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 June 30, 2013

¨ 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	¨  (do not check if a smaller reporting company)	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 August 1, 2013, the registrant has 4,844,202 shares of common stock, par value $.50 per share, outstanding.

Index to Quarterly Report on Form 10-Q

Part I – Financial Information
Item 1 – Financial Statements (Unaudited):
Condensed Balance Sheets – June 30, 2013 (Unaudited) and December 31, 2012	3
Condensed Statements of Operations – Three and Six Months Ended June  30, 2013 and 2012 (Unaudited)	4
Condensed Statements of Cash Flows – Six Months Ended June 30, 2013 and 2012 (Unaudited)	5
Notes to Condensed Financial Statements (Unaudited)	6-10
Item  2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	11-16
Item 4 – Controls and Procedures	16
Part II – Other Information:
Item 5 Other Information	17
Item 6 Exhibits	17
Signatures	18

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Part I – FINANCIAL INFORMATION

Item 1 – Financial Statements

PROVIDENCE AND WORCESTER RAILROAD COMPANY

CONDENSED BALANCE SHEETS (Unaudited)

(Dollars in Thousands Except Per Share Amounts)

	JUNE 30,		DECEMBER 31,
	2013		2012
ASSETS
Current Assets:
Cash and cash equivalents	$	1,248	$	951
Accounts receivable, net of allowance for doubtful accounts of $115 in 2013 and 2012		4,218		4,461
Materials and supplies		1,140		979
Prepaid expenses and other current assets		—		445
Deferred income taxes		294		294
Total Current Assets		6,900		7,130
Property and Equipment, net		86,306		86,071
Land Held for Development		12,457		12,457
Total Assets	$	105,663	$	105,658
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	3,880	$	4,333
Current portion of deferred grant and other revenue		388		111
Accrued expenses		1,939		1,625
Total Current Liabilities		6,207		6,069
Deferred Income Taxes		13,166		13,360
Deferred Grant Income and Other Revenue		11,255		10,305
Shareholders’ Equity:
Preferred stock, 10% noncumulative, $50 par value; authorized, issued and outstanding 640 shares in 2013 and 2012		32		32
Common stock, $.50 par value; authorized 15,000,000 shares; issued and outstanding 4,844,202 shares in 2013 and 4,841,955 shares in 2012		2,422		2,421
Additional paid-in capital		37,559		37,444
Retained earnings		35,022		36,027
Total Shareholders’ Equity		75,035		75,924
Total Liabilities and Shareholders’ Equity	$	105,663	$	105,658

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					Six Months Ended
	June 30,					June 30,
	2013		2012			2013			2012
Operating Revenues	$	8,777	$	8,354		$	15,769		$	15,133
Operating Expenses:
Maintenance of way and structures		1,312		(1,241	)		2,838			200
Maintenance of equipment		999		945			2,018			1,841
Transportation		2,614		2,557			5,124			5,106
General and administrative		1,110		1,141			2,379			2,362
Depreciation		861		834			1,717			1,662
Taxes, other than income taxes		721		841			1,685			1,514
Car hire, net		220		257			459			492
Employee retirement plans		56		54			111			108
Track usage fees		80		(134	)		122			114
Total Operating Expenses		7,973		5,254			16,453			13,399
Operating Income (Loss) before Interest and Income Taxes		804		3,100			(684	)		1,734
Other income		13		23			19			26
Interest expense		—		(53	)		—			(106	)
Income (Loss) from operations before Income Taxes		817		3,070			(665	)		1,654
Income Tax Provision (Benefit)		339		(29	)		(53	)		(545	)
Net Income (Loss)		478		3,099			(612	)		2,199
Preferred Stock Dividends		—		—			3			3
Net Income (Loss) Attributable to Common Shareholders	$	478	$	3,099		$	(615	)	$	2,196
Income (Loss) Per Common Share:
Basic	$	.10	$	.64		$	(.13	)	$	.45
Diluted	$	.10	$	.63		$	(.13	)	$	.44
Weighted-Average Common Shares Outstanding:
For basic		4,843,608		4,833,640			4,843,012			4,833,640
For diluted		4,917,396		4,905,461			4,843,012			4,904,371

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)

	Six Months Ended June 30,
	2013			2012
Cash Flows from Operating Activities:
Net income (loss)	$	(612	)	$	2,199
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation		1,717			1,662
Non-cash component of Amtrak Agreement		—			(1,108	)
Amortization of deferred grant income		(396	)		(280	)
Proceeds from deferred grant and other income		1,580			199
Deferred income taxes benefit		(194	)		(567	)
Proceeds from sale of property		—			(181	)
Share-based compensation		78			65
Increase (decrease) in cash from:
Accounts receivable		243			101
Materials and supplies		(163	)		153
Prepaid expenses and other current assets		447			412
Accounts payable and accrued expenses		(648	)		(870	)
Net cash flows from operating activities		2,052			1,785
Cash flows from Investing Activities:
Purchase of property and equipment		(1,443	)		(1,730	)
Proceeds from sale of property and equipment		—			181
Net cash flows used in investing activities		(1,443	)		(1,549	)
Cash Flows from Financing Activities:
Repayments of long term debt		—			(59	)
Proceeds from deferred grant and other income		43			245
Dividends paid		(393	)		(390	)
Issuance of common shares for stock options exercised and employee stock purchases		38			68
Net cash flows used in financing activities		(312	)		(136	)
Increase in Cash and Cash Equivalents		297			100
Cash and Cash Equivalents, Beginning of Period		951			3,943
Cash and Cash Equivalents, End of Period	$	1,248		$	4,043
Supplemental Disclosures:
Cash paid during year for interest	$	—		$	107
Cash paid for income taxes	$	420		$	70
Property and equipment included in accounts payable and accrued expenses	$	509		$	421

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

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PROVIDENCE AND WORCESTER RAILROAD COMPANY

NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)

SIX MONTHS ENDED JUNE 30, 2013 AND 2012

(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 June 30, 2013, the results of operations for the three and six months ended June 30, 2013 and 2012 and cash flows for the six months ended June 30, 2013 and 2012 in accordance with accounting principles generally accepted in the United States. The accompanying condensed balance sheet as of December 31, 2012, 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, 2012 filed with the Securities and Exchange Commission. Results for interim periods may not necessarily be indicative of the results to be expected for the full year.

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, 2012	$	32	$	2,421	$	37,444	$	36,027		$	75,924
Issuance of 2,705 common shares for employee stock purchases, stock options exercised and employee stock awards				1		37					38
Share-based compensation, options granted						78					78
Dividends:
Preferred stock, $5.00 per share								(3	)		(3	)
Common stock, $.08 per share								(390	)		(390	)
Net loss for the period								(612	)		(612	)
Balance June 30, 2013	$	32	$	2,422	$	37,559	$	35,022		$	75,035

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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, 2015. 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 June 30, 2013 and December 31, 2012, no amounts were outstanding.

5. Income (Loss) per Common Share:

Basic income (loss) per common share is computed using the weighted-average number of common shares outstanding during each period. Diluted income (loss) per common share reflects the effect of the Company’s outstanding convertible preferred stock and stock options except where such items would be antidilutive.

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
Weighted-average common shares for basic		4,843,608		4,833,640		4,843,012		4,833,640
Dilutive effect of convertible preferred stock and stock options		73,788		71,821		—		70,731
Weighted-average common shares for diluted		4,917,396		4,905,461		4,843,012		4,904,371

Options to purchase 70,348 shares of common stock were outstanding at June 30, 2013. Options to purchase 65,508 shares of common stock were outstanding at June 30, 2012. For the three month periods ended June 30, 2013 and 2012, 9,788 and 7,821 of outstanding options to purchase common shares were included in the computation of diluted earnings per share (EPS) For the six month period ended June 30, 2013 no outstanding options were included as the effect would be antidilutive. For the six month period ended June 30, 2012, 6,731 of outstanding options to purchase common shares were included in the computation of diluted 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 price of the Company’s common stock.

Preferred Stock is convertible into common stock at the rate of 100 shares of common stock for each one share of Preferred Stock outstanding for the three and six-month periods ended June 30, 2013 and 2012. For the three month periods ended June 30, 2013 and 2012, the 64,000 shares of the Company’s common stock were included. For the six month period ended June 30, 2013, the 64,000 shares of the Company’s common stock were not included as the effect would be antidilutive. For the six month period ended June 30, 2012, the 64,000 shares of the Company’s common stock were included.

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6. Commitments and Contingent Liabilities:

The Company is a defendant in certain lawsuits relating to casualty losses, many of which are covered by insurance subject to a deductible. The Company believes that adequate provision has been made in the 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 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.

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7. Deferred Grant Income and Other Income

In January 2013, the Company entered into a license for the use of the Company’s right of way to an unrelated party for a twenty-five (25) year period, commencing March 11, 2013. The Company received the rental payments of $927 in advance. The Company will amortize $37 per annum into rental income during the 25 year term which expires in April 2038.

8. Amtrak Agreement

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.

Pursuant to the Agreement, the Company received a credit for mileage travelled along the Northeast Corridor. 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 at the date of the settlement. The Company has recorded the following offsets to Track Usage expense and has the following track mileage credit remaining:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
Mileage credit available, beginning	$	1,890	$	2,571	$	1,994	$	2,571
Utilized		201		147		305		147
Mileage credit available, ending	$	1,689	$	2,424	$	1,689	$	2,424

9. 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 it 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

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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. At June 30, 2013 and December 31, 2012, respectively, the remaining receivable in the amount of $22 from RIDOT, and the corresponding accounts payable to CTC have been reflected in the Company’s Condensed Balance Sheets.

10. Subsequent event and dividends:

On July 31, 2013, the Company declared a dividend of $.04 per share on its outstanding common stock payable August 28, 2013 to shareholders of record as of August 14, 2013.

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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. 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, 2012 during the first six months of 2013.

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.

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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 of $202 and $140 during the three months ended June 30, 2013 and 2012, respectively and $329 and $260 during the six months ended June 30, 2013 and 2012, respectively, by category in dollars and as a percentage of operating revenues:

	Three Months Ended June 30,								Six Months Ended June 30,
	2013				2012				2013				2012
	(In thousands, except percentages)
Freight
Revenues:
Conventional carloads	$	7,852	91.6	%	$	6,975	84.9	%	$	14,136	91.6	%	$	13,084	88.0	%
Containers		295	3.5			311	3.8			646	4.2			570	3.8
Other freight related		210	2.4			156	1.9			296	1.9			263	1.8
Other Operating Revenues		218	2.5			772	9.4			362	2.3			956	6.4
Total	$	8,575	100.0	%	$	8,214	100.0	%	$	15,440	100.0	%	$	14,873	100.0	%

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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 June 30,								Six Months Ended June 30,
	2013				2012				2013				2012
	(In thousands, except percentages)
Salaries, wages, payroll taxes and employee benefits	$	4,085	47.6	%	$	4,081	49.7	%	$	8,156	52.8	%	$	8,197	55.1	%
Casualties and insurance		254	3.0			84	1.0			539	3.5			390	2.6
Depreciation		861	10.0			834	10.2			1,717	11.1			1,662	11.2
Diesel fuel		818	9.5			849	10.3			1,605	10.4			1,632	11.0
Car hire, net		220	2.6			257	3.1			459	3.0			492	3.3
Purchased services, including legal and professional fees		526	6.1			697	8.5			901	5.8			1,133	7.6
Repair and maintenance of equipment		467	5.5			322	3.9			1,005	6.5			757	5.1
Track and signal materials		762	8.9			857	10.4			971	6.3			1,190	8.0
Track usage fees		281	3.3			13	0.2			426	2.8			261	1.8
Other materials and supplies		398	4.6			388	4.7			751	4.9			708	4.8
Other		563	6.6			728	8.9			1,481	9.6			1,225	8.2
Total		9,235	107.7			9,110	110.9			18,011	116.7			17,647	118.7
Less capitalized and recovered costs, including amounts relating to the Amtrak Agreement		1,262	14.7			3,856	46.9			1,558	10.1			4,248	28.6
Total	$	7,973	93.0	%	$	5,254	64.0	%	$	16,453	106.6	%	$	13,399	90.1	%

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Operating Revenues:

Operating revenues increased $567 thousand, or 3.9%, to $15.4 million in the six months ended June 30, 2013 from $14.9 million in 2012. This increase is the result of a $1.1 million (8.0%) increase in conventional freight revenues, a $76 thousand (13.3%) increase in container freight revenues, a $33 thousand (12.5%) increase in other freight revenues, offset by a $594 thousand (62.1%) decrease in other operating revenues.

The increase in conventional freight revenues results from a 4.0% increase in the average revenue received per conventional carload and a 4.0% increase in traffic volume. The Company’s conventional carload increased by 610 to 15,906 in the first six months of 2013 from 15,296 in 2012.

The number of shipments of most commodities handled by the Company was substantially level with increases in stone, metals and ethanol shipments contributing the majority of the increase during the first six months of 2013 which were offset in part by decreases in coal and automobile shipments. The

13

decrease in coal shipments during the first six months of 2013 was due to a power plant customer being offline during a substantial portion of the period. The decrease in automobiles is due to changes in the distribution patterns of certain of the shippers and changes in consumer demand for certain of the automobiles the Company handles. The increase in the average revenue received per conventional carloading is due mainly to shifts in the mix of commodities, as well as rate changes.

The increase in container freight revenues is the result of a 15.3% increase in traffic volume. Container traffic volume increased by 1,195 containers to 9,003 containers in the first six months of 2013 from 7,808 containers in 2012 as a result of the terminal operator located on the Company’s line obtaining an additional customer.

The small increase in other freight-related revenues results from an increase in miscellaneous operating revenue.

The decrease in other operating revenues reflects an decrease in maintenance department billings for services rendered to freight customers and other outside parties.

Operating Expenses:

Operating expenses for the six-month period ended June 30, 2013 were $16.5 million. During 2013, the Company utilized $305 thousand of the track usage fee offsets obtained via the Amtrak Agreement. The offsets are included in recovered costs. Exclusive of the Amtrak Agreement offsetting $3 million of Maintenance of Way costs during 2012 operating expenses increased in 2013 by $46 thousand or 0.3%. During 2012, the Company utilized $147 thousand of the track usage fee offsets obtained via the Amtrak Agreement. The offsets are included in recovered costs. Increased operating costs were due primarily to increases in maintenance charges and maintenance of way expenses and other expenses, and increases in other tax amounts assessed to the Company These increases were offset in part by decreases in diesel fuel costs and professional fees.

As noted above, the Company’s track usage fees were reduced by $305 and $147 thousand for the six month period ended June 30, 2013 and 2012, respectively, as a result of the utilization of a portion of the available mileage credit received pursuant to the Amtrak Agreement. The mileage credit utilized is reflected above in the line item capturing capitalized and recovered costs. The Company has $1.689 million of credit remaining to offset future mileage charges for use of Amtrak’s Northeast Corridor.

Provision for Income Taxes (Benefit):

The income tax benefit for the first six months of 2013 and 2012 is equal to (8%) and (33%) of the pre-tax income. This effective rate reflects the federal income tax rate adjusted by the effect of non deductible expenses and state taxes. The estimated annual rate does not agree with statutory rate due to changes in the valuation allowance the Company had previously established against its deferred tax assets based upon the Company’s analysis of the Company’s reversal pattern of taxable temporary differences.

Three Months Ended June 30, 2013 Compared to Three Months Ended June 30, 2012

Operating Revenues:

Operating revenues increased $361 thousand, or 4.4%, to $8.6 million in the second quarter of 2013 from $8.2 million in the second quarter of 2012. This increase is the result of an $877 thousand (12.6%) increase in conventional carload revenue, and a $54 thousand (34.7%) increase in other freight related revenues, offset by a $16 thousand (5.2%) decrease in container freight revenues, and an $554 thousand (71.8%) decrease in other operating revenues.

14

The increase in conventional freight revenues is attributable to a 9.0% increase in traffic volume and a 3.7% increase in average revenue per carload. The Company’s conventional carloads increased by 755 to 9,380 in the second quarter of 2013 from 8,605 in 2012. The reasons for the increase in conventional traffic volume and increase in average revenue per carload are as previously discussed for the six months ended June 30, 2013.

The decrease in container freight revenues is the result of flat traffic volume and a 2.3% decrease in the average revenue received per container. Container traffic volume decreased by 32 containers to 4,202 in the second quarter of 2013 from 4,234 in the second quarter of 2012.

Other operating revenues decreased due to a decrease of State projects performed by the Company’s maintenance of way personnel.

Operating Expenses:

Operating expenses for the three month period ended June 30, 2013 were $8.0 million. Operating expenses for the three-month period ended June 30, 2012 were $8.4 million before the Amtrak Agreement offsetting $3 million to Maintenance of Way costs. Additionally, the Amtrak Agreement offset $201 and $147 thousand of Track usage fees during the three month period ended June 30, 2013 and 2012, respectively. 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 expense decreased by $400 thousand, or 4.8%, to $8.0 million from $8.4 million in 2012. The principal reason for this overall decrease was recovered costs of $452 thousand.

As noted above, the Company’s track usage fees were reduced by $201 and $147 thousand as a result of the utilization of a portion of the available mileage credit received under the Amtrak Agreement. The Company has $1.689 million of credit remaining to offset future mileage charges for use of Amtrak’s Northeast Corridor.

Provision for Income Taxes:

The income tax provision for the three month period ended June 30, 2013 and 2012 is equal to approximately 41% and (1%) respectively of pre-tax income. This effective tax rate represents the federal income tax rate increased by the impact of state income taxes and non-deductible expenses. The estimated annual rate does not agree to statutory rate due to changes in the valuation allowance the Company had previously established against its deferred tax assets based upon the Company’s analysis of the Company’s reversal pattern of taxable temporary differences.

Liquidity and Capital Resources

During the six months ended June 30, 2013, the Company generated $2.1 million of cash from operating activities, and the Company used $1.4 million in investing activities and $312 thousand in financing activities.

On July 31, 2013, the Company declared a quarterly dividend of approximately $193 thousand ($.04 per common share) to be paid on August 28, 2013. The declaration of future dividends and the amount thereof will depend on the Company’s future earnings, financial factors and other events.

15

The Company has a revolving line of credit facility in the amount of $5 million from a commercial bank. At June 30, 2013, no amounts were outstanding.

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.

16

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 Chief 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 Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2013, filed with the Securities and Exchange Commission on August 13, 2013, formatted in eXtensible Business Reporting Language:

(i) Balance Sheets as of June 30, 2013 and December 31, 2012

(ii) Statements of Operations for the Three and Six Months ended June 30, 2013 and 2012

(iii) Statements of Cash Flows for the Six Months ended June 30, 2013 and 2012

(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.

17

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 Chief Financial Officer

DATED: August 13, 2013

18

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: August 13, 2013

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: August 13, 2013

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 June 30, 2013, 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 August 13, 2013

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 June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Daniel T. Noreck, Treasurer and 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
	August 13, 2013

XML

Income (Loss) Per Common Share (Tables)

6 Months Ended

Jun. 30, 2013

Income (Loss) per Common Share [Abstract]

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

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
Weighted-average common shares for basic		4,843,608		4,833,640		4,843,012		4,833,640
Dilutive effect of convertible preferred stock and stock options		73,788		71,821		—		70,731
Weighted-average common shares for diluted		4,917,396		4,905,461		4,843,012		4,904,371

XML

Condensed Statements of Operations (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Condensed Statements of Operations [Abstract]
Operating Revenues	$ 8,777	$ 8,354	$ 15,769	$ 15,133
Operating Expenses:
Maintenance of way and structures	1,312	(1,241)	2,838	200
Maintenance of equipment	999	945	2,018	1,841
Transportation	2,614	2,557	5,124	5,106
General and administrative	1,110	1,141	2,379	2,362
Depreciation	861	834	1,717	1,662
Taxes, other than income taxes	721	841	1,685	1,514
Car hire, net	220	257	459	492
Employee retirement plans	56	54	111	108
Track usage fees	80	(134)	122	114
Total Operating Expenses	7,973	5,254	16,453	13,399
Operating Income (Loss) before Interest and Income Taxes	804	3,100	(684)	1,734
Other income	13	23	19	26
Interest expense		(53)		(106)
Income (Loss) from operations before Income Taxes	817	3,070	(665)	1,654
Income Tax Provision (Benefit)	339	(29)	(53)	(545)
Net Income (Loss)	478	3,099	(612)	2,199
Preferred Stock Dividends			3	3
Net Income (Loss) Attributable to Common Shareholders	$ 478	$ 3,099	$ (615)	$ 2,196
Income (Loss) Per Common Share:
Basic	$ 0.10	$ 0.64	$ (0.13)	$ 0.45
Diluted	$ 0.10	$ 0.63	$ (0.13)	$ 0.44
Weighted-Average Common Shares Outstanding:
For basic	4,843,608	4,833,640	4,843,012	4,833,640
For diluted	4,917,396	4,905,461	4,843,012	4,904,371

XML

Income (Loss) Per Common Share

6 Months Ended

Jun. 30, 2013

Income (Loss) per Common Share [Abstract]

Income (Loss) per Common Share

5. Income (Loss) per Common Share:

Basic income (loss) per common share is computed using the weighted-average number of common shares outstanding during each period. Diluted income (loss) per common share reflects the effect of the Company’s outstanding convertible preferred stock and stock options except where such items would be antidilutive.

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
Weighted-average common shares for basic		4,843,608		4,833,640		4,843,012		4,833,640
Dilutive effect of convertible preferred stock and stock options		73,788		71,821		—		70,731
Weighted-average common shares for diluted		4,917,396		4,905,461		4,843,012		4,904,371

Options to purchase 70,348 shares of common stock were outstanding at June 30, 2013. Options to purchase 65,508 shares of common stock were outstanding at June 30, 2012. For the three month periods ended June 30, 2013 and 2012, 9,788 and 7,821 of outstanding options to purchase common shares were included in the computation of diluted earnings per share (EPS) For the six month period ended June 30, 2013 no outstanding options were included as the effect would be antidilutive. For the six month period ended June 30, 2012, 6,731 of outstanding options to purchase common shares were included in the computation of diluted 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 price of the Company’s common stock.

Preferred Stock is convertible into common stock at the rate of 100 shares of common stock for each one share of Preferred Stock outstanding for the three and six-month periods ended June 30, 2013 and 2012. For the three month periods ended June 30, 2013 and 2012, the 64,000 shares of the Company’s common stock were included. For the six month period ended June 30, 2013, the 64,000 shares of the Company’s common stock were not included as the effect would be antidilutive. For the six month period ended June 30, 2012, the 64,000 shares of the Company’s common stock were included.

XML

Commitments and Contingent Liabilities (Details Textual) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013 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

Amtrak Agreement (Tables)

6 Months Ended

Jun. 30, 2013

Amtrak Agreement [Abstract]

Schedule of remaining track mileage credit

The Company has recorded the following offsets to Track Usage expense and has the following track mileage credit remaining:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
Mileage credit available, beginning	$	1,890	$	2,571	$	1,994	$	2,571
Utilized		201		147		305		147
Mileage credit available, ending	$	1,689	$	2,424	$	1,689	$	2,424

XML

Related Party Transaction (Details Textual) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013 Pipelines	Dec. 31, 2012
Related Party Transaction (Textual) [Abstract]
Number of pipelines	2
Received invoice, amount	$ 219
Total amount of receivables paid	22	22
Maximum [Member]
Related Party Transaction (Additional Textual) [Abstract]
Maximum reimbursement	$ 159

XML

Amtrak Agreement (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Schedule of remaining track mileage credit
Mileage credit available beginning	$ 1,890	$ 2,571	$ 1,994	$ 2,571
Utilized	201	147	305	147
Mileage credit available, ending	$ 1,689	$ 2,424	$ 1,689	$ 2,424

XML

Deferred Grant Income And Other Income (Details Textual) (USD $) In Thousands, unless otherwise specified	1 Months Ended
	Jan. 31, 2013	Jun. 30, 2013
Deferred Grant Income and Other Income (Textual) [Abstract]
License period for the use of the Company's right of way to an unrelated party	25 years
Rentals Payment		$ 927
Rentals	$ 37
Expiration period for license	2038-04

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2013

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 June 30, 2013, the results of operations for the three and six months ended June 30, 2013 and 2012 and cash flows for the six months ended June 30, 2013 and 2012 in accordance with accounting principles generally accepted in the United States. The accompanying condensed balance sheet as of December 31, 2012, 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, 2012 filed with the Securities and Exchange Commission. Results for interim periods may not necessarily be indicative of the results to be expected for the full year.

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Changes in Shareholders' Equity

6 Months Ended

Jun. 30, 2013

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, 2012	$	32	$	2,421	$	37,444	$	36,027		$	75,924
Issuance of 2,705 common shares for employee stock purchases, stock options exercised and employee stock awards				1		37					38
Share-based compensation, options granted						78					78
Dividends:
Preferred stock, $5.00 per share								(3	)		(3	)
Common stock, $.08 per share								(390	)		(390	)
Net loss for the period								(612	)		(612	)
Balance June 30, 2013	$	32	$	2,422	$	37,559	$	35,022		$	75,035

XML

Commitments and Contingent Liabilities

6 Months Ended

Jun. 30, 2013

Commitments and Contingent Liabilities [Abstract]

Commitments and Contingent Liabilities

6. Commitments and Contingent Liabilities:

The Company is a defendant in certain lawsuits relating to casualty losses, many of which are covered by insurance subject to a deductible. The Company believes that adequate provision has been made in the 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 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.

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Debt

6 Months Ended

Jun. 30, 2013

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, 2015. 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 June 30, 2013 and December 31, 2012, no amounts were outstanding.

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Subsequent Event and Dividends (Details Textual) (Subsequent Event [Member], USD $)	1 Months Ended
	Jul. 30, 2013	Jul. 31, 2013
Subsequent Event [Member]
Subsequent Event (Textual) [Abstract]
Dividend payable declared	Jul. 31, 2013
Dividend declared		$ 0.04
Outstanding common stock payable date	Aug. 28, 2013
Dividend payable date on record	Aug. 14, 2013

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Condensed Balance Sheets (Parenthetical) (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Condensed Balance Sheets [Abstract]
Allowance for doubtful accounts	$ 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	4,844,202	4,841,955
Common stock, shares outstanding	4,844,202	4,841,955

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Related Party Transaction

6 Months Ended

Jun. 30, 2013

Related Party Transaction [Abstract]

Related Party Transaction

9. 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 it 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. At June 30, 2013 and December 31, 2012, respectively, the remaining receivable in the amount of $22 from RIDOT, and the corresponding accounts payable to CTC have been reflected in the Company’s Condensed Balance Sheets.

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Condensed Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash Flows from Operating Activities:
Net income (loss)	$ (612)	$ 2,199
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation	1,717	1,662
Non-cash component of Amtrak Agreement		(1,108)
Amortization of deferred grant income	(396)	(280)
Proceeds from deferred grant and other income	1,580	199
Deferred income taxes benefit	(194)	(567)
Proceeds from sale of property		(181)
Share-based compensation	78	65
Increase (decrease) in cash from:
Accounts receivable	243	101
Materials and supplies	(163)	153
Prepaid expenses and other current assets	447	412
Accounts payable and accrued expenses	(648)	(870)
Net cash flows from operating activities	2,052	1,785
Cash flows from Investing Activities:
Purchase of property and equipment	(1,443)	(1,730)
Proceeds from sale of property and equipment		181
Net cash flows used in investing activities	(1,443)	(1,549)
Cash Flows from Financing Activities:
Repayments of long term debt		(59)
Proceeds from deferred grant and other income	43	245
Dividends paid	(393)	(390)
Issuance of common shares for stock options exercised and employee stock purchases	38	68
Net cash flows used in financing activities	(312)	(136)
Increase in Cash and Cash Equivalents	297	100
Cash and Cash Equivalents, Beginning of Period	951	3,943
Cash and Cash Equivalents, End of Period	1,248	4,043
Supplemental Disclosures:
Cash paid during year for interest		107
Cash paid for income taxes	420	70
Property and equipment included in accounts payable and accrued expenses	$ 509	$ 421

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Condensed Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Current Assets:
Cash and cash equivalents	$ 1,248	$ 951
Accounts receivable, net of allowance for doubtful accounts of $115 in 2013 and 2012	4,218	4,461
Materials and supplies	1,140	979
Prepaid expenses and other current assets		445
Deferred income taxes	294	294
Total Current Assets	6,900	7,130
Property and Equipment, net	86,306	86,071
Land Held for Development	12,457	12,457
Total Assets	105,663	105,658
Current Liabilities:
Accounts payable	3,880	4,333
Current portion of deferred grant and other revenue	388	111
Accrued expenses	1,939	1,625
Total Current Liabilities	6,207	6,069
Deferred Income Taxes	13,166	13,360
Deferred Grant Income and Other Revenue	11,255	10,305
Shareholders' Equity:
Preferred stock, 10% noncumulative, $50 par value; authorized, issued and outstanding 640 shares in 2013 and 2012	32	32
Common stock, $.50 par value; authorized 15,000,000 shares; issued and outstanding 4,844,202 shares in 2013 and 4,841,955 shares in 2012	2,422	2,421
Additional paid-in capital	37,559	37,444
Retained earnings	35,022	36,027
Total Shareholders' Equity	75,035	75,924
Total Liabilities and Shareholders' Equity	$ 105,663	$ 105,658

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Income (Loss) Per Common Share (Details Textual) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Income (Loss) per Common Share (Textual) [Abstract]
Options to purchase common shares were included in the computation of diluted EPS	9,788	7,821		6,731
Preferred stock convertible into common stock at rate of shares of common stock	100	100	100	100
Convertible Preferred Stock [Member]
Income (Loss) per Common Share (Textual) [Abstract]
Preferred stock convertible into shares of common stock	64,000	64,000	64,000	64,000
Stock Options [Member]
Income (Loss) per Common Share (Textual) [Abstract]
Option outstanding for the purchase of common stock	70,348	65,508	70,348	65,508
Preferred stock convertible into shares of common stock			0

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Amtrak Agreement

6 Months Ended

Jun. 30, 2013

Amtrak Agreement [Abstract]

Amtrak Agreement

8. Amtrak Agreement

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.

Pursuant to the Agreement, the Company received a credit for mileage travelled along the Northeast Corridor. 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 at the date of the settlement. The Company has recorded the following offsets to Track Usage expense and has the following track mileage credit remaining:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
Mileage credit available, beginning	$	1,890	$	2,571	$	1,994	$	2,571
Utilized		201		147		305		147
Mileage credit available, ending	$	1,689	$	2,424	$	1,689	$	2,424

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Changes in Shareholders' Equity (Tables)

6 Months Ended

Jun. 30, 2013

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, 2012	$	32	$	2,421	$	37,444	$	36,027		$	75,924
Issuance of 2,705 common shares for employee stock purchases, stock options exercised and employee stock awards				1		37					38
Share-based compensation, options granted						78					78
Dividends:
Preferred stock, $5.00 per share								(3	)		(3	)
Common stock, $.08 per share								(390	)		(390	)
Net loss for the period								(612	)		(612	)
Balance June 30, 2013	$	32	$	2,422	$	37,559	$	35,022		$	75,035

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Deferred Grant Income and Other Income

6 Months Ended

Jun. 30, 2013

Deferred Grant Income and Other Income [Abstract]

Deferred Grant Income and Other Income

7. Deferred Grant Income and Other Income

In January 2013, the Company entered into a license for the use of the Company’s right of way to an unrelated party for a twenty-five (25) year period, commencing March 11, 2013. The Company received the rental payments of $927 in advance. The Company will amortize $37 per annum into rental income during the 25 year term which expires in April 2038.

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2013

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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Changes in Shareholders' Equity (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Changes in Shareholders' Equity:
Stockholders Equity Beginning Balance			$ 75,924
Issuance of 2,705 common shares for employee stock purchases, stock options exercised and employee stock awards			38
Share-based compensation, options granted			78
Dividends:
Preferred stock, $5.00 per share			(3)
Common stock, $.08 per share			(390)
Net loss for the period	478	3,099	(612)	2,199
Stockholders Equity Ending Balance	75,035		75,035
Preferred Stock [Member]
Changes in Shareholders' Equity:
Stockholders Equity Beginning Balance			32
Issuance of 2,705 common shares for employee stock purchases, stock options exercised and employee stock awards
Share-based compensation, options granted
Dividends:
Preferred stock, $5.00 per share
Common stock, $.08 per share
Net loss for the period
Stockholders Equity Ending Balance	32		32
Common Stock [Member]
Changes in Shareholders' Equity:
Stockholders Equity Beginning Balance			2,421
Issuance of 2,705 common shares for employee stock purchases, stock options exercised and employee stock awards			1
Share-based compensation, options granted
Dividends:
Preferred stock, $5.00 per share
Common stock, $.08 per share
Net loss for the period
Stockholders Equity Ending Balance	2,422		2,422
Additional Paid-in Capital [Member]
Changes in Shareholders' Equity:
Stockholders Equity Beginning Balance			37,444
Issuance of 2,705 common shares for employee stock purchases, stock options exercised and employee stock awards			37
Share-based compensation, options granted			78
Dividends:
Preferred stock, $5.00 per share
Common stock, $.08 per share
Net loss for the period
Stockholders Equity Ending Balance	37,559		37,559
Retained Earnings [Member]
Changes in Shareholders' Equity:
Stockholders Equity Beginning Balance			36,027
Issuance of 2,705 common shares for employee stock purchases, stock options exercised and employee stock awards
Share-based compensation, options granted
Dividends:
Preferred stock, $5.00 per share			(3)
Common stock, $.08 per share			(390)
Net loss for the period			(612)
Stockholders Equity Ending Balance	$ 35,022		$ 35,022

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Subsequent Event and Dividends

6 Months Ended

Jun. 30, 2013

Subsequent event and dividends [Abstract]

Subsequent event and dividends

10. Subsequent event and dividends:

On July 31, 2013, the Company declared a dividend of $.04 per share on its outstanding common stock payable August 28, 2013 to shareholders of record as of August 14, 2013.

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Income (Loss) Per Common Share (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Reconciliation of weighted-average shares used for the basic computation and that used for the diluted computation
Weighted-average common shares for basic	4,843,608	4,833,640	4,843,012	4,833,640
Dilutive effect of convertible preferred stock and stock options	73,788	71,821		70,731
Weighted-average common shares for diluted	4,917,396	4,905,461	4,843,012	4,904,371

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Changes in Shareholders' Equity (Details Textual) (USD $)	6 Months Ended
	Jun. 30, 2013
Changes in Shareholders' Equity (Textual) [Abstract]
Issuance of common shares for stock options exercised	2,705
Preferred stock dividends per share	$ 5.00
Common stock dividends per share	$ 0.08

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 01, 2013
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	Jun. 30, 2013
Amendment Flag	false
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		4,844,202

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Debt (Details Textual) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Debt (Textual) [Abstract]
Compensating balance amount	$ 0
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Extended revolving line of credit facility	5,000
Line of credit facility maturity date	Jun. 25, 2015
Variable rate interest	LIBOR
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
Outstanding line of credit	$ 0	$ 0