-----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, GsW1NbwqEtLM6kjE5qtbsLxyLY7VTvzxudZqOyxU4sHHI4WlzKBTv0CeFwU9srPH aJxj1+BgTP9qy8oxetm4fg== 0000831968-99-000012.txt : 19990510 0000831968-99-000012.hdr.sgml : 19990510 ACCESSION NUMBER: 0000831968-99-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990507 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: SEC FILE NUMBER: 001-12761 FILM NUMBER: 99614064 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 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q X ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 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, 1999, the registrant has 4,239,809 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, 1999 and December 31,1998 3 Statements of Income - Three Months Ended March 31, 1999 and 1998 4 Statements of Cash Flows - Three Months Ended March 31, 1999 and 1998 5 Notes to Financial Statements 6-7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8-10 Item 3 - Quantitative and Qualitative Disclosures About Market Risk 11 Part II - Other Information: Item 6 - Exhibits and Reports on Form 8-K 12 Signatures 13 Item 1. Financial Statements PROVIDENCE AND WORCESTER RAILROAD COMPANY BALANCE SHEETS (Unaudited) (Dollars in Thousands Except Per Share Amounts) ASSETS MARCH 31, DECEMBER 31, 1999 1998 --------- --------- Current Assets: Cash and equivalents $ 4,186 $ 7,294 Accounts receivable, net of allowance for doubtful accounts of $125 in 1999 and 1998 2,877 2,806 Materials and supplies 1,969 1,810 Prepaid expenses and other 471 568 Deferred income taxes 57 55 -------- -------- Total Current Assets 9,560 12,533 Property and Equipment, net 73,183 71,895 Goodwill, net 149 166 -------- -------- Total Assets $82,892 $84,594 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 2,319 $ 4,046 Accrued expenses 439 709 -------- --------- Total Current Liabilities 2,758 4,755 -------- --------- Profit-Sharing Plan Contribution 425 425 -------- --------- Deferred Grant Income 7,009 6,928 -------- --------- Deferred Income Taxes 8,829 8,777 -------- --------- Commitments and Contingent Liabilities Shareholders' Equity: Preferred stock, 10% noncumulative, $50 par value; authorized, issued and outstanding 647 shares 32 32 Common stock, $.50 par value; authorized 15,000,000 shares; issued and outstanding 4,232,179 shares in 1999 and 4,228,131 shares in 1998 2,116 2,114 Additional paid-in capital 27,985 27,955 Retained earnings 33,738 33,608 -------- --------- Total Shareholders' Equity 63,871 63,709 -------- --------- Total Liabilities and Shareholders' Equity $82,892 $84,594 ======== ========
The accompanying notes are an integral part of the financial statements. PROVIDENCE AND WORCESTER RAILROAD COMPANY STATEMENTS OF INCOME (Unaudited) (Dollars in Thousands Except Per Share Amounts) Three Months Ended March 31 1999 1998 --------- --------- Operating Revenues - Freight and Non-Freight $ 4,926 $ 4,983 --------- --------- Operating Expenses: Maintenance of way and structures 720 798 Maintenance of equipment 541 508 Transportation 1,275 1,216 General and administrative 903 819 Depreciation 564 528 Taxes, other than income taxes 620 581 Car hire, net 167 155 --------- --------- Total Operating Expenses 4,790 4,605 --------- --------- Income from Operations 136 378 Other Income 269 186 Interest Expense -- (350) --------- --------- Income before Income Taxes 405 214 --------- --------- Provision for Income Taxes: Current 95 33 Deferred 50 45 --------- --------- Total Provision for Income Taxes 145 78 --------- --------- Net Income $ 260 $ 136 Preferred Stock Dividends 3 3 --------- --------- Net Income Available to Common Shareholders $ 257 $ 133 ========= ========= Basic Income Per Common Share $ .06 $ .06 ========= ========= Diluted Income Per Common Share $ .06 $ .06 ========= =========
The accompanying notes are an integral part of the financial statements. PROVIDENCE AND WORCESTER RAILROAD COMPANY STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands) Three Months Ended March 31 1999 1998 ---------- ---------- Cash flows from operating activities: Net income $ 260 $ 136 Adjustments to reconcile net income to net cash flows from (used by) operating activities: Depreciation and amortization 581 528 Amortization of deferred grant income (41) (39) Gains from sale, condemnation and disposal of properties, equipment and easements, net (63) (60) Deferred income taxes 50 45 Other, net -- 20 Increase (decrease) in cash from: Accounts receivable (108) (258) Materials and supplies (159) 138 Prepaid expenses and other 97 15 Accounts payable and accrued expenses (179) (580) -------- -------- Net cash flows from (used by) operating activities 438 (55) -------- -------- Cash flows from Investing Activities: Purchase of property and equipment (3,670) (895) Proceeds from sale and condemnation of property and equipment 78 458 Proceeds from deferred grant income 144 85 -------- -------- Net cash flows used by investing activities (3,448) (352) -------- -------- Cash Flows from Financing Activities: Net payments under line of credit -- (1,350) Payments of long-term debt -- (4,179) Dividends paid (130) (70) Proceeds from public offering of 1,000,000 shares of common stock -- 12,590 Issuance of common shares for stock options exercised and employee stock purchases 32 21 -------- -------- Net cash flows from (used by) financing activities (98) 7,012 -------- -------- Increase (Decrease) in Cash and Equivalents (3,108) 6,605 Cash and Equivalents, Beginning of Period 7,294 519 -------- --------- Cash and Equivalents, End of Period $ 4,186 $ 7,124 ======== ======== Supplemental disclosures: Cash paid during the period for: Interest $ -- $ 387 ======== ======== Income taxes $ 53 $ 45 ======== ========
The accompanying notes are an integral part of the financial statements. PROVIDENCE AND WORCESTER RAILROAD COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (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, 1999 and the results of operations and cash flows for the three months ended March 31, 1999 and 1998. 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 1998 Annual Report on Form 10-K for the year ended December 31, 1998 filed with the Securities and Exchange Commission. 2. Changes in Shareholders' Equity: Additional Total Preferred Common Paid-in Retained Shareholders' Stock Stock Capital Earnings Equity ------ ------- ------- ------- ------- Balance December 31, 1998 $ 32 $2,114 $27,955 $ 33,608 $63,709 Issuance of 4,048 common shares for stock options exercised and employee stock purchases 2 30 32 Dividends: Preferred stock, $5.00 per share (3) (3) Common stock, $.03 per share (127) (127) Net income for the period 260 260 ------ ------ ------- ------- ------- Balance March 31, 1999 $ 32 $2,116 $27,985 $33,738 $63,871 ====== ====== ======= ======= =======
3. Other Income: 1999 1998 --------- --------- Gains from sale, condemnation and disposal of properties, equipment and easements, net $ 63 $ 60 Rentals 148 113 Interest 58 13 -------- -------- $ 269 $ 186 ======== ========
4. Income per Share: Basic income per common share is computed using the weighted average number of common shares outstanding during each year. Diluted income per common share reflects the effect of the Company's outstanding convertible preferred stock, options and warrants except where such items would be antidilutive. A reconciliation of weighted average shares used for the basic computation and that used for the diluted computation is as follows: 1999 1998 --------- --------- Weighted average shares for basic 4,230,052 2,327,198 Dilutive effect of convertible preferred stock, options and warrants 91,270 84,844 --------- --------- Weighted average shares for diluted 4,321,322 2,412,042 ========= =========
5. Dividends: On April 28, 1999, the Company declared a dividend of $.04 per share on its outstanding Common Stock payable May 27, 1999 to shareholders of record May 13, 1999. 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. In 1995 the Company entered into a settlement agreement with Bestfoods (formerly CPC International, Inc.) resolving an environmental claim against the Company, arising out of a 1974 rail car incident. Pursuant to the settlement agreement, the Company paid Bestfoods $990 in common stock of the company and cash. The Company and Bestfoods agreed that in the event Bestfoods recovered proceeds from its insurance carrier for the costs of remediation of the involved site, the Company would be entitled to 10% of Bestfoods' net recovery after deduction of litigation expenses. In 1997, Bestfoods obtained a judgement in its favor from its insurance carrier for over $18,000 (which amount includes approximately $5,000 of prejudgment interest) as well as an order that obligates the insurance carrier to reimburse Bestfoods for future remediation expenses. The insurance carrier's appeal of this judgement was unsuccessful and it has now paid the $18,000 judgement to Bestfoods. In July 1998, Bestfoods paid $1,000 to the Company as an interim payment of the Company's 10% recovery pending final resolution of amounts to be paid to Bestfoods by its insurance carrier. Negotiations continue between Bestfoods and the insurance carrier concerning the payment of future expenses, the potential recovery of litigation expenses and the resolution of a lawsuit filed by the insurance carrier against Bestfoods and the Company (for which Bestfoods is both defending and indemnifying the Company). The insurance policy has limits of $25,000. While it is possible that some of the foregoing matters may be settled at a cost greater than that provided for, it is the opinion of management based upon the advice of counsel that the ultimate liability, if any, will not be material to the Company's financial statements. 7. Subsequent Events: In April 1999 the Rhode Island Supreme Court issued an opinion confirming the Company's fee simple absolute title to the 33 acres of waterfront land ("South Quay") located in East Providence, Rhode Island. This confirmation of the Company's fee simple absolute title permits the Company to explore all development opportunities for the South Quay, including rail and non rail related uses. This property was created on formerly tide flowed land by the Company to capitalize on the growth of intermodal transportation utilizing the property's rail, water and highway connections. The South Quay property has good highway access (1/2 mile from I-195), direst rail access, is adjacent to a 12 acre site also owned by the Company and is located 1 1/2 miles from downtown Providence, Rhode Island. In April 1998 the Company acquired all of the outstanding common stock of Connecticut Central Railroad Company ("Conn Central") for 20,000 newly issued shares of common stock of the Company. Conn Central's operations were merged into those of the Company at the time of acquisition. In April 1999 the Company issued an additional 7,500 shares of its common stock to the former shareholders of Conn Central since certain financial and other considerations as specified in the purchase and sale agreement were met. Issuance of these shares gives rise to additional goodwill in the amount of $83. This goodwill will be amortized over the remaining life of the goodwill recorded in connection with the April 1998 acquisition (approximately 24 months). 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. 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 --------------------------------------- 1999 1998 -------------------- ------------------ (In thousands, except percentages) Freight Revenues: Conventional carloads $,4,010 81.4% $4,109 82.5% Containers 510 10.4 420 8.4 Non-Freight Operating Revenues: Transportation services 140 2.8 182 3.6 Other 266 5.4 272 5.5 -------- ------- ------- ------- Total $4,926 100.0% $4,983 100.0% ======== ======= ======= =======
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 ---------------------------------------- 1999 1998 ------------------- ------------------- (In thousands, except percentages) Salaries, wages, payroll taxes and employee benefits $2,927 59.4% $2,658 53.3% Casualties and insurance 157 3.2 205 4.1 Depreciation and amortization 581 11.8 528 10.6 Diesel fuel 115 2.3 129 2.6 Car hire, net 167 3.4 155 3.1 Purchased services, including legal and professional fees 424 8.6 353 7.1 Repair and maintenance of equipment 269 5.5 253 5.1 Track and signal materials 403 8.2 243 4.9 Other materials and supplies 332 6.7 278 5.6 Other 403 8.2 378 7.6 -------- ------ ------- ------- Total 5,778 117.3 5,180 104.0 Less capitalized and recovered costs 988 20.1 575 11.6 -------- ------ ------- ------- Total $4,790 97.2% $4,605 92.4% ======== ====== ======= =======
Operating Revenues: Operating revenues decreased $57,000, or 1.1%, to $4.9 million in the first quarter of 1999 from $5.0 million in the first quarter of 1998. This decrease resulted from a $99,000 (2.4%) decrease in conventional freight revenues and a $48,000 (10.6%) decrease in non-freight operating revenues offset, in part by a $90,000 (21.4%) increase in net container freight revenues. The increase in container freight revenues was the result of an increase in container traffic volume. Total intermodal containers handled increased by 2,413, or 22.8%, to 12,982 containers in the first quarter of 1999 from 10,569 containers in 1998. The average rate received per intermodal container decreased by approximately 1.1% due to rate decreases attributable to decreases in certain railroad industry cost indices and to variations in the mix of containers handled. The decrease in conventional freight revenues is attributable to a decrease in traffic volume partially offset by an increase in the average revenue received per conventional carloading of approximately 4.2%. The Company's conventional freight carloadings decreased by 353, or 6.4%, to 5,165 carloadings in the first quarter of 1999 from 5,518 carloadings in 1998. The decrease in conventional carloadings during the quarter is substantially attributable to construction aggregates which declined by 364 carloadings, or 50.6%, to 355 carloadings in the first quarter of 1999 from 719 carloadings in 1998. Construction aggregates is a seasonal commodity which is shipped over a period of approximately nine months each year beginning in March and ending in early December. Cold weather experienced during the first part of March 1999 delayed the commencement of construction aggregate shipments compared with 1998 when milder weather allowed for a comparatively early start to such shipments. The increase in the average revenue received per carloading is primarily attributable to the lower volume of construction aggregate carloadings since this commodity commands a relatively low freight rate. The $48,000 decrease in non-freight operating revenues was primarily due to decreases in demurrage and other transportation related revenues. Such revenues can vary from period to period depending upon customer needs. Operating Expenses: Operating expenses increased $185,000, or 4.0%, to $4.8 million in the first quarter of 1999 from $4.6 million in 1998. Operating expenses as a percentage of operating revenues ("operating ratio") increased to 97.2% in the first quarter of 1999 from 92.4% in 1998. The most significant increase in operating expenses was in salaries, wages, payroll taxes and employee benefits which increased by $269,000, or 10.1%, to $2.9 million in the first quarter of 1999 from $2.7 million in 1998. This increase results from the fact that the number of employees on the Company's payroll has increased by approximately 4.0% between quarters, the average rate of pay has increased due to semi annual cost of living adjustments and pay rate increases mandated by union contracts and by higher costs for employee health and welfare benefits. Increased costs of purchased services and track, signal and other materials and supplies have been substantially offset by increased capitalized and recovered costs. The Company's operating expenses are of a relatively fixed nature and do not increase or decrease proportionately with changes in operating revenues. Other Income: Other income increased $83,000, or 44.6%, to $269,000 in the first quarter of 1999 from $186,000 in 1998 as a result of increased rental and interest income. Gains from the sales of properties and easements remained virtually unchanged between quarters. Such income can vary significantly from period to period. Interest Expense: The Company had no interest expense in the first quarter of 1999 compared with $350,000 in 1998. This decrease is the result of the Company utilizing a portion of the proceeds of its 1998 public stock offerings and other income to pay off all of its long and short-term debt. Liquidity and Capital Resources During the first quarter of 1999 the Company expended $3.1 million on rolling stock and other equipment. Included were expenditures of approximately $2.1 million for forty gondola railcars in January and approximately $820,000 for three used locomotives in March. The funds for these acquisitions were derived, primarily, from the Company's 1998 public stock offerings. In management's opinion cash generated from operations during the remainder of 1999 will be sufficient to enable the Company to meet its operating expenses, capital expenditure and remaining debt service requirements. Seasonality Historically, the Company's operating revenues are lowest for the first quarter due to the absence of aggregate shipments during a portion of this period and to winter weather conditions. Year 2000 Compliance The Company operates a mainframe computer with a PC network and employs three in-house programmers who write and maintain a substantial portion of the Company's software programs. The Company utilizes Electronic Data Interchange and Interline Settlement Systems through Railinc in Washington, D.C. for the interchange of rail cars and revenue allocations with other railroads. The Company has compatible back up mainframe systems at both its Worcester, MA and Plainfield, CT facilities. The Company has completed an analysis of its information technology and other operating systems to determine which may be impacted by "Year 2000" issues. Based on this analysis, preparation for the Year 2000 have been underway for six years and changes to the Company's information technology are substantially complete. The Company's other non-information technology systems have also been evaluated and no Year 2000 issues have been identified. Modifications to the Company's information technology programs have been performed by internal staff with the associated costs incorporated into the Company's annual operating budgets and, therefore, such costs are not separately identifiable. No material additional costs are anticipated at this time. Due to the short periodic cycle of rail car movements, the exchange of data covers time periods where Year 2000 compliance is not a major factor and should not adversely affect the Company's ability to operate. The Company relies on waybills and car supply and revenue data generated by other railroads in the interchange of rail cars. The failure of these railroads to supply accurate data could disrupt the Company's operations. However, Railinc with whom the majority of these railroads interface electronically, has informed the Company that it is currently addressing the Year 2000 issue and expects to be Year 2000 compliant by mid 1999. The Company believes that any modifications to its programs resulting from Railinc changes will be minimal and that such changes can be readily made. The Company's contingency plan in the event other parties should be unable to provide Year 2000 compliant electronic data is to revert to paper documentation from these parties. However, to the extent that customers, connecting carriers or other entities with which the Company has material relationships do not adequately address Year 2000 issues, the Company could experience payment delays and service disruptions which could materially adversely affect its operations. Recent Accounting Pronouncements In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", effective for fiscal years beginning after June 15, 1999. The new standard requires that all companies record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. Management is currently assessing the impact of SFAS No. 133 on the financial statements of the Company. The Company will adopt this accounting standard on January 1, 2000, as required. Item 3. Quantitative and Qualitative Disclosures About Market Risk Cash and Cash Equivalents As of March 31, 1999, 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, 1999. 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. 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 31,1999. 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/ Orville R. Harrold ---------------------------- Orville R. Harrold,President By: /s/ Robert J. Easton ---------------------------- Robert J. Easton Treasurer and Principal Financial Officer DATED: May 7, 1999 EX-27 2
5 1000 3-mos DEC-31-1999 MAR-31-1999 4186 0 3002 125 1969 9560 101086 27903 82892 2758 0 0 32 2116 61723 82872 0 5195 0 4790 0 0 0 405 145 260 0 0 0 260 .06 .06
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