-----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, O8y5M0/7DPLBOeu3zo/eFJhc+1VaV9myF6Z21A3Miyi+qaT0Maz3J9DURrN+eG3N 9lBJ+Z2+N51IcMpvOTkatQ== 0000831968-06-000086.txt : 20060814 0000831968-06-000086.hdr.sgml : 20060814 20060814105737 ACCESSION NUMBER: 0000831968-06-000086 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20060630 FILED AS OF DATE: 20060814 DATE AS OF CHANGE: 20060814 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: 061027592 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-q20060630.txt QUARTERLY 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 June 30, 2006 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 by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (check one) Large accelerated filer___ Accelerated filer___ Non-accelerated filer X --- Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ___ NO X --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of August 1, 2006, the registrant has 4,527,624 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 - June 30, 2006 (Unaudited) and December 31, 2005.......................................3 Statements of Income (Loss) (Unaudited) - Three and Six Months Ended June 30, 2006 and 2005....................................................4 Statements of Cash Flows (Unaudited) - Six Months Ended June 30, 2006 and 2005.........................5 Notes to Financial Statements (Unaudited)................6-10 Item 2 -Management's Discussion and Analysis of Financial Condition and Results of Operations.....................11-14 Item 3 -Quantitative and Qualitative Disclosures About Market Risk..........................................14 Item 4 -Controls and Procedures...................................14 Part II - Other Information: Item 4 -Submission of Matters to a Vote of Security Holders.......15 Item 5 -Reports on Form 8-K.......................................15 Item 6 -Exhibits..................................................15 Signatures.............................................................16 2 Item 1. Financial Statements - ----------------------------- PROVIDENCE AND WORCESTER RAILROAD COMPANY BALANCE SHEETS (Dollars in Thousands Except Per Share Amounts) ASSETS JUNE 30,DECEMBER 31, 2006 2005 (Unaudited) ------- ------- Current Assets: Cash and cash equivalents ........................... $ 1,627 $ 2,063 Accounts receivable, net of allowance for doubtful accounts of $175 in 2006 and 2005 ......... 4,053 3,202 Materials and supplies .............................. 1,934 1,654 Prepaid expenses and other current assets ........... 308 152 Deferred income taxes ............................... 161 193 ------- ------- Total Current Assets ............................... 8,083 7,264 Property and Equipment, net .......................... 74,139 74,126 Land Held for Development ............................ 11,958 11,958 ------- ------- Total Assets ......................................... $94,180 $93,348 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable .................................... $ 3,350 $ 1,905 Accrued expenses .................................... 868 1,471 ------- ------- Total Current Liabilities .......................... 4,218 3,376 ------- ------- Profit-Sharing Plan Contribution ..................... -- 211 ------- ------- Deferred Income Taxes ................................ 11,753 11,530 ------- ------- Deferred Grant Income ................................ 8,118 8,140 ------- ------- Commitments and Contingent Liabilities................ Shareholders' Equity: Preferred stock, 10% noncumulative, $50 par value; authorized, issued and outstanding 640 shares in 2006 and 645 shares in 2005 .......... 32 32 Common stock, $.50 par value; authorized 15,000,000 shares; issued and outstanding 4,527,367 shares in 2006 and 4,507,056 shares in 2005 ..................................... 2,264 2,254 Additional paid-in capital .......................... 30,559 30,230 Retained earnings ................................... 37,236 37,575 ------- ------- Total Shareholders' Equity ......................... 70,091 70,091 ------- ------- Total Liabilities and Shareholders' Equity ........... $94,180 $93,348 ======= ======= The accompanying notes are an integral part of the financial statements. 3 PROVIDENCE AND WORCESTER RAILROAD COMPANY STATEMENTS OF INCOME (LOSS) (Unaudited) (Dollars in Thousands Except Per Share Amounts) Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 ------- ------- ------- ------- Revenues: Operating Revenues .................. $ 7,243 $ 6,588 $ 13,850 $12,228 Other Income ........................ 244 164 424 359 ------- ------- ------- ------- Total Revenues .................... 7,487 6,752 14,274 12,587 ------- ------- ------- ------- Operating Expenses: Maintenance of way and structures ......................... 1,139 955 2,538 2,001 Maintenance of equipment ............ 901 697 1,794 1,413 Transportation ...................... 2,101 1,946 4,206 3,670 General and administrative .......... 1,118 1,036 2,159 2,021 Depreciation ........................ 690 691 1,381 1,382 Taxes, other than income taxes .............................. 575 563 1,160 1,143 Car hire, net ....................... 290 277 526 546 Employee retirement plans ........... 57 57 114 114 Track usage fees .................... 181 213 336 350 ------- ------- ------- ------- Total Operating Expenses ........... 7,052 6,435 14,214 12,640 ------- ------- ------- ------- Income (Loss) before Income Taxes ............................... 435 317 60 (53) Provision for Income Taxes (Benefit) ........................... 158 110 35 (5) ------- ------- ------- ------- Net Income (Loss) .................... 277 207 25 (48) Preferred Stock Dividends ............ -- -- 3 3 ------- ------- ------- ------- Net Income (Loss) Available to Common Shareholders ................. $ 277 $ 207 $ 22 $ (51) ======= ======= ======= ======= Basic and Diluted Income (Loss) Per Common Share ............. $ .06 $ .05 $ -- $ (.01) ======= ======= ======= ======= 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) Six Months Ended June 30, 2006 2005 ------- ------- Cash flows from operating activities: Net income (loss) .................................... $ 25 $ (48) Adjustments to reconcile net loss to net cash flows from operating activities: Depreciation ........................................ 1,381 1,382 Amortization of deferred grant income ............... (119) (115) Gains from sale and disposal of property, equipment and easements, net ....................... (129) (89) Deferred income taxes ............................... 255 205 Common shares issued to employees for services ...... 24 -- Share-based compensation ............................ 43 -- Increase (decrease) in cash from: Accounts receivable ................................ (938) (869) Materials and supplies ............................. (280) (259) Prepaid expenses and other ......................... (156) (88) Accounts payable and accrued expenses .............. 773 959 ------- ------- Net cash flows from operating activities ............. 879 1,078 ------- ------- Cash flows from Investing Activities: Purchase of property and equipment ................... (1,409) (2,071) Proceeds from sale of property, equipment and easements ........................................... 213 90 Proceeds from deferred grant income .................. 184 27 ------- ------- Net cash flows used in investing activities .......... (1,012) (1,954) ------- ------- Cash Flows from Financing Activities: Dividends paid ....................................... (364) (363) Issuance of common shares for stock options exercised and employee stock purchases .............. 61 49 ------- ------- Net cash flows used in financing activities .......... (303) (314) ------- ------- Decrease in Cash and Cash Equivalents ................ (436) (1,190) Cash and Cash Equivalents, Beginning of Period .............................................. 2,063 1,735 ------- ------- Cash and Cash Equivalents, End of Period ............. $ 1,627 $ 545 ======= ======= Non-cash transactions are described in Note 3. The accompanying notes are an integral part of the financial statements. 5 PROVIDENCE AND WORCESTER RAILROAD COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) SIX MONTHS ENDED JUNE 30, 2006 AND 2005 (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 June 30, 2006 and the results of operations and cash flows for the interim periods ended June 30, 2006 and 2005. Results for interim periods may not necessarily be indicative of the results to be expected for the year. These interim financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2005 filed with the Securities and Exchange Commission. 2. Stock-Based Compensation: Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment," (SFAS No. 123(R)) using the modified prospective method. This method requires that companies recognize compensation expense for new stock option grants and the unvested portion of prior stock option grants at their fair value on the grant date and recognize this expense over the requisite service period for awards expected to vest. All of the Company's stock options granted prior to January 1, 2006 were 100% vested and as a result did not impact the amount of expense recorded during the three- and six-month periods ended June 30, 2006. The results for prior year periods have not been restated. As a result of adopting SFAS No. 123(R), stock-based employee compensation expense, net of income taxes, in the amount of $14 and $28, has been charged against income in the three- and six month periods ended June 30, 2006, respectively, for stock options granted during these periods. The Company's policy is to estimate the fair market value of each option granted on the date of grant using the Black-Scholes option pricing model and record the compensation expense on a straight-line basis over the year in which the grant was made. The Company issues new common stock to satisfy stock options exercised. Key assumptions used to apply the Black-Scholes option pricing model are set forth below: Average risk-free interest rate 4.32% Expected life of option grants 7.0 years Expected volatility of underlying stock 88.28% Expected dividend payment rate, as a percentage of the share price on the date of grant 1.07% The following table illustrates the effect on the net loss and net loss per share for the three-month and six month periods ended June 30, 2005 as if the fair value based method of SFAS No. 123, "Accounting for Stock-Based Compensation," had been applied for all outstanding awards for periods prior to the adoption of SFAS No. 123(R). 6 Three Months Ended Six Months Ended June 30, 2005 June 30, 2005 ------------------ ---------------- Net income (loss) attributable to common shareholders: As reported ........... $ 207 $ (51) Less impact of stock option expense ....... 10 21 ------- ------- Pro forma ............. $ 197 $ (72) ======= ======= Basic and diluted income (loss) per share: As reported ............ $ .05 $ (.01) Less impact of stock option expense ....... .01 .01 ------- ------- Pro forma .............. $ .04 $ (.02) ======= ======= At June 30, 2006, the Company had one stock option plan, the Nonqualified Stock Option Plan. Under the plan, options to purchase common stock were granted to officers, directors and management employees at prices not less than the fair market value of the common stock on the date of the grant. The options expire ten years from the grant date. As of June 30, 2006, there were 226,368 shares available for stock option grants under the plan. The following table summarizes the stock option activity under the Company's plan for the three-month period ended June 31, 2006: Weighted Average --------------------- Remaining Contractual Number Exercise Term of Options Price (Years) ------- ------- ------ Outstanding and exercisable at December 31, 2005................... 44,668 $10.20 6 Granted ................................ 8,140 14.90 10 Exercised .............................. (2,927) 8.78 N/A Expired ................................ (1,607) 6.88 N/A ------ ------ ---- Outstanding and exercisable at June 30, 2006 ........................ 48,274 $11.19 6 ====== ====== ==== 7 3. Changes in Shareholders' Equity: Total Additional Share Preferred Common Paid-in Retained holders' Stock Stock Capital Earnings Equity ------- ------- ------- ------- ------- Balance December 31,2005. $ 32 $ 2,254 $30,230 $37,575 $70,091 Issuance of 6,800 common shares for stock options exercised, employee stock purchases and other .................. 3 82 85 Issuance of 13,011 common shares to fund the Company's 2005 profit-sharing plan contribution (non-cash transaction) ........... 7 204 211 Conversion of 5 shares of preferred stock into 500 shares of common stock .................. -- -- -- Share-based compensation ........... 43 43 Dividends: Preferred stock, $5.00 per share ........ (3) (3) Common stock, $.08 per share .............. (361) (361) Net income for the period ................. 25 25 ----- ------- ------- ------- ------- Balance June 30,2006 .... $ 32 $ 2,264 $30,559 $37,236 $70,091 ===== ======= ======= ======= ======= During the six months ended June 30, 2005 the Company issued 13,980 shares of its common stock with an aggregate fair market value of $188 to fund its 2004 profit-sharing plan contribution. 4. Other Income: Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------ 2006 2005 2006 2005 ------ ------ ------ ------ Gains from sale and disposal of property, equipment and easements, net ...... $ 98 $ 39 $129 $ 89 Rentals .............. 134 120 269 259 Interest ............. 12 5 26 11 ---- ---- ---- ---- $244 $164 $424 $359 ==== ==== ==== ==== 5. Income (Loss) per Common Share: Basic income (loss) per common share is computed using the weighted-average number of common shares outstanding during each period. Diluted income (loss) per common share reflects the effect of the Company's outstanding convertible preferred stock and stock options except where such items would be antidilutive. 8 A reconciliation of weighted-average shares used for the basic computation and that used for the diluted computation is as follows: Three Months Ended Six Months Ended June 30, June 30, --------------------- --------------------- 2006 2005 2006 2005 --------- --------- --------- --------- Weighted-average shares for basic ............ 4,521,650 4,494,993 4,515,419 4,488,319 Dilutive effect of convertible preferred stock and stock options 86,139 79,278 85,108 -- --------- --------- --------- --------- Weighted-average shares for diluted .......... 4,607,789 4,574,271 4,600,527 4,488,319 ========= ========= ========= ========= Options to purchase 5,029 and 5,394 shares of common stock were outstanding for the three-month periods ended June 30, 2006 and 2005, respectively, but were not included in the computation of income per share because their effect would be antidilutive. Preferred stock convertible into 64,500 shares of common stock was outstanding for the six-month period ended June 30, 2005 and options to purchase 5,029 and 51,011 shares of common stock were outstanding for the six-month periods ended June 30, 2006 and 2005, respectively. These common stock equivalents were not included in the computation of the diluted income (loss) per share for these periods because their effect would be antidilutive. 6. 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 9 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 and therefore no liability has been accrued for this matter. On December 15, 2003, the EPA issued a second "Notice of Potential Liability" letter to the Company regarding the Site. EPA again identified the Company as a PRP, this time because EPA "believes that [the Company] accepted hazardous substance for transport to disposal or treatment facilities and selected the site for disposal." The Company responded again to EPA stating that it is interested in cooperating with EPA but that it does not believe it has engaged in any activities that caused contamination at the Site. 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 to this suit, and to share technical costs and information in evaluating the Plaintiffs' claims. Although 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 paid $45 to settle this suit in March 2006. 7. Dividends: On July 26, 2006, the Company declared a dividend of $.04 per share on its outstanding Common Stock payable August 21, 2006 to shareholders of record August 7, 2006. 10 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") defines critical accounting 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. Not all of these significant accounting policies require management to make difficult, subjective or complex judgments or estimates. Management believes that the Company's policy for the evaluation of long-lived asset impairment is a critical accounting policy. The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When factors indicate that assets should be evaluated for possible impairment, the Company uses an estimate of the related undiscounted future cash flows over the remaining lives of the assets in measuring whether the carrying amounts of the assets are recoverable. 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 June 30, Six Months Ended June 30, ---------------------------- ----------------------------- 2006 2005 2006 2005 ------------- ------------- -------------- -------------- (In thousands, except percentages) Freight Revenues: Conventional carloads ...... $6,095 84.2% $5,553 84.3% $11,400 82.3% $10,019 81.9% Containers ..... 871 12.0 691 10.5 1,713 12.4 1,401 11.5 Other freight related ....... 124 1.7 181 2.7 388 2.8 441 3.6 Other Operating Revenues ....... 153 2.1 163 2.5 349 2.5 367 3.0 ------ ----- ------ ----- ------- ----- ------- ----- Total ........ $7,243 100.0% $6,588 100.0% $13,850 100.0% $12,228 100.0% ====== ===== ====== ===== ======= ===== ======= ===== 11 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 June 30, Six Months Ended June 30, ---------------------------- ----------------------------- 2006 2005 2006 2005 ------------- ------------- -------------- -------------- (In thousands, except percentages) Salaries, wages, payroll taxes and employee benefits. $3,694 51.0% $3,477 52.8% $ 7,484 54.0% $ 6,822 55.8% Casualties and insurance ....... 181 2.5 249 3.8 367 2.6 499 4.1 Depreciation ..... 690 9.5 691 10.5 1,381 10.0 1,382 11.3 Diesel fuel ...... 641 8.8 502 7.6 1,242 9.0 851 7.0 Car hire, net .... 290 4.0 277 4.2 526 3.8 546 4.5 Purchased services, including legal and professional fees ............ 607 8.4 292 4.4 992 7.2 527 4.3 Repair and maintenance of equipment ....... 574 7.9 329 5.0 1,020 7.4 664 5.4 Track and signal materials ....... 510 7.1 825 12.5 1,414 10.2 1,127 9.2 Track usage fees . 181 2.5 213 3.2 336 2.4 350 2.9 Other materials and supplies .... 207 2.9 250 3.8 551 4.0 516 4.2 Other ............ 454 6.3 418 6.4 893 6.4 894 7.3 ------ ----- ------ ----- ------- ----- ------- ----- Total ........... 8,029 110.9 7,523 114.2 16,206 117.0 14,178 116.0 Less capitalized and recovered costs .......... 977 13.5 1,088 16.5 1,992 14.4 1,538 12.6 ------ ----- ------ ----- ------- ----- ------- ----- Total ......... $7,052 97.4% $6,435 97.7% $14,214 102.6% $12,640 103.4% ====== ===== ====== ===== ======= ===== ======= ===== Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005 Operating Revenues: Operating revenues increased $1.6 million, or 13.3%, to $13.8 million in the six months ended June 30, 2006 from $12.2 million in 2005. This increase is the net result of a $1.4 million (13.8%) increase in conventional freight revenues and a $312,000 (22.3%) increase in container freight revenues offset to a small extent by a $53,000 decrease in other freight related revenues and an $18,000 decrease in other operating revenues. The increase in conventional freight revenues is attributable to a 9.8% increase in traffic volume and a 3.6% increase in the average revenue received per conventional carloading. The Company's conventional carloadings increased by 1,419 to 15,917 in the first six months of 2006 from 14,498 in 2005. Rate increases, including diesel fuel surcharges, as well as changes in the mix of commodities account for the increase in the average revenue per carloading. The increase in container freight revenues is the combined result of an 18.0% increase in the average revenue received per container and a 3.6% percent increase in container traffic volume. Intermodal containers handled during the six-month period increased by 1,078 to 30,691 in 2006 from 29,613 in 2005. The increase in the average revenue received per container is attributable to 12 contractual rate adjustments based upon railroad industry cost indices, as well as a continuing shift in the mix of containers handled toward higher rated containers. The decrease in other freight related revenues is the result of a decrease in demurrage charges incurred by freight customers and the decrease in other operating revenues is the result of lower maintenance department billings. Revenues of these types vary from period to period depending upon the needs of freight and other customers. Operating Expenses: Operating expenses increased by $1.6 million, or 12.5%, to $14.2 million during the six months ended June 30, 2006 from $12.6 million in 2005. Diesel fuel expense for the six-month period increased by $391,000 as a result of significant increases in the cost of petroleum products. Employee health and welfare costs increased by $383,000 between periods. This is largely a one- time cost relating to changes in employee health insurance plans implemented in 2006. The increase in expenditures for purchased services of $465,000 was largely offset by grant proceeds resulting in increased cost recoveries. Three Months Ended June 30, 2006 Compared to Three Months Ended June 30, 2005 Operating Revenues: Operating revenues increased $655,000, or 9.9%, to $7.2 million in the second quarter of 2006 from $6.6 million in the second quarter of 2005. This increase is the net result of a $542,000 (9.8%) increase in conventional freight revenues and a $180,000 (26.0%) increase in container freight revenues offset to a small extent by a $57,000 decrease in other freight-related revenues and a $10,000 decrease in other operating revenues. The increase in conventional freight revenues for the quarter is attributable to an 8.2% increase in the average revenue received per conventional carloading and a 1.5% increase in traffic volume. The Company's conventional carloadings increased by 136 to 9,348 in the second quarter of 2006 from 9,212 in the second quarter of 2005. The increase in the average revenue per carloading during the quarter results from a change in the mix in traffic towards higher rated commodities, as well as rate increases, including diesel fuel surcharges. The increase in container freight revenues for the quarter is the combined result of a 16.0% increase in the average revenue received per container and an 8.7% increase in container traffic volume. Intermodal containers handled during the quarter increased by 1,236 to 15,499 in 2006 from 14,263 in 2005. The increase in the average revenue received per container is attributable to contractual rate adjustments and to a shift in the mix of containers handled, as previously discussed. The decrease in other freight related revenues results from a decrease in demurrage charges to freight customers. The decline in other operating revenues is attributable to a lower level of maintenance department billings to outside parties Operating Expenses: Operating expenses increased by $617,000, or 9.6%, to $7.1 million in the second quarter of 2006 from $6.4 million in 2005. Increased diesel fuel and employee health and welfare costs, as previously discussed, accounted for approximately $250,000 of this increase. 13 Liquidity and Capital Resources - ------------------------------- During the first six months of 2006 the Company generated $879,000 of cash from its operations. Total cash and cash equivalents decreased by $436,000 for the period. The principal utilization of cash during the period, other than for operations, was for expenditures for property and equipment and for the payment of dividends. In management's opinion, cash generated from operations during the remainder of 2006 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. Item 3. Quantitative and Qualitative Disclosures About Market Risk - ------------------------------------------------------------------ Cash and Equivalents As of June 30, 2006, 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 June 30, 2006. 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 - ------------------------------- As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Treasurer and Chief Financial Officer. Based upon that evaluation, the Chief Executive Officer and the Treasurer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. There was no significant change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 14 PART II - Other Information - --------------------------- Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- The Annual Meeting of Shareholders was held on April 26, 2006. Of the 4,509,092 shares of common stock entitled to vote, 3,841,137 shares were present, in person or by proxy. Of the 640 shares of preferred stock entitled to vote, 511 shares were present, in person or by proxy. All directors of the Company are elected on an annual basis and the following were so elected at this Annual Meeting: Richard W. Anderson, Robert H. Eder and John J. Healy were elected Common Stock Directors. Mr. Anderson received 3,739,673 affirmative votes and 101,464 votes withheld, Mr. Eder received 3,483,171 affirmative votes and 357,966 votes withheld and Mr. Healy received 3,739,415 affirmative votes and 101,722 votes withheld of common shares. Frank W. Barrett, P. Scott Conti, J. Joseph Garrahy, James C. Garvey, Charles M. McCollam, Jr. and Craig M. Scott were elected Preferred Stock Directors. Messrs. Conti and Garrahy each received 511 affirmative votes and no votes withheld of preferred shares. Messrs. Barrett, Garvey, McCollam, and Scott each received 508 affirmative votes and 3 votes withheld of preferred shares. A proposal was presented to amend the Company's Bylaws to eliminate the requirement that salaries of all officers of the Company be fixed by the Board of Directors. The proposal received 3,574,000 affirmative votes, 251,091 negative votes and 16,046 abstentions of common shares. The proposal received 508 affirmative votes and 3 abstentions of preferred shares. Item 5. Reports on Form 8-K ------------------- (a) A report on Form 8-K was filed on June 1, 2006 in which the Company reported that it had entered into a confidentiality agreement with RailAmerica, Inc. with respect to exploring possible business opportunities. Item 6. Exhibits -------- (3.2) By-laws (31.1)Rule 13a-14(a) Certification of Chairman of the Board and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (31.2) Rule 13a-14(a) Certification of Treasurer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (32) Certifications of Chairman of the Board and Chief Executive Officer and Treasurer and Principal Financial Officer pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 15 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: August 14, 2006 16 EXHIBIT 3.2 MAY 1995 AMENDED AS OF JUNE 30, 2006 BY-LAWS OF PROVIDENCE AND WORCESTER RAILROAD COMPANY ARTICLE I OFFICES The corporation may have offices at such places either within or without the State of Rhode Island as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. All annual meetings of the stockholders for the election of directors shall be held within or without the State of Rhode Island at such place as may be fixed from time to time by the Board of Directors; at least ten days' notice shall be given to the stockholders of the place so fixed. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Rhode Island, as shall be stated in the notice of the meeting. Section 2. Annual meetings of stockholders, commencing with the year 1988, shall be held on the last Wednesday of April if not a legal holiday, and if a legal holiday, then on the secular day following, at which the stockholders shall elect a Board of Directors and transact such other business as may properly be brought before the meeting. Section 3. Written notice of the annual meeting shall be given to each stockholder of record at least ten days before the date of the meeting. Section 4. Special meetings of the stockholders, for any purpose or purposes, may be called by the President, or by the Chairman if there be a Chairman, and shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors. Such request shall state the purpose or purposes of the proposed meeting. Section 5. Written notice of any special meeting of stockholders, stating the time, place and purpose thereof, shall be given to each stockholder of record at least ten days before the date fixed for the meeting. Section 6. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 7. Stockholders representing a majority of each class of the shares entitled to vote, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted at the meeting as originally notified. ARTICLE. III DIRECTORS Section 1. The number of directors which shall constitute the whole Board of Directors shall be not less than six [amended December 12, 1995] nor more than fifteen [amended December 12, 1995]. Within the foregoing limits, the number of directors to constitute the whole Board shall be fixed by vote of the Board of Directors at any regular or special meeting of the Board of Directors, or by the stockholders at the annual meeting. If, pursuant to the foregoing authority, the number of directors constituting the whole Board shall be decreased, such decrease shall not be effective with respect to the terms of directors then holding office until the next annual meeting of stockholders. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified. [Amended as of April 27, 2005.] No person who is not a shareholder of the corporation shall be eligible to serve as a director of the corporation. Any director who, during the period beginning with his or her first election to office and ending on the December 31 next following such election, or during any calendar year thereafter, attends less than seventy-five percent (75%) of either (i) the total number of meetings of the Board of Directors held during such period, or (ii) the total number of meetings held by all committees of the Board of Directors on which he or she shall have served during such period, shall be ineligible for re- election as a director upon the expiration of his or her term as a director; provided, that a majority of the remaining directors may waive such requirement upon receipt of evidence satisfactory to them that the failure of any director to satisfy the foregoing requirements was due to medical reasons. [amended April 26, 1995] Section 2. Vacancies in the Board of Directors may be filled in the manner provided in the charter. A vacancy or vacancies shall be deemed to exist at any time the number of directors then in office is less than the whole Board as provided in Section 1, above. Section 3. The business of the corporation shall be managed by its Board of Directors, which may exercise all powers of the corporation and do all such lawful acts and things as are not by statute or by the charter or by these by-laws directed or required to be exercised or done by the stockholders. Section 4. The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Rhode Island. Section 5. The Board of Directors shall hold a meeting immediately after each annual meeting of stockholders, at which meeting they shall elect a President, a Vice President, a Treasurer, a Secretary, and such other officers as they may deem appropriate, provided, however, that they may adjourn said meeting to such time as they see fit and elect said officers at said adjourned meeting. They may also, at any annual meeting, or at any adjournment thereof, transact any other business which may be properly brought before them. Regular quarterly meetings of the directors shall be held on the last Wednesdays in the months of July, October, January and April. Special meetings of the directors shall be held upon the call of the President, or by the Chairman if there be a Chairman, as hereinafter provided. The Secretary shall give each director notice, by mail, at least twenty-four hours before any meeting, whether regular or special (except the first meeting), of the time and place of such meeting. But in the case of necessity, such notice may be given at such time and in such manner as the President or the Chairman may direct. Section 6. At all meetings of the Board of Directors the presence of both (i) a majority of the directors, and (ii) a majority of the directors elected by the holders of the corporation's Preferred Stock (including any director elected to fill any vacancy resulting from the resignation, death or removal of a director elected by such holders), shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 7. The Board of Directors may, by resolution passed by a majority of the directors, designate one or more committees, each committee to consist of three or more of the directors of the corporation, which, to the extent provided in the resolution, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Section 8. The committees shall keep regular minutes of their proceedings and report the same to the Board of Directors when required. Section 9. Members of the Board of Directors or any committee designated hereby may participate in any special meeting of the Board or any meeting of such committee by means of a conference telephone or similar communications equipment, by means of which all persons participating in the meeting can hear each other at the same time, and participation by such means shall constitute presence at any such meeting. Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors or any committee designated by the Board, and directors who are not also full-time employees of the corporation may be paid a fixed sum for attendance at each meeting of the Board at which a quorum is present, whether regular or special, and at each meeting of any such committee attended in person and at which a majority of the members are present, such fixed sum to be determined in each case by the Board of Directors. [amended April 26, 1995] Section 10. A director may be removed, with or without cause, only in the manner provided in the charter. ARTICLE IV OFFICERS Section 1. The officers of the corporation shall include a President, a Vice President, a Secretary and a Treasurer. The offices of Treasurer and Secretary may be held by the same person. Section 2. The Board of Directors may appoint such other officers and agents, including a Chairman, as it shall deem necessary, who shall hold their offices for such terms as shall be determined from time to time by the Board. Section 3. [Deleted April 26, 2006] Section 4. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise shall be filled by the Board of Directors. Section 5. The Chairman, if any, shall be the chief executive officer of the corporation; the President shall be the chief operating officer of the corporation; and the Treasurer shall be the chief financial officer of the corporation. If no Chairman is elected, qualified and acting, the President shall also be the chief executive officer of the corporation. The other officers of the corporation shall have the powers and shall perform the duties customarily appurtenant to their respective offices, and shall have such further power and shall perform such further duties as shall be from time to time assigned to them. ARTICLE V CERTIFICATES OF STOCK Section 1. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of, the corporation, by the President and Treasurer or Secretary, certifying the number and class of shares owned by him in the corporation. Section 2. Where a certificate is signed (1) by a transfer agent or an assistant transfer agent or (2) by a transfer clerk acting on behalf of the corporation and a registrar, the signature of any such President, Secretary or Treasurer may be facsimile. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation, whether because of death, resignation or otherwise, before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be adopted by the corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature has been used thereon, had not ceased to be such officer or officers of the corporation. Section 3. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnify against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed. Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 5. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof. ARTICLE VI INDEMNIFICATION OF OFFICERS The corporation shall indemnify, to the full extent permitted by law from time to time, any person who is or was an officer of the corporation and any person who, while an officer of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, other enterprise or employee benefit plan, against all judgments, penalties, fines, settlements and reasonable expenses actually incurred by such person in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, in which such person was, is or is threatened to be made a named defendant or respondent by reason of the fact that such person is serving or at any time was serving in one or more of the capacities set forth above. ARTICLE VII GENERAL PROVISIONS Section 1. The President shall present at each annual meeting a statement of the business and condition of the corporation. Section 2. All checks and notes of the corporation shall be signed by such officer or officers or such other person persons as the Board of Directors may from time to time designate. Section 3. The fiscal year of the corporation shall end on the thirty-first day of December in each year. Section 4. The corporate seal shall have the inscribed thereon the name of the corporation, the year of its organization and the words "Incorporated 1969 Rhode Island". The seal may be used by causing it or a facsimile thereof to be impressed, affixed or reproduced or otherwise. ARTICLE VIII REPEAL AND AMENDMENT OF BY-LAWS These By-laws may be amended or repealed at any annual or special meeting of the stockholders, provided that they shall not be amended or repealed at a special meeting unless notice that it is proposed to amend or repeal them is given by the Secretary in the notice of such meeting. The Board of Directors shall not have authority to amend these By-Laws. EXHIBIT 31.1 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 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 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-15(e) and 15d-15 (e)) for the registrant and we have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on our evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors: a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. DATE: August 14, 2006 By: /s/ Robert H. Eder ---------------------------- Robert H. Eder, Chairman of the Board and Chief Executive Officer EXHIBIT 31.2 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 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 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-15(e) and 15d-15 (e)) for the registrant and we have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on our evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors: a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. DATE: August 14, 2006 By: /s/ Robert J. Easton ---------------------------- Robert J. Easton Treasurer and Principal Financial Officer EXHIBIT 32 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 June 30, 2006, 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 August 14, 2006 In connection with the Quarterly Report of Providence and Worcester Railroad Company ("the Company") on form 10-Q for the quarterly period ended June 30, 2006, 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 August 14, 2006 -----END PRIVACY-ENHANCED MESSAGE-----