,052
Dilutive effect of convertible preferred
stock, options and warrants ................... 68,431 91,270
--------- ---------
Weighted average shares for diluted ............ 4,349,825 4,321,322
========= =========
</TABLE>
Options and warrants to purchase 197,012 and 191,020 shares of common stock
were outstanding during the quarter ended March 31, 2000 and 1999
respectively, but were not included in the computation of diluted earnings
per common share because their effect would be antidilutive.
5. Commitments and Contingent Liabilities:
The Company is a defendant in certain lawsuits relating to casualty losses,
many of which are covered by insurance subject to a deductible. The Company
believes that adequate provision has been made in the financial statements
for any expected liabilities which may result from disposition of such
lawsuits.
While it is possible that some of the foregoing matters may be settled at a
cost greater than that provided for, it is the opinion of management based
upon the advice of counsel that the ultimate liability, if any, will not be
material to the Company's financial statements.
6. Dividends:
On April 26, 2000, the Company declared a dividend of $.04 per share on its
outstanding Common Stock payable May 25, 2000 to shareholders of record May
11, 2000.
<PAGE>
8
PROVIDENCE AND WORCESTER RAILROAD COMPANY
ITEM 2-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.
Results of Operations
The following table sets forth the Company's operating revenues by category in
dollars and as a percentage of operating revenues:
<TABLE>
Three Months Ended March 31
--------------------------------------
2000 1999
--------------------------------------
(In thousands, except percentages)
<S> <C> <C> <C> <C>
Freight Revenues:
Conventional carloads ............ $4,220 80.1% $4,010 81.4%
Containers ....................... 632 12.0 510 10.4
Non-Freight Operating Revenues:
Transportation services .......... 259 4.9 140 2.8
Other ............................ 155 3.0 266 5.4
------ ----- ------ -----
Total ......................... $5,266 100.0% $4,926 100.0%
====== ===== ====== =====
</TABLE>
The following table sets forth a comparison of the Company's operating expenses
expressed in dollars and as a percentage of operating revenues:
<TABLE>
Three Months Ended March 31
--------------------------------------
2000 1999
--------------------------------------
(In thousands, except percentages)
<S> <C> <C> <C> <C>
Salaries, wages, payroll taxes
and employee benefits ............... $3,091 58.7% $2,927 59.4%
Casualties and insurance ............... 150 2.8 157 3.2
Depreciation and amortization .......... 656 12.5 581 11.8
Diesel fuel ............................ 293 5.6 115 2.3
Car hire, net .......................... 185 3.5 167 3.4
Purchased services, including
legal and professional fees ........... 274 5.2 424 8.6
Repair and maintenance of equipment .... 318 6.0 269 5.5
Track and signal materials ............. 521 9.9 403 8.2
Other materials and supplies ........... 262 5.0 332 6.7
Other .................................. 372 7.1 403 8.2
------ ----- ------ -----
Total ................................ 6,122 116.3 5,778 117.3
Less capitalized and
recovered costs ..................... 672 12.8 988 20.1
------ ----- ------ -----
Total ............................. $5,450 103.5% $4,790 97.2%
====== ===== ====== =====
</TABLE>
<PAGE>
9
Operating Revenues:
Operating revenues increased $340,000, or 6.9%, to $5.3 million in the first
quarter of 2000 from $4.9 million in the first quarter of 1999. This increase is
the result of a $210,000 (5.2%) increase in conventional freight revenues, a
$122,000 (23.9%) increase in net container freight revenues and an $8,000 (2.0%)
increase in non-freight operating revenues.
The increase in conventional freight revenues is attributable to an increase in
traffic volume, partially offset by a decrease in the average revenue received
per conventional carloading of approximately 3.0%. The Company's conventional
freight carloadings increased by 436, or 8.5%, to 5,595 in 2000 from 5,159 in
1999. The increase in conventional carloadings results from new customers as
well as increased rail traffic from certain existing customers. A change in the
mix of traffic during the quarter toward lower margin commodities, such as
construction aggregate traffic, accounts for the reduction in the average
revenue received per conventional carloading.
The increase in net container freight revenues is primarily the result of an
increase in container traffic volume. Total intermodal containers handled
increased by 2,587, or 19.9%, to 15,569 containers in the first quarter of 2000
from 12,982 containers in 1999. The average revenue received per container
increased by approximately 3.3% due to increases in certain railroad industry
cost indices and to variations in the mix of containers handled.
The small increase in non-freight operating revenues results from increases in
demurrage and other transportation-related revenues partially offset by
decreases in Maintenance of Way Department billings. Such revenues can vary from
period to period depending upon customer needs.
Operating Expenses:
Operating expenses increased $660,000, or 13.8%, to $5.5 million in the first
quarter of 2000 from $4.8 million in 1999. Operating expenses as a percentage of
operating revenues ("operating ratio") increased to 103.5% in the first quarter
of 2000 from 97.2% in 1999. The increase in operating expenses is attributable
to a number of factors, among the more significant of which are the following:
o Diesel fuel expense increased by $178,000, or 154.8%, to $293,000 in the
first quarter of 2000 from $115,000 in 1999 as a result of sharply
increased costs in effect for petroleum products.
o Depreciation and amortization expense increased by $75,000, or 12.9%, to
$656,000 in the first quarter of 2000 from $581,000 in 1999 due to recent
property and equipment additions and amortization of goodwill.
o Costs capitalized and recovered through projects funded by public grants
and contracts decreased by $316,000, or 32.0% to $672,000 in the first
quarter of 2000 from $988,000 in 1999.
The Company's operating expenses are of a relatively fixed nature and do not
increase or decrease proportionately with variations in operating revenues. In
addition the Company's operating ratio is typically near 100% for the first
quarter of each year since the seasonal nature of certain of its freight traffic
and winter weather conditions typically result in lower levels of freight
revenues and proportionally higher levels of operating expenses for that
quarter.
Provision for Income Taxes:
The provision for income taxes for the first quarter of 2000 is equal to 62.2%
of pre-tax income. This abnormally high percentage is attributable to the
disproportionate impact of non- deductible expenses when pre-tax income is at a
marginal level.
<PAGE>
10
Liquidity and Capital Resources
During the first quarter of 2000 the Company generated $901,000 of cash from
operations. Total cash and equivalents decreased by $80,000 for the quarter. The
principal utilization of cash during the quarter was for expenditures for
property and equipment, of which $619,000 was for additions and improvements to
track structure, and for the payment of dividends.
In management's opinion cash generated from operations during the remainder of
2000 will be sufficient to enable the Company to meet its operating expenses and
capital expenditure and dividend requirements.
Seasonality
Historically, the Company's operating revenues are lowest for the first quarter
due to the absence of construction aggregate shipments during a portion of this
period and to winter weather conditions.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities", subsequently amended in June 1999 and
effective for fiscal years beginning after June 15, 2000. The new standard
requires that all companies record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. Management is
currently assessing the impact of SFAS No. 133 on the financial statements of
the Company. The Company will adopt this accounting standard on January 1, 2001,
as required.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Cash and Equivalents
As of March 31, 2000, the Company is exposed to market risks which primarily
include changes in U.S. interest rates.
The Company invests cash balances in excess of operating requirements in
short-term securities, generally with maturities of 90 days or less. In
addition, the Company's revolving line of credit agreement provides for
borrowings which bear interest at variable rates based on either prime rate or
one and one half percent over either the one or three month London Interbank
Offered Rates. The Company had no borrowings outstanding pursuant to the
revolving line of credit agreement at March 31, 2000. The Company believes that
the effect, if any, of reasonably possible near-term changes in interest rates
on the Company's financial position, results of operations, and cash flows
should not be material.
<PAGE>
11
PART II - Other Information
Item 6.Exhibits and Reports on Form 8-K
(b) Noreports on Form 8-K were filed during the quarter ended March 31,
2000.
<PAGE>
12
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: May 9, 2000
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0
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</TABLE>
