-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BnK/fzxWkpSJYTh+jI0+qucVU2KOc2f8HglPJQSXeyOj7+Zn5/bAY5gtobZeTaq7 hZShLNA4sTTmFRPmvuv+EQ== 0000831968-03-000073.txt : 20030512 0000831968-03-000073.hdr.sgml : 20030512 20030512153423 ACCESSION NUMBER: 0000831968-03-000073 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROVIDENCE & WORCESTER RAILROAD CO/RI/ CENTRAL INDEX KEY: 0000831968 STANDARD INDUSTRIAL CLASSIFICATION: RAILROADS, LINE-HAUL OPERATING [4011] IRS NUMBER: 050344399 STATE OF INCORPORATION: RI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12761 FILM NUMBER: 03692758 BUSINESS ADDRESS: STREET 1: 75 HAMMOND ST CITY: WORCESTER STATE: MA ZIP: 01610 BUSINESS PHONE: 5087554000 MAIL ADDRESS: STREET 1: PROVIDENCE & WORCESTER RAILROAD CO STREET 2: 75 HAMMOND STREET CITY: WORCESTER STATE: MA ZIP: 01610 10-Q 1 body10-q20030331.txt QUARTERLY REPORT Microsoft Word 10.0.2627;UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2003 TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission file number 0-16704 ------- PROVIDENCE AND WORCESTER RAILROAD COMPANY - --------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) - --------------------------------------------------------------------------- Rhode Island 05-0344399 ----------------------------- -------------------------- (State or other jurisdiction of I.R.S. Employer Identification No. incorporation or organization) 75 Hammond Street, Worcester, Massachusetts 01610 ----------------------------- -------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (508) 755-4000 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.) YES X NO ___ --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of May 1, 2003, the registrant has 4,446,686 shares of common stock, par value $.50 per share, outstanding. PROVIDENCE AND WORCESTER RAILROAD COMPANY Index Part I - Financial Information Item 1 - Financial Statements: Balance Sheets - March 31, 2003 (Unaudited) and December 31, 2002............................3 Statements of Operations (Unaudited) - Three Months Ended March 31, 2003 and 2002...................4 Statements of Cash Flows (Unaudited) - Three Months Ended March 31, 2003 and 2002...................5 Notes to Financial Statements (Unaudited)..................6-9 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.............10-13 Item 3 -Quantitative and Qualitative Disclosures About Market Risk....13 Item 4 -Controls and Procedures.......................................13 Part II - Other Information: Item 6 Exhibits and Reports on Form 8-K...............................14 Signatures ................................................................15 Certificates Pursuant To Section 302, of The Sarbanes-Oxley Act of 2002.................................16-17 EXHIBIT 99 - Certification Pursuant To 18 U.S.C. Section 1350, as Adopted Pursuant To Section 906 of The Sarbanes-Oxley Act of 2002....................................18 2 Item 1. Financial Statements - ----------------------------- PROVIDENCE AND WORCESTER RAILROAD COMPANY BALANCE SHEETS (Dollars in Thousands Except Per Share Amounts) ASSETS MARCH 31, DECEMBER 31, 2003 2002 (Unaudited) ------- ------- Current Assets: Cash and equivalents ................................ $ 1,490 $ 2,888 Accounts receivable, net of allowance for doubtful accounts of $125 in 2003 and 2002 ......... 3,177 3,304 Materials and supplies .............................. 1,825 1,634 Prepaid expenses and other .......................... 684 536 Deferred income taxes ............................... 78 126 ------- ------- Total Current Assets ............................... 7,254 8,488 Property and Equipment, net .......................... 70,245 70,057 Land Held for Development ............................ 11,959 11,955 ------- ------- Total Assets ......................................... $89,458 $90,500 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable .................................... $ 2,823 $ 3,017 Accrued expenses .................................... 737 964 ------- ------- Total Current Liabilities .......................... 3,560 3,981 ------- ------- Deferred Grant Income ................................ 7,925 7,980 ------- ------- Deferred Income Taxes ................................ 10,000 9,898 ------- ------- Commitments and Contingent Liabilities Shareholders' Equity: Preferred stock, 10% noncumulative, $50 par value; authorized, issued and outstanding 645 shares in 2003 and 2002 ........................ 32 32 Common stock, $.50 par value; authorized 15,000,000 shares; issued and outstanding 4,446,686 shares in 2003 and 4,443,380 shares in 2002 ..................................... 2,224 2,222 Additional paid-in capital .......................... 29,636 29,619 Retained earnings ................................... 36,081 36,768 ------- ------- Total Shareholders' Equity ......................... 67,973 68,641 ------- ------- Total Liabilities and Shareholders' Equity ........... $89,458 $90,500 ======= ======= The accompanying notes are an integral part of the financial statements. 3 PROVIDENCE AND WORCESTER RAILROAD COMPANY STATEMENTS OF OPERATIONS (Unaudited) (Dollars in Thousands Except Per Share Amounts) Three Months Ended March 31, 2003 2002 ------- ------ Revenues: Operating Revenues - Freight and Non- Freight .......................................... $ 4,859 $ 4,956 Other Income ...................................... 153 331 ------- ------- Total Revenues ................................... 5,012 5,287 ------- ------- Operating Expenses: Maintenance of way and structures ................. 1,025 1,094 Maintenance of equipment .......................... 590 537 Transportation .................................... 1,565 1,471 General and administrative ........................ 910 1,007 Depreciation ...................................... 715 662 Taxes, other than income taxes .................... 582 629 Car hire, net ..................................... 182 261 Employee retirement plans ......................... 57 57 Track usage fees .................................. 142 47 ------- ------- Total Operating Expenses ........................ 5,768 5,765 ------- ------- Loss before Income Tax Benefit ..................... (756) (478) Income Tax Benefit ................................. (250) (165) ======= ======= Net Loss ........................................... (506) (313) Preferred Stock Dividends .......................... 3 3 ------- ------- Net Loss Available to Common Shareholders .......... $ (509) $ (316) ======= ======= Basic Loss Per Common Share ........................ $ (.11) $ (.07) ======= ======= Diluted Loss Per Common Share ...................... $ (.11) $ (.07) ======= ======= The accompanying notes are an integral part of the financial statements. 4 PROVIDENCE AND WORCESTER RAILROAD COMPANY STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands) Three Months Ended March 31, 2003 2002 ------- ------ Cash flows from operating activities: Net loss ............................................. $ (506) $ (313) Adjustments to reconcile net loss to net cash flows from (used in) operating activities: Depreciation ........................................ 715 662 Amortization of deferred grant income ............... (55) (53) Gains from sale and disposal of property, equipment and easements, net ....................... (13) (167) Deferred income tax expense ......................... 150 85 Increase (decrease) in cash from: Accounts receivable ................................ (51) 959 Materials and supplies ............................. (191) -- Prepaid expenses and other ......................... (148) (44) Accounts payable and accrued expenses .............. (522) (417) ------- ------- Net cash flows from (used in) operating activities .......................................... (621) 712 ------- ------- Cash flows from Investing Activities: Purchase of property and equipment ................... (806) (824) Proceeds from sale of property, equipment and easements ........................................... 18 199 Proceeds from deferred grant income .................. 173 203 ------- ------- Net cash flows used in investing activities .......... (615) (422) ------- ------- Cash Flows from Financing Activities: Dividends paid ....................................... (181) (180) Issuance of common shares for stock options exercised and employee stock purchases .............. 19 24 ------- ------- Net cash flows used in financing activities .......... (162) (156) ------- ------- Increase (Decrease) in Cash and Equivalents .......... (1,398) 134 Cash and Equivalents, Beginning of Period ............ 2,888 3,804 ------- ------- Cash and Equivalents, End of Period .................. $ 1,490 $ 3,938 ======= ======= The accompanying notes are an integral part of the financial statements. 5 PROVIDENCE AND WORCESTER RAILROAD COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) THREE MONTHS ENDED MARCH 31, 2003 AND 2002 (Dollars in Thousands Except Per Share Amounts) 1. In the opinion of management, the accompanying interim financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position as of March 31, 2003 and the results of operations and cash flows for the three months ended March 31, 2003 and 2002. Certain prior period amounts have been reclassified to be consistent with current period presentation. Results for interim periods may not be necessarily indicative of the results to be expected for the year. These interim financial statements should be read in conjunction with the Company's 2002 Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange Commission. 2. Changes in Shareholders' Equity: Total Additional Share Preferred Common Paid-in Retained holders' Stock Stock Capital Earnings Equity ------- ------- ------- ------- ------- Balance December 31,2002. $ 32 $ 2,222 $29,619 $36,768 $68,641 Issuance of 3,306 common shares for employee stock purchases and stock options exercised ...... 2 17 19 Dividends: Preferred stock, $5.00 per share ........ (3) (3) Common stock, $.04 per share .............. (178) (178) Net loss for the period ................. (506) (506) ------- ------- ------- ------- ------- Balance March 31, 2003... $ 32 $ 2,224 $29,636 $36,081 $67,973 ======= ======= ======= ======= ======= 3. Other Income: 2003 2002 ---- ---- Gains from sale and disposal of property, equipment and easements, net ........................................... $ 13 $167 Rentals ........................................ 135 148 Interest ....................................... 5 16 ---- ---- $153 $331 ==== ==== 4. Loss per Common Share: Basic loss per common share is computed using the weighted average number of common shares outstanding during the period. Diluted loss per common share reflects the effect of the Company's outstanding convertible preferred stock, options and warrants except where such items would be antidilutive. 6 PROVIDENCE AND WORCESTER RAILROAD COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) -- (Continued) (Dollars in Thousands Except Per Share Amounts) A reconciliation of weighted average shares used for the basic computation and that used for the diluted computation is as follows: 2003 2002 --------- --------- Weighted average shares for basic .......... 4,443,768 4,411,484 Dilutive effect of convertible preferred stock, options and warrants ............... -- -- --------- --------- Weighted average shares for diluted ........ 4,443,768 4,411,484 ========= ========= Preferred Stock convertible into 64,500 shares of Common Stock was outstanding during the quarters ended March 31, 2003 and 2002. In addition, options and warrants to purchase 228,274 and 228,396 shares of common stock were outstanding during the quarters ended March 31, 2003 and 2002 respectively. These Common Stock equivalents were not included in the computation of the diluted loss per share in either of the quarters because their effect would be antidilutive. 5. Commitments and Contingent Liabilities: The Company is a defendant in certain lawsuits relating to casualty losses, many of which are covered by insurance subject to a deductible. The Company believes that adequate provision has been made in the financial statements for any expected liabilities which may result from disposition of such lawsuits. On January 29, 2002, the Company received a "Notice of Potential Liability" from the United States Environmental Protection Agency ("EPA") regarding an existing Superfund Site that includes the J.M. Mills Landfill in Cumberland, Rhode Island. EPA sends these "Notice" letters to potentially responsible parties ("PRPs") under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"). EPA identified the Company as a PRP based on its status as an owner and/or operator because its railroad property traverses the Superfund Site. Via these Notice letters, EPA makes a demand for payment of past costs (identified in the letter as $762) and future costs associated with the response actions taken to address the contamination at the Site, and requests PRPs to indicate their willingness to participate and resolve their potential liability at the Site. The Company has responded to EPA by stating that it does not believe it has any liability for this Site, but that it is interested in cooperating with EPA to address issues concerning liability at the Site. At this point, two other parties have already committed via a consent order with EPA to pay for the Remedial Investigation/Feasibility Study ("RI/FS") phase of the clean-up at the Site, which will take approximately two or more years to complete. After that, EPA will likely seek to negotiate the cost of the Remedial Design and implementation of the remedy at the Site with the PRPs it has identified via these Notice Letters (which presently includes over sixty parties, and is likely to increase after EPA completes its investigation of the identity of PRPs). The Company believes that none of its activities caused contamination at the Site, and will contest this claim by EPA. In connection with the EPA claim described above, the two parties who have committed to conduct the RI/FS at the Site filed a complaint in the U.S. District Court of Rhode Island against the Company, in an action entitled CCL Custom Manufacturing, Inc. v. Arkwright Incorporated, et al (consolidated with Unilever Bestfoods v. American Steel & Aluminum Corp. et al), C.A. No. 01-496/L, on December 18, 2002. The Company is one of about sixty parties named thus far by Plaintiffs, who seek to recover response costs incurred in investigating and responding to the releases of hazardous substances at the Site. Plaintiffs allege that the Company is liable under 42 U.S.C. section 961(a)(3) of CERCLA as an "arranger" or "generator" of waste that ended up at the Site. The Company has entered into a Generator Cooperation Agreement with other defendants to allocate costs in responding 7 to this suit, and to share technical costs and information in evaluating the Plaintiffs' claims. The Company does not believe it generated any waste that ended up at this Site, or that its activities caused contamination at the Site. The Company will contest this suit. 6. Dividends: On April 30, 2003, the Company declared a dividend of $.04 per share on its outstanding Common Stock payable May 22, 2003 to shareholders of record May 8, 2003. 7. Stock Based Compensation: The Company accounts for stock-based compensation awards to employees using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". Had the Company used the fair value method to value compensation, as set forth in Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", the Company's net loss and net loss per share would have been reported as follows: Three Months Ended March 31, 2003 2002 ------- ------ Net loss available to common shareholders: As reported .......................... $ (509) $ (316) Less impact of stock option expense .. 12 9 ------- ------ Pro forma ............................ $ (521) $ (325) ======= ====== Basic loss per share: As reported .......................... $ (.11) $ (.07) Less impact of stock option expense .. .01 -- ------- ------ Pro forma ............................ $ (.12) $ (.07) ======= ====== Diluted loss per share: As reported .......................... $ (.11) $ (.07) Less impact of stock option expense .. .01 -- ------- ------ Pro forma ............................ $ (.12) $ (.07) ======= ====== 8. Recently Issued Financial Accounting Standards: In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". This statement establishes accounting standards for recognition and measurement of a liability for an asset retirement obligation and the associated costs. Under this statement, an entity must recognize the fair value of a liability for an asset retirement obligation in the period in which it is incurred or in a period in which a reasonable estimate of fair value may be made. This statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company adopted this Statement on January 1, 2003 and there was no effect on the Company's financial statements. In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections". This statement rescinds FASB Statement No. 4, "Reporting 8 Gains and Losses from Extinguishment of Debt," and an amendment of that Statement, FASB Statement No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements". This statement also rescinds FASB Statement No. 44, "Accounting for Intangible Assets of Motor Carriers". This statement amends FASB Statement No. 13, "Accounting for Leases," to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. This statement is effective for financial statements issued on or after May 15, 2002. The Company adopted this Statement on January 1, 2003 and there was no effect on the Company's financial statements. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". This statement is effective for exit or disposal activities that are initiated after December 31, 2002. The Company adopted this Statement on January 1, 2003 and there was no effect on the Company's financial statements. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure-an Amendment of FASB Statement No. 123". SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. The Company does not currently intend to adopt the fair value based method of measuring compensation associated with stock awards and grants. As a consequence of continuing to utilize the intrinsic value method of measuring such compensation, the Company has provided additional disclosures in its quarterly financial statements which reflect the impact on net income and earnings per share on a pro forma basis as if it had applied the fair value method to stock-based employee compensation. 9 PROVIDENCE AND WORCESTER RAILROAD COMPANY ITEM 2-MANAGEMENT'S DISCUSSION AND ANALYSIS OF - ---------------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- The statements contained in Management's Discussion and Analysis of Financial Condition and Results of Operations ("MDA") which are not historical are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent the Company's present expectations or beliefs concerning future events. The Company cautions, however, that actual results could differ materially from those indicated in MDA. Critical Accounting Policies - ---------------------------- The Securities and Exchange Commission ("SEC") recently issued guidance for the disclosure of "critical accounting policies." The SEC defines such policies as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. The Company's significant accounting policies are described in Note 1 of the Notes to Financial Statements in its Annual Report on Form 10-K. None of these significant accounting policies require management to make difficult, subjective or complex judgments or estimates, and therefore do not meet the SEC definition of "critical." Results of Operations - --------------------- The following table sets forth the Company's operating revenues by category in dollars and as a percentage of operating revenues: Three Months Ended March 31, ----------------------------------- 2003 2002 ----------------------------------- (In thousands, except percentages) Freight Revenues: Conventional carloads ............... $3,873 79.7% $4,038 81.5% Containers .......................... 649 13.4 604 12.2 Non-Freight Operating Revenues: Transportation services ............. 208 4.3 239 4.8 Other ............................... 129 2.6 75 1.5 ------ ----- ------ ----- Total ............................ $4,859 100.0% $4,956 100.0% ====== ===== ====== ===== 10 The following table sets forth a comparison of the Company's operating expenses expressed in dollars and as a percentage of operating revenues: Three Months Ended March 31, ----------------------------------- 2003 2002 ----------------------------------- (In thousands, except percentages) Salaries, wages, payroll taxes and employee benefits ................ $3,289 67.7% $3,248 65.5% Casualties and insurance .............. 208 4.3 191 3.9 Depreciation and amortization ......... 715 14.7 662 13.4 Diesel fuel ........................... 238 4.9 227 4.6 Car hire, net ......................... 182 3.8 261 5.3 Purchased services, including legal and professional fees .......... 262 5.4 375 7.6 Repair and maintenance of equipment ............................ 248 5.1 197 4.0 Track and signal materials ............ 289 5.9 428 8.6 Track usage fees ...................... 142 2.9 47 .9 Other materials and supplies .......... 277 5.7 243 4.9 Other ................................. 422 8.7 394 7.9 ------ ----- ------ ----- Total ............................... 6,272 129.1 6,273 126.6 Less capitalized and recovered costs .................... 504 10.4 508 10.3 ------ ----- ------ ----- Total ............................ $5,768 118.7% $5,765 116.3% ====== ===== ====== ===== Operating Revenues: Operating revenues decreased $97,000, or 2.0%, to $4.9 million in the first quarter of 2003 from $5.0 million in the first quarter of 2002. This decrease is the net result of a $165,000 (4.1%) decrease in conventional freight revenues partially offset by a $45,000 (7.5%) increase in container freight revenues and a $23,000 (7.3%) increase in non-freight operating revenues. The decrease in conventional freight revenues is the result of an 11.4% decrease in conventional carloadings, partially offset by an 8.3% increase in the average revenue received per conventional carloading. The Company's conventional carloadings decreased by 603 to 4,683 in the first quarter of 2003 from 5,286 in 2002. The decline in conventional traffic during the quarter is largely attributable to extreme winter weather conditions which had a particular impact on the volume of construction aggregate traffic. Shipments of this seasonal commodity did not commence until late March of 2003. The increase in the average revenue received per conventional carloading is the result of a shift in traffic mix away from construction aggregates, a lower rated commodity, toward higher rated freight. The increase in container freight revenues is the result of a 1.7% increase in traffic volume and a 5.6% increase in the average revenue received per container. Intermodal containers handled during the quarter increased by 251 to 14,956 in 2003 from 14,705 in 2002. The increase in the average revenue received per container is largely the result of a contractual rate increase. The increase in non-freight operating revenues for the quarter results from increased maintenance department billings partially offset by decreased billings for demurrage charges. Revenues of this type typically vary from period to period depending upon the needs of freight customers and other outside parties. 11 Other Income: Other income decreased by $178,000 to $153,000 in the first quarter of 2003 from $331,000 in 2002. This decrease is primarily due to lower gains from the sale of property, equipment and easements. Income of this nature can vary significantly from period to period. Operating Expenses: Operating expenses for the first quarter of 2003 increased by just $3,000 from 2002. Increased track usage fees of $95,000 resulting from the June 2002 Amtrak arbitration decision were largely offset by overall decreases in other expense categories. Liquidity and Capital Resources - ------------------------------- During the first quarter of 2003 the Company used $621,000 of cash in its operations. Total cash and equivalents decreased by $1.4 million for the quarter. The principal utilization of cash during the quarter, other than for operations, was for expenditures for property and equipment, of which $566,000 was for additions and improvements to track structure, and for the payment of dividends. In management's opinion cash generated from operations during the remainder of 2003 will be sufficient to enable the Company to meet its operating expenses and capital expenditure and dividend requirements. Seasonality - ----------- Historically, the Company's operating revenues are lowest for the first quarter due to the absence of construction aggregate shipments during a portion of this period and to winter weather conditions. Recent Accounting Pronouncements - -------------------------------- In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". This statement establishes accounting standards for recognition and measurement of a liability for an asset retirement obligation and the associated costs. Under this statement, an entity must recognize the fair value of a liability for an asset retirement obligation in the period in which it is incurred or in a period in which a reasonable estimate of fair value may be made. This statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company adopted this statement on January 1, 2003 and there was no effect on the Company's financial statements. In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections". This statement rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt," and an amendment of that Statement, FASB Statement No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements". This statement also rescinds FASB Statement No. 44, "Accounting for Intangible Assets of Motor Carriers". This statement amends FASB Statement No. 13, "Accounting for Leases," to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. This statement is effective for financial statements issued on or after May 15, 2002. The Company adopted this statement on January 1, 2003 and there was no effect on the Company's financial statements. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other 12 Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". This statement is effective for exit or disposal activities that are initiated after December 31, 2002. The Company adopted this Statement on January 1, 2003 and there was no effect on the Company's financial statements. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure-an Amendment of FASB Statement No. 123". SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. The Company does not currently intend to adopt the fair value based method of measuring compensation associated with stock awards and grants. As a consequence of continuing to utilize the intrinsic value method of measuring such compensation, the Company has provided additional disclosures in its quarterly financial statements which reflect the impact on net income and earnings per share on a pro forma basis as if it had applied the fair value method to stock-based employee compensation. Item 3. Quantitative and Qualitative Disclosures About Market Risk - ------------------------------------------------------------------ Cash and Equivalents As of March 31, 2003, the Company is exposed to market risks which primarily include changes in U.S. interest rates. The Company invests cash balances in excess of operating requirements in short-term securities, generally with maturities of 90 days or less. In addition, the Company's revolving line of credit agreement provides for borrowings which bear interest at variable rates based on either prime rate or one and one half percent over either the one or three month London Interbank Offered Rates. The Company had no borrowings outstanding pursuant to the revolving line of credit agreement at March 31, 2003. The Company believes that the effect, if any, of reasonably possible near-term changes in interest rates on the Company's financial position, results of operations, and cash flows should not be material. Item 4. Controls and Procedures - ------------------------------- Based on their evaluation of the effectiveness of the Company's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report, the undersigned officers of the Company have concluded that such disclosure controls and procedures are designed to provide a reasonable level of assuarance. There were no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses, subsequent to the date of the most recent evaluation by the undersigned officers of the Company of the design and operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data. 13 PART II - Other Information - --------------------------- Item 6. Exhibits and Reports on Form 8-K -------------------------------- (b) No reports on Form 8-K were filed during the quarter ended March 31, 2003. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PROVIDENCE AND WORCESTER RAILROAD COMPANY By: /s/ Robert H. Eder ---------------------------- Robert H. Eder, Chairman of the Board And Chief Executive Officer By: /s/ Robert J. Easton ---------------------------- Robert J. Easton Treasurer and Principal Financial Officer DATED: May 12, 2003 15 Providence and Worcester Railroad Company Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Robert H. Eder, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Providence and Worcester Railroad Company; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entries, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. DATE: May 12, 2003 By: /s/ Robert H. Eder ---------------------------- Robert H. Eder, Chairman of the Board And Chief Executive Officer 16 Providence and Worcester Railroad Company Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Robert J. Easton certify that: 1. I have reviewed this quarterly report on Form 10-Q of Providence and Worcester Railroad Company; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entries, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. DATE: May 12, 2003 By: /s/ Robert J. Easton ---------------------------- Robert J. Easton Treasurer and Principal Financial Officer 17 EXHIBIT 99 PROVIDENCE AND WORCESTER RAILROAD COMPANY CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Providence and Worcester Railroad Company (the Company) on form 10-Q for the quarterly period ended September 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Robert H. Eder, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Robert H. Eder ----------------------------- Robert H. Eder, Chairman of the Board And Chief Executive Officer May 12, 2003 In connection with the Quarterly Report of Providence and Worcester Railroad Company (the Company) on form 10-Q for the quarterly period ended September 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Robert J. Easton, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Robert J. Easton ----------------------------- Robert J. Easton, Treasurer and Chief Financial Officer May 12, 2003 -----END PRIVACY-ENHANCED MESSAGE-----