<PAGE>
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
AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from __________________to______________________
Commission file number 1-6146
SOUTHERN PACIFIC TRANSPORTATION COMPANY
(Exact name of registrant as specified in its charter)
Delaware 94-6001323W
------------------------------------- --------------------------------
(State or other jurisdiction (I.R.S. employer
of organization identification no.)
Southern Pacific Building
One Market Plaza
San Francisco, CA 94105
Telephone Number (415) 541-1000
Indicate by checkmark 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 last practicable date.
Outstanding at
Class July 31, 1995
-------------------------------------- ----------------------------------
Common stock, without par value 1,350 shares
<PAGE>
PART 1. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
SOUTHERN PACIFIC TRANSPORTATION COMPANY
AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
--------- ------------
(in millions)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents............................ $ - $ 54.4
Accounts and notes receivable, net of allowance
for doubtful accounts.............................. 151.8 176.6
Notes receivable from Rio Grande Receivables, Inc.... 90.4 96.1
Materials and supplies, at cost...................... 72.8 71.1
Other notes receivable............................... 7.4 7.2
Other current assets................................. 63.4 62.6
--------- ---------
Total current assets............................... 385.8 468.0
--------- ---------
PROPERTY, AT COST
Roadway and structures............................... 5,860.1 5,800.6
Railroad equipment................................... 2,200.0 1,871.5
Other property....................................... 259.0 239.1
--------- ---------
Total property..................................... 8,319.1 7,911.2
Less accumulated depreciation and amortization....... 2,854.4 2,779.2
--------- ---------
Property, net...................................... 5,464.7 5,132.0
--------- ---------
OTHER ASSETS AND DEFERRED CHARGES
Note receivable and other investments................ 97.4 95.3
Other assets and deferred charges.................... 96.1 94.1
--------- ---------
Total other assets................................. 193.5 189.4
--------- ---------
Total assets..................................... $ 6,044.0 $ 5,789.4
========= =========
</TABLE>
(continued)
See accompanying notes to consolidated condensed financial statements.
2
<PAGE>
SOUTHERN PACIFIC TRANSPORTATION COMPANY
AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
--------- ------------
(in millions)
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts and wages payable........................... $ 125.0 $ 151.0
Accrued payables..................................... 114.5 137.1
Current portion of long-term debt.................... 54.9 59.5
Redeemable preference shares of a subsidiary......... 1.9 1.9
Other current liabilities (Note 4)................... 604.7 629.3
--------- ---------
Total current liabilities.......................... 901.0 978.8
--------- ---------
ADVANCES PAYABLE TO PARENT............................. 117.5 -
--------- ---------
LONG-TERM DEBT (Notes 2 and 3)......................... 1,042.8 725.3
--------- ---------
DEFERRED INCOME TAXES.................................. 1,001.8 1,038.4
--------- ---------
OTHER LIABILITIES (Note 4)............................. 718.4 720.5
--------- ---------
REDEEMABLE PREFERENCE SHARES OF A SUBSIDIARY........... 41.5 42.3
--------- ---------
STOCKHOLDER'S EQUITY
Common stock......................................... 424.9 424.9
Additional paid-in capital........................... 1,090.1 1,090.1
Retained income...................................... 1,425.1 1,488.2
Advances to parent................................... (719.1) (719.1)
--------- ---------
Total stockholder's equity......................... 2,221.0 2,284.1
--------- ---------
Total liabilities and stockholder's equity....... $ 6,044.0 $ 5,789.4
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
SOUTHERN PACIFIC TRANSPORTATION COMPANY
AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
----------------- ---------------------
1995 1994 1995 1994
------- ------- --------- ---------
(in millions)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Railroad............................... $ 782.8 $ 784.8 $ 1,527.0 $ 1,511.0
Other.................................. 16.5 16.9 32.7 32.8
------- ------- --------- ---------
Total................................ 799.3 801.7 1,559.7 1,543.8
------- ------- --------- ---------
OPERATING EXPENSES
Railroad............................... 752.5 709.9 1,470.9 1,402.2
Special charge (Note 4)................ 112.6 - 112.6 -
Other.................................. 15.9 16.3 31.2 31.6
------- ------- --------- ---------
Total................................ 881.0 726.2 1,614.7 1,433.8
------- ------- --------- ---------
OPERATING INCOME (LOSS).................. (81.7) 75.5 (55.0) 110.0
------- ------- --------- ---------
OTHER INCOME
Gains from sales of property........... 2.6 12.2 18.4 22.7
Real estate rentals, net............... 4.4 6.9 9.5 11.7
Interest............................... 2.4 2.3 4.1 3.2
Other income (expense), net............ (12.4) (11.5) (31.4) (24.8)
------- ------- --------- ---------
Total................................ (3.0) 9.9 0.6 12.8
------- ------- --------- ---------
INTEREST EXPENSE......................... 24.5 28.9 48.6 57.1
------- ------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES........ (109.2) 56.5 (103.0) 65.7
------- ------- --------- ---------
INCOME TAXES (BENEFIT)
Current................................ - (1.0) 0.1 60.1
Deferred............................... (42.4) 23.1 (40.0) (34.3)
------- ------- --------- ---------
Total................................ (42.4) 22.1 (39.9) 25.8
------- ------- --------- ---------
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING......... (66.8) 34.4 (63.1) 39.9
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR POST-EMPLOYMENT
BENEFITS IN 1994
(Net of income tax benefit of $3.8).... - - - (6.0)
------- ------- --------- ---------
NET INCOME (LOSS)........................ $ (66.8) $ 34.4 $ (63.1) $ 33.9
======= ======= ========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
SOUTHERN PACIFIC TRANSPORTATION COMPANY
AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDER'S EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
----------------- Additional Advances
Number of Paid-in Retained To
Shares Amount Capital Income Parent Total
--------- ------- --------- --------- -------- ---------
(in millions, except for number of shares)
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1994..... 1,350 $ 424.9 $ 1,090.1 $ 1,488.2 $ (719.1) $ 2,284.1
Net loss.......................... - - - (63.1) - (63.1)
----- ------- --------- --------- -------- ---------
Balances at June 30, 1995......... 1,350 $ 424.9 $ 1,090.1 $ 1,425.1 $ (719.1) $ 2,221.0
===== ======= ========= ========= ======== =========
</TABLE>
5
<PAGE>
SOUTHERN PACIFIC TRANSPORTATION COMPANY
AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
---------------------
1995 1994
-------- --------
(in millions)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)............................... $ (63.1) $ 33.9
-------- --------
Adjustments to net income (loss):
Gains from sales of property.................. (18.4) (22.7)
Depreciation and amortization................. 130.4 125.0
Deferred income taxes......................... (40.0) (38.2)
Special charge................................ 112.6 -
Cumulative effect of change in accounting for
post-employment benefits in 1994............ - 9.8
Other adjustments............................. (91.3) (143.8)
-------- --------
Total adjustments......................... 93.3 (69.9)
-------- --------
Net cash provided by (used for) operating
activities.................................. 30.2 (36.0)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property sold and retired....................... 15.7 26.5
Capital expenditures............................ (164.8) (117.1)
Change in notes receivable and other
investments, net.............................. (5.8) (2.3)
-------- --------
Net cash used for investing activities........ (154.9) (92.9)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt, net of costs.... 25.0 54.4
Debt and revolver drawdown (repayment), net..... (71.4) (225.3)
Advances from (to) parent, net.................. 117.5 13.7
Dividends paid.................................. - (53.8)
Proceeds from issuance of stock, net of costs... - 294.4
Redeemable preference shares repayment.......... (0.8) (0.8)
-------- --------
Net cash provided by financing activities..... 70.3 82.6
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS........... (54.4) (46.3)
CASH AND CASH EQUIVALENTS-BEGINNING
OF THE PERIOD................................... 54.4 51.7
-------- --------
CASH AND CASH EQUIVALENTS-END OF THE PERIOD....... $ - $ 5.4
======== ========
</TABLE>
6
<PAGE>
SOUTHERN PACIFIC TRANSPORTATION COMPANY
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1995
(Unaudited)
(1) OWNERSHIP AND PRINCIPLES OF CONSOLIDATION
-----------------------------------------
Southern Pacific Transportation Company ("SPT") is a wholly-owned
subsidiary of Southern Pacific Rail Corporation ("SPRC"); therefore, per share
data are not shown in the accompanying consolidated condensed financial
statements. As used in this document, the Company refers to SPT together with
its subsidiaries. The consolidated condensed financial statements are prepared
on the historical cost basis of accounting and include the accounts of SPT and
all significant subsidiary companies, including St. Louis Southwestern Railway
Company ("SSW"), the Denver and Rio Grande Western Railroad Company ("D&RGW")
and SPCSL Corp. ("SPCSL), on a consolidated basis. SPRC transferred ownership
of D&RGW to SPT effective October 1, 1994 by a contribution to capital. The
consolidated condensed financial statements have been restated to reflect the
combined results of operations and cash flows of the companies for prior periods
presented. These consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and notes thereto for the
year ended December 31, 1994. In the opinion of management, all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
interim period results have been included. However, these results are not
necessarily indicative of results for a full year.
(2) SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
<TABLE>
<CAPTION>
Six Months
Ended June 30,
-----------------
1995 1994
-------- -------
(in millions)
<S> <C> <C>
Cash payments:
Interest $ 20.0 $40.6
Non-cash transactions:
Capital lease obligations for railroad equipment 359.3 26.5
</TABLE>
(3) CAPITAL LEASE FINANCING
-----------------------
During May and June 1995, the Company completed the capitalized
leveraged lease financing for 278 new locomotives, 17 remanufactured locomotives
and 920 new hopper cars. This financing includes the issuance of non-recourse
debt of $395 million for the leveraged portion of the leases. As of June 30,
1995, $359.3 million of equipment has been received and included in the capital
lease obligations incurred during the first six months of 1995. An additional
$168.0 million of equipment to be financed under capital leases (including 97
locomotives, 17 hopper cars and approximately 1,200 reconditioned freight cars)
is expected to be received by year end.
7
<PAGE>
(4) SPECIAL CHARGE
--------------
In June 1995, the Board of Directors approved plans aimed at reducing
future operating costs and increasing productivity which resulted in a $112.6
million pretax charge. Approximately $41 million of the charge is related to
severance payments to be made during the next year for up to 600 employees (both
management and labor), approximately $4 million of the charge is related to
costs associated with terminating certain leased facilities, and approximately
$68 million is for the expected loss associated with the sale, lease or
abandonment of 600 miles of light density rail lines. Current liabilities, non-
current liabilities and accumulated depreciation at June 30, 1995 were increased
by approximately $28 million, $17 million and $68 million, respectively, as a
result of this charge. As part of the plans to increase productivity, the
Company also approved the relocation and training of up to 300 employees for
which future expected costs of approximately $8 million will be expensed as
incurred under current accounting principles.
(5) OTHER
-----
In November 1994, the Burlington Northern Railroad Company ("BN") and
the Atchison, Topeka & Santa Fe Railway Company ("ATSF") filed an application
with the Interstate Commerce Commission ("ICC") for approval of a proposed
merger of the two companies. On April 13, 1995, the Company entered into an
agreement with BN and ATSF to provide trackage and haulage rights over portions
of each other's rail lines, effective upon the completion of the proposed
BN/ATSF merger. At a conference on July 20, 1995, the ICC voted to approve the
proposed merger. A written ICC decision and order approving the merger is
expected to be served on or prior to August 23, 1995. The order is expected to
set an effective date of 30 days after service.
On March 31, 1995, the Company and Union Pacific ("UPRR") entered into
an agreement to settle the outstanding litigation, which was reported in the
Company's Annual Report on Form 10-K for the period ending December 31, 1994,
relating to the compensation SSW would pay for trackage rights over UPRR
railroad lines between Kansas City and St. Louis. Under the settlement
agreement, the Company paid UPRR $30.76 million on April 3, 1995 and executed a
note agreeing to pay UPRR $30.76 million, plus interest at 7%, on April 3,
1996. As a result of the settlement agreement, both parties agreed to dismiss
their claims in the ICC and court proceedings.
(6) SUBSEQUENT EVENT
----------------
On August 3, 1995, the Board of Directors of SPRC approved an
agreement providing for the merger of SPRC and UPRR, a wholly-owned subsidiary
of Union Pacific Corporation ("UP"). Under the terms of the agreement, a first-
step cash tender offer would be commenced on or before August 9, 1995 by a
subsidiary of UP for up to 25% of the common stock of SPRC at a price of $25.00
per share. The shares purchased in the tender offer would be held in a voting
trust pending approval of the merger by the ICC. Following completion of the
offer, receipt of ICC approval and the satisfaction of other conditions
(including approval by SPRC stockholders), SPRC (and the UP subsidiary that
purchases SPRC stock in the cash tender offer) will be merged into UPRR. In the
SPRC/UPRR merger, each share of SPRC stock would be converted, at the holder's
election (subject to proration), into the right to receive $25.00 in cash or
0.4065 shares of UP common stock. As a result of the transaction, 60% of the
outstanding SPRC stock will be converted into UP stock and the remaining 40%
into cash, including the shares acquired in the original tender offer. The two
companies expect to file an application with the ICC late this year.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
---------------------
Three Months Ended June 30, 1995 Compared to Three Months Ended June
--------------------------------------------------------------------
30, 1994
--------
The Company had a net loss of $66.8 million for the second quarter of
1995 after a $112.6 million pre-tax special charge compared to net income of
$34.4 million for the second of quarter of 1994. The Company had an
operating loss of $81.7 million for the second quarter 1995 including the
special charge (an operating income of $30.9 million excluding the special
charge) compared to an operating income of $75.5 million for the 1994 quarter.
For the second quarter of 1995, railroad operating revenues decreased 0.3% and
railroad operating expenses increased 6.0% (excluding the special charge) over
the 1994 period. The $112.6 million special charge includes provisions for
employee separation and for the sale, lease or abandonment of light density
rail lines (see Note 4 to the Consolidated Condensed Financial Statements).
Operating Revenues. In the second quarter of 1995, railroad operating revenues
------------------
decreased $2.0 million, or 0.3%, compared to the second quarter of 1994.
Railroad freight operating revenues decreased $3.5 million, or 0.5%, due
primarily to decreased shipments of intermodal traffic, chemical and petroleum
products, forest products and food and agricultural products. Carloads for coal,
metals and ores and construction materials and minerals increased for the 1995
quarter compared to the 1994 quarter. Other railroad revenues (primarily
switching and incidental) increased $1.5 million during the second quarter of
1995 compared to the 1994 quarter due primarily to the increase in traffic
volume. For the second quarter of 1995, carloads increased 1.2% and revenue ton-
miles increased 9.2% compared to the same period in 1994. The average net
freight revenue per ton-mile for the second quarter of 1995 declined by 8.8%
compared to the second quarter of 1994 due principally to an increase in traffic
volume for commodities which generate lower revenue per ton-mile (e.g., coal
traffic).
The following table compares traffic volume (in carloads), gross
freight revenues (before contract allowances and adjustments) and gross freight
revenue per carload by commodity group for the three months ended June 30, 1995
and 1994.
Carload and Gross Freight Revenue Comparison
Three Months Ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
Gross Freight Gross Freight
Carloads Gross Freight Revenues Revenue Per Carload
--------------------------------- ------------------------- --------------------------
1995 1994 % Change 1995 1994 % Change 1995 1994 % Change
-------- -------- --------- ------- ------ -------- ------ ------ ---------
(in thousands) (dollars in millions, except revenue per carload)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Intermodal..................... 178.2 190.5 (6.5) % $209.0 $ 220.6 (5.3)% $1,172 $1,158 1.3 %
Coal........................... 94.6 75.7 25.0 92.5 75.9 21.9 978 1,003 (2.5)
Chemical and petroleum
products...................... 82.8 89.9 (7.9) 148.6 154.9 (4.1) 1,795 1,723 4.1
Food and agricultural
products...................... 59.8 61.4 (2.7) 103.9 106.3 (2.2) 1,739 1,731 0.5
Forest products................ 53.6 57.3 (6.5) 101.0 109.2 (7.6) 1,885 1,906 (1.1)
Metals and ores................ 52.4 44.2 18.5 77.7 67.8 14.7 1,483 1,534 (3.3)
Construction materials and
minerals...................... 50.4 45.9 9.8 47.4 47.4 - 940 1,033 (9.0)
Automotive..................... 20.2 20.1 0.4 46.2 51.1 (9.6) 2,294 2,548 (10.0)
----- ----- ------ -------
Total......................... 592.0 585.0 1.2% $826.3 $ 833.2 (0.8)% $1,396 $1,424 (2.0)%
===== ===== ====== =======
</TABLE>
9
<PAGE>
. Intermodal carloads and revenue declined for the second quarter of
1995 compared to the same period in 1994 due to reduced trailer-on-
flatcar ("TOFC") traffic. This decline was generated by a slowing
economy and changes in customer distribution and shipping patterns.
. Coal carloadings and revenue increased for the 1995 period due to
continued demand for the low-sulfur high-BTU content coal produced by
Company-served mines. This demand was from both existing utility
customers and new utility customers and was enhanced by the customers'
ability to blend the low-sulfur coal with higher sulfur coal in order to
satisfy requirements of the Clean Air Act. Coke traffic and revenue also
increased during the 1995 period due to higher coal coke imports.
Revenue per carload declined due to the effect of new short-haul traffic.
. Chemical and petroleum products carloads and revenue decreased during
the second quarter of 1995 compared to the same period in 1994. A
portion of this decrease was attributable to reduced traffic caused by
the flooding in California and Texas during the spring of 1995, to a
change in the classification of certain plastics traffic and to changes
in the customer mix for certain crude oil traffic. Revenue per carload
increased for the 1995 quarter over the 1994 quarter due primarily to
changes in the commodity mix.
. Food and agricultural products carloads and revenue decreased during
the second quarter of 1995 compared to the same period in 1994 due to
reduced shipments of grain, temperature control products, alcoholic
beverages and vegetable oils, partially offset by increased shipments of
sugar beets, canned foods and cotton.
. Forest products carloads and revenue decreased during the second
quarter of 1995 due, in part, to reduced lumber and paper traffic caused
by severe weather and flooding in California during the spring of 1995
and to a slowdown in the construction markets affecting lumber traffic.
. Carloads and revenue for metals and ores traffic increased in the
second quarter of 1995 compared to the second quarter of 1994 due
primarily to the startup of iron ore traffic between Minnesota and Utah
in August 1994, to increased copper concentrate traffic due to shifts in
customers' markets and to a strong sulfuric acid market. Revenue per
carload decreased for the 1995 period due to the higher share of lower-
rated iron ore traffic in the commodity mix.
. Construction materials and minerals carloads increased for the 1995
period due to increased shipments of minerals, cement and other
aggregates. The revenue per carload reduction was due to the reduced
length of haul associated with aggregates traffic.
. Automotive revenue and revenue per carload declined during the second
quarter of 1995 due to lower rates in effect during 1995.
Operating Expenses. Railroad operating expenses for the second quarter of 1995
------------------
increased $42.6 million (excluding the special charge), or 6.0%, compared to the
second quarter of 1994. The following table sets forth a comparison of the
Company's railroad operating expenses, excluding the special charge, during the
three months ended June 30, 1995 and 1994.
10
<PAGE>
Railroad Operating Expense Comparison
Three Months Ended June 30, 1995 and 1994
(in millions)
<TABLE>
<CAPTION>
%
1995 1994 Change
------- -------- --------
(Restated)
<S> <C> <C> <C>
Labor and fringe benefits....... $280.8 $267.6 4.9%
Fuel............................ 65.2 63.4 2.9
Materials and supplies.......... 47.9 53.9 (11.1)
Equipment rental................ 81.4 83.3 (2.3)
Depreciation and amortization... 67.3 63.9 5.3
Other........................... 209.9 177.8 18.0
------ ------
Total.................. $752.5 $709.9 6.0%
====== ======
</TABLE>
. Labor and fringe benefit costs increased $13.2 million, or 4.9%, for
the second quarter of 1995 compared to the second quarter of 1994. The
Company increased employment by 1.3% to a total of 19,028 as of the end
of June 1995 compared to 18,775 at the end of June 1994. The increase in
employment was due primarily to an increase in train and engine crews in
order to improve customer service. Train crew starts increased by 3.7%
for the second quarter of 1995 compared to the same period in 1994 and
gross ton-miles increased by 6.7% over the same period. The increased
expense is also due to increased cost per start associated with training
new train and engine crew employees. Expressed as a percentage of
operating revenues, labor and fringe benefit expenses were 35.1% for the
second quarter of 1995 compared to 33.4% for the second quarter of 1994.
. Fuel expenses increased $1.8 million, or 2.9%, for the second quarter
of 1995 compared to the same period in 1994. The increase is a result of
an increase in gallons consumed of 1.2% for the 1995 quarter compared to
the 1994 quarter attributable to the increase in traffic volume, coupled
with an increase in the average price per gallon of fuel (which includes
handling and fuel hedging costs) from $.57 during the second quarter of
1994 to $.58 during the second quarter of 1995. Included in the second
quarter 1995 fuel expense is $0.2 million related to fuel hedging
contracts compared to $3.9 million for the 1994 quarter. While total
fuel expense increased for the 1995 quarter, fuel efficiency also
increased by approximately 4% as measured by gallons consumed per gross
ton-mile.
. Materials and supplies expenses decreased $6.0 million, or 11.1%, for
the second quarter of 1995 compared to the second quarter of 1994 due
primarily to reduced locomotive material expenses and running repairs.
During the second quarter of 1995, the Company rebuilt or overhauled 54
locomotives compared to 85 during the 1994 period. This decrease was
partially offset by increased freight car repair material expenses and
transportation train supplies expenses.
. Equipment rental costs decreased $1.9 million, or 2.3%, for the second
quarter of 1995 compared to the second quarter of 1994. The decrease is
primarily attributable to the conversion of freight car equipment from
operating lease to capital lease late in 1994. Partially offsetting these
expense decreases was a $0.9 million increase in net car hire
attributable to the increase in traffic volume.
. Depreciation and amortization expense increased $3.4 million, or 5.3%,
for the second quarter of 1995 due to an increase in the depreciable
property base.
11
<PAGE>
. Other expenses increased $32.1 million, or 18.0%, for the second
quarter of 1995 compared to the second quarter of 1994. This category of
expense includes outside repairs and services, joint facility rent and
maintenance costs, casualty costs and property and other taxes. Expenses
in this category which increased significantly over the prior period were
casualty and detour costs, joint facility costs, intermodal rent and
equipment repair costs, information system outsourcing costs and other
costs including utilities, travel expenses, meals and lodging expenses
and user fees. Casualty costs, including destroyed equipment, increased
$4.7 million and detour expenses increased $4.9 million for the second
quarter of 1995 compared to the 1994 quarter due primarily to the severe
weather and flooding in California during the spring of 1995. Joint
facility costs increased $5.9 million due to increased billings for
maintenance, increased interest rental payments as well as costs
associated with a new haulage agreement for traffic between Memphis and
Chicago. Intermodal rent and equipment repair costs increased $5.1
million due to increased facility rent and crane repair costs.
Information system outsourcing costs increased $1.9 million for the
second quarter of 1995 compared to the same period in 1994. Other costs
including user fees, meals and lodging expenses, utilities and travel
expenses increased $7.5 million in the second quarter of 1995 compared to
the 1994 period.
Other Income and Interest Expense. Other income was an expense of $3.0 million
---------------------------------
for the second quarter of 1995 compared to income of $9.9 million for the same
period in 1994. The reduced income was due primarily to a $9.6 million decrease
in gains on sales of property and a $2.5 million decrease in real estate
rentals, net due to increased expenses on leased property and expenses related
to property sales. Interest expense was $24.5 million for the second quarter of
1995 compared to $28.9 million for the second quarter of 1994, a decrease of
$4.4 million associated primarily with the repayment of the Company's $290
million Senior Secured Notes in December 1994. Other decreases were offset by
increased interest expense associated with the higher level of capitalized lease
obligations for new locomotives and freight cars outstanding during the second
quarter of 1995 compared to the second quarter of 1994.
Six Months Ended June 30, 1995 Compared to Six Months Ended June 30, 1994
-------------------------------------------------------------------------
The Company had net loss of $63.1 million for the first six months of 1995
after a $112.6 million pre-tax special charge compared to net income of $33.9
million for the first six months of 1994 (which included a $6.0 million charge
for the cumulative effect of a change in accounting for post-employment benefits
under Statement of Financial Accounting Standards ("FAS") No. 112 adopted by the
Company effective January 1, 1994). The Company had an operating loss of $55.0
million for the first six months 1995 including the special charge (an operating
income of $57.6 million excluding the special charge) compared to $110.0 million
for the 1994 period. For the first six months of 1995, railroad operating
revenues increased 1.1% and railroad operating expenses increased 4.9%
(excluding the special charge) over the 1994 period. The $112.6 million special
charge includes provisions for employee separation and for the sale, lease or
abandonment of light density rail lines (see Note 4 to the Consolidated
Condensed Financial Statements).
Operating Revenues. In the first six months of 1995, railroad operating
------------------
revenues increased $16.0 million, or 1.1%, compared to the first six months of
1994. Railroad freight operating revenues increased $14.4 million, or 1.0%, due
primarily to increased shipments of coal, metals and ores and construction
materials and minerals. Carloads for chemicals and petroleum products, food and
agricultural products, forest products and intermodal traffic declined for the
1995 period compared to the 1994 period. Other railroad revenues (primarily
switching and incidental) increased $1.6 million during the first six months of
1995 compared to the 1994 period due primarily to the increase in traffic
volume. For the first six months of 1995, carloads increased 1.8% and revenue
ton-miles increased 10.1% compared to the same period in 1994. The average net
freight revenue per ton-mile for the first six months of 1995 declined by 8.3%
compared to the first six months of 1994 due principally to an increase in
traffic volume for commodities which generate lower revenue per ton-mile (e.g.,
coal traffic).
12
<PAGE>
The following table compares traffic volume (in carloads), gross freight
revenues (before contract allowances and adjustments) and gross freight revenue
per carload by commodity group for the six months ended June 30, 1995 and 1994.
Carload and Gross Freight Revenue Comparison
Six Months Ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
Gross Freight
Carloads Gross Freight Revenues Revenue Per Carload
--------------------------------- ---------------------------- --------------------------
1995 1994 % Change 1995 1994 % Change 1995 1994 % Change
-------- -------- --------- ------- ------ -------- ------ ------ ---------
(in thousands) (dollars in millions, except revenue per carload)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Intermodal..................... 351.1 354.1 (0.8)% $ 414.0 409.3 1.2 % $1,179 $1,156 2.0 %
Coal........................... 181.6 150.0 21.1 175.5 146.6 19.7 966 977 (1.1)
Chemical and petroleum
products...................... 160.1 178.3 (10.2) 290.9 311.0 (6.5) 1,817 1,744 4.2
Food and agricultural
products...................... 116.8 118.4 (1.4) 200.8 202.9 (1.0) 1,719 1,714 0.3
Forest products................ 105.5 114.1 (7.6) 202.1 216.2 (6.5) 1,916 1,895 1.1
Metals and ores................ 101.5 87.9 15.5 149.4 137.2 8.9 1,472 1,561 (5.7)
Construction materials and
minerals...................... 91.3 85.9 6.3 87.7 86.3 1.6 960 1,005 (4.5)
Automotive..................... 39.0 37.7 3.4 90.6 97.1 (6.7) 2,324 2,578 (9.9)
------- ------- -------- --------
Total....................... 1,146.9 1,126.4 1.8 % $1,611.0 $1,606.0 0.3 % $1,405 $1,426 (1.5)%
======= ======= ======== ========
</TABLE>
. Intermodal carloads declined slightly for the first six months of 1995
compared to the same period for 1994 due to the combined effects of a
decrease in TOFC traffic due to a slowing economy and to changes in
customer distribution and shipping patterns, partially offset by
increased container-on-flatcar ("COFC") business with major steamship
accounts. The increase in revenue per carload was due to an increase in
length of haul for both COFC and TOFC traffic.
. Coal carloadings and revenue increased for the 1995 period due to
continued demand for the low-sulfur high-BTU content coal produced by
Company-served mines. This demand was from both existing utility
customers and new utility customers and was enhanced by the customers'
ability to blend the low-sulfur coal with higher sulfur coal in order to
satisfy requirements of the Clean Air Act. The revenue per carload
declined due to the effect of new short-haul traffic.
. Chemical and petroleum products carloads and revenue decreased during
the first quarter of 1995. A portion of this decrease was attributable
to reduced fertilizer traffic caused by the flooding in California during
the spring of 1995, a longer than planned maintenance shutdown for a
primary crude oil customer, and to a change in the classification of
certain plastics traffic. Revenue per carload increased for the 1995
period over the 1994 period due primarily to changes in the commodity
mix.
. Food and agricultural products carloads and revenue decreased during
the first six months of 1995 compared to the same period in 1994 due to
reduced shipments of grain, temperature control products, alcoholic
beverages and vegetable oils, partially offset by increased shipments of
sugar beets, canned foods and cotton.
. Forest products carloads and revenue decreased during the first six
months of 1995 due, in part, to reduced lumber and paper traffic caused
by severe weather and flooding in California during the spring of 1995,
to a slowdown in the construction markets affecting lumber traffic and to
a strike by millworkers affecting paper traffic that ended in March 1995.
13
<PAGE>
. Carloads and revenue for metals and ores traffic increased in the
first six months of 1995 compared to the first six months of 1994 due
primarily to the startup of iron ore traffic between Minnesota and Utah
in August 1994, to increased copper concentrate traffic due to shifts in
customers' markets and to a strong sulfuric acid market. Revenue per
carload decreased for the 1995 period due to the higher share of lower-
rated iron ore traffic in the commodity mix.
. Construction materials and minerals carloads and revenue increased
for the 1995 period due principally to increased shipments of minerals,
cement and other aggregates. The revenue per carload reduction was due
to the reduced length of haul associated with aggregates traffic.
. Automotive carloads increased during the first six months of 1995
compared to the first six months of 1994 due to strong northbound
shipments from Mexico. The decline in revenue and revenue per carload is
due to lower rates in effect during 1995.
Operating Expenses. Railroad operating expenses for the first six months of
-------------------
1995 increased $68.7 million (excluding the special charge), or 4.9%, compared
to the first six months of 1994. The following table sets forth a comparison of
the Company's railroad operating expenses, excluding the special charge, during
the six months ended June 30, 1995 and 1994.
Railroad Operating Expense Comparison
Six Months Ended June 30, 1995 and 1994
(in millions)
<TABLE>
<CAPTION>
%
1995 1994 Change
------- -------- -------
(Restated)
<S> <C> <C> <C>
Labor and fringe benefits........ $ 550.5 $ 541.2 1.7%
Fuel............................. 127.2 120.9 5.3
Materials and supplies........... 95.3 99.5 (4.3)
Equipment rental................. 158.5 165.3 (4.1)
Depreciation and amortization.... 130.4 125.0 4.3
Other............................ 409.0 350.3 16.8
-------- --------
Total................... $1,470.9 $1,402.2 4.9%
======== ========
</TABLE>
. Labor and fringe benefit costs increased $9.3 million, or 1.7%, for
the first six months of 1995 compared to the first six months of 1994.
The Company increased employment by 1.3% to a total of 19,028 as of the
end of June 1995 compared to 18,775 at the end of June 1994. The
increase in employment was due primarily to an increase in train and
engine crews in order to improve customer service. Train crew starts
increased by 4.0% for the first six months of 1995 compared to the same
period in 1994 and gross ton-miles increased by 7.7% over the same
period. The increased expense is also due to increased cost per start
associated with training the new train and engine crew employees.
Partially offsetting the expense increase was an adjustment in the first
quarter of 1995 to reflect reduced costs associated with non-agreement
fringe benefits. Expressed as a percentage of operating revenues, labor
and fringe benefit expenses were 35.3% for the first six months of 1995
compared to 35.1% for the first six months of 1994.
. Fuel expenses increased $6.3 million, or 5.3%, for the first six
months of 1995 compared to the same period in 1994. The increase is a
result of an increase in gallons consumed of 3.7% for the 1995 period
compared to the 1994 period attributable to the increase in traffic
volume, coupled with an increase in the average price per gallon of fuel
(which includes
14
<PAGE>
handling and fuel hedging costs) from $.56 during the first six months of
1994 to $.57 during the first six months of 1995. Included in the six
month 1995 fuel expense is $2.7 million related to fuel hedging contracts
compared to $8.1 million for the 1994 period. While total fuel expense
increased for the 1995 period, fuel efficiency also increased by
approximately 3.9% as measured by gallons consumed per gross ton-mile.
. Materials and supplies expenses decreased $4.2 million, or 4.3%, for
the first six months of 1995 compared to the first six months of 1994 due
primarily to reduced locomotive material expenses and running repairs.
During the first six months of 1995, the Company rebuilt or overhauled
101 locomotives compared to 164 during the 1994 period. This decrease
was partially offset by increased freight car repair material expenses
during the second quarter of 1995 as well as increased transportation
safety equipment and train supplies expenses.
. Equipment rental costs decreased $6.8 million, or 4.1%, for the first
six months of 1995 compared to the first six months of 1994. The
decrease is primarily attributable to the conversion of freight car
equipment from operating lease to capital lease late in 1994. Partially
offsetting these expense decreases was a $3.5 million increase in net car
hire attributable to the increase in traffic volume.
. Depreciation and amortization expense increased $5.4 million, or 4.3%,
for the first six months of 1995 due to an increase in the depreciable
property base.
. Other expenses increased $58.7 million, or 16.8%, for the first six
months of 1995 compared to the first six months of 1994. This category
of expense includes outside repairs and services, joint facility rent and
maintenance costs, casualty costs and property and other taxes. Expenses
in this category which increased significantly over the prior period were
casualty and detour costs, joint facility costs, intermodal rent and
equipment repair costs, information system outsourcing costs and other
costs including utilities, travel expenses, meals and lodging expenses
and user fees. Casualty costs, including destroyed equipment, increased
$19.8 million and detour expenses increased $5.6 million for the first
six months of 1995 compared to the 1994 period due primarily to the
severe weather and flooding in California during the spring of 1995.
Partially offsetting these increased casualty costs was a $5 million
insurance recovery received as a partial settlement of claims relating to
the 1993 midwest flood. Joint facility costs increased $15.8 million due
to increased billings for maintenance, increased interest rental payments
as well as costs associated with a new haulage agreement for traffic
between Memphis and Chicago. Intermodal rent and equipment repair
costs increased $5.6 million due to increased facility rent and crane
repair costs. Information system outsourcing costs increased $4.0
million for the first six months of 1995 compared to the same period in
1994. Other costs including user fees, meals and lodging expenses,
utilities and travel expenses increased $9.2 million for the first six
months of 1995 compared to the same period in 1994.
Other Income and Interest Expense. Other income was $0.6 million for the first
---------------------------------
six months of 1995 compared to $12.8 million for the same period in 1994. The
decreased income was due primarily to a $4.3 million decrease in gains on sales
of property and a $2.2 million decrease in real estate rental income
attributable to increased leased property expenses and expenses related to
property sales. Interest expense was $48.6 million for the first six months of
1995 compared to $57.1 million for the first six months of 1994, a decrease of
$8.5 million associated primarily with the repayment of the Company's $290
million Senior Secured Notes in December 1994. Other decreases were offset by
increased interest expense associated with the higher level of capitalized lease
obligations for new locomotives and freight cars outstanding during the first
six months of 1995 compared to the first six months of 1994.
15
<PAGE>
Liquidity and Capital Resources
-------------------------------
The Company's business is capital intensive and requires on-going substantial
expenditures for, among other things, improvements to roadway, structures and
technology, acquisitions and repair of equipment, and maintenance of the rail
system. During the first six months of 1995, and for a number of years before
that, the Company's railroad operations did not produce sufficient cash flows to
meet its capital expenditure, debt service and other cash needs. As a result,
the Company relied on proceeds from transit corridor, real estate and other
asset sales, borrowings and other financings for these purposes.
The capital and debt transactions completed over the last two years have
substantially improved the Company's liquidity. The Company anticipates that,
for the next few years, cash flows generated by rail operations will be
insufficient to meet its cash needs including acquisition of equipment and other
necessary capital expenditures. In order to satisfy these cash flow
requirements, as well as satisfy financial covenants in its credit facilities,
the Company must continue to improve its operating results and obtain equipment
financing while maintaining its bank credit facilities for use from time to time
as required. In addition, in order to reduce the need for further borrowing,
the Company expects to continue to sell real estate assets with substantial
values that are not necessary to its transportation operations. However, levels
of asset sales may vary substantially from period to period, which in turn can
cause significant variations in the Company's net income or loss, cash flows and
liquidity.
As of June 30, 1995, the Company had no cash, cash equivalents or short-term
investments. The Company had $300 million available under its revolving credit
facility and $150 million available under a separate term loan facility which
expires, if unused, by December 31, 1995. In July 1995, the Company borrowed
$25 million under its revolving credit facility.
Continued implementation of the Company's strategic plan will require the
ongoing availability of additional sources of funding, including secured
equipment and capital lease financing to complete the upgrade of the Company's
locomotive and railcar fleet, as well as borrowings under the Company's bank
credit facilities. The Company will remain leveraged to a significant extent
and its debt service and capital lease obligations will continue to be
substantial.
Operating Activities
--------------------
As shown in the Consolidated Condensed Statements of Cash Flows, cash provided
by operating activities was $30.2 million for the first six months of 1995
compared to cash used for operating activities of $36.0 million for the first
six months of 1994. The change between periods is due primarily to the net
effect of changes in accounts receivable and payable between periods based on
the timing of receipts and payments. The Company expects to fund its operations
(including scheduled interest and capital lease payments and severance payments
attributable to items provided for in the special charge) over the next twelve
months with cash from operations, property sales, secured equipment financing,
capital leases and borrowings under its bank credit facilities.
The Company had working capital deficits of $515.2 million and $479.2 million
at June 30, 1995 and 1994, respectively. The increased deficit is due primarily
to increased utilization of working capital for capital expenditures at June 30,
1995 compared to June 30, 1994, as well as the inclusion of a Special Charge
liability at June 30, 1995.
The Company received cash proceeds from sales and retirements of real estate
and other property totaling $15.7 million and $26.5 million for the first six
months of 1995 and 1994, respectively.
16
<PAGE>
Capital Expenditures
--------------------
Capital expenditures (exclusive of capital leases) for the first six months of
1995 were $164.8 million compared to $117.1 million for the same period in 1994.
The 1995 amount included approximately $135.9 million for roadway and structures
and $16.9 million for rebuilt locomotives. The 1994 amount includes
approximately $78.8 million for roadway and structures and $32.3 million for
rebuilt locomotives. During the first six months of 1995, the Company rebuilt 37
locomotives compared to 95 locomotives during the 1994 period. The Company
expects 1995 capital expenditures for railroad operations to be approximately
$408 million (exclusive of capital leases).
The Company is continuing its plan of expansion and upgrading of its
locomotive and freight car fleets principally through capitalized lease
financing. During the first six months of 1995, the Company received 18
remanufactured locomotives, 181 of the 282 new locomotives on order, 903 of the
920 new hopper cars on order, 1,050 used hopper cars and 269 of 1,500
reconditioned freight cars. All of the remaining equipment is expected to be
received by year end. The Company has completed capitalized lease financing for
278 of the new locomotives, 17 of the remanufactured locomotives and all of the
new and used hopper cars. The total expected capitalized lease obligation to be
incurred in 1995 is approximately $527 million.
Financing Activities
--------------------
During the first six months of 1995, the Company incurred $359.3 million of
capitalized lease obligations related to locomotive and freight car acquisitions
and repaid $46.4 million of debt (net of a $25 million credit facility borrowing
and repayment).
During May and June 1995, the Company completed the capitalized leveraged
lease financing for 278 new locomotives, 17 remanufactured locomotives and 920
new hopper cars. This financing includes the issuance of non-recourse debt of
$395 million for the leveraged portion of the leases. As of June 30, 1995,
$359.3 million of equipment has been received and included in the capital lease
obligations incurred during the first six months of 1995. An additional $168.0
million of equipment to be financed under capital leases (including 97
locomotives, 17 hopper cars and approximately 1,200 reconditioned freight cars)
is expected to be received by year end.
The Company is in the process of replacing its facility to sell accounts
receivable which expires on October 31, 1995. In connection with this process,
the Company is seeking to increase the size of the facility from $300 million to
$400 million.
Other
-----
In November 1994, the Burlington Northern Railroad Company ("BN") and the
Atchison, Topeka & Santa Fe Railway Company ("ATSF") filed an application with
the Interstate Commerce Commission ("ICC") for approval of a proposed merger of
the two companies. On April 13, 1995, the Company entered into an agreement
with BN and ATSF to provide trackage and haulage rights over portions of each
other's rail lines, effective upon the completion of the proposed BN/ATSF
merger. At a conference on July 20, 1995, the ICC voted to approve the proposed
merger. A written ICC decision and order approving the merger is expected to be
served on or prior to August 23, 1995. The order is expected to set an
effective date of 30 days after service.
On March 31, 1995, the Company and Union Pacific Railroad Company ("UPRR")
entered into an agreement to settle the outstanding litigation, which was
reported in the Company's Annual Report on Form 10-K for the period ending
December 31, 1994, relating to the compensation SSW would pay for trackage
rights over UPRR lines between Kansas City and St. Louis. Under the settlement
agreement, the Company paid UPRR $30.76 million on April 3, 1995 and executed a
note agreeing to pay UPRR $30.76 million, plus interest at 7%, on April 3, 1996.
As a result of the settlement agreement, both parties agreed to dismiss their
claims in the ICC and court proceedings.
17
<PAGE>
In June 1995, the Board of Directors approved plans aimed at reducing future
operating costs and increasing productivity which resulted in a $112.6 million
pretax charge. Approximately $41 million of the charge is related to severance
payments to be made during the next year for up to 600 employees (both
management and labor), approximately $4 million of the charge is related to
costs associated with terminating certain leased facilities, and approximately
$68 million is for the expected loss associated with the sale, lease or
abandonment of 600 miles of light density rail lines. Current liabilities, non-
current liabilities and accumulated depreciation at June 30, 1995 were increased
by approximately $28 million, $17 million and $68 million, respectively, as a
result of this charge. As part of the plans to increase productivity, the
Company also approved the relocation and training of up to 300 employees for
which future expected costs of approximately $8 million will be expensed as
incurred under current accounting principles.
On August 3, 1995, the Board of Directors of SPRC approved an agreement
providing for the merger of SPRC and UPRR, a wholly-owned subsidiary of Union
Pacific Corporation ("UP"). Under the terms of the agreement, a first-step cash
tender offer would be commenced on or before August 9, 1995 by a subsidiary of
UP for up to 25% of the common stock of SPRC at a price of $25.00 per share.
The shares purchased in the tender offer would be held in a voting trust pending
approval of the merger by the ICC. Following completion of the offer, receipt
of ICC approval and the satisfaction of other conditions (including approval by
SPRC stockholders), SPRC (and the UP subsidiary that purchases SPRC stock in the
cash tender offer) will be merged into UPRR. In the SPRC/UPRR merger, each
share of SPRC stock would be converted, at the holder's election (subject to
proration), into the right to receive $25.00 in cash or 0.4065 shares of UP
common stock. As a result of the transaction, 60% of the outstanding SPRC stock
will be converted into UP stock and the remaining 40% into cash, including the
shares acquired in the original tender offer. The two companies expect to file
an application with the ICC late this year.
Earlier this year, the Financial Accounting Standards Board issued Statement
No. 121, "Impairment of Long-Lived Assets", which is required to be adopted by
January 1, 1996. The Company has not evaluated the potential impact of adopting
this Statement.
To ensure stability of its fuel costs, the Company has entered into fuel
hedging agreements covering approximately 95% of its estimated 1995 fuel needs
at an average purchase price of $.49 per gallon (excluding handling costs).
However, in the event that fuel prices decline below the average purchase price
under the hedging agreements the Company will not receive any benefit from these
fuel hedging agreements and may in fact pay more for fuel than it would have
paid in the absence of such agreements.
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
Union Pacific-Missouri Pacific Trackage Rights Compensation - On March 31, 1995,
the Company and UPRR entered into an agreement to settle the outstanding
litigation, which was reported in the Company's Annual Report on Form 10-K for
the period ending December 31, 1994, relating to the compensation SSW would pay
for trackage rights over UPRR lines between Kansas City and St. Louis. Under
the settlement agreement, the Company paid UPRR $30.76 million on April 3, 1995
and executed a note agreeing to pay UPRR $30.76 million, plus interest at 7%, on
April 3, 1996. As a result of the settlement agreement, both parties agreed to
dismiss their claims in the ICC and court proceedings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) During the quarter ended June 30, 1995, no reports on Form 8-K were filed
by the Company.
18
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SOUTHERN PACIFIC TRANSPORTATION COMPANY
Date: August 8, 1995 By /s/ B. C. Kane
--------------------------------
Controller
(Principal Accounting Officer)
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SPT 2ND QTR
1995 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 258
<ALLOWANCES> (9)
<INVENTORY> 73
<CURRENT-ASSETS> 386
<PP&E> 8,319
<DEPRECIATION> 2,854
<TOTAL-ASSETS> 6,044
<CURRENT-LIABILITIES> 901
<BONDS> 1,043
<COMMON> 425
0
0
<OTHER-SE> 1,796
<TOTAL-LIABILITY-AND-EQUITY> 6,044
<SALES> 0
<TOTAL-REVENUES> 1,560
<CGS> 0
<TOTAL-COSTS> 1,615
<OTHER-EXPENSES> 31
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49
<INCOME-PRETAX> (103)
<INCOME-TAX> (40)
<INCOME-CONTINUING> (63)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (63)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
