10-Q

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 September 30, 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)

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 has submitted electronically and posted on its website, 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 fields).    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 “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	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 November 5, 2012, the registrant had 4,839,348 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 – September  30, 2012 and December 31, 2011	3
Condensed Statements of Operations – Three and Nine Months Ended September 30, 2012 and 2011	4
Condensed Statements of Cash Flows – Nine Months Ended September 30, 2012 and 2011	5
Notes to Condensed Financial Statements	6-12
Item  2 –Management’s Discussion and Analysis of Financial Condition and Results of Operations	13-18
Item 4 –Controls and Procedures	18
Part II – Other Information:
Item 5 –Other Information	19
Item 6 –Exhibits	19
Signatures	20

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Part I – Financial Information

Item 1. Financial Statements

PROVIDENCE AND WORCESTER RAILROAD COMPANY

CONDENSED BALANCE SHEETS

(Dollars in Thousands Except Per Share Amounts)

(Unaudited)

	September 30, 2012		December 31, 2011
ASSETS
Current Assets:
Cash and cash equivalents	$	3,805	$	3,943
Accounts receivable, net of allowance for doubtful accounts of $115 in 2012 and 2011		2,696		3,570
Materials and supplies		757		842
Prepaid expenses and other current assets		644		412
Deferred income taxes		291		291
Total Current Assets		8,193		9,058
Property and Equipment, net		86,817		84,676
Land Held for Development		12,457		12,457
Total Assets	$	107,467	$	106,191
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current portion of long term debt	$	124	$	120
Accounts payable		4,900		4,046
Current portion of deferred grant and other income		111		111
Accrued expenses		1,796		2,327
Total Current Liabilities		6,931		6,604
Long term debt, net of current portion		3,729		3,821
Deferred Income Taxes		11,954		12,290
Deferred Grant and Other Income		10,478		10,487
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 4,839,273 shares in 2012 and 4,830,503 shares in 2011		2,420		2,417
Additional paid-in capital		37,419		37,271
Retained earnings		34,504		33,269
Total Shareholders’ Equity		74,375		72,989
Total Liabilities and Shareholders’ Equity	$	107,467	$	106,191

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

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PROVIDENCE AND WORCESTER RAILROAD COMPANY

CONDENSED STATEMENTS OF OPERATIONS

(Dollars in Thousands Except Per Share Amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Operating Revenues	$	7,951		$	8,398		$	23,084		$	23,376
Operating Expenses:
Maintenance of way and structures		1,524			999			1,723			3,016
Maintenance of equipment		940			921			2,781			2,944
Transportation		2,699			2,671			7,805			8,054
General and administrative		1,137			1,216			3,499			3,850
Depreciation		834			817			2,496			2,392
Taxes, other than income taxes		721			606			2,235			1,755
Car hire, net		262			230			754			820
Employee retirement plans		60			59			168			182
Track usage fees		69			200			183			585
Total Operating Expenses		8,246			7,719			21,644			23,598
Income (loss) from Operations		(295	)		679			1,440			(222	)
Other income, net		198			1,303			224			1,429
Interest expense		(53	)		(40	)		(159	)		(56	)
Income (loss) from operations prior to income taxes		(150	)		1,942			1,505			1,151
Provision for Income Taxes (Benefit)		231			360			(314	)		825
Net Income (Loss)		(381	)		1,582			1,819			326
Preferred Stock Dividends		—			—			3			3
Net Income (Loss) Available to Common Shareholders.		(381	)	$	1,582		$	1,816		$	323
Basic and Diluted Income (Loss) Per Common Share	$	(.08	)	$	.32		$	.37		$	.07
Weighted-Average Common Shares Outstanding:
For basic		4,837,987			4,828,286			4,834,485			4,826,126
For diluted		4,837,987			4,897,901			4,903,430			4,898,442

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

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PROVIDENCE AND WORCESTER RAILROAD COMPANY

CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Nine Months Ended September 30,
	2012			2011
Cash Flows from Operating Activities:
Net income	$	1,819		$	326
Adjustments to reconcile the net income to cash flows from operating activities:
Depreciation		2,496			2,392
Non-cash component of Amtrak Agreement		(1,108	)		—
Amortization of deferred grant and other income		(431	)		(198	)
Proceeds from deferred grant and other income		177			—
(Gains) from sale and disposal of property, equipment and easements		(181	)		(1,921	)
Deferred income tax benefit		(336	)		807
Share-based compensation		65			113
Increase (decrease) in cash from:
Trade receivable		874			(789	)
Materials and supplies		85			(82	)
Prepaid expenses and other		(232	)		(218	)
Accounts payable and accrued expenses		(67	)		308
Net cash flows from operating activities		3,161			738
Cash flows from Investing Activities:
Purchase of property and equipment		(3,166	)		(6,715	)
Proceeds from note receivable		—			75
Proceeds from sale of property, equipment and easements		208			1,921
Net cash flows used in investing activities		(2,958	)		(4,719	)
Cash Flows from Financing Activities:
Borrowings (payments) under line of credit		—			(500	)
Proceeds from long term debt		—			4,000
Repayments of long term debt		(88	)		(30	)
Dividends paid		(584	)		(584	)
Proceeds from deferred grant and other		245			—
Issuance of common shares for stock options exercised and employee stock purchases		86			93
Net cash flows from financing activities		(341	)		2,979
Increase (decrease) in Cash and Cash Equivalents		(138	)		(1,002	)
Cash and Cash Equivalents, Beginning of Period		3,943			1,517
Cash and Cash Equivalents, End of Period		3,805		$	515
Supplemental Disclosures:
Cash paid for interest	$	142		$	104
Property and equipment included in accounts payable and accrued expenses	$	635		$	391

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

5

PROVIDENCE AND WORCESTER RAILROAD COMPANY

NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)

(Dollars in Thousands Except Per Share Amounts)

1. In the opinion of management, the accompanying interim financial statements of Providence and Worcester Railroad Company (the “Company”) contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position as of September 30, 2012, the results of operations for the three and nine months ended September 30, 2012 and 2011 and cash flows for the nine months ended September 30, 2012 and 2011. Results for interim periods may not be necessarily indicative of the results to be expected for the full 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, 2011 filed with the Securities and Exchange Commission.

Certain amounts in the 2011 financial statements have been reclassified to conform with the current presentation. Interest expense is shown separately in the 2012 presentation. Other income items which are non-recurring in nature have been reclassified as below operating income 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.

6

PROVIDENCE AND WORCESTER RAILROAD COMPANY

NOTES CONDENSED TO FINANCIAL STATEMENTS (Unaudited) — (Continued)

(Dollars in Thousands Except Per Share Amounts)

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 6,261 common shares for stock options exercised, employee stock purchases and employee stock awards				3		83					86
Share-based compensation, options granted						65					65
Dividends:
Preferred stock, $5.00 per share								(3	)		(3	)
Common stock, $.12 per share								(581	)		(581	)
Net income for the period								1,819			1,819
Balance September 30, 2012	$	32	$	2,420	$	37,419	$	34,504		$	74,375

4. Debt:

Revolving Line of Credit

In June 2011, the Company extended its revolving line of credit facility in the amount of $5 million from a commercial bank. The line of credit facility matures 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 on the incurrence of additional indebtedness, as well as the sale or encumbrance of its assets. At September 30, 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 September 30, 2012, the outstanding principal balance was $3,853.

7

PROVIDENCE AND WORCESTER RAILROAD COMPANY

NOTES CONDENSED TO FINANCIAL STATEMENTS (Unaudited) — (Continued)

(Dollars in Thousands Except Per Share Amounts)

The carrying value of the Company’s debt facilities approximated its fair value at September 30, 2012 which was estimated using current borrowing rates available to the Company.

5. Other Income:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Proceeds from legal settlement	$	—	$	1,242	$	—	$	1,242
Interest		7		5		16		12
Other		191		56		208		175
	$	198	$	1,303	$	224	$	1,429

The Company received $1.2 million in July 2011 for settlement of certain legal proceedings and the grant of a permanent easement.

6. 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.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Weighted-average shares for basic		4,837,987		4,828,286		4,834,485		4,826,126
Dilutive effect of convertible preferred stock and stock options		—		69,615		68,944		72,316
Weighted-average shares for diluted		4,837,987		4,897,901		4,903,430		4,898,442

Options to purchase 65,508 shares of common stock were outstanding at September 30, 2012. Options to purchase 59,244 shares of common stock were outstanding at September 30, 2011. For the three month period ended September 20, 2012, 4,085 of outstanding options to purchase common stock were not included in the diluted earnings per share (EPS) as the effect would antidilutive. For the three month period ended September 30, 2011, 5,615 of outstanding options to purchase common shares were included in the computation of diluted earnings per share (EPS). The remaining outstanding options to purchase common stock were not included in the computation of diluted EPS because the options exercise price was greater than the average market prices of the Company’s common stock.

8

PROVIDENCE AND WORCESTER RAILROAD COMPANY

NOTES CONDENSED TO FINANCIAL STATEMENTS (Unaudited) — (Continued)

(Dollars in Thousands Except Per Share Amounts)

For the nine month period ended September 30, 2012 and 2011, 4,944 and 8,316 of outstanding options to purchase common shares were included in the computation of diluted earnings per share (EPS). The remaining outstanding options to purchase common stock were not included in the computation of diluted EPS because the options exercise price was greater than the average market prices of the Company’s common stock

Preferred Stock, convertible into 64,000 shares of common stock at the rate of 100 shares of common stock for each one share of Preferred Stock, was outstanding for the three and nine-month periods ended September 30, 2012 and 2011. For the three month period ended September 30, 2012, the 64,000 shares of the Company’s common stock were not included as the effect would be antidilutive. For the three month period ended September 30, 2011 and for the nine month period ended September 30, 2012, 64,000 shares of the Company’s common stock were included in the diluted EPS.

7. Track Maintenance Agreement:

In the second quarter of 2011, the Company entered into a track maintenance agreement with an unrelated third party customer (“Shipper”). The Shipper paid for qualifying railroad track maintenance expenditures during 2011 in consideration of the assignment of railroad track miles which permits the Shipper to claim certain federal tax credits pursuant to Internal Revenue Code Section 45G. During 2011, the Company received $869 thousand, net of expenses. The authorizing federal legislation for track maintenance credits was not renewed by Congress upon its expiration on December 31, 2011. No amounts were received during the three months ended September 30, 2012 and 2011 or the nine months ended September 30, 2012 for track maintenance credits.

8. 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 (“the 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

9

PROVIDENCE AND WORCESTER RAILROAD COMPANY

NOTES CONDENSED TO FINANCIAL STATEMENTS (Unaudited) — (Continued)

(Dollars in Thousands Except Per Share Amounts)

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 thousand to settle this suit in March 2006.

9. Amtrak Agreement

On April 4, 2012, Providence and Worcester Railroad Company (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”) ($179), (2) delivering to the Company track materials ($684), (3) granting the Company a credit against mileage charges payable to Amtrak by the Company for freight traffic utilizing the Northeast Corridor ($2,571), and (4) cash and relief of certain outstanding obligations the Company owed to Amtrak ($2,143), 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 NEC freight sidings along the Northeast Corridor, 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.

The Company recorded such amounts as recoveries of related operating expenses. The Company recorded recoveries of $3,006 during the second quarter of 2012, offsetting Maintenance of Way expense. As the related operating expenses relative to the mileage credit have not yet been incurred, the Company did not recognize offsetting recoveries during the

10

PROVIDENCE AND WORCESTER RAILROAD COMPANY

NOTES CONDENSED TO FINANCIAL STATEMENTS (Unaudited) — (Continued)

(Dollars in Thousands Except Per Share Amounts)

second quarter of 2012. The Company will recognize the expense offset relative to Track Usage Fees as the expenses are incurred. As such, the Company did not record any related assets or liabilities relative to the mileage credit. The Company has recorded the following offsets to Track Usage expense and has the following track mileage credit remaining:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Mileage credit available	$	2,424	$	—	$	2,571	$	—
Utilized		173		—		320		—
Mileage credit remaining	$	2,251	$	—	$	2,251	$	—

10. 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 September 30, 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.

11

PROVIDENCE AND WORCESTER RAILROAD COMPANY

NOTES CONDENSED TO FINANCIAL STATEMENTS (Unaudited) — (Continued)

(Dollars in Thousands Except Per Share Amounts)

11. Subsequent event and dividends:

The Company has reached agreement with an unrelated person (the “Grantee”) to convey to the Grantee a permanent easement along a portion of its right of way in exchange for a payment by the Grantee of $2,625. The Company received proceeds, less related fees, in the amount of $2,605 in November 2012.

On October 31, 2012, the Company declared a dividend of $.04 per share on its outstanding Common Stock payable November 28, 2012 to shareholders of record on November 14, 2012.

12

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. The Company does not undertake the obligation to update forward-looking statements in response to new information, future events or otherwise.

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 nine 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.

13

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 long-term debt;

• 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.

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, exclusive of rental operating revenues, by category in dollars and as a percentage of operating revenues:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2012				2011				2012				2011
	(In thousands, except percentages)
Freight Revenues:
Conventional carloads	$	6,696	86.0	%	$	7,791	93.6	%	$	19,780	87.3	%	$	21,130	92.1	%
Containers		299	3.8			179	2.2			869	3.8			570	2.5
Other freight related		185	2.4			152	1.8			449	2.0			485	2.1
Other Operating Revenues		604	7.8			199	2.4			1,559	6.9			760	3.3
Total	$	7,784	100.0	%	$	8,321	100.0	%	$	22,657	100.0	%	$	22,945	100.0	%

14

The following table sets forth a comparison of the Company’s operating expenses expressed in dollars and as a percentage of operating revenues, exclusive of rental operating revenues:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2012				2011				2012				2011
	(In thousands, except percentages)
Salaries, wages, payroll taxes and employee benefits	$	4,114	52.9	%	$	4,097	49.2	%	$	12,311	54.3	%	$	11,994	52.3	%
Casualties and insurance		376	4.8			214	2.6			767	3.4			524	2.3
Depreciation		835	10.7			817	9.8			2,496	11.0			2,392	10.4
Diesel fuel		775	10.0			911	10.9			2,407	10.6			3,026	13.2
Car hire, net		262	3.4			230	2.8			754	3.3			820	3.6
Purchased services, including legal and professional fees		591	7.6			860	10.3			1,724	7.6			2,336	10.2
Repair and maintenance of equipment		473	6.1			204	2.5			1,230	5.4			899	3.9
Track and signal materials		544	7.0			798	9.6			1,734	7.7			1,225	5.3
Track usage fees		242	3.1			200	2.4			503	2.2			585	2.5
Other materials and supplies		349	4.4			289	3.5			1,057	4.7			895	3.9
Other		541	6.9			492	5.9			1,765	7.8			1,546	6.7
Total		9,102	116.9			9,112	109.5			26,747	118.0			26,242	114.3
Less capitalized and recovered costs, including amounts relating to the Amtrak Agreement		856	11.0			1,393	16.7			5,104	22.5			2,644	11.5
Total	$	8,246	105.9	%	$	7,719	92.8	%	$	21,644	95.5	%	$	23,598	102.8	%

Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011

Operating Revenues:

Operating revenues decreased $288,000, or 1.3%, to $22.6 million in the nine months ended September 30, 2012 from $22.9 million in 2011. This decrease is the result of a $1.3 million (6.4%) decrease in conventional freight revenues, a $36,000 (7.4%) decrease in other freight-related revenues, offset by a $299,000 (52.5%) increase in container freight revenues and an $799,000 (105.1%) increase in other operating revenues.

The decrease in conventional freight revenues results from an 11.4% decrease in traffic volume, offset by a 5.7% increase in the average revenue received per conventional carloading. The Company’s conventional carloadings decreased by 3,009 to 23,386 in the nine-month period ended September 30, 2012 from 26,395 in 2011.

15

The number of shipments of most commodities handled by the Company was substantially constant except for decreases in ethanol shipments during the first nine months of 2012. The increase in the average revenue received per conventional carloading is due to a shift in the mix of commodities, as well as some rate changes.

The increase in container freight revenues is the result of a 44.3% increase in traffic volume and a 7.6% increase in the average revenue received per container. Container traffic volume increased 3,657 to 11,908 in the first nine months of 2012 from 8,251 containers in 2011. This increase in traffic, along with improved economic conditions, contributed to the increase in the average revenue received per container.

The decrease in other freight-related revenues and increase in other operating revenues result primarily from overall increase in the number of shipments handled by the Company.

Other Income:

Other income decreased by $1.2 million to $224 thousand in the nine-month period ended September 30, 2012 from $1.4 million in 2011. The settlement of certain legal proceedings and the granting of a permanent easement for $1.2 million in July 2011 accounts for the decrease.

Operating Expenses:

Operating expenses for the nine-month period ended September 30, 2012 were $21.6 million. The Amtrak Agreement offset $3 million of maintenance of way costs. Additionally, the Amtrak Agreement offset $320 thousand of track usage fees. The Amtrak Agreement amounts are included as recovered costs in the above table of the Company’s operating expenses as a percentage of operating income. Exclusive of the Amtrak Agreement credits, operating expenses increased by $1.4 million or 5.8%, from $23.6 million in 2011. This increase was caused primarily by higher payroll related expenses ($317 thousand), higher casualties and insurance costs ($243 thousand), increased spending on track materials ($509 thousand) and less recoveries related to track maintenance credits ($869 thousand), offset by lower diesel fuel prices and usage ($619 thousand) and decreased usage of outside services ($613 thousand).

As noted above, the Company’s track usage fees were reduced by $320 thousand as a result of the utilization of a portion of the available mileage credit received pursuant to the Amtrak Agreement. The Company has $2.251 million of credit remaining to offset future mileage charges for use of Amtrak’s Northeast Corridor.

Provision for Income Tax Benefit/Expense:

The income tax benefit for the nine months ended September 30, 2012 is equal to (20)% of the Company’s pre-tax income. This effective rate reflects the federal and state income tax rates decreased by the effect of a reduction in the valuation allowance against tax credit carryovers that are reserved based upon the reversal pattern of the Company’s deferred tax assets and liabilities for federal tax purposes.

Three Months Ended September 30, 2012 Compared to Three Months Ended September 30, 2011

Operating Revenues:

Operating revenues decreased $537,000, or 6.5%, to $7.8 million in the third quarter of 2012 from $8.3 million in the third quarter of 2011. The decrease is the result of a $1.1 million (14%) decrease in conventional freight revenues, offset by a $120,000 (67%) increase in container freight revenues, a $33,000 (21.7%) increase in other freight related revenue, and a $405,000 (203.5%) increase in other operating revenues.

16

The decrease in conventional freight revenues results from an 18.7% decrease in conventional traffic volume, offset by a 6.7% increase in the average revenue received per conventional carloading. Conventional carloads decreased by 1,859 to 8,090 in the third quarter of 2012 from 9,949 in the third quarter of 2011. The reasons for the decrease in conventional traffic and the increase in average revenue received per carloading are the same as for the nine-month period ended September 30, 2012, as previously discussed.

The increase in container freight revenues for the quarter is the result of a 58.2% increase in traffic volume and a 6.7% increase in the average revenue received per container. Container traffic volume increased by 1,508 to 4,100 in the third quarter of 2012 from 2,592 in the third quarter of 2011. Reasons for the increases in traffic volume and in the average revenue received per container during the third quarter are as previously discussed.

The reason for the increase in other freight-related revenues and other operating revenue is the same as for the nine-month period ended September 30, 2012, as previously discussed.

Other Income:

Other income decreased by $1.1 million to $198 thousand in the third quarter of 2012 from $1.3 million in the third quarter 2011. The settlement in July 2011 of certain legal proceedings and the granting of a permanent easement for $1.2 million account for the increase.

Operating Expenses:

Operating expenses for the three-month period ended September 30, 2012 were $8.2 million. The Amtrak Agreement offset $173 thousand of track usage fees. The Amtrak Agreement amount is included as recovered costs in the above table of the Company’s operating expenses as a percentage of operating income. Exclusive of the Amtrak Agreement, operating expense increased by $698 thousand, or 9%, from $7,719 million in 2011. The increase was caused primarily by higher casualties and insurance costs ($162 thousand), increased repairs and maintenance ($269 thousand) and a decrease in amounts recovered for maintenance of way projects ($710 thousand), offset, in part, by lower diesel fuel prices and usage ($136 thousand), less usage of outside services ($270 thousand) and track and signal material ($254 thousand).

As noted above, the Company’s track usage fees were reduced by $173 thousand as a result of the utilization of a portion of the available mileage credit received under the Amtrak Agreement. The Company has $2.251 million of credit remaining to offset future mileage charges for use of Amtrak’s Northeast Corridor.

Provision for Income Tax Benefit/Expense:

The income tax provision for the third quarter of 2012 is equal to 154% of pre-tax income. This effective rate reflects the federal income and state tax rates increased by the effect of an increase in the valuation allowance against tax credit carryovers that are reserved based upon the reversal pattern of the Company’s deferred tax assets and liabilities.

Liquidity and Capital Resources

During the nine months ended September 30, 2012, the Company generated $3.2 million of cash from operating activities, and the Company used $3.0 million in investing activities and $341 thousand in financing activities.

17

On October 31, 2012, the Company declared a quarterly dividend of approximately $193 thousand ($.04 per common share) to be paid on November 28, 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 September 30, 2012, no amounts were outstanding.

The Company received $2.625 million as a result of granting a permanent easement in November 2012.

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 Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (2) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

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.

18

PART II – Other Information

Item 5. Other information

None.

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 Sarbanes-Oxley Act of 2002.
101† The following financial information from the Company’s Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2012, filed with the Securities and Exchange Commission on November 14, 2012, formatted in eXtensible Business Reporting Language:
(i) Balance Sheets as of September 30, 2012 and December 31, 2011;
(ii) Statements of Operations for the Three and Nine Months ended September 30, 2012 and 2011;
(iii) Statements of Cash Flows for the Nine Months ended September 30, 2012 and 2011; and
(iv) 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.

19

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/ Daniel T. Noreck
	Daniel T. Noreck
	Treasurer and Chief Financial Officer

DATED: November 14, 2012

20

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: November 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: November 14, 2012

By:	/s/ Daniel T. Noreck
	Daniel T. Noreck
	Treasurer and Chief 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 September 30, 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. 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

November 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 September 30, 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. 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/ Daniel T. Noreck

Daniel T. Noreck

Treasurer and Chief Financial Officer

November 14, 2012

XML

Subsequent event and dividends (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	1 Months Ended
	Oct. 31, 2012	Nov. 30, 2012 Subsequent Event [Member]	Sep. 30, 2012 Subsequent Event [Member]
Loss Contingencies [Line Items]
Amount received for settlement of certain legal proceedings and grant of permanent easement			$ 2,625
Amount received less related fees for settlement of certain legal proceedings and grant of permanent easement		$ 2,605
Subsequent event and dividends (Textual) [Abstract]
Dividend declared	$ 0.04
Dividend payable, declared	Oct. 31, 2012
Dividends payable date on record	Nov. 14, 2012
Outstanding common stock payable date	Nov. 28, 2012

XML

Other Income (Details Textual) (USD $) In Thousands, unless otherwise specified	1 Months Ended	3 Months Ended		9 Months Ended
	Jul. 31, 2011	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Other Income (Textual) [Abstract]
Settlement of certain legal proceedings and the grant of a permanent easement	$ 1,200		$ (1,242)		$ (1,242)

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Debt

9 Months Ended

Sep. 30, 2012

Debt [Abstract]

Debt

4. Debt:

Revolving Line of Credit

In June 2011, the Company extended its revolving line of credit facility in the amount of $5 million from a commercial bank. The line of credit facility matures 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 on the incurrence of additional indebtedness, as well as the sale or encumbrance of its assets. At September 30, 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 September 30, 2012, the outstanding principal balance was $3,853.

The carrying value of the Company’s debt facilities approximated its fair value at September 30, 2012 which was estimated using current borrowing rates available to the Company.

XML

Commitments and Contingent Liabilities (Details Textual) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012 Plaintiffs
Commitments and Contingent Liabilities (Textual) [Abstract]
Payment of past costs demand	$ 762
Minimum period for clean-up of site	2 years
Number of parties named by Plaintiff	60
Amount paid to settle suit	$ 45

XML

Track Maintenance Agreement (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Dec. 31, 2011
Track Maintenance Agreement (Textual) [Abstract]
Track maintenance revenue from third party	$ 0	$ 0	$ 869
Track maintenance expiration		Dec. 31, 2011

XML

Amtrak Agreement (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Schedule of remaining track mileage credit
Mileage credit available	$ 2,424		$ 2,571
Utilized	173		320
Mileage credit remaining	$ 2,251		$ 2,251

XML

Amtrak Agreement (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended		6 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Jun. 30, 2012 Amtrak Agreement [Member]	Sep. 30, 2012 Amtrak Agreement [Member]	Sep. 30, 2012 License Arrangement [Member] Amtrak Agreement [Member]	Sep. 30, 2012 Track Material [Member] Amtrak Agreement [Member]	Sep. 30, 2012 Mileage Charges Freight [Member] Amtrak Agreement [Member]	Sep. 30, 2012 Inter Entity Outstanding Adjustment [Member] Amtrak Agreement [Member]
Amtrak Agreement (Textual) [Abstract]
Dispute settlement gross amount	$ 2,424		$ 2,571			$ 5,578	$ (179)	$ (684)	$ (2,571)	$ (2,143)
Recorded Revenue					3,006
Remaining revenue relates to credit against mileage charges payable to Amtrak					$ 0

XML

Changes in Shareholders' Equity

9 Months Ended

Sep. 30, 2012

Changes in Shareholders' Equity [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 6,261 common shares for stock options exercised, employee stock purchases and employee stock awards				3		83					86
Share-based compensation, options granted						65					65
Dividends:
Preferred stock, $5.00 per share								(3	)		(3	)
Common stock, $.12 per share								(581	)		(581	)
Net income for the period								1,819			1,819
Balance September 30, 2012	$	32	$	2,420	$	37,419	$	34,504		$	74,375

XML

Related Party Transaction (Details) (USD $) In Thousands, unless otherwise specified	1 Months Ended			9 Months Ended
	Sep. 30, 2012	Mar. 31, 2012	May 31, 2011	Sep. 30, 2012 Pipelines
Related Party Transaction (Textual) [Abstract]
Number of pipelines				2
Received invoice, amount			$ 219
Amount received from RIDOT		152
Remaining receivable from RIDOT	67			67
Increase in amount payable	219
Maximum [Member]
Related Party Transaction [Line Items]
Maximum reimbursement				159
Subsidiary of Common Parent [Member]
Related Party Transaction [Line Items]
Amount remitted to CTC		$ 152

XML

Condensed Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Current Assets:
Cash and cash equivalents	$ 3,805	$ 3,943
Accounts receivable, net of allowance for doubtful accounts of $115 in 2012 and 2011	2,696	3,570
Materials and supplies	757	842
Prepaid expenses and other current assets	644	412
Deferred income taxes	291	291
Total Current Assets	8,193	9,058
Property and Equipment, net	86,817	84,676
Land Held for Development	12,457	12,457
Total Assets	107,467	106,191
Current Liabilities:
Current portion of long term debt	124	120
Accounts payable	4,900	4,046
Current portion of deferred grant and other income	111	111
Accrued expenses	1,796	2,237
Total Current Liabilities	6,931	6,604
Long term debt, net of current portion	3,729	3,821
Deferred Income Taxes	11,954	12,290
Deferred Grant Income and Other Income	10,478	10,487
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 4,839,273 shares in 2012 and 4,830,503 shares in 2011	2,420	2,417
Additional paid-in capital	37,419	37,271
Retained earnings	34,504	33,269
Total Shareholders' Equity	74,375	72,989
Total Liabilities and Shareholders' Equity	$ 107,467	$ 106,191

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Basis of Presentation

9 Months Ended

Sep. 30, 2012

Basis of Presentation [Abstract]

Basis of Presentation

1. In the opinion of management, the accompanying interim financial statements of Providence and Worcester Railroad Company (the “Company”) contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position as of September 30, 2012, the results of operations for the three and nine months ended September 30, 2012 and 2011 and cash flows for the nine months ended September 30, 2012 and 2011. Results for interim periods may not be necessarily indicative of the results to be expected for the full 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, 2011 filed with the Securities and Exchange Commission.

Certain amounts in the 2011 financial statements have been reclassified to conform with the current presentation. Interest expense is shown separately in the 2012 presentation. Other income items which are non-recurring in nature have been reclassified as below operating income in the 2012 presentation.

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Changes in Shareholders' Equity (Details Textual) (USD $)	9 Months Ended
	Sep. 30, 2012
Changes in Shareholders' Equity (Textual) [Abstract]
Issuance of common shares for stock options exercised	6,261
Preferred stock dividends per share	$ 5.00
Common stock dividends per share	$ 0.12

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Other Income (Details) (USD $) In Thousands, unless otherwise specified	1 Months Ended	3 Months Ended		9 Months Ended
	Jul. 31, 2011	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Other Income
Proceeds from legal settlement	$ (1,200)		$ 1,242		$ 1,242
Interest		7	5	16	12
Other		191	56	208	175
Other income, Total		$ 198	$ 1,303	$ 224	$ 1,429

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 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.

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Condensed Balance Sheets (Parenthetical) (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011
Condensed Balance Sheets [Abstract]
Allowance for Trade receivables	$ 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	4,839,273	4,830,503
Common stock, shares outstanding	4,839,273	4,830,503

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Changes in Shareholders' Equity (Tables)

9 Months Ended

Sep. 30, 2012

Changes in Shareholders' Equity [Abstract]

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 6,261 common shares for stock options exercised, employee stock purchases and employee stock awards				3		83					86
Share-based compensation, options granted						65					65
Dividends:
Preferred stock, $5.00 per share								(3	)		(3	)
Common stock, $.12 per share								(581	)		(581	)
Net income for the period								1,819			1,819
Balance September 30, 2012	$	32	$	2,420	$	37,419	$	34,504		$	74,375

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Nov. 05, 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	Sep. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		4,839,348

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Other Income (Tables)

9 Months Ended

Sep. 30, 2012

Other Income [Abstract]

Other Income

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Proceeds from legal settlement	$	—	$	1,242	$	—	$	1,242
Interest		7		5		16		12
Other		191		56		208		175
	$	198	$	1,303	$	224	$	1,429

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Condensed Statements of Operations (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Condensed Statements of Operations [Abstract]
Operating Revenues	$ 7,951	$ 8,398	$ 23,084	$ 23,376
Operating Expenses:
Maintenance of way and structures	1,524	999	1,723	3,016
Maintenance of equipment	940	921	2,781	2,944
Transportation	2,699	2,671	7,805	8,054
General and administrative	1,137	1,216	3,499	3,850
Depreciation	834	817	2,496	2,392
Taxes, other than income taxes	721	606	2,235	1,755
Car hire, net	262	230	754	820
Employee retirement plans	60	59	168	182
Track usage fees	69	200	183	585
Total Operating Expenses	8,246	7,719	21,644	23,598
Income (loss) from Operations	(295)	679	1,440	(222)
Other income, net	198	1,303	224	1,429
Interest expense	(53)	(40)	(159)	(56)
Income (loss) from operations prior to income taxes	(150)	1,942	1,505	1,151
Provision for Income Taxes (Benefit)	231	360	(314)	825
Net Income (Loss)	(381)	1,582	1,819	326
Preferred Stock Dividends			3	3
Net Income (Loss) Available to Common Shareholders	$ (381)	$ 1,582	$ 1,816	$ 323
Basic and Diluted Income (Loss) Per Common Share	$ (0.08)	$ 0.32	$ 0.37	$ 0.07
Weighted-Average Common Shares Outstanding:
For basic	4,837,987	4,828,286	4,834,485	4,826,126
For diluted	4,837,987	4,897,901	4,903,430	4,898,442

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Track Maintenance Agreement

9 Months Ended

Sep. 30, 2012

Track Maintenance Agreement [Abstract]

Track Maintenance Agreement

7. Track Maintenance Agreement:

In the second quarter of 2011, the Company entered into a track maintenance agreement with an unrelated third party customer (“Shipper”). The Shipper paid for qualifying railroad track maintenance expenditures during 2011 in consideration of the assignment of railroad track miles which permits the Shipper to claim certain federal tax credits pursuant to Internal Revenue Code Section 45G. During 2011, the Company received $869 thousand, net of expenses. The authorizing federal legislation for track maintenance credits was not renewed by Congress upon its expiration on December 31, 2011. No amounts were received during the three months ended September 30, 2012 and 2011 or the nine months ended September 30, 2012 for track maintenance credits.

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Income (Loss) per Common Share

9 Months Ended

Sep. 30, 2012

Income (Loss) per Common Share [Abstract]

Income (Loss) per Common Share

6. 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.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Weighted-average shares for basic		4,837,987		4,828,286		4,834,485		4,826,126
Dilutive effect of convertible preferred stock and stock options		—		69,615		68,944		72,316
Weighted-average shares for diluted		4,837,987		4,897,901		4,903,430		4,898,442

Options to purchase 65,508 shares of common stock were outstanding at September 30, 2012. Options to purchase 59,244 shares of common stock were outstanding at September 30, 2011. For the three month period ended September 20, 2012, 4,085 of outstanding options to purchase common stock were not included in the diluted earnings per share (EPS) as the effect would antidilutive. For the three month period ended September 30, 2011, 5,615 of outstanding options to purchase common shares were included in the computation of diluted earnings per share (EPS). The remaining outstanding options to purchase common stock were not included in the computation of diluted EPS because the options exercise price was greater than the average market prices of the Company’s common stock.

For the nine month period ended September 30, 2012 and 2011, 4,944 and 8,316 of outstanding options to purchase common shares were included in the computation of diluted earnings per share (EPS). The remaining outstanding options to purchase common stock were not included in the computation of diluted EPS because the options exercise price was greater than the average market prices of the Company’s common stock

Preferred Stock, convertible into 64,000 shares of common stock at the rate of 100 shares of common stock for each one share of Preferred Stock, was outstanding for the three and nine-month periods ended September 30, 2012 and 2011. For the three month period ended September 30, 2012, the 64,000 shares of the Company’s common stock were not included as the effect would be antidilutive. For the three month period ended September 30, 2011 and for the nine month period ended September 30, 2012, 64,000 shares of the Company’s common stock were included in the diluted EPS.

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Debt (Details) (USD $)		9 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012 Revolving Credit Facility [Member]	Jun. 30, 2011 Revolving Credit Facility [Member]	Sep. 30, 2012 Long term debt [Member]	Dec. 31, 2010 Long term debt [Member]
Debt (Textual) [Abstract]
Extended revolving line of credit facility			$ 5,000,000		$ 4,000,000
Line of credit facility maturity date		Jun. 25, 2013
Variable rate interest		LIBOR		5/20 rate plus 3%
Variable rate interest with percent interest rate		1.75%		3.00%
Outstanding line of credit		0
Variable rate interest Option 2		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.
Commitment fee amount		0
Compensating balance amount	0
Construction loan converted to term loan period				10 years
Construction loan amortization period				20 years
Interest rate at Federal Home Loan				5.18%
Outstanding balance, construction loan				$ 3,853,000
Period after which interest rate will be reset				5 years

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Income (Loss) per Common Share (Tables)

9 Months Ended

Sep. 30, 2012

Income (Loss) per Common Share [Abstract]

Reconciliation of weighted-average shares used for the basic computation and that used for the diluted computation

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Weighted-average shares for basic		4,837,987		4,828,286		4,834,485		4,826,126
Dilutive effect of convertible preferred stock and stock options		—		69,615		68,944		72,316
Weighted-average shares for diluted		4,837,987		4,897,901		4,903,430		4,898,442

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Related Party Transaction

9 Months Ended

Sep. 30, 2012

Related Party Transaction [Abstract]

Related Party Transaction

10. 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 September 30, 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.

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Commitments and Contingent Liabilities

9 Months Ended

Sep. 30, 2012

Commitments and Contingent Liabilities [Abstract]

Commitments and Contingent Liabilities

8. 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 (“the 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 thousand to settle this suit in March 2006.

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Amtrak Agreement

9 Months Ended

Sep. 30, 2012

Amtrak Agreement [Abstract]

Amtrack Agreement

9. Amtrak Agreement

On April 4, 2012, Providence and Worcester Railroad Company (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”) ($179), (2) delivering to the Company track materials ($684), (3) granting the Company a credit against mileage charges payable to Amtrak by the Company for freight traffic utilizing the Northeast Corridor ($2,571), and (4) cash and relief of certain outstanding obligations the Company owed to Amtrak ($2,143), 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 NEC freight sidings along the Northeast Corridor, 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.

The Company recorded such amounts as recoveries of related operating expenses. The Company recorded recoveries of $3,006 during the second quarter of 2012, offsetting Maintenance of Way expense. As the related operating expenses relative to the mileage credit have not yet been incurred, the Company did not recognize offsetting recoveries during the second quarter of 2012. The Company will recognize the expense offset relative to Track Usage Fees as the expenses are incurred. As such, the Company did not record any related assets or liabilities relative to the mileage credit. The Company has recorded the following offsets to Track Usage expense and has the following track mileage credit remaining:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Mileage credit available	$	2,424	$	—	$	2,571	$	—
Utilized		173		—		320		—
Mileage credit remaining	$	2,251	$	—	$	2,251	$	—

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Subsequent Event and Dividends

9 Months Ended

Sep. 30, 2012

Subsequent event and dividends [Abstract]

Subsequent event and dividends

11. Subsequent event and dividends:

The Company has reached agreement with an unrelated person (the “Grantee”) to convey to the Grantee a permanent easement along a portion of its right of way in exchange for a payment by the Grantee of $2,625. The Company received proceeds, less related fees, in the amount of $2,605 in November 2012.

On October 31, 2012, the Company declared a dividend of $.04 per share on its outstanding Common Stock payable November 28, 2012 to shareholders of record on November 14, 2012.

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Changes in Shareholders' Equity (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Changes in Shareholders' Equity:
Stockholders Equity Beginning Balance			$ 72,989
Issuance of 6,261 common shares for stock options exercised, employee stock purchases and employee stock awards			86
Share-based compensation, options granted			65
Dividends:
Preferred stock, $5.00 per share			(3)
Common stock, $.12 per share			(581)
Net income for the period	(381)	1,582	1,819	326
Stockholders Equity Ending Balance	74,375		74,375
Preferred Stock [Member]
Changes in Shareholders' Equity:
Stockholders Equity Beginning Balance			32
Issuance of 6,261 common shares for stock options exercised, employee stock purchases and employee stock awards
Share-based compensation, options granted
Dividends:
Preferred stock, $5.00 per share
Common stock, $.12 per share
Net income for the period
Stockholders Equity Ending Balance	32		32
Common Stock [Member]
Changes in Shareholders' Equity:
Stockholders Equity Beginning Balance			2,417
Issuance of 6,261 common shares for stock options exercised, employee stock purchases and employee stock awards			3
Share-based compensation, options granted
Dividends:
Preferred stock, $5.00 per share
Common stock, $.12 per share
Net income for the period
Stockholders Equity Ending Balance	2,420		2,420
Additional Paid-in Capital [Member]
Changes in Shareholders' Equity:
Stockholders Equity Beginning Balance			37,271
Issuance of 6,261 common shares for stock options exercised, employee stock purchases and employee stock awards			83
Share-based compensation, options granted			65
Dividends:
Preferred stock, $5.00 per share
Common stock, $.12 per share
Net income for the period
Stockholders Equity Ending Balance	37,419		37,419
Retained Earning [Member]
Changes in Shareholders' Equity:
Stockholders Equity Beginning Balance			33,269
Issuance of 6,261 common shares for stock options exercised, employee stock purchases and employee stock awards
Share-based compensation, options granted
Dividends:
Preferred stock, $5.00 per share			(3)
Common stock, $.12 per share			(581)
Net income for the period			1,819
Stockholders Equity Ending Balance	$ 34,504		$ 34,504

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Income (Loss) per Common Share (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Reconciliation of weighted-average shares used for the basic computation and that used for the diluted computation
Weighted-average shares for basic	4,837,987	4,828,286	4,834,485	4,826,126
Dilutive effect of convertible preferred stock and stock options		69,615	68,944	72,316
Weighted-average shares for diluted	4,837,987	4,897,901	4,903,430	4,898,442

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Condensed Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash Flows from Operating Activities:
Net income	$ 1,819	$ 326
Adjustments to reconcile the net income to cash flows from operating activities:
Depreciation	2,496	2,392
Non-cash component of Amtrak Agreement	(1,108)
Amortization of deferred grant and other income	(431)	(198)
Proceeds from deferred grant and other income	177
(Gains) from sale and disposal of property, equipment and easements	(181)	(1,921)
Deferred income tax benefit	(336)	807
Share-based compensation	65	113
Increase (decrease) in cash from:
Trade receivable	874	(789)
Materials and supplies	85	(82)
Prepaid expenses and other	(232)	(218)
Accounts payable and accrued expenses	(67)	308
Net cash flows from operating activities	3,161	738
Cash flows from Investing Activities:
Purchase of property and equipment	(3,166)	(6,715)
Proceeds from note receivable		75
Proceeds from sale of property, equipment and easements	208	1,921
Net cash flows used in investing activities	(2,958)	(4,719)
Cash Flows from Financing Activities:
Borrowings (payments) under line of credit		(500)
Proceeds from long term debt		4,000
Repayments of long term debt	(88)	(30)
Dividends paid	(584)	(584)
Proceeds from deferred grant and other	245
Issuance of common shares for stock options exercised and employee stock purchases	86	93
Net cash flows from financing activities	(341)	2,979
Increase (decrease) in Cash and Cash Equivalents	(138)	(1,002)
Cash and Cash Equivalents, Beginning of Period	3,943	1,517
Cash and Cash Equivalents, End of Period	3,805	515
Supplemental Disclosures:
Cash paid for interest	142	104
Property and equipment included in accounts payable and accrued expenses	$ 635	$ 391

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Other Income

9 Months Ended

Sep. 30, 2012

Other Income [Abstract]

Other Income

5. Other Income:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Proceeds from legal settlement	$	—	$	1,242	$	—	$	1,242
Interest		7		5		16		12
Other		191		56		208		175
	$	198	$	1,303	$	224	$	1,429

The Company received $1.2 million in July 2011 for settlement of certain legal proceedings and the grant of a permanent easement.

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Income (Loss) per Common Share (Details Textual)						3 Months Ended	9 Months Ended				3 Months Ended	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Sep. 30, 2012 Convertible Preferred Stock [Member]	Sep. 30, 2011 Convertible Preferred Stock [Member]	Sep. 30, 2011 Convertible Preferred Stock [Member] Common Stock [Member]	Sep. 30, 2012 Convertible Preferred Stock [Member] Common Stock [Member]	Sep. 30, 2011 Convertible Preferred Stock [Member] Common Stock [Member]	Sep. 30, 2012 Stock Options [Member]	Sep. 30, 2011 Stock Options [Member]	Sep. 30, 2011 Stock Options [Member] Common Stock [Member]	Sep. 30, 2012 Stock Options [Member] Common Stock [Member]	Sep. 30, 2011 Stock Options [Member] Common Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common stock, shares outstanding	4,839,273	4,830,503		64,000	64,000				65,508	59,244
Shares excluded from computation of diluted earnings per share							64,000					4,085
Shares included to computation of earnings per share						64,000	64,000	64,000			5,615	4,944	8,316
Income (Loss) per Common Share (Textual) [Abstract]
Preferred stock convertible into common stock at rate of shares of common stock	100		100

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Amtrak Agreement (Tables)

9 Months Ended

Sep. 30, 2012

Amtrak Agreement [Abstract]

Schedule of remaining track mileage credit

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Mileage credit available	$	2,424	$	—	$	2,571	$	—
Utilized		173		—		320		—
Mileage credit remaining	$	2,251	$	—	$	2,251	$	—