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, 1996
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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
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CONRAIL INC.
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(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)
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(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, 1996) 81,066,843
<PAGE>
CONRAIL INC.
INDEX
Page Number
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Statements
of Income - Quarters and six months
ended June 30, 1996 and 1995 3
Condensed Consolidated Balance
Sheets - June 30, 1996 and
December 31, 1995 4
Condensed Consolidated Statements
of Cash Flows - Six months ended
June 30, 1996 and 1995 5
Notes to Condensed Consolidated
Financial Statements 6
Report of Independent Accountants 8
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 4. Submission of Matters to a Vote
of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
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<PAGE>
PART I. FINANCIAL INFORMATION
CONRAIL INC.
Item 1. Financial Statements.
--------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
[CAPTION]
($ In Millions Except Per Share Data)
Quarters Ended Six Months Ended
June 30, June 30,
---------------- ----------------
1996 1995 1996 1995
------ ------ ------ ------
[S] [C] [C] [C] [C]
Revenues $949 $923 $1,838 $1,812
Operating expenses
Way and structures 119 117 259 251
Equipment 199 187 418 388
Transportation 355 330 717 673
General and administrative 87 109 186 206
Voluntary separation programs 135 135
---- ---- ------ ------
Total operating expenses 895 743 1,715 1,518
---- ---- ------ ------
Income from operations 54 180 123 294
Interest expense (46) (50) (93) (98)
Other income, net 30 35 58 60
---- ---- ------ ------
Income before income taxes 38 165 88 256
Income taxes 12 42 31 78
---- ---- ------ ------
Net income $ 26 $123 $ 57 $ 178
==== ==== ====== ======
Net income per common share
Primary $ .30 $1.52 $ .66 $2.17
Fully diluted .29 1.37 .64 1.98
Dividends per common share $ .425 $.375 $ .85 $ .75
Weighted average number of shares
used in computing earnings per share
(thousands)
Primary 77,485 78,710 77,748 78,903
Fully diluted 87,230 88,569 87,499 88,765
Ratio of earnings to fixed charges 1.57x 3.42x 1.66x 2.92x
See accompanying notes.
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<PAGE>
CONRAIL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
[CAPTION]
($ In Millions) June 30, December 31,
1996 1995
-------- ------------
[S] [C] [C]
ASSETS
Current assets
Cash and cash equivalents $ 28 $ 73
Accounts receivable 667 614
Deferred tax assets 337 333
Material and supplies 156 158
Other current assets 35 28
------ ------
Total current assets 1,223 1,206
Property and equipment, net 6,446 6,408
Other assets 672 810
------ ------
Total assets $8,341 $8,424
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings 35 89
Current maturities of long-term debt 156 181
Accounts payable 153 113
Wages and employee benefits 192 183
Casualty reserves 114 110
Accrued and other current liabilities 563 494
------ ------
Total current liabilities 1,213 1,170
Long-term debt 1,887 1,911
Casualty reserves 213 217
Deferred income taxes 1,408 1,393
Special income tax obligation 393 440
Other liabilities 328 316
------ ------
Total liabilities 5,442 5,447
------ ------
Stockholders' equity
Series A ESOP convertible junior
preferred stock 281 282
Unearned ESOP compensation (227) (233)
Common stock 86 85
Additional paid-in capital 2,184 2,187
Employee benefits trust (306) (329)
Retained earnings 1,157 1,176
------ ------
3,175 3,168
Treasury stock (276) (191)
------ ------
Total stockholders' equity 2,899 2,977
------ ------
Total liabilities and
stockholders' equity $8,341 $8,424
====== ======
See accompanying notes.
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<PAGE>
CONRAIL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
[CAPTION]
($ In Millions)
Six Months Ended
June 30,
----------------
1996 1995
----- -----
[S] [C] [C]
Cash flows from operating activities $ 329 $ 306
----- -----
Cash flows from investing activities
Property and equipment acquisitions (117) (224)
Payments for capital lease buyouts (17) (56)
Other (11) (48)
----- -----
Net cash used in investing activities (145) (328)
----- -----
Cash flows from financing activities
Repurchase of common stock (85) (39)
Net proceeds from (reductions in)
short-term borrowings (54) 102
Loans from and redemptions of insurance policies 95
Proceeds from long-term debt 85
Payment of long-term debt (113) (53)
Dividends paid on common stock (69) (59)
Dividends paid on preferred stock (10) (16)
Other 7 5
----- -----
Net cash provided by (used in) financing
activities (229) 25
----- -----
Increase (decrease) in cash and cash equivalents (45) 3
Cash and cash equivalents
Beginning of period 73 43
----- -----
End of period $ 28 $ 46
===== =====
See accompanying notes.
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<PAGE>
CONRAIL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The unaudited financial statements contained herein present the
consolidated financial position of Conrail Inc.(the "Company") as of
June 30, 1996 and December 31, 1995, the consolidated results of
operations for the three and six-month periods ending June 30, 1996 and
1995 and the consolidated cash flows for the six-month periods ended
June 30, 1996 and 1995. In the opinion of management, these financial
statements include all adjustments, consisting of normal recurring
adjustments and the voluntary separation programs charge mentioned in
Note 2, 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, 1995, presented in
the Company's Annual Report on Form 10-K.
2. During the second quarter of 1996, the Company recorded a charge of
$135 million (before tax benefits of $52 million) consisting of
termination benefits to be paid to non-union employees participating in
the voluntary retirement and separation programs ("voluntary separation
programs") of $102 million and losses on long-term non-cancellable
leases for office space no longer required as a result of the reductions
in the Company's workforce. The charge increased from the Company's
original estimate in May 1996 of approximately $100 million, primarily
due to changes in estimates related to losses on the long-term leases.
A total of 879 applications were accepted from eligible employees under
both programs. Approximately $90 million of the termination benefits to
be paid under the voluntary separation programs will be paid from the
Company's overfunded pension plan.
3. As a result of a decrease in a state income tax rate enacted during
the second quarter of 1995, income tax expense for the quarter and six
months ended June 30, 1995 was reduced by $21 million representing the
effects of adjusting deferred income taxes and the special income tax
obligation for the rate decrease as required under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes".
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<PAGE>
4. In April 1996, Consolidated Rail Corporation, the Company's
principal subsidiary, issued $50 million of Pass-Through Certificates at
a rate of 6.96% to finance equipment. Although the certificates are not
direct obligations of, or guaranteed by Consolidated Rail Corporation,
amounts payable under two related capital leases will be sufficient to
pay principal and interest on the certificates.
In July 1996, Consolidated Rail Corporation issued $26 million of 1996
Equipment Trust Certificates, Series A, with interest rates ranging from
6.0% to 7.48%, maturing annually from 1997 to 2011. The certificates
were used to finance approximately 85% of the total purchase price of
twenty locomotives.
5. In June 1996, the Company borrowed $69 million against the cash
surrender value of its company-owned life insurance policies which it
maintains on certain of its non-union employees. The Company also
redeemed the remaining excess cash surrender value of $26 million.
6. In April 1995, the Board of Directors approved a $250 million multi-
year stock repurchase program. During the six months of 1996, the
Company acquired 1,184,204 shares for $85 million under this program,
and at June 30, 1996, $164 million remained available from this
authorization.
7. 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, 1995. Material developments with
respect to these and other matters are discussed in "Other Matters" in
the Management's Discussion and Analysis and in Part II, Item I - Legal
Proceedings in this Form 10-Q.
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<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, 1996
and the related condensed consolidated statements of income for the
three and six months ended June 30, 1996 and June 30, 1995 and the
condensed consolidated statements of cash flows for the six months ended
June 30, 1996 and June 30, 1995. 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.
We previously audited in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1995, and
the related consolidated statements of income, of stockholders' equity
and of cash flows for the year then ended (not presented herein), and in
our report dated January 22, 1996, except as to paragraphs five and six
of Note 12 to the consolidated financial statements which are as of
February 21, 1996, we expressed an unqualified opinion on those
consolidated financial statements and included an explanatory paragraph
describing the Company's change in methods of accounting for income taxes
and postretirement benefits other than pensions in 1993. In our opinion,
the information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1995, is fairly stated in all material
respects in relation to the consolidated balance sheet from which it has
been derived.
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, PA 19103
July 17, 1996
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<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 $26 million
for the second quarter of 1996 compared with $123 million for the second
quarter of 1995. Net income for the second quarter of 1996 includes a
one-time charge of $83 million (net of $52 million of tax benefits)
related to voluntary separation programs and related costs (see Note 2
to the Condensed Consolidated Financial Statements). Results for the
second quarter of 1995 include recognition of a $21 million reduction in
income taxes related to a decrease in a state income tax rate enacted
during the quarter (see Note 3 to the Condensed Consolidated Financial
Statements). Without the aforementioned items, Conrail's net income for
the second quarters of 1996 and 1995 would have been $109 million and
$102 million, respectively.
Net income for the first six months of 1996 was $57 million compared
with $178 million for the first six months of 1995. Conrail's net
income for the first six months excluding the one-time charge of $83
million in 1996 and the $21 million tax benefit in 1995, would have been
$140 million and $157 million for 1996 and 1995, respectively.
Net income per common share for the second quarter of 1996 was $.30 on a
primary basis and $.29 on a fully diluted basis compared with $1.52 and
$1.37 on the same bases for the second quarter of 1995. Without the
effect of the one-time voluntary separation programs charge, net income
per share for the second quarter of 1996 would have been $1.37 on a
primary basis and $1.25 on a fully diluted basis. Without the effect of
the state tax reduction, net income per common share for the second
quarter of 1995 would have been $1.25 on a primary basis and $1.14 on a
fully diluted basis. Net income per common share for the six months of
1996 was $.66 on a primary basis and $.64 on a fully diluted basis,
compared with $2.17 and $1.98 on the respective bases for the same six-
month period of 1995. Without the one-time charge in the first six
months of 1996, net income per common share would have been $1.72 on a
primary basis and $1.59 on a fully diluted basis. Excluding the one-
time tax benefit for the first six months of 1995, net income per common
share would have been $1.91 on a primary basis and $1.74 on a fully
diluted basis.
Traffic volume and revenues increased 2.2% and 2.8%, respectively, for
the second quarter of 1996, compared with the second quarter of 1995.
Traffic volume was unchanged and revenues increased 1.4% for the first
half of 1996, compared with the same period of 1995. The Company has
lowered its 1996 annual projection of line haul revenue growth to
between 2.0% and 3.0% from between 3.0% and 4.0%. The lower than
expected revenue growth and the higher than expected operating expenses
(excluding the one-time charge for the voluntary separation programs)
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<PAGE>
during the first half of 1996 will prevent the Company from achieving
its original operating ratio (operating expenses as a percent of
revenues excluding one-time charges) goal of 77.5% for 1996.
Second Quarter 1996 compared with Second Quarter 1995
- -----------------------------------------------------
Net income for the second quarter of 1996 was $26 million after the net
income effects of $83 million for the one-time charge for the voluntary
separation programs (see Note 2 to the Condensed Consolidated Financial
Statements). Net income for the second quarter of 1995 was $123
million, which includes the effects of a one-time tax benefit of $21
million (see Note 3 to the Condensed Consolidated Financial Statements).
Operating revenues (primarily freight line haul revenues, but also
including switching, demurrage and incidental revenues) increased $26
million, or 2.8%, from $923 million in the second quarter of 1995 to
$949 million in the second quarter of 1996. A 2.2% increase in traffic
volume in units (freight cars and intermodal trailers and containers)
resulted in a $19 million increase in revenues. Average revenue per
unit increased revenues by $5 million due to increases in average rates.
Other revenues increased $2 million.
Operating expenses increased $152 million (including the $135 million
charge related to the voluntary separation programs), or 20.5%, from
$743 million in the second quarter of 1995 to $895 million in the second
quarter of 1996. The following table sets forth the operating expenses
for the two periods:
Second Quarter
--------------
Increase
($ In Millions) 1996 1995 (Decrease)
---- ---- --------
Compensation and benefits $309 $322 $(13)
Fuel 52 41 11
Material and supplies 46 43 3
Equipment rents 95 83 12
Depreciation and amortization 70 73 (3)
Casualties and insurance 45 37 8
Other 143 144 (1)
Voluntary separation programs 135 135
---- ---- ----
$895 $743 $152
==== ==== ====
Compensation and benefits as a percent of revenues was 32.6% in the
second quarter of 1996 as compared with 34.8% in the second quarter of
1995. The decrease in labor costs of $13 million, or 4.0%, was mainly
attributable to lower employment levels in the second quarter of 1996
and the absence of approximately $4 million in severance costs
associated with a workforce reduction of approximately 600 employees in
the second quarter of 1995.
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<PAGE>
Fuel costs increased $11 million, or 26.8%, primarily as a result of
higher fuel prices.
Equipment rents increased $12 million, or 14.5%, principally as a result
of declines in equipment utilization and increases in car hire rates.
In the second quarter of 1996, the Company recorded a one-time charge of
$135 million for the voluntary separation programs and related costs
(see Note 2 to the Condensed Consolidated Financial Statements).
Conrail's operating ratio was 94.3% for the second quarter of 1996,
compared with 80.5% for the second quarter of 1995. Without the charge
for the voluntary separation programs, the operating ratio for the
second quarter of 1996 would have been 80.0%.
The Company's effective income tax rate for the second quarter of 1996
(including the effects of the voluntary separation programs charge) was
31.6% compared with 25.5% for the second quarter of 1995. The increase
is primarily related to the inclusion of a $21 million reduction in
income taxes in the second quarter of 1995 resulting from a decrease in
a state income tax rate enacted during that quarter (see Note 3 to the
Condensed Consolidated Financial Statements).
First Six Months of 1996 compared with First Six Months of 1995
- ---------------------------------------------------------------
Net income for the first six months of 1996 was $57 million and included
the aforementioned second quarter one-time after-tax charge of $83
million (see Note 2 to the Condensed Consolidated Financial Statements).
Net income for the first six months of 1995 was $178 million which
included the aforementioned tax benefit of $21 million recorded during
the second quarter (see Note 3 to the Condensed Consolidated Financial
Statements).
Operating revenues increased $26 million, or 1.4%, to $1,838 million for
the first six months of 1996 from $1,812 million for the first six
months of 1995. A .3% decrease in traffic volume resulted in $4
million lower revenues. Average revenue per unit increased revenues by
$21 million for the period, with higher average rates providing $27
million, while an unfavorable traffic mix caused a $6 million decrease.
Other revenues increased $9 million.
Operating expenses increased $197 million, or 13.0%, to $1,715
million in the first six months of 1996, from $1,518 million in
the first six months of 1995. The following table sets forth the
operating expenses for the two periods:
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<PAGE>
First Six Months
----------------
Increase
($ In Millions) 1996 1995 (Decrease)
------ ------ --------
Compensation and benefits $ 653 $ 654 $ (1)
Fuel 102 87 15
Material and supplies 106 99 7
Equipment rents 193 168 25
Depreciation and amortization 141 146 (5)
Casualties and insurance 93 76 17
Other 292 288 4
Voluntary separation programs 135 135
------ ------ ----
$1,715 $1,518 $197
====== ====== ====
Compensation and benefits as a percent of revenues was 35.5% in the
first six months of 1996 as compared with 36.0% in the first six months
of 1995. Reductions in employment levels were essentially offset by
increased wage costs, increased train crew costs and overtime caused by
adverse weather conditions experienced during the first quarter of 1996.
Fuel costs increased $15 million, or 17.2%, due in the most part to
higher fuel prices, which are expected to be lower than current levels
in the second half of 1996, but higher than those in the second half of
1995.
Equipment rents increased $25 million, or 14.9%, primarily as a result
of declines in equipment utilization, increased car hire rates and a
decrease in locomotives temporarily leased to other railroads in the
first quarter of 1996.
Casualties and insurance costs increased $17 million, or 22.4%,
primarily due to an increase in the cost and number of occupational
health claims, the cost to settle employee injury and road crossing
accident claims, and damage to equipment and property owned by others
from several derailments in the first quarter of 1996.
Conrail's operating ratio was 93.3% for the first six months of 1996,
compared with 83.8% for the first six months of 1995. Without the $135
million one-time charge for the voluntary separation programs, the
operating ratio for the first six months of 1996 would have been 85.9%.
The Company's effective income tax rate for the first six months
of 1996 was 35.2% compared with 30.5% for the same period of 1995.
The increase is primarily related to a $21 million reduction in
income taxes as a result of a decrease in a state income tax rate
which was enacted during the second quarter of 1995 (see Note 3 to
the Condensed Consolidated Financial Statements).
Liquidity and Capital Resources
- -------------------------------
The Company's cash and cash equivalents decreased $45 million in the
first six months of 1996, from $73 million at December 31, 1995 to
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<PAGE>
$28 million at June 30, 1996. Cash generated from operations,
primarily from its wholly-owned subsidiary, Consolidated Rail
Corporation, and borrowings by Consolidated Rail Corporation have
been the Company's principal sources of liquidity and are used
primarily for capital expenditures, debt service and dividends. In
the first six months of 1996, operating activities provided cash of
$329 million and loans from and redemptions of insurance policies
provided $95 million.
The principal uses of cash were as follows: property and equipment
acquisitions, $117 million; payment of long-term debt, $113 million;
repurchase of common stock, $85 million; and cash dividends on common
and preferred stock, $79 million.
Working capital (current assets less current liabilities) of $10
million existed at June 30, 1996 as compared with working capital of
$36 million at December 31, 1995. 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 1996, Consolidated Rail Corporation
issued $45 million of commercial paper and repaid $99 million. At
June 30, 1996, $135 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 April 1996, Consolidated Rail Corporation issued $50 million of Pass-
Through Certificates at a rate of 6.96% to finance equipment. Although
the certificates are not direct obligations of, or guaranteed by
Consolidated Rail Corporation, amounts payable under two related capital
leases will be sufficient to pay principal and interest on the
certificates.
In July 1996, Consolidated Rail Corporation issued $26 million of 1996
Equipment Trust Certificates, Series A, with interest rates ranging from
6.0% to 7.48%, maturing annually from 1997 to 2011. The certificates
were used to finance approximately 85% of the total purchase price of
twenty locomotives.
In June 1996, Consolidated Rail Corporation borrowed $69 million against
the cash surrender value of its company-owned life insurance policies
which it maintains on certain of its non-union employees. The Company
also redeemed the remaining excess cash surrender value of $26 million.
Both transactions resulted in an increase of $95 million in cash for the
first six months of 1996.
In April 1995, the Board of Directors approved a $250 million multi-
year stock repurchase program. During the first six months of 1996,
the Company acquired 1,184,204 shares for approximately $85 million
under this program, and at June 30, 1996, approximately $164 million
remained available from this authorization.
On July 17, 1996, the Company's Board of Directors declared a
quarterly dividend of $.475 per common share, an increase of $.05 per
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<PAGE>
share, commencing with the dividend payable September 16, 1996, to
shareholders of record on August 30, 1996.
Other Matters
- --------------
Consolidated Rail Corporation ("CRC") has recently received three
adverse jury verdicts related to railroad crossing accidents in
Ohio that include significant punitive damage awards that
collectively approximate $40 million. CRC believes the punitive
damage awards in the referenced cases are improper and that it has
meritorious defenses and plans to appeal. The Company is not
presently able to reasonably estimate the ultimate outcome of
these cases, and accordingly, no expense for such awards has been
recorded as of June 30, 1996.
Consolidated Rail Corporation has reached tentative labor
agreements with approximately 70% of its unionized work force.
Certain of these agreements, which were the product of national
bargaining, are subject to industry-wide ratification by the union
membership. Conrail expects that these agreements ultimately will
be ratified; however, in the event that agreements are not ratified,
the union membership would be free to strike, which could severely
curtail or shut down the operations of the railroads that are the
subject of the strike.
Except for the historical information contained herein, the
matters discussed in this report are forward-looking statements
that involve risks and uncertainties that may cause actual results
to differ, including but not limited to the effect of economic
conditions, competition, regulation and weather on Conrail's
operations, customers, service and prices, and other factors
discussed elsewhere in this report and, from time to time, in
other reports filed with the Securities and Exchange Commission.
-14-
<PAGE>
PART II. OTHER INFORMATION
CONRAIL INC.
Item 1. Legal Proceedings.
-----------------
Punitive Damage Awards in Ohio Crossing Accident Cases
Consolidated Rail Corporation has recently received adverse jury
verdicts in three separate crossing accident cases in Ohio: Garrett and
Gollihue v Consolidated Rail Corp.; Wightman v Consolidated Rail Corp.;
and Moore, et al. v Consolidated Rail Corp. In each case, the jury
awarded substantial punitive damages in connection with property damage
resulting from the accidents. Collectively, the total punitive damage
awards total approximately $40 million, based on property damage that
totals less than $5,000. Conrail believes that, ultimately, these
awards should not be sustainable due to their failure to bear a
reasonable relationship to the amount of physical property damage
involved, and plans to appeal. Ohio law prohibits the award of punitive
damages in connection with a wrongful death action.
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<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
(a) The Registrant held its Annual Meeting of
Shareholders on May 15, 1996.
(b) Proxies for the meeting were solicited pursuant to
Rule 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 III
to serve until the Annual Meeting of
Shareholders in 1999 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
---------- ---------
Claude S. Brinegar
For 71,857,941 8,820,751
Withheld 1,013,980 934,108
---------- ---------
Total 72,871,921 9,754,859
========== =========
Daniel B. Burke
For 71,857,333 8,820,751
Withheld 1,014,588 934,108
---------- ---------
Total 72,871,921 9,754,859
========== =========
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<PAGE>
Roger S. Hillas
For 71,830,838 8,773,977
Withheld 1,041,083 980,882
---------- ---------
Total 72,871,921 9,754,859
========== =========
E. Bradley Jones
For 71,848,461 8,806,316
Withheld 1,023,460 948,543
---------- ---------
Total 72,871,921 9,754,859
========== =========
(ii) Approval of the Amendment of the Conrail 1991 Long-
Term Incentive Plan ("the Plan"). The Plan was
passed by majority vote and the number of votes cast
follows:
Common Preferred
---------- ---------
For 55,538,125 7,129,859
Against 16,273,498 2,276,210
Abstentions 1,060,298 348,790
---------- ---------
Total 72,871,921 9,754,859
========== =========
(iii) Ratification of the appointment of Price Waterhouse
LLP as the independent accountants for the year 1996.
The appointment of Price Waterhouse LLP was ratified
by majority vote and the number of votes cast follows
(there were no broker non-votes):
Common Preferred
---------- ---------
For 72,334,392 8,989,576
Against 294,264 458,160
Abstentions 243,265 307,123
---------- ---------
Total 72,871,921 9,754,859
========== =========
-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 Letter re unaudited interim financial
information from Price Waterhouse LLP.
27 Financial data schedule.
(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/ Timothy T. O'Toole
-------------------------------
Timothy T. O'Toole
Senior Vice President - Finance
(Principal Financial Officer)
Date: August 5, 1996
-19-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
No.
- -------
11 Statement of earnings per share
computations.
12 Computations of the ratio of earnings to
fixed charges.
15 Letter re unaudited interim financial
information from Price Waterhouse LLP.
27 Financial data schedule.
<PAGE>
Exhibit 11
----------
CONRAIL INC.
------------
EARNINGS PER SHARE COMPUTATIONS
-------------------------------
[CAPTION]
($ In Millions Except Per Share)
<TABLE>
Quarters Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income
- ----------
Primary
Net income $ 26 $123 $ 57 $178
Dividends declared on Series A ESOP
convertible junior preferred stock
(ESOP Stock), net of tax benefit (3) (4) (6) (7)
---- ---- ---- ----
$ 23 $119 $ 51 $171
==== ==== ==== ====
Fully diluted
Net income 26 123 57 178
Nondiscretionary adjustment (1) (1) (1) (2)
---- ---- ---- ----
$ 26 $122 $ 56 $176
==== ==== ==== ====
Weighted average number of shares (2)
- ---------------------------------
Primary
Weighted average number of common
shares outstanding 76,833,596 78,258,484 77,059,915 78,427,633
Effect of shares issuable under
employee stock compensation
plans 651,031 451,532 687,738 475,729
---------- ---------- ---------- ----------
77,484,627 78,710,016 77,747,653 78,903,362
========== ========== ========== ==========
Fully diluted
Weighted average number of common
shares outstanding 76,833,596 78,258,484 77,059,915 78,427,633
Series A ESOP convertible
junior preferred stock 9,745,435 9,806,989 9,750,952 9,814,132
Effect of shares issuable under
employee stock compensation
plans 651,031 503,103 687,738 522,785
---------- ---------- ---------- ----------
87,230,062 88,568,576 87,498,605 88,764,550
========== ========== ========== ==========
Net income per common share
Primary $ .30 $1.52 $ .66 $2.17
Fully diluted .29 1.37 .64 1.98
</TABLE>
Page 1 of 2
<PAGE>
Exhibit 11
----------
CONRAIL INC.
------------
EARNINGS PER SHARE COMPUTATIONS
-------------------------------
Notes: 1. Represents the increase, net of income tax benefits, in
ESOP-related expenses assuming conversion of all ESOP
Stock to common stock.
2. Shares held by the Employee Benefits Trust (the
"Trust") are not considered outstanding for earnings per
share computations until issued by the Trust.
Page 2 of 2
<PAGE>
Exhibit 12
----------
CONRAIL INC.
------------
COMPUTATIONS OF THE RATIO OF EARNINGS TO FIXED CHARGES
------------------------------------------------------
[CAPTION]
($ In Millions)
<TABLE>
Quarters Ended Six Months Ended
June 30, June 30,
-------------- ----------------
1996 1995 1996 1995
<S> ---- ---- ---- ----
Earnings <C> <C> <C> <C>
- --------
Pre-tax income $ 38 $165 $ 88 $256
Add:
Interest expense 46 50 93 98
Rental expense interest factor 14 16 28 30
Less equity in undistributed
earnings of 20%-50% owned companies (4) (5) (8) (10)
---- ---- ---- ----
Earnings available for fixed charges $ 94 $226 $201 $374
==== ==== ==== ====
Fixed charges
- -------------
Interest expense 46 50 93 98
Rental expense interest factor 14 16 28 30
---- ---- ---- ----
Fixed charges $ 60 $ 66 $121 $128
==== ==== ==== ====
Ratio of earnings to fixed charges 1.57x 3.42x 1.66x 2.92x
</TABLE>
For purposes of computing the ratio of earning to fixed charges, earnings
represent income before income taxes plus fixed charges, less equity in
undistributed earnings of 20% to 50% owned companies. Fixed charges
represent interest expense together with any interest capitalized and
a portion of rent under long-term operating leases representative of an
interest factor.
<PAGE>
Exhibit 15
----------
August 5, 1996
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Dear Sirs:
We are aware that Conrail Inc. has incorporated by reference
our report dated July 17, 1996 (issued pursuant to the
provisions of Statement on Auditing Standards No. 71) in the
following documents:
* Registration Statement on Form S-8 No. 33-19155
* Registration Statement on Form S-8 No. 33-44140
* Registration Statement on Form S-8 No. 33-57717
* Registration Statement on Form S-8 No. 33-60445
* Registration Statement on Form S-8 No. 333-6513
* Prospectus constituting part of Registration Statement
on Form S-3 No. 33-64670
* Prospectus constituting part of Registration Statement
on Form S-3 No. 33-62929.
We are also aware of our responsibilities under the
Securities Act of 1933 and that pursuant to Rule 436(c) our
report dated July 17, 1996 shall not be considered part of a
registration statement prepared or certified by us or a
report prepared or certified by us within the meaning of
Sections 7 and 11 of the Securities Act of 1933.
Yours very truly,
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, PA 19103
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27
----------
CONRAIL INC.
FINANCIAL DATA SCHEDULE
($ In Millions Except Per Share)
<CAPTION>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM FORM 10-Q AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
<S> <C>
<MULTIPLIER> 1,000,000
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 6-MOS
<CASH> 28
<SECURITIES> 0
<RECEIVABLES> 667
<ALLOWANCES> 0
<INVENTORY> 156
<CURRENT-ASSETS> 1,223
<PP&E> 6,446
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,341
<CURRENT-LIABILITIES> 1,213
<BONDS> 1,887
0
281
<COMMON> 86
<OTHER-SE> 2,532
<TOTAL-LIABILITY-AND-EQUITY> 8,341
<SALES> 0
<TOTAL-REVENUES> 1,838
<CGS> 0
<TOTAL-COSTS> 1,715
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93
<INCOME-PRETAX> 88
<INCOME-TAX> 31
<INCOME-CONTINUING> 57
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57
<EPS-PRIMARY> .66
<EPS-DILUTED> .64
</TABLE>
