10-Q

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, 2012

¨ 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 incorporation or organization)	I.R.S. Employer Identification No.
75 Hammond Street, Worcester, Massachusetts	01610
(Address of principal executive offices)	(Zip Code)

(508) 755-4000

Registrant’s telephone number, including area code

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (do not check if a smaller reporting company)	Smaller reporting company	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 May 4, 2012, the registrant has 4,834,559 shares of common stock, par value $.50 per share, outstanding.

PROVIDENCE AND WORCESTER RAILROAD COMPANY

Index to Quarterly Report on Form 10-Q

Part I – Financial Information
Item 1 – Financial Statements (Unaudited):
Condensed Balance Sheets – March 31, 2012 (Unaudited) and December 31, 2011	3
Condensed Statements of Operations – Three Months Ended March 31, 2012 and 2011 (Unaudited)	4
Condensed Statements of Cash Flows – Three Months Ended March 31, 2012 and 2011 (Unaudited)	5
Notes to Condensed Financial Statements (Unaudited)	6-10
Item  2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	11-14
Item 4 – Controls and Procedures	14
Part II – Other Information:
Item 5 Reports on Form 8-K	15
Item 6 Exhibits	15
Signatures	16

2

Part I – Financial Information

Item 1. Financial Statements

PROVIDENCE AND WORCESTER RAILROAD COMPANY

CONDENSED BALANCE SHEETS (Unaudited)

(Dollars in Thousands Except Per Share Amounts)

	MARCH 31, 2012		DECEMBER 31, 2011
ASSETS
Current Assets:
Cash and cash equivalents	$	3,488	$	3,943
Accounts receivable, net of allowance for doubtful accounts of $115 in 2012 and 2011, respectively		2,618		3,570
Materials and supplies		646		842
Prepaid expenses and other current assets		198		412
Deferred income taxes		291		291
Total Current Assets		7,241		9,058
Property and Equipment, net		84,691		84,676
Land Held for Development		12,457		12,457
Total Assets	$	104,389	$	106,191
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current portion of long term debt	$	121	$	120
Accounts payable		3,796		4,046
Current portion of deferred grant and other revenue		310		111
Accrued expenses		1,861		2,327
Total Current Liabilities		6,088		6,604
Long term debt, net of current portion		3,790		3,821
Deferred Income Taxes		11,774		12,290
Deferred Grant and Other Revenue		10,758		10,487
Commitments and Contingencies
Shareholders’ Equity:
Preferred stock, 10% noncumulative, $50 par value; authorized, issued and outstanding 640 shares in 2012 and 2011		32		32
Common stock, $.50 par value; authorized 15,000,000 shares; issued and outstanding 4,834,559 shares in 2012 and 4,833,012 shares in 2011		2,417		2,417
Additional paid-in capital		37,356		37,271
Retained earnings		32,174		33,269
Total Shareholders’ Equity		71,979		72,989
Total Liabilities and Shareholders’ Equity	$	104,389	$	106,191

The accompanying notes are an integral part of the condensed financial statements.

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PROVIDENCE AND WORCESTER RAILROAD COMPANY

CONDENSED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in Thousands Except Per Share Amounts)

	Three Months Ended March 31,
	2012			2011
Revenues:
Operating Revenues	$	6,659		$	6,850
Other Income		123			197
Total Revenues		6,782			7,047
Operating Expenses:
Maintenance of way and structures		1,440			1,835
Maintenance of equipment		896			1,030
Transportation		2,549			2,631
General and administrative		1,221			1,314
Depreciation		828			787
Taxes, other than income taxes		673			583
Car hire, net		235			225
Employee retirement plans		54			58
Track usage fees		248			203
Total Operating Expenses		8,144			8,666
Operating Loss before Interest and Income Taxes		(1,362	)		(1,619	)
Interest expense		53			7
Loss from operations before income taxes		(1,415	)		(1,626	)
Income Tax Provision (Benefit)		(516	)		460
Net Loss		(899	)		(2,086	)
Preferred Stock Dividends		3			3
Net Loss Attributable to Common Shareholders		(902	)	$	(2,089	)
Basic and Diluted Loss Per Common Share	$	(.19	)	$	(.43	)
Weighted-Average Common Shares Outstanding
For basic		4,833,031			4,817,576
For diluted		4,833,031			4,817,576

The accompanying notes are an integral part of the condensed financial statements.

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PROVIDENCE AND WORCESTER RAILROAD COMPANY

CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in Thousands)

	Three Months Ended March 31,
	2012			2011
Cash Flows from Operating Activities:
Net loss	$	(899	)	$	(2,086	)
Adjustments to reconcile net loss to net cash flows from (used in) operating activities:
Depreciation		828			787
Amortization of deferred grant income		(102	)		(66	)
Gain from sale of property		(34	)		—
Deferred revenue		199			—
Deferred income taxes provision (benefit)		(516	)		460
Share-based compensation		65			102
Increase (decrease) in cash from:
Accounts receivable		952			(100	)
Materials and supplies		196			—
Prepaid expenses and other current assets		214			158
Accounts payable and accrued expenses		(971	)		90
Net cash flows used in operating activities		(68	)		(655	)
Cash flows from Investing Activities:
Purchase of property and equipment		(588	)		(2,977	)
Proceeds from the sale of property		34			—
Proceeds from note receivable		—			18
Net cash flows used in investing activities		(554	)		(2,959	)
Cash Flows from Financing Activities:
Borrowings under long term debt		—			2,864
Payments on long term debt		(30	)		—
Dividends paid		(196	)		(196	)
Proceeds from deferred grant and other revenue		373			—
Issuance of common shares for stock options exercised and employee stock purchases		20			48
Net cash flows from financing activities		167			2,716
Decrease in Cash and Cash Equivalents		(455	)		(898	)
Cash and Cash Equivalents, Beginning of Period		3,943			1,517
Cash and Cash Equivalents, End of Period	$	3,488		$	619
Supplemental Disclosures:
Cash paid during period for interest	$	54		$	13
Property and equipment included in accounts payable	$	255		$	679

The accompanying notes are an integral part of the condensed financial statements.

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PROVIDENCE AND WORCESTER RAILROAD COMPANY

NOTES TO FINANCIAL STATEMENTS (Unaudited)

THREE MONTHS ENDED MARCH 31, 2012 AND 2011

(Dollars in Thousands Except Per Share Amounts)

1. In the opinion of management, the accompanying interim condensed financial statements of the Providence and Worcester Railroad Company (the “Company”) contain all adjustments (consisting solely of normal and recurring adjustments) necessary to present fairly the financial position as of March 31, 2012 and the results of operations and cash flows for the three months ended March 31, 2012 and 2011 in accordance with accounting principles generally accepted in the United States. The accompanying condensed balance sheet as of December 31, 2011, has been derived from audited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. 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, 2011 filed with the Securities and Exchange Commission. Results for interim periods may not be necessarily indicative of the results to be expected for the full year.

Certain amounts in the 2011 financial statements have been reclassified to conform with the 2012 presentation. Interest expense is shown separately in the 2012 presentation.

2. Recent Accounting Pronouncements:

The Company reviews new accounting standards as issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any standards that it believes merit further discussion. The Company expects none of the recent accounting pronouncements will have a significant impact on its financial statements.

3. Changes in Shareholders’ Equity:

	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings			Total Shareholders’ Equity
Balance December 31, 2011	$	32	$	2,417	$	37,271	$	33,269		$	72,989
Issuance of 1,547 common shares for employee stock purchases, stock options exercised and employee stock awards						20					20
Share-based compensation, options granted						65					65
Dividends:
Preferred stock, $5.00 per share								(3	)		(3	)
Common stock, $.04 per share								(193	)		(193	)
Net loss for the period								(899	)		(899	)
Balance March 31, 2012	$	32	$	2,417	$	37,356	$	32,174		$	71,979

4. Debt

Revolving Line of Credit:

The Company has a revolving line of credit facility in the amount of $5,000 from a commercial bank expiring on June 25, 2013. Borrowings under this line of credit are unsecured, due on

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PROVIDENCE AND WORCESTER RAILROAD COMPANY

NOTES TO FINANCIAL STATEMENTS (Unaudited) — (Continued)

(Dollars in Thousands Except Per Share Amounts)

demand and bear interest at either the bank’s prime rate or one and three-quarters percent over the thirty, sixty or ninety day London Interbank Offered Rate (“LIBOR”) with a LIBOR floor of one and one-quarter percent. The Company pays no commitment fee on this line of credit and has no compensating balance requirements. It is subject to financial and non-financial covenants including maintenance of a minimum net worth and restrictions as to the incurrence of additional indebtedness, as well as the sale or encumbrance of its assets. At March 31, 2012, no amounts were outstanding.

Long term debt

In December 2010, the Company borrowed $4,000 from the same commercial bank, in order to finance the rehabilitation of the Willimantic Branch. The loan of up to $4,000 required payments of interest only for the first six months and accruing at the bank’s prime rate. After the six month period, the loan converted to a 10 year loan with a 20 year amortization period and bears interest at the Federal Home Loan Bank of Boston 5/20 rate plus 3% (5.18% at the date of conversion). This rate will reset based upon the same conversion factors after 5 years (Federal Home Loan Bank of Boston 5/20 rate plus 3%). The Company has the right to prepay all or any part thereof out of internally-generated funds without penalty. The Company is subject to financial and non-financial covenants, including maintenance of minimum net worth and minimum debt service coverage. As of March 31, 2012, the outstanding principal balance was $3,911.

The carrying value of the Company’s debt facilities approximated its fair value at March 31, 2012 which was estimated using current borrowing rates available to the Company.

5. Other Income:

		XXX,XXX		XXX,XXX
	2012		2011
Rentals	$	120	$	194
Interest		3		3
	$	123	$	197

6. Loss per Common Share:

Loss per common share is computed using the weighted average number of common shares outstanding during each quarter. Diluted income (loss) per common share reflects the effect of the Company’s outstanding convertible preferred stock (using the if-converted method) and options (using the treasury stock method), except where such items would be anti-dilutive.

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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:

	2012								2011
	Net Loss			Shares		Per Share Amount			Net Loss			Shares		Per Share Amount
Basic Earnings per Share
Net Loss available to Common Shareholders	$	(902	)						$	(2,089	)
Basic Earnings/(loss) per share	$	(902	)		4,833	$	(.19	)	$	(2,089	)		4,818	$	(.43	)
Diluted Earnings per Share
Net Loss available to Common Shareholders	$	(902	)						$	(2,089	)
Effect of Dilutive Securities					—								—
Diluted loss per Share	$	(902	)		4,833	$	(.19	)	$	(2,089	)		4,818	$	(.43	)

Options to purchase 65,977 and 59,833 shares of common stock were outstanding at March 31, 2012 and 2011, respectively. These options were not included in the computation of diluted (loss) earnings per common share for 2012 and 2011 because of the anti-dilutive effect. Shares of preferred stock convertible into 64,000 shares of common stock were outstanding at March 31, 2012 and 2011. These shares were not included in the computation of diluted (loss) earnings per common share for 2012 and 2011 because of the anti-dilutive effect.

7. 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 condensed 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 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). 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

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PROVIDENCE AND WORCESTER RAILROAD COMPANY

NOTES TO FINANCIAL STATEMENTS (Unaudited) — (Continued)

(Dollars in Thousands Except Per Share Amounts)

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. 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.

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 was one of about sixty parties named by Plaintiffs, in this suit, to recover response costs incurred in investigating and responding to the releases of hazardous substances at the Site. Plaintiffs alleged that the Company is liable under 42 U.S.C. § 961(a)(3) of CERCLA as an “arranger” or “generator” of waste that ended up at the Site. The Company 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.

8. Related Party Transaction:

Robert Eder, who owns a majority of the Company’s Preferred Shares, with his wife, also controls Capital Properties, Inc. (“CPI”) and its subsidiaries. Pursuant to an agreement between the Company and Getty Oil Company (Eastern Operations), Inc. dated August 6, 1975, the Company has the right to relocate any portion of two pipelines located within the Company’s right of way, in East Providence, Rhode Island. The Company and CPI have supported an extension of Waterfront Drive, so-called, in East Providence, which road is being constructed on the Company’s right of way. The State of Rhode Island’s plans for Waterfront Drive’s extension required a relocation of a portion of the pipelines which the Company has the right to relocate. The Rhode Island Department of Transportation (“RIDOT”) entered into an agreement with the Company to reimburse the Company for expenses incurred by us in relocating the pipelines up to a maximum of $159. In May 2011, CPI’s subsidiary, Capital Terminal Company (“CTC”), entered into an agreement with the Company to act as the Company’s agent to select, direct and supervise all subcontractors subject to the Company’s approval. All invoices from contractors to CTC are submitted to the Company for approval along with a check from CTC in the amount of the invoice. The Company pays the invoice out of the funds provided by CTC. The Company is then obligated to submit the invoices to RIDOT for reimbursement under its agreement with RIDOT. When the Company receives reimbursement from RIDOT, it is obligated to pay that amount to CTC. Any shortfall in RIDOT’s reimbursement is borne by CTC. The Company has received invoices to date of $219, which have been paid by the Company to the subcontractors out of funds received from CTC. CTC, through subcontractors, completed the pipeline relocation during 2011. During March 2012, the Company received $152 from RIDOT and remitted $152 to CTC. At March 31, 2012, the remaining receivable in the amount of $67 from RIDOT, and the corresponding accounts payable to CTC, in the same amount, have been reflected in the Company’s Condensed Balance Sheets. The Company has requested RIDOT to approve change orders to increase the amount payable to $219. The Company is obligated to CTC only to the extent it receives payment from RIDOT.

9. Dividends:

On April 25, 2012, the Company declared a dividend of $.04 per share on its outstanding Common Stock payable May 23, 2012 to shareholders of record on May 9, 2012.

9

PROVIDENCE AND WORCESTER RAILROAD COMPANY

NOTES TO FINANCIAL STATEMENTS (Unaudited) — (Continued)

(Dollars in Thousands Except Per Share Amounts)

10. Subsequent Event:

On April 4, 2012, the Company and National Railroad Passenger Corporation (“Amtrak”) entered into the 2012 Settlement and Amendment Agreement (the “2012 Agreement”) which settles certain disputes between the parties and amends, in part, both an Agreement dated January 3, 1978 (the “1978 Agreement”) and an Agreement dated July 9, 1979 by and between Amtrak and the Company. Under the 1978 Agreement, Amtrak obtained the right to remove certain Company trackage subject to the requirement of providing replacement facilities.

Under the 2012 Agreement, Amtrak’s obligations to P&W for outstanding track capacity are satisfied in full by, among other things, Amtrak (1) granting the Company a license for railroad operations to certain Amtrak trackage located in Cranston, RI (the “Cranston Yard Trackage”), (2) delivering to the Company track materials, (3) granting the Company a credit against mileage charges payable to Amtrak by the Company for freight traffic utilizing the Northeast Corridor (“NEC”), and (4) cash, with the foregoing items having an agreed aggregate value of $5,578. The 2012 Agreement also relieves Amtrak of any future obligation (a) to maintain the Cranston Yard Trackage, and (b) to replace P&W track capacity modified or eliminated by Amtrak provided that no such modification or elimination may unreasonably interfere with the continuity of tracks being used for P&W’s freight service. The 2012 Agreement also contains provisions allocating the risk of use of the Cranston Yard Trackage, establishing procedures for contesting Amtrak invoices for maintenance of freight sidings along the NEC, permitting the Company to bill Amtrak for non-routine services requested by Amtrak and provided by the Company and permitting Amtrak to deduct from its cash payment to the Company the amount of certain uncontested invoices.

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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. The following discussion should be read in conjunction with the Condensed Financial Statements and applicable notes to the Condensed Financial Statements, Item 1.

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. We continue to monitor our accounting policies to ensure proper application of current rules and regulations. There have been no significant changes to these policies as discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 during the first three months of 2012.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements, including, without limitations, statements concerning the conditions in our industry and our operations, economic performance and financial condition, including, in particular, statements relating to our business and strategy. The words “may,” “might,” “should,” “estimate,” “project,” “plan,” “anticipate,” “expect,” “intend,” “outlook,” “believe,” and other similar expressions are intended to identify forward-looking statements and information although not all forward-looking statements include these identifying words. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are based on estimates and assumptions by our management that, although we believe to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties.

In particular, our business might be affected by uncertainties affecting the railroad and transportation industry generally as well as the following, among other factors:

• general economic, financial and political conditions, including downturns affecting the railroad industry and credit markets;

• our relationships with Class I railroads and other carriers;

• legislative and regulatory developments by the Surface Transportation Board, Railroad Retirement Board or the Federal Railroad Administration;

• our ability to comply with financial and non-financial covenants contained in our revolving line of credit and Construction Loan;

• limitations and restrictions on the operation of our business contained in the documents governing our indebtedness;

• increases in transportation costs, including fuel prices, which in some instances may not be passed on to customers;

• competitive pressures, including changes in competitors’ pricing;

• our ability to generate cash flows to invest in the operation of our business; and

• our dependence upon our key customers, executives and other key employees and our ability to renegotiate our union contracts.

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Recent Accounting Pronouncements

The Company reviews new accounting standards as issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any standards that it believes merit further discussion. The Company expects none of the recent accounting pronouncements will have a significant impact on its financial statements.

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,
	2012				2011
	(In thousands, except percentages)
Freight Revenues:
Conventional carloads	$	6,108	91.7	%	$	6,138	89.6	%
Containers		260	3.9			179	2.6
Other freight related		107	1.6			166	2.4
Other operating revenues		184	2.8			367	5.4
Total	$	6,659	100.0	%	$	6,850	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,
	2012				2011
	(In thousands, except percentages)
Salaries, wages, payroll taxes and employee benefits	$	4,116	61.8	%	$	3,979	58.1	%
Casualties and insurance		306	4.6			190	2.8
Depreciation		828	12.4			787	11.5
Diesel fuel		784	11.8			1,002	14.6
Car hire, net		235	3.5			225	3.3
Purchased services, including legal and professional fees		437	6.7			619	9.0
Repair and maintenance of equipment		435	6.5			603	8.8
Track and signal materials		333	5.0			283	4.1
Track usage fees		248	3.7			203	3.0
Other materials and supplies		320	4.8			314	4.6
Other		495	7.4			595	8.7
Total		8,537	128.2			8,800	128.5
Less capitalized and recovered costs		393	5.9			134	2.0
Total	$	8,144	122.3	%	$	8,666	126.5	%

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Operating Revenues:

Operating revenues decreased $191 thousand, or 2.8%, to $6.66 million in the first quarter of 2012 from $6.85 million in the first quarter of 2011. This decrease is a result of $183 thousand (50.0%) decrease in other operating revenues, mainly reimbursable contract revenue.

The slight decrease in conventional freight revenues is attributable to a 4.7% decrease in traffic volume, offset by a 3.5% increase in the average revenue received per conventional carloading. The Company’s conventional carloadings decreased by 333 to 6,691 in the first quarter of 2012 from 7,024 in 2011.

Shipments of most commodities were flat during the first quarter of 2012, as compared to the first quarter of 2011, offset by a decrease in the Company’s ethanol and plastic business due to changes in the consumption patterns of the end users. The increase in the average revenue received per conventional carloading is due mainly to rate changes.

The increase in container freight revenues is the result of a 41% increase in traffic volume and a 6.8% increase in the average revenue received per container. Container traffic volume increased by 1,040 containers to 3,574 in the first quarter of 2012 from 2,534 in 2011. This increase in traffic is attributable to the terminal operator located on the Company’s line obtaining an additional customer.

The slight decrease in other freight-related revenues is the result of the decrease in both demurrage income and switching income, offset by slight increases in weighing revenue.

Other Income:

The net change in other income is primarily due to the $50 thousand decrease in rental income.

Operating Expenses:

Operating expenses for the first quarter of 2012 decreased by $600 thousand, or 6.9%, to $8.1 million from $8.7 million in the first quarter of 2011. The decrease consists of a $218 thousand decrease in fuel consumed offset in part by an increase in the average price per gallon, $182 thousand in purchased services relating to projects in 2011 and not in 2012, $168 thousand in repairs and maintenance equipment relating to the purchase of parts and supplies, $100 thousand in other relating mainly to utility expenditures, and an increase of $259 thousand in capitalized track expenditures and recovered costs, offset by increases of $137 thousand in payroll and related costs due to contractual wage increases and related costs, $41 thousand in depreciation due mainly to the improvements and purchases being reflected in depreciation in 2012 and not in 2011, $45 thousand in track usage fee due to increased traffic along routes for which the Company pays track usage fees, and $116 thousand in casualties and insurance.

Income Tax Provision/Benefit:

The income tax (provision)/benefit for the first quarter of 2012 and 2011 is approximately 36% and (28%) of the pre-tax loss, respectively. The current rate is impacted by a variety of factors, including estimated future taxable income and possible tax planning strategies. The Company will continue to evaluate its provision for income taxes. The 2011 income tax rate represented the effective tax benefit which the Company expected to realize at that time, including provision for an increase to the Company’s valuation allowance against its deferred tax assets.

13

Liquidity and Capital Resources

During the first quarter of 2012, the Company used $68 thousand of cash in operating activities and $554 thousand in investing activities, and the Company generated $167 thousand from financing activities.

On April 25, 2012, the Company declared a quarterly dividend of approximately $193 thousand ($.04 per common share) to be paid on May 23, 2012. The declaration of future dividends and the amount thereof will depend on the Company’s future earnings, financial factors and other events.

The Company has a revolving line of credit facility in the amount of $5 million from a commercial bank expiring on June 25, 2013. At March 31, 2012, no amounts were outstanding.

On May 3, 2012, the Company received approximately $1.85 million in conjunction with the Amtrak settlement.

Seasonality

Historically, the Company’s operating revenues are lowest for the first quarter due to the reduction in construction aggregate shipments during a portion of this period and to winter weather conditions.

Item 4. Controls and Procedures

Our management with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in rule 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934) as of March 31, 2012. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2012, our disclosure controls and procedures were 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 affect, the Company’s internal control over financial reporting. The Company continues to enhance its internal controls over financial reporting, primarily by evaluating and enhancing process and control documentation. Management discusses with and discloses these matters to the Audit Committee of the Board of Directors and the Company’s auditors.

14

PART II—Other Information

Item 5. Reports on Form 8-K

(a) Reports on Form 8-K were appropriately filed during the quarter ended March 31, 2012.

Item 6. Exhibits

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.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101†	The following financial information from the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission on March 23, 2012, formatted in eXtensible Business Reporting Language:
	Condensed Balance Sheets as of March 31, 2012 and December 31, 2011;
	Condensed Statements of Operations for the Three Months ended March 31, 2012 and 2011;
	Condensed Statements of Cash Flows for the Three Months ended March 31, 2012 and 2011; and
	Notes to Financial Statements.
†	This exhibit will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C.78r), or otherwise subject to the liability of that section. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or Securities Exchange Act, except to the extent that the Company specifically incorporates it by reference.

15

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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/ Daniel T. Noreck
	Daniel T. Noreck
	Treasurer and Principal Financial Officer

DATED: May 14, 2012

16

EX-31.1

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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 such evaluation; and

d) 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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: May 14, 2012
	By:	/s/ Robert H. Eder
		Robert H. Eder
		Chairman of the Board and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Providence and Worcester Railroad Company

Certification Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, DANIEL T. NORECK 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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 such evaluation; and

d) 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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: May 14, 2012
	By:	/s/ Daniel T. Noreck
		Daniel T. Noreck
		Treasurer and Principal Financial Officer

EX-32

EXHIBIT 32

PROVIDENCE AND WORCESTER RAILROAD COMPANY

CERTIFICATIONS 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 March 31, 2012, 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. section 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.

By:	/s/ Robert H. Eder
	Robert H. Eder Chairman of the Board and Chief Executive Officer May 14, 2012

EX-32.1

EXHIBIT 32.1

PROVIDENCE AND WORCESTER RAILROAD COMPANY

CERTIFICATIONS 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 March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Daniel T. Noreck, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 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.

By:	/s/ Daniel T. Noreck
	Daniel T. Noreck Treasurer and Chief Financial Officer May 14, 2012

XML

Debt

3 Months Ended

Mar. 31, 2012

Debt [Abstract]

Debt

4. Debt

Revolving Line of Credit:

The Company has a revolving line of credit facility in the amount of $5,000 from a commercial bank expiring on June 25, 2013. Borrowings under this line of credit are unsecured, due on demand and bear interest at either the bank’s prime rate or one and three-quarters percent over the thirty, sixty or ninety day London Interbank Offered Rate (“LIBOR”) with a LIBOR floor of one and one-quarter percent. The Company pays no commitment fee on this line of credit and has no compensating balance requirements. It is subject to financial and non-financial covenants including maintenance of a minimum net worth and restrictions as to the incurrence of additional indebtedness, as well as the sale or encumbrance of its assets. At March 31, 2012, no amounts were outstanding.

Long term debt

In December 2010, the Company borrowed $4,000 from the same commercial bank, in order to finance the rehabilitation of the Willimantic Branch. The loan of up to $4,000 required payments of interest only for the first six months and accruing at the bank’s prime rate. After the six month period, the loan converted to a 10 year loan with a 20 year amortization period and bears interest at the Federal Home Loan Bank of Boston 5/20 rate plus 3% (5.18% at the date of conversion). This rate will reset based upon the same conversion factors after 5 years (Federal Home Loan Bank of Boston 5/20 rate plus 3%). The Company has the right to prepay all or any part thereof out of internally-generated funds without penalty. The Company is subject to financial and non-financial covenants, including maintenance of minimum net worth and minimum debt service coverage. As of March 31, 2012, the outstanding principal balance was $3,911.

The carrying value of the Company’s debt facilities approximated its fair value at March 31, 2012 which was estimated using current borrowing rates available to the Company.

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Changes in Shareholders' Equity

3 Months Ended

Mar. 31, 2012

Changes in Shareholders' Equity/Dividends [Abstract]

Changes in Shareholders' Equity

3. Changes in Shareholders’ Equity:

	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings			Total Shareholders’ Equity
Balance December 31, 2011	$	32	$	2,417	$	37,271	$	33,269		$	72,989
Issuance of 1,547 common shares for employee stock purchases, stock options exercised and employee stock awards						20					20
Share-based compensation, options granted						65					65
Dividends:
Preferred stock, $5.00 per share								(3	)		(3	)
Common stock, $.04 per share								(193	)		(193	)
Net loss for the period								(899	)		(899	)
Balance March 31, 2012	$	32	$	2,417	$	37,356	$	32,174		$	71,979

XML

Condensed Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Current Assets:
Cash and cash equivalents	$ 3,488	$ 3,943
Accounts receivable, net of allowance for doubtful accounts of $115 in 2012 and 2011, respectively	2,618	3,570
Materials and supplies	646	842
Prepaid expenses and other current assets	198	412
Deferred income taxes	291	291
Total Current Assets	7,241	9,058
Property and Equipment, net	84,691	84,676
Land Held for Development	12,457	12,457
Total Assets	104,389	106,191
Current Liabilities:
Current portion of long term debt	121	120
Accounts payable	3,796	4,046
Current portion of deferred grant and other revenue	310	111
Accrued expenses	1,861	2,327
Total Current Liabilities	6,088	6,604
Long term debt, net of current portion	3,790	3,821
Deferred Income Taxes	11,774	12,290
Deferred Grant and Other Revenue	10,758	10,487
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, 10% noncumulative, $50 par value; authorized, issued and outstanding 640 shares in 2012 and 2011	32	32
Common stock, $.50 par value; authorized 15,000,000 shares; issued and outstanding 4,834,559 shares in 2012 and 4,833,012 shares in 2011	2,417	2,417
Additional paid-in capital	37,356	37,271
Retained earnings	32,174	33,269
Total Shareholders' Equity	71,979	72,989
Total Liabilities and Shareholders' Equity	$ 104,389	$ 106,191

XML

Basis of Presentation

3 Months Ended

Mar. 31, 2012

Basis of Presentation [Abstract]

Basis of Presentation

1. In the opinion of management, the accompanying interim condensed financial statements of the Providence and Worcester Railroad Company (the “Company”) contain all adjustments (consisting solely of normal and recurring adjustments) necessary to present fairly the financial position as of March 31, 2012 and the results of operations and cash flows for the three months ended March 31, 2012 and 2011 in accordance with accounting principles generally accepted in the United States. The accompanying condensed balance sheet as of December 31, 2011, has been derived from audited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. 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, 2011 filed with the Securities and Exchange Commission. Results for interim periods may not be necessarily indicative of the results to be expected for the full year.

Certain amounts in the 2011 financial statements have been reclassified to conform with the 2012 presentation. Interest expense is shown separately in the 2012 presentation.

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Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2012

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

2. Recent Accounting Pronouncements:

The Company reviews new accounting standards as issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any standards that it believes merit further discussion. The Company expects none of the recent accounting pronouncements will have a significant impact on its financial statements.

XML

Condensed Balance Sheets (Unaudited) (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Condensed Balance Sheets [Abstract]
Allowance for accounts receivable	$ 115	$ 115
Percentage of noncumulative preferred stock	10.00%	10.00%
Preferred stock, par value	$ 50	$ 50
Preferred stock, shares authorized	640	640
Preferred stock, shares issued	640	640
Preferred stock, shares outstanding	640	640
Common stock, par value	$ 0.50	$ 0.50
Common stock, shares authorized	15,000,000	15,000,000
Common stock, shares issued	4,834,559	4,833,012
Common stock, shares outstanding	4,834,559	4,833,012

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2012	May 04, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	PROVIDENCE & WORCESTER RAILROAD CO/RI/
Entity Central Index Key	0000831968
Document Type	10-Q
Document Period End Date	Mar. 31, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		4,834,559

XML

Condensed Statements of Operations (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Revenues:
Operating Revenues	$ 6,659	$ 6,850
Other Income	123	197
Total Revenues	6,782	7,047
Operating Expenses:
Maintenance of way and structures	1,440	1,835
Maintenance of equipment	896	1,030
Transportation	2,549	2,631
General and administrative	1,221	1,314
Depreciation	828	787
Taxes, other than income taxes	673	583
Car hire, net	235	225
Employee retirement plans	54	58
Track usage fees	248	203
Total Operating Expenses	8,144	8,666
Operating Loss before Interest and Income Taxes	(1,362)	(1,619)
Interest expense	53	7
Loss from operations before income taxes	(1,415)	(1,626)
Income Tax Provision (Benefit)	(516)	460
Net Loss	(899)	(2,086)
Preferred Stock Dividends	3	3
Net Loss Attributable to Common Shareholders	$ (902)	$ (2,089)
Basic and Diluted Loss Per Common Share	$ (0.19)	$ (0.43)
Weighted-Average Common Shares Outstanding
For basic	4,833,031	4,817,576
For diluted	4,833,031	4,817,576

XML

Commitments and Contingent Liabilities

3 Months Ended

Mar. 31, 2012

Commitments and Contingent Liabilities [Abstract]

Commitments and Contingent Liabilities

7. 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 condensed 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 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). 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. 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.

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 was one of about sixty parties named by Plaintiffs, in this suit, to recover response costs incurred in investigating and responding to the releases of hazardous substances at the Site. Plaintiffs alleged that the Company is liable under 42 U.S.C. § 961(a)(3) of CERCLA as an “arranger” or “generator” of waste that ended up at the Site. The Company 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.

XML

Loss per Common Share

3 Months Ended

Mar. 31, 2012

Loss per Common Share [Abstract]

Loss per Common Share

6. Loss per Common Share:

Loss per common share is computed using the weighted average number of common shares outstanding during each quarter. Diluted income (loss) per common share reflects the effect of the Company’s outstanding convertible preferred stock (using the if-converted method) and options (using the treasury stock method), except where such items would be anti-dilutive.

A reconciliation of weighted average shares used for the basic computation and that used for the diluted computation is as follows:

	2012								2011
	Net Loss			Shares		Per Share Amount			Net Loss			Shares		Per Share Amount
Basic Earnings per Share
Net Loss available to Common Shareholders	$	(902	)						$	(2,089	)
Basic Earnings/(loss) per share	$	(902	)		4,833	$	(.19	)	$	(2,089	)		4,818	$	(.43	)
Diluted Earnings per Share
Net Loss available to Common Shareholders	$	(902	)						$	(2,089	)
Effect of Dilutive Securities					—								—
Diluted loss per Share	$	(902	)		4,833	$	(.19	)	$	(2,089	)		4,818	$	(.43	)

Options to purchase 65,977 and 59,833 shares of common stock were outstanding at March 31, 2012 and 2011, respectively. These options were not included in the computation of diluted (loss) earnings per common share for 2012 and 2011 because of the anti-dilutive effect. Shares of preferred stock convertible into 64,000 shares of common stock were outstanding at March 31, 2012 and 2011. These shares were not included in the computation of diluted (loss) earnings per common share for 2012 and 2011 because of the anti-dilutive effect.

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Subsequent Event

3 Months Ended

Mar. 31, 2012

Subsequent Event [Abstract]

Subsequent Event

10. Subsequent Event:

On April 4, 2012, the Company and National Railroad Passenger Corporation (“Amtrak”) entered into the 2012 Settlement and Amendment Agreement (the “2012 Agreement”) which settles certain disputes between the parties and amends, in part, both an Agreement dated January 3, 1978 (the “1978 Agreement”) and an Agreement dated July 9, 1979 by and between Amtrak and the Company. Under the 1978 Agreement, Amtrak obtained the right to remove certain Company trackage subject to the requirement of providing replacement facilities.

Under the 2012 Agreement, Amtrak’s obligations to P&W for outstanding track capacity are satisfied in full by, among other things, Amtrak (1) granting the Company a license for railroad operations to certain Amtrak trackage located in Cranston, RI (the “Cranston Yard Trackage”), (2) delivering to the Company track materials, (3) granting the Company a credit against mileage charges payable to Amtrak by the Company for freight traffic utilizing the Northeast Corridor (“NEC”), and (4) cash, with the foregoing items having an agreed aggregate value of $5,578. The 2012 Agreement also relieves Amtrak of any future obligation (a) to maintain the Cranston Yard Trackage, and (b) to replace P&W track capacity modified or eliminated by Amtrak provided that no such modification or elimination may unreasonably interfere with the continuity of tracks being used for P&W’s freight service. The 2012 Agreement also contains provisions allocating the risk of use of the Cranston Yard Trackage, establishing procedures for contesting Amtrak invoices for maintenance of freight sidings along the NEC, permitting the Company to bill Amtrak for non-routine services requested by Amtrak and provided by the Company and permitting Amtrak to deduct from its cash payment to the Company the amount of certain uncontested invoices.

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Related Party Transaction

3 Months Ended

Mar. 31, 2012

Related Party Transaction [Abstract]

Related Party Transaction

8. Related Party Transaction:

Robert Eder, who owns a majority of the Company’s Preferred Shares, with his wife, also controls Capital Properties, Inc. (“CPI”) and its subsidiaries. Pursuant to an agreement between the Company and Getty Oil Company (Eastern Operations), Inc. dated August 6, 1975, the Company has the right to relocate any portion of two pipelines located within the Company’s right of way, in East Providence, Rhode Island. The Company and CPI have supported an extension of Waterfront Drive, so-called, in East Providence, which road is being constructed on the Company’s right of way. The State of Rhode Island’s plans for Waterfront Drive’s extension required a relocation of a portion of the pipelines which the Company has the right to relocate. The Rhode Island Department of Transportation (“RIDOT”) entered into an agreement with the Company to reimburse the Company for expenses incurred by us in relocating the pipelines up to a maximum of $159. In May 2011, CPI’s subsidiary, Capital Terminal Company (“CTC”), entered into an agreement with the Company to act as the Company’s agent to select, direct and supervise all subcontractors subject to the Company’s approval. All invoices from contractors to CTC are submitted to the Company for approval along with a check from CTC in the amount of the invoice. The Company pays the invoice out of the funds provided by CTC. The Company is then obligated to submit the invoices to RIDOT for reimbursement under its agreement with RIDOT. When the Company receives reimbursement from RIDOT, it is obligated to pay that amount to CTC. Any shortfall in RIDOT’s reimbursement is borne by CTC. The Company has received invoices to date of $219, which have been paid by the Company to the subcontractors out of funds received from CTC. CTC, through subcontractors, completed the pipeline relocation during 2011. During March 2012, the Company received $152 from RIDOT and remitted $152 to CTC. At March 31, 2012, the remaining receivable in the amount of $67 from RIDOT, and the corresponding accounts payable to CTC, in the same amount, have been reflected in the Company’s Condensed Balance Sheets. The Company has requested RIDOT to approve change orders to increase the amount payable to $219. The Company is obligated to CTC only to the extent it receives payment from RIDOT.

XML

Dividends

3 Months Ended

Mar. 31, 2012

Changes in Shareholders' Equity/Dividends [Abstract]

Dividends

9. Dividends:

On April 25, 2012, the Company declared a dividend of $.04 per share on its outstanding Common Stock payable May 23, 2012 to shareholders of record on May 9, 2012.

XML

Condensed Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Cash Flows from Operating Activities:
Net loss	$ (899)	$ (2,086)
Adjustments to reconcile net loss to net cash flows from (used in) operating activities:
Depreciation	828	787
Amortization of deferred grant income	(102)	(66)
Gain from sale of property	(34)
Deferred revenue	199
Deferred income taxes provision (benefit)	(516)	460
Share-based compensation	65	102
Increase (decrease) in cash from:
Accounts receivable	952	(100)
Materials and supplies	196
Prepaid expenses and other current assets	214	158
Accounts payable and accrued expenses	(971)	90
Net cash flows used in operating activities	(68)	(655)
Cash flows from Investing Activities:
Purchase of property and equipment	(588)	(2,977)
Proceeds from the sale of property	34
Proceeds from note receivable		18
Net cash flows used in investing activities	(554)	(2,959)
Cash Flows from Financing Activities:
Borrowings under long term debt		2,864
Payments on long term debt	(30)
Dividends paid	(196)	(196)
Proceeds from deferred grant and other revenue	373
Issuance of common shares for stock options exercised and employee stock purchases	20	48
Net cash flows from financing activities	167	2,716
Decrease in Cash and Cash Equivalents	(455)	(898)
Cash and Cash Equivalents, Beginning of Period	3,943	1,517
Cash and Cash Equivalents, End of Period	3,488	619
Supplemental Disclosures:
Cash paid during period for interest	54	13
Property and equipment included in accounts payable	$ 255	$ 679

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Other Income

3 Months Ended

Mar. 31, 2012

Other Income [Abstract]

Other Income

5. Other Income:

		XXX,XXX		XXX,XXX
	2012		2011
Rentals	$	120	$	194
Interest		3		3
	$	123	$	197