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, 1994
or
( ) 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 1-12184
CONRAIL INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2728514
------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 Market Street, Philadelphia, Pennsylvania 19101
---------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(215) 209-4000
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(Registrant's telephone number, including area code)
---------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
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.
Number of shares of Conrail Inc. common stock outstanding (as of
July 15, 1994) 78,821,747
<PAGE>
CONRAIL INC.
INDEX
Page Number
-----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Statements
of Income - Quarters and six months
ended June 30, 1994 and 1993 3
Condensed Consolidated Balance
Sheets - June 30, 1994 and
December 31, 1993 4
Condensed Consolidated Statements
of Cash Flows - Six months ended
June 30, 1994 and 1993 5
Notes to Condensed Consolidated
Financial Statements 6
Reports of Independent Accountants 8
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote
of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
2
<PAGE>
PART I. FINANCIAL INFORMATION
CONRAIL INC.
Item 1. Financial Statements.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
($ In Millions Except Per Share Data)
Quarters Ended Six Months Ended
June 30, June 30,
-------------- -----------------
1994 1993 1994 1993
---- ---- ------ ------
<S> <C> <C> <C> <C>
Revenues $951 $873 $1,798 $1,689
Operating expenses
Way and structures 121 122 265 258
Equipment 209 178 419 354
Transportation 342 320 692 642
General and administrative 90 95 181 192
Early retirement program 84
---- ---- ------ ------
Total operating expenses 762 715 1,641 1,446
---- ---- ------ ------
Income from operations 189 158 157 243
Interest expense (48) (46) (95) (90)
Other income, net 25 25 51 57
---- ---- ------ ------
Income before income taxes and the
cumulative effect of changes in
accounting principles 166 137 113 210
Income taxes 65 52 44 79
---- ---- ------ ------
Income before the cumulative effect
of changes in accounting principles 101 85 69 131
Cumulative effect of changes in
accounting principles (74)
---- ---- ------ ------
Net income $101 $ 85 $ 69 $ 57
==== ==== ====== ======
Income (loss) per common share
Before the cumulative effect of
changes in accounting principles
Primary $1.24 $1.01 $.79 $ 1.53
Fully diluted 1.12 .92 .74 1.40
Cumulative effect of changes in
accounting principles
Primary (.91)
Fully diluted (.81)
Net income per common share
Primary $1.24 $1.01 $.79 $ .62
Fully diluted 1.12 .92 .74 .59
Dividends per common share $.325 $.275 $.65 $ .55
Weighted average number of shares
used in computing earnings per share
(thousands)
Primary 79,632 80,730 80,033 80,855
Fully diluted 89,547 90,687 89,962 90,814
Ratio of earnings to fixed charges 3.84x 3.65x 1.94x 2.96x
See accompanying notes.
</TABLE>
3
<PAGE>
<TABLE>
CONRAIL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
($ In Millions) June 30, December 31,
1994 1993
-------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 28 $ 38
Accounts receivable 673 644
Deferred tax assets 238 227
Material and supplies 157 132
Other current assets 25 21
------ ------
Total current assets 1,121 1,062
Property and equipment, net 6,349 6,313
Other assets 667 573
------ ------
Total assets $8,137 $7,948
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings 185 79
Current maturities of long-term debt 118 146
Accounts payable 61 62
Wages and employee benefits 194 185
Casualty reserves 96 93
Accrued and other current liabilities 545 510
------ ------
Total current liabilities 1,199 1,075
Long-term debt 1,971 1,959
Casualty reserves 204 132
Deferred income taxes 1,128 1,081
Special income tax obligation 544 575
Other liabilities 338 342
------ ------
Total liabilities 5,384 5,164
====== ======
Stockholders' equity
Series A ESOP convertible junior
preferred stock 286 286
Unearned ESOP compensation (248) (253)
Common stock 80 80
Additional paid-in capital 1,832 1,819
Retained earnings 868 857
------ ------
2,818 2,789
Treasury stock (65) (5)
------ ------
Total stockholders' equity 2,753 2,784
------ ------
Total liabilities and
stockholders' equity $8,137 $7,948
====== ======
See accompanying notes.
</TABLE>
4
<PAGE>
<TABLE>
CONRAIL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
($ In Millions) Six Months Ended
June 30,
-------------------
1994 1993
----- -----
<S> <C> <C>
Cash flows from operating activities $ 223 $ 117
Cash flows from investing activities
Property and equipment acquisitions (181) (202)
Loans to and investments in affiliates (5) (24)
Proceeds from disposals of properties 11 7
Other (26) (27)
----- -----
Net cash used in investing activities (201) (246)
----- -----
Cash flows from financing activities
Repurchase of common stock (60) (32)
Net proceeds from (repayment of) short-term
borrowings 105 (67)
Net proceeds from (payment of) medium-term notes 10 (1)
Proceeds from long-term debt 305
Payment of capital lease and equipment
obligations (37) (44)
Dividends paid on common stock (51) (44)
Dividends paid on preferred stock (11) (11)
Other 12 7
----- -----
Net cash from (used in) financing activities (32) 113
----- -----
Decrease in cash and cash equivalents (10) (16)
Cash and cash equivalents
Beginning of period 38 40
----- -----
End of period $ 28 $ 24
===== =====
See accompanying notes.
</TABLE>
5
<PAGE>
CONRAIL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The unaudited financial statements contained herein present
Conrail Inc.'s (the "Company") consolidated financial position as
of June 30, 1994 and December 31, 1993, the consolidated results
of operations for the three and six-month periods ending June 30,
1994 and 1993 and the consolidated cash flows for the six-month
periods ended June 30, 1994 and 1993. In the opinion of
management, these financial statements include all adjustments,
consisting of normal recurring adjustments, and the cumulative
effects of changes in accounting principles mentioned in Note 3,
necessary to present fairly the results for the interim periods
included.
The rules and regulations of the Securities and Exchange
Commission permit certain information and footnote disclosures,
ordinarily required by generally accepted accounting principles,
to be condensed or omitted from interim financial reports.
Accordingly, the financial statements included herein should be
read in conjunction with the audited financial statements and
notes for the year ended December 31, 1993, presented in the
Company's Annual Report on Form 10-K.
2. During the first quarter of 1994, the Company recorded a
charge of $51 million (after tax benefits of $33 million) for a
non-union employee voluntary early retirement program and related
costs. The majority of the cost of the early retirement program
will be paid from the Company's overfunded pension plan.
3. Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions" and Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes." As a result, the Company recorded cumulative after tax
charges totalling $74 million in the first quarter of 1993.
4. In July 1993, the Board of Directors authorized a $100 million
common stock repurchase program. During the first six months of
1994, the Company acquired 1,027,571 shares for approximately $60
million under this program, and at June 30, 1994 approximately
$26 million remained available from the authorization. On
July 20, 1994, the Company's Board of Directors authorized an
additional $100 million common stock repurchase program.
6
<PAGE>
5. In June 1994, Consolidated Rail Corporation, the Company's
principal subsidiary, issued $15 million of Medium-Term Notes
with an interest rate of 6.33%, maturing in 1996, pursuant to a
registration statement on Form S-3.
In July 1994, Consolidated Rail Corporation issued approximately
$49 million of 1994 Equipment Trust Certificates, Series A, with
interest rates ranging from 5.5% to 7.6%, maturing annually from
1995 to 2009. The certificates were used to finance
approximately 85% of the total purchase price of 36 locomotives.
6. Information regarding contingent liabilities and litigation
was included in Note 12 to Consolidated Financial Statements and
Part I, Item 3 - Legal Proceedings in the Company's Annual Report
on Form 10-K for the year ended December 31, 1993. There have
been no material developments with respect to these matters
during the first six months of 1994, except as disclosed in that
Annual Report on Form 10-K and the quarterly report on Form 10-Q
for the three months ended March 31, 1994.
7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Stockholders and Board of Directors of
Conrail Inc.
We have reviewed the accompanying condensed consolidated
balance sheet of Conrail Inc. and its subsidiaries (the
"Company") as of June 30, 1994 and the related condensed
consolidated statements of income for the three and six months
ended June 30, 1994 and the condensed consolidated statement of
cash flows for the six months ended June 30, 1994. The
condensed consolidated statements of income for the three and
six months ended June 30, 1993 and the condensed consolidated
statement of cash flows of Consolidated Rail Corporation for
the six months ended June 30, 1993 were reviewed by other
independent accountants, whose report dated July 21, 1993,
disclosed that no material modifications should have been made
to the interim financial information for it to be in conformity
with generally accepted accounting principles. This financial
information is the responsibility of the Company's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information
consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in
scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying interim
financial information for it to be in conformity with generally
accepted accounting principles.
The Company's consolidated balance sheet as of December 31,
1993 and the related consolidated statements of income,
stockholders' equity and cash flows for the year then ended
(not presented herein) were audited by other independent
accountants, whose report dated January 24, 1994 expressed an
unqualified opinion on those statements and included an
explanatory paragraph describing the Company's change in
methods for accounting for income taxes and postretirement
benefits other than pensions in 1993.
PRICE WATERHOUSE
Thirty South Seventeenth Street
Philadelphia, PA 19103
July 20, 1994
8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Stockholders and Board of Directors of
Conrail Inc.
We have made a review of the condensed consolidated balance
sheet of Consolidated Rail Corporation and subsidiaries as of
June 30, 1993, and the related condensed consolidated
statements of income for the three and six-month periods ended
June 30, 1993, and the condensed consolidated statement of
cash flows for the six-month period ended June 30, 1993, in
accordance with standards established by the American
Institute of Certified Public Accountants.
A review of interim financial information consists principally
of obtaining an understanding of the system for the
preparation of interim financial information, applying
analytical procedures to financial data, and making inquiries
of persons responsible for financial and accounting matters.
It is substantially less in scope than an audit in accordance
with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the condensed
consolidated financial statements referred to above for them
to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet as
of December 31, 1993, and the related consolidated statements
of income, stockholders' equity and cash flows for the year
then ended (not presented herein); and in our report, dated
January 24, 1994, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1993, is fairly
presented, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
COOPERS & LYBRAND
2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 24, 1994
9
<PAGE>
CONRAIL INC.
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations.
-----------------------------------
Results of Operations
---------------------
Overview
--------
Net income for Conrail Inc. ("Conrail" or "the Company") was
$101 million for the second quarter of 1994 compared with $85
million for the second quarter of 1993. Net income for the
first six months of 1994 was $69 million compared with $57
million for the first six months of 1993. Results for the
first six months of 1994 include a one-time charge of $51
million (net of tax benefits of $33 million) relating to a non-
union early retirement program and related costs that the
Company recorded in the first quarter of 1994 (see Note 2 to
the Condensed Consolidated Financial Statements). Results for
the first six months of 1993 include one-time charges in the
first quarter of $74 million (net of tax benefits of $14
million) for adoption of required changes in accounting for
income taxes and postretirement benefits other than pensions
(see Note 3 to the Condensed Consolidated Financial
Statements). Absent these one-time charges, Conrail would have
net income of $120 million and $131 million for the first six
months of 1994 and 1993, respectively.
Net income per common share for the second quarter of 1994 was
$1.24 on a primary basis and $1.12 on a fully diluted basis,
compared with $1.01 and $.92 on the respective bases for the
second quarter of 1993. Net income per common share for the
first six months of 1994 was $.79 on a primary basis and $.74
on a fully diluted basis, compared with $.62 and $.59 on the
respective bases for the first six months of 1993. Excluding
the one-time charges, net income per common share for the first
six months of 1994 would have been $1.43 on a primary basis and
$1.31 on a fully-diluted basis compared with $1.53 and $1.40 on
the respective bases for the first six months of 1993.
Traffic volume increased in each of the four Service Groups,
Intermodal, Automotive, Unit Train and Core, for both the
second quarter and six months ended June 30, 1994, compared
with these same periods in 1993. Conrail believes that the
economy will continue to grow during the remainder of 1994 and
has modestly increased its projections for traffic volume and
revenue during this period.
10
<PAGE>
The Company is continuing to assess its existing capital
resources required for the Service Groups and expects to
complete the assessment by year end. In anticipation of
continued traffic growth, the Company is increasing its
locomotive fleet and hiring train and engine employees to
meet the demand for transportation services.
Second Quarter 1994 compared with Second Quarter 1993
-----------------------------------------------------
Net income for the second quarter of 1994 was $101 million, an
increase of $16 million, or 18.8%, from $85 million for the
second quarter of 1993.
Operating revenues (primarily freight line-haul revenues, but
also including switching, demurrage and incidental revenues)
increased $78 million, or 8.9%, from $873 million in the second
quarter of 1993 to $951 million in the second quarter of 1994.
A 10.1% increase in traffic volume in units (freight cars and
intermodal trailers and containers) resulted in an $84 million
increase in revenues that was partially offset by a 1.0%
decrease in average revenue per unit which reduced revenues by
$9 million. The decline in average revenue per unit is
attributable to an unfavorable traffic mix which decreased
revenues by $17 million, partially offset by an increase in
average rates which increased revenues $8 million. Other
revenues increased by $3 million.
Operating expenses for the quarter increased $47 million, or
6.6%, from $715 million in 1993 to $762 million in 1994. The
following table sets forth the operating expenses for the two
periods:
Second Quarter
--------------
($ In Millions) 1994 1993 Increase
---- ---- --------
Compensation and benefits $311 $309 $ 2
Fuel 47 44 3
Material and supplies 51 50 1
Equipment rents 102 75 27
Depreciation and amortization 69 69 -
Casualties and insurance 39 31 8
Other 143 137 6
---- ---- ---
$762 $715 $47
==== ==== ===
Compensation and benefits as a percent of revenues were 32.6%
in the second quarter of 1994 and 35.4% in the second quarter
of 1993.
11
<PAGE>
The increase of $27 million, or 36%, in equipment rents
primarily reflects an increase in the number of cars handled
and the congestion in the yards, both caused by increased
traffic volume. The effects of new operating leases also
increased equipment rents in 1994 versus 1993.
Casualties and insurance costs increased $8 million, or 25.8%,
due to an increase in personal injury claims expense based on
the increase in estimated costs to settle such claims. The
Company continues to experience increasing costs associated
with the resolution of personal injury and occupational illness
claims, despite the recent decline in the actual number of lost-
time injuries. As a result, the Company has formed a new Risk
Management Department to consolidate all facets of personal
injury risk management and to review its safety practices, the
process by which it resolves claims, and the costs of such
claims. The Company is continuing the process of reviewing the
adequacy of its personal injury reserves.
The Company's operating ratio (operating expenses as a percent
of revenues) was 80.1% for the second quarter of 1994, compared
with 81.9% for the second quarter of 1993.
First Six Months of 1994 compared with First Six Months of 1993
---------------------------------------------------------------
Net income for the first six months of 1994 was $69 million, an
increase of $12 million, or 21.1%, from $57 million for the
first six months of 1993. Net income for the first six months
of 1994 includes the effects of a one-time charge of $51
million (net of tax benefits of $33 million) relating to a non-
union voluntary early retirement program and related costs
which the Company recorded during the first quarter of 1994
(see Note 2 to the Condensed Consolidated Financial
Statements). Net income for the first six months of 1993
includes the effects of one-time charges in the first quarter
of $74 million (net of tax benefits of $14 million) for
adoption of required changes in accounting for income taxes and
postretirement benefits other than pensions (see Note 3 to the
Condensed Consolidated Financial Statements).
Operating revenues increased $109 million, or 6.5%, to $1,798
million from $1,689 million for the first six months of 1993.
A 9.0% increase in traffic volume resulted in a $145 million
increase in revenues that was partially offset by a 1.9%
decrease in average revenue per unit which reduced revenues by
$34 million. The decline in average revenue per unit was
caused by an unfavorable traffic mix and decreases in average
rates, which lowered revenues by $24 million and $10 million,
respectively. Other revenues decreased $2 million.
12
<PAGE>
Operating expenses increased $195 million, including $84
million related to the non-union voluntary early retirement
program and related costs, or 13.5%, to $1,641 million from
$1,446 million for the first six months of 1993. The following
table shows the operating expenses for the periods:
First Six Months
---------------- Increase
($ In Millions) 1994 1993 (Decrease)
------ ------ ----------
Compensation and benefits $ 652 $ 632 $ 20
Fuel 94 87 7
Material and supplies 113 107 6
Equipment rents 193 150 43
Depreciation and amortization 139 141 (2)
Casualties and insurance 84 65 19
Other 282 264 18
Early retirement program 84 - 84
------ ------ ----
$1,641 $1,446 $195
====== ====== ====
Compensation and benefits as a percent of revenues were 36.2%
in the first six months of 1994 and 37.4% in the first six
months of 1993. The compensation and benefits increase of $20
million, or 3.2%, was attributable primarily to increased
overtime caused by the adverse weather conditions and service
disruptions experienced in the first quarter of 1994.
The increase of $43 million, or 28.7%, in equipment rents is
primarily attributable to increased traffic volume and new
operating leases, as well as the effects of crowded serving
yards and train delays caused by adverse weather conditions
experienced in the first quarter of 1994.
Casualties and insurance costs increased $19 million, or 29.2%,
due to an increase in personal injury claims expense based on
higher expected costs to settle claims along with an increase
in the number of personal injury claims, which increase
occurred in the first quarter of 1994.
Other operating expenses increased $18 million, or 6.8%,
primarily due to increases in lease rentals and property and
corporate taxes, as well as higher snow removal costs in the
first quarter of 1994.
In the first quarter of 1994, the Company incurred a one-time
pre-tax charge of $84 million for the non-union voluntary early
retirement program and related costs (see Note 2 to the
Condensed Consolidated Financial Statements).
13
<PAGE>
Conrail's operating ratio was 91.3% for the first six months of
1994, compared with 85.6% for the first six months of 1993.
Without the $84 million one-time charge for the early
retirement program, the operating ratio for the first six
months of 1994 would have been 86.6%. The Company's financial
goal of achieving an 81.5 % operating ratio (excluding non-
recurring charges) for the full year has not changed but
continues to be evaluated as the year progresses.
Liquidity and Capital Resources
-------------------------------
The Company's cash and cash equivalents decreased $10 million
in the first six months of 1994, from $38 million at
December 31, 1993 to $28 million at June 30, 1994. Cash
generated from operations, primarily from its wholly-owned
subsidiary, Consolidated Rail Corporation, and borrowings are
the Company's principal sources of liquidity and are used
primarily for capital expenditures, debt service and dividends.
In the first six months of 1994, operating activities provided
cash of $223 million and net proceeds from short-term
borrowings and medium-term notes provided $115 million. The
principal uses of cash were for property and equipment
acquisitions, $181 million; repurchases of common stock, $60
million; payment of capital lease and equipment obligations,
$37 million; and cash dividends on common and preferred stock,
$62 million.
A working capital (current assets less current liabilities)
deficiency of $78 million existed at June 30, 1994 as compared
with a deficiency of $13 million at December 31, 1993.
Management believes that the Company's financial position
allows it sufficient access to credit sources on investment
grade terms, and, if necessary, additional intermediate or long-
term debt could be obtained for working capital requirements.
During the first six months of 1994, Consolidated Rail
Corporation issued $169 million of commercial paper and repaid
$64 million. At June 30, 1994, $285 million of commercial
paper remained outstanding, of which $100 million is classified
as long-term debt since it is expected to be refinanced through
subsequent issuances of commercial paper and is supported by a
long-term credit facility.
In June 1994, Consolidated Rail Corporation issued $15 million
of Medium-Term Notes with an interest rate of 6.33%, maturing
in 1996, pursuant to a registration statement on Form S-3.
14
<PAGE>
In July 1994, Consolidated Rail Corporation issued
approximately $49 million of 1994 Equipment Trust Certificates,
Series A, with interest rates ranging from 5.5% to 7.6%,
maturing annually from 1995 to 2009. The certificates were
used to finance approximately 85% of the total purchase price
of 36 locomotives.
In July 1993, the Company began a third common stock repurchase
program of up to $100 million. During the first six months of
1994, 1,027,571 shares were acquired for $60 million, bringing
the total acquired under this program through June 30, 1994 to
1,265,426 shares at a cost of approximately $74 million. At
June 30, 1994, approximately $26 million remained from this
program, and on July 20, 1994, the Board of Directors
authorized an additional $100 million common stock repurchase
program.
Also on July 20, 1994, the Company's Board of Directors
approved an increase of $.05 per share, or 15.4%, in the
Company's quarterly dividend to $.375 per common share
commencing with the dividend payable September 15, 1994 to
shareholders of record on August 31, 1994.
Other Matters
-------------
The United Transportation Union ("UTU") is currently involved
in a work stoppage that is confined to the Soo Line Railroad.
The Company has been advised that the strike may spread in the
near future to the Delaware & Hudson Railroad (an affiliate of
the Soo Line), a carrier with which Conrail shares facilities
and which has trackage rights over Conrail. In such event,
Conrail's operations may be adversely affected or Conrail may
be the subject of secondary picketing which, in turn, could
result in Conrail's operations in those areas being severely
curtailed for the duration of the picketing.
15
<PAGE>
PART II. OTHER INFORMATION
CONRAIL INC.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
(a) The Registrant held its Annual Meeting of
Shareholders on May 18, 1994.
(b) Proxies for the meeting were solicited pursuant to
Regulation 14A; there was no solicitation in
opposition to management's nominees for directors
as listed in such Proxy Statement and all such
nominees were elected.
(c) Listed below is each matter voted on at the
Registrant's Annual Meeting as fully described
in the Registrant's Proxy Statement solicited
pursuant to Rule 14A. Following are the results
of the voting and the number of votes cast for
each matter.
(i) The election of four directors in Class I to
serve until the Annual Meeting of Shareholders
in 1997 and until their successors are elected
and take office. All nominees were elected by
majority vote and the number of votes cast for
each follows (there were no broker non-votes):
Common Preferred
---------- ---------
H. Furlong Baldwin
For 69,552,669 8,314,526
Withheld 163,004 350,494
Shares not voted 9,929,617 1,277,209
---------- ---------
Total 79,645,290 9,942,229
========== =========
James A. Hagen
For 69,544,218 8,286,738
Withheld 171,455 378,282
Shares not voted 9,929,617 1,277,209
---------- ---------
Total 79,645,290 9,942,229
========== =========
16
<PAGE>
Common Preferred
---------- ---------
Michael H. Moskow
For 69,543,953 8,275,417
Withheld 171,720 389,603
Shares not voted 9,929,617 1,277,209
---------- ---------
Total 79,645,290 9,942,229
========== =========
David H. Swanson
For 69,536,326 8,259,321
Withheld 179,347 405,699
Shares not voted 9,929,617 1,277,209
---------- ---------
Total 79,645,290 9,942,229
========== =========
(ii) Ratification of the appointment of Price
Waterhouse as the independent accountants for
the year 1994. The appointment of Price
Waterhouse was ratified by majority vote and
the number of votes cast follows (there were
no broker non-votes):
Common Preferred
---------- ---------
For 69,160,535 8,236,750
Against 178,581 299,994
Abstentions 376,557 128,276
Shares not voted 9,929,617 1,277,209
---------- ---------
Total 79,645,290 9,942,229
========== =========
17
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
11 Statement of earnings per share
computations.
12 Computations of the ratio of earnings to
fixed charges.
15.a Letter re unaudited interim financial
information from Price Waterhouse.
15.b Letter re unaudited interim financial
information from Coopers & Lybrand.
(b) Reports on Form 8-K
None
18
<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.
CONRAIL INC.
Registrant
/s/ Bruce B. Wilson
Bruce B. Wilson
Senior Vice President - Law
/s/ H. W. Brown
H. W. Brown
Senior Vice President -
Finance and Administration
(Principal Financial Officer)
Date: July 29, 1994
19
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Page Number in
No. SEC Sequential
Numbering System
------- ----------------
11 Statement of earnings per share
computations.
12 Computations of the ratio of
earnings to fixed charges.
15.a Letter re unaudited interim
financial information from Price
Waterhouse.
15.b Letter re unaudited interim
financial information from
Coopers & Lybrand.
<TABLE>
Exhibit 11
----------
CONRAIL INC.
-----------
EARNINGS PER SHARE COMPUTATIONS
-------------------------------
($ In Millions Except Per Share)
<CAPTION>
Quarters Ended Six Months Ended
June 30, June 30,
-------------- ----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary
- -------
Income before the cumulative effect
of changes in accounting principles (1) $101 $85 $69 $131
Dividends declared on Series A
ESOP convertible junior preferred
stock (ESOP Stock), net of
tax benefits (3) (3) (6) (7)
---- --- --- ----
98 82 63 124
Charges relative to the cumulative
effect of changes in accounting
principles (1) (74)
---- --- --- ----
Adjusted net income $ 98 $82 $63 $ 50
==== === === ====
Fully Diluted
- -------------
Income before the cumulative effect
of changes in accounting principles (1) 101 85 69 131
Nondiscretionary adjustment (2) (2) (2) (4) (4)
---- --- --- ----
99 83 65 127
Charges relative to the cumulative
effect of changes in accounting
principles (1) (74)
---- --- --- ----
Adjusted net income $ 99 $83 $65 $ 53
==== === === ====
Page 1 of 3
</TABLE>
<PAGE>
Exhibit 11
----------
<TABLE>
CONRAIL INC.
-----------
EARNINGS PER SHARE COMPUTATIONS
-------------------------------
($ In Millions Except Per Share)
<CAPTION>
Quarters Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average number of shares
Primary
Weighted average number of
common shares outstanding 79,005,858 79,728,103 79,306,171 79,800,724
Effect of shares issuable
under stock option plans 625,930 1,001,751 726,475 1,054,546
---------- ---------- ---------- ----------
79,631,788 80,729,854 80,032,646 80,855,270
========== ========== ========== ==========
Fully diluted
Weighted average number of
common shares outstanding 79,005,858 79,728,103 79,306,171 79,800,724
ESOP Stock 9,915,237 9,957,004 9,929,331 9,958,757
Effect of shares issuable
under stock option plans 625,930 1,001,751 726,475 1,054,546
---------- ---------- ---------- ----------
89,547,025 90,686,858 89,961,977 90,814,027
========== ========== ========== ==========
Income (loss) per common share
Before the cumulative effect of
changes in accounting principles
Primary $1.24 $1.01 $.79 $1.53
Fully diluted 1.12 .92 .74 1.40
Cumulative effect of changes in
accounting principles
Primary (.91)
Fully diluted (.81)
Net income
Primary $1.24 $1.01 $.79 $ .62
Fully diluted 1.12 .92 .74 .59
</TABLE>
Page 2 of 3
<PAGE>
Exhibit 11
----------
CONRAIL INC.
-----------
EARNINGS PER SHARE COMPUTATIONS
-------------------------------
($ In Millions Except Per Share)
Notes: 1. Conrail adopted Statement of Financial Accounting
Standards No. 106 ("Employers' Accounting for
Postretirement Benefits Other Than Pensions") and
Statement of Financial Accounting Standards No. 109
("Accounting for Income Taxes") effective January 1,
1993. As a result, Conrail recorded cumulative
after tax charges of $22 million and $52 million,
respectively.
2. Represents the increase, net of income tax benefits,
in ESOP-related expenses assuming conversion of all
ESOP stock to common stock.
Page 3 of 3
Exhibit 12
----------
<TABLE>
CONRAIL INC.
-----------
COMPUTATIONS OF THE RATIO OF EARNINGS TO FIXED CHARGES
------------------------------------------------------
($ In Millions)
<CAPTION>
Quarters Ended Six Months Ended
June 30, June 30,
-------------- ----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings
- --------
Pre-tax income $166 $137 $113 $210
Add:
Interest expense 48 46 95 90
Rental expense interest factor 9 5 18 12
Less equity in undistributed (earnings)
loss of 20-50% owned companies (4) 2 (7) (7)
---- ---- ---- ----
Earnings available for fixed charges $219 $190 $219 $305
==== ==== ==== ====
Fixed charges
- -------------
Interest expense 48 46 95 90
Rental expense interest factor 9 5 18 12
Capitalized interest 1 1
---- ---- ---- ----
Fixed charges $ 57 $ 52 $113 $103
==== ==== ==== ====
Ratio of earnings to fixed charges 3.84x 3.65x 1.94x 2.96x
<FN>
For purposes of computing the ratio of earnings to fixed
charges, earnings represent income before income taxes plus
fixed charges, less equity in undistributed (earnings) loss of
20% to 50% owned companies. Fixed charges represent interest
expense together with any interest capitalized and a portion
of rent under long-term operating leases representative of an
interest factor.
</FN>
</TABLE>
Exhibit 15.a
------------
July 29, 1994
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Dear Sirs:
We are aware that Conrail Inc. has incorporated by
reference our report dated July 20, 1994 (issued
pursuant to the provisions of Statement of Auditing
Standards No. 71) in the following registration
statements:
Registration Statement on Form S-8 No. 33-19155
Registration Statement on Form S-8 No. 33-44140
Registration Statement on Form S-3 No. 33-64670.
We are also aware of our responsibilities under the
Securities Act of 1933 and that pursuant to Rule 436(c)
our report dated July 20, 1994 shall not be considered
part of a registration statement prepared or certified
by us or a report prepared or certified by us within the
meaning of Sections 7 and 11 of the Securities Act of
1933.
Very truly yours,
PRICE WATERHOUSE
Thirty South Seventeenth Street
Philadelphia, PA 19103
Exhibit 15.b
------------
July 29, 1994
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Conrail Inc.
Registration on Form S-8 (Registration Form No. 33-19155 and
Registration Form No. 33-44140)
Registration on Form S-3 (Registration Form No. 33-64670)
We are aware that our report dated January 24, 1994 on
our review of interim financial information of Conrail
Inc. and subsidiaries for the three and six-month periods
ended June 30, 1993 and included in the Company's
quarterly report on Form 10-Q for the quarter ended
June 30, 1994 will be incorporated by reference in the
registration statements. Pursuant to Rule 436(c) under
the Securities Act of 1933, this report should not be
considered a part of the registration statements prepared
or certified by us within the meaning of Sections 7 and
11 of that Act.
COOPERS & LYBRAND
