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 March 31, 2016

o 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

(Former name, former address and former fiscal year, if changed since last report)

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 o

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 o

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	o	Accelerated filer	o
Non-accelerated filer	o	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 o 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 May 5, 2016, the registrant had 4,865,737 shares of common stock, par value $.50 per share, outstanding.

PROVIDENCE AND WORCESTER RAILROAD COMPANY

Index to Quarterly Report on Form 10-Q

Part I – Financial Information
Item 1 –Financial Statements (Unaudited):
Condensed Balance Sheets – March 31, 2016 (Unaudited) and December 31, 2015	3
Condensed Statements of Operations – Three Months Ended March 31, 2016 and 2015 (Unaudited)	4
Condensed Statements of Cash Flows – Three Months Ended March 31, 2016 and 2015 (Unaudited)	5
Notes to Condensed Financial Statements (Unaudited)	6-9
Item 2 –Management’s Discussion and Analysis of Financial Condition and Results of Operations	10-13
Item 4 –Controls and Procedures	13
Part II – Other Information:
Item 5 –Other Information	14
Item 6 –Exhibits	14
Signatures	15

Part I – Financial Information

Item 1.  Financial Statements

PROVIDENCE AND WORCESTER RAILROAD COMPANY

CONDENSED BALANCE SHEETS

(Dollars in Thousands Except Per Share Amounts)

(Unaudited)

	March 31,		December 31,
	2016		2015
ASSETS
Current Assets:
Cash and cash equivalents	$	5,619	$	6,281
Accounts receivable, net of allowance for doubtful accounts of $160 in 2016    and 2015		4,167		4,977
Materials and supplies		942		911
Prepaid expenses and other current assets		303		621
Total Current Assets		11,031		12,790
Property and Equipment, net		88,508		88,910
Land Held for Development		12,457		12,457
Total Assets	$	111,996	$	114,157
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	3,495	$	4,251
Current portion of long-term debt		20		20
Current portion of deferred grant and other income		447		319
Accrued expenses		1,839		1,653
Total Current Liabilities		5,801		6,243
Long-Term Debt, net of current portion		980		980
Deferred Income Taxes		13,066		13,602
Deferred Grant and Other Income		12,639		12,714
Shareholders’ Equity:
Preferred stock, 10% noncumulative, $50 par value; authorized, issued and    outstanding 640 shares in 2016 and 2015		32		32
Common stock, $.50 par value; authorized 15,000,000 shares; issued and    outstanding 4,865,737 shares in 2016 and 4,862,693 shares in 2015		2,433		2,432
Additional paid-in capital		38,140		38,050
Retained earnings		38,905		40,104
Total Shareholders’ Equity		79,510		80,618
Total Liabilities and Shareholders’ Equity	$	111,996	$	114,157

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
	March 31,
	2016			2015
Operating Revenues	$	7,223		$	7,261
Operating Expenses:
Maintenance of way and structures		1,543			1,533
Maintenance of equipment		1,097			762
Transportation		2,291			2,792
General and administrative		1,368			1,382
Depreciation		959			876
Taxes, other than income taxes		806			733
Car hire, net		387			383
Employee retirement plans		56			57
Track usage fees		255			40
Total Operating Expenses		8,762			8,558
Loss from operations		(1,539	)		(1,297	)
Other income		9			7
Interest expense		5			—
Loss from operations prior to income taxes		(1,535	)		(1,290	)
Provision for income taxes		(536	)		(447	)
Net Loss		(999	)		(843	)
Preferred Stock Dividends		3			3
Net Loss Attributable to Common Shareholders	$	(1,002	)	$	(846	)
Net Loss Per Common Share
Basic	$	(.21	)	$	(.17	)
Diluted	$	(.21	)	$	(.17	)
Weighted-Average Common Shares Outstanding:
For basic		4,865			4,860
For diluted		4,865			4,860

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)

	Three Months Ended March 31,
	2016			2015
Cash Flows from Operating Activities:
Net Loss	$	(999	)	$	(843	)
Adjustments to reconcile the net loss to cash flows from operating    activities:
Depreciation		959			876
Amortization of deferred grant and other income		(246	)		(235	)
Deferred grant and other income		316			288
Deferred income taxes		(536	)		(447	)
Share-based compensation		76			98
Increase (decrease) in cash from:
Accounts receivable		793			278
Materials and supplies		(31	)		10
Prepaid expenses and other current assets		318			340
Accounts payable and accrued expenses		(305	)		444
Net cash flows provided by operating activities		345			809
Cash Flows from Investing Activities:
Purchase of property and equipment		(822	)		(350	)
Net cash flows used in investing activities		(822	)		(350	)
Cash Flows from Financing Activities:
Dividends paid		(200	)		(198	)
Issuance of common shares for stock options exercised and employee stock    purchases		15			12
Net cash flows used in financing activities		(185	)		(186	)
(Decrease) Increase in Cash and Cash Equivalents		(662	)		273
Cash and Cash Equivalents, Beginning of Period		6,281			6,414
Cash and Cash Equivalents, End of Period	$	5,619		$	6,687
Supplemental Disclosures:
Cash paid for income taxes	$	310		$	385
Deferred grant income in accounts receivable	$	17		$	-
Property and equipment included in accounts payable	$	265		$	217

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

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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 condensed financial statements of Providence and Worcester Railroad Company (the “Company”) contain all adjustments (consisting solely of normal and recurring adjustments) necessary to present fairly the financial position as of March 31, 2016 and the results of operations and cash flows for the three months ended March 31, 2016 and 2015 in accordance with accounting principles generally accepted in the United States.  The accompanying condensed balance sheet as of December 31, 2015, 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, 2015 filed with the Securities and Exchange Commission.  Results for interim periods may not be necessarily indicative of the results to be expected for the full year.

2. Recent Accounting Pronouncements:

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes previous revenue recognition guidance. The new standard requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services.  ASU 2014-09 anticipates companies using more judgment and estimates than under the current guidance. On July 9, 2015, the FASB approved a one year deferral of the effective date of ASU 2014-09. ASU 2014-09 permits the use of retrospective application to period presented or a cumulative effect transition adjustment. The Company is currently evaluating the impact and method of implementing this new guidance on its financial statements and related disclosures.

In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which, effective for annual and interim reporting periods beginning after December 15, 2016, simplifies the presentation of deferred income taxes, requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. Since early application is permitted, the new standard has been applied in the Company’s financial statements as of December 31, 2015. Prior periods were not retrospectively adjusted.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.The Company is currently evaluating the impact of our pending adoption of the new standard on our financial statements.

3. Changes in Shareholders’ Equity:

					Additional					Total
	Preferred		Common		Paid-in		Retained			Shareholders’
	Stock		Stock		Capital		Earnings			Equity
Balance, December 31, 2015	$	32	$	2,432	$	38,050	$	40,104		$	80,618
Issuance of 1,049 common shares for stock options exercised, employee stock purchases, and other				1		14					15
Share based compensation – options granted						76					76
Dividends paid:
Preferred stock, $5.00 per share								(3	)		(3	)
Common stock, $.04 per share								(197	)		(197	)
Net loss								(999	)		(999	)
Balance, March 31, 2016	$	32	$	2,433	$	38,140	$	38,905		$	79,510

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PROVIDENCE AND WORCESTER RAILROAD COMPANY

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

(Dollars in Thousands Except Per Share Amounts)

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, 2017. 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. The Company is subject to financial and non-financial covenants including maintenance of a minimum net worth and restrictions as to the incurrence of additional indebtedness, as well as the sale or encumbrance of its assets. At March 31, 2016 and December 31, 2015, no amounts were outstanding.

Long-term Debt

The Company entered into a loan agreement with its commercial bank for $5 million in 2014, the majority of which was or will be utilized to rehabilitate four and replace one main line bridges. Once the rehabilitation and replacement are complete, the Company will have the ability to haul freight with a lading of 286,000 pounds on its main line from Worcester, MA to Davisville/Providence RI. As provided in the agreement, the loan requires payments of interest only for twelve months whereupon it converts to a ten year term loan with payments based upon a twenty year amortization.  The loan will bear interest at 4.11% per annum for the life of the loan. The loan is unsecured and subjects the Company to certain financial and non-financial covenants, including the maintenance of certain tangible net worth levels. The Company drew down the remaining $4 million in April 2016.

5. Net Loss per Common Share:

Basic income per common share is computed using the weighted-average number of common shares outstanding during each period.  Diluted income 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:

	2016								2015
	Net Loss			Shares		Per Share Amount			Net Loss			Shares		Per Share Amount
Basic Loss per Share
Net Loss Attributable to Common Shareholders	$	(1,002	)						$	(846	)
Basic Loss per share	$	(1,002	)		4,865	$	(0.21	)	$	(846	)		4,860	$	(0.17	)
Diluted Loss per Share
Net Loss Attributable to Common Shareholders	$	(1,002	)						$	(846	)
Effect of Dilutive Securities					-							-
Diluted Loss per Share	$	(1,002	)		4,865	$	(0.21	)	$	(846	)		4,860	$	(0.17	)

Options to purchase 114,312 and 67,289 shares of common stock were outstanding at March 31, 2016 and 2015, respectively. No outstanding options were included in the computation of diluted loss per common share for 2016 and 2015 as the effect would be antidilutive. Shares of preferred stock convertible into 64,000 shares of common stock were outstanding at March 31, 2016 and 2015. These shares were not included in the computation of diluted loss per common share for 2016 and 2015 because of the anti-dilutive effect.

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PROVIDENCE AND WORCESTER RAILROAD COMPANY

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

(Dollars in Thousands Except Per Share Amounts)

6. Commitments and Contingent Liabilities: 

The Company is a defendant in certain lawsuits relating to casualty losses, many of which are covered by insurance subject to a deductible. The Company believes that adequate provision has been made in the financial statements for any expected liabilities which may result from disposition of such lawsuits.

On January 29, 2002, the Company received a “Notice of Potential Liability” from the United States Environmental Protection Agency (“EPA”) regarding an existing Superfund Site (“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.

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. This settlement covered investigation costs; not cleanup costs.

The Government has now selected a remedy for the Site and has indicated that it will negotiate with all of the PRPs at the site to take over and or pay for the cleanup. As it did before, the Company responded 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.

7. 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.

Pursuant to the Agreement, the Company received a credit for mileage travelled along the Northeast Corridor.  The Company recognized the expense offset relative to Track Usage Fees as the expenses were 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. No credits remained outstanding as of March 31, 2016.

	Three Months Ended
	March 31,
	2016		2015
Mileage credit available	$	-	$	418
Utilized		-		130
Mileage credit remaining	$	-	$	288

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PROVIDENCE AND WORCESTER RAILROAD COMPANY

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

(Dollars in Thousands Except Per Share Amounts)

8. Share-Based Compensation: 

In April 2015, the Company’s shareholders approved the Providence and Worcester Railroad Company 2015 Equity Incentive Plan (“Plan”), which replaced the Company’s non-qualified stock option plan (“SOP”). In January 2016, 54,000 options and 70,500 restricted stock units (“RSU”) were awarded under the Plan. The option awards vest in accordance with the term of the option awards (mainly time vested over a 5 year period) and the RSU are performance based. Options issued but not exercised under the SOP totaling 114,312 remain outstanding until they are either exercised or expire.

9. Subsequent events:

On April 27, 2016, the Company declared a dividend of $.04 per share on its outstanding common stock payable May 25, 2016 to shareholders of record as of May 11, 2016.

In April 2016, the Company drew down $4,000 from an unsecured loan bearing interest at 4.11% per annum for the life of the loan.

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PROVIDENCE AND WORCESTER RAILROAD COMPANY

ITEM 2-MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The statements contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MDA”) which are not historical are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  These forward-looking statements represent the Company’s present expectations or beliefs concerning future events. The Company cautions, however, that actual results could differ materially from those indicated in MDA. The following discussion should be read in conjunction with the Condensed Financial Statements and applicable notes to the Condensed Financial Statements, Item 1.  

Critical Accounting Policies

The Securities and Exchange Commission (“SEC”) defines critical accounting policies as those that require application of management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

The Company’s significant accounting policies are described in Note 1 of the Notes to Financial Statements in its Annual Report on Form 10‑K. Not all of these significant accounting policies require management to make difficult, subjective or complex judgments or estimates. We continue to monitor our accounting policies to ensure proper application of current rules and regulations. There have been no significant changes to these policies as discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and during the first three months of 2016.

Forward-Looking Statements

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

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

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

· our relationships with Class I railroads and other carriers;

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

· our ability to comply with financial and non-financial covenants contained in our revolving line of credit and 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

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes previous revenue recognition guidance. The new standard requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in

10

exchange for those goods or services.  ASU 2014-09 anticipates companies using more judgment and estimates than under the current guidance. On July 9, 2015, the FASB approved a one year deferral of the effective date of ASU 2014-09. ASU 2014-09 permits the use of retrospective application to period presented or a cumulative effect transition adjustment. The Company is currently evaluating the impact and method of implementing this new guidance on its financial statements and related disclosures.

In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which, effective for annual and interim reporting periods beginning after December 15, 2016, simplifies the presentation of deferred income taxes, requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. Since early application is permitted, the new standard has been applied in the Company’s financial statements as of December 31, 2015. Prior periods were not retrospectively adjusted.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact of our pending adoption of the new standard on our financial statements.

Results of Operations

The following table sets forth the Company’s operating revenues, exclusive of rental revenues of $174 and $170 for the first three months in 2016 and 2015, respectively, by category in dollars and as a percentage of operating revenues:

	Three Months Ended March 31,
	2016				2015
	(In thousands, except percentages)
Freight Revenues:
Conventional carloads	$	6,407	91.9	%	$	6,485	91.4	%
Containers		196	2.8			302	4.3
Other freight related		207	2.9			178	2.5
Other Operating Revenues		239	3.4			126	1.8
Total	$	7,049	100.0	%	$	7,091	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 March 31,
	2016				2015
	(In thousands, except percentages)
Salaries, wages, payroll taxes and employee    benefits	$	4,195	59.5	%	$	4,084	57.6	%
Casualties and insurance		367	5.2			529	7.5
Depreciation		959	13.6			876	12.4
Diesel fuel		464	6.6			742	10.5
Car hire, net		387	5.5			383	5.4
Purchased services, including legal and    professional fees		556	7.9			541	7.6
Repair and maintenance of equipment		471	6.7			204	2.9
Track and signal materials		224	3.2			228	3.2
Track usage fees		255	3.6			170	2.4
Other materials and supplies		435	6.2			386	5.4
Other		712	10.1			802	11.3
Total		9,025	128.1			8,945	126.2
Less capitalized and recovered costs,    including amounts relating to the Amtrak    Agreement		263	3.7			387	5.5
Total	$	8,762	124.4	%	$	8,558	120.7	%

Operating Revenues:

Operating revenues decreased $40 thousand, or 0.6%, to $7.05 million in the first quarter of 2016 from $7.09 million in the first quarter of 2015.  

The decrease in conventional freight revenues is attributable to a 3.6% decrease in the average revenue received per conventional carload, offset in part by a 2.5% increase in traffic volume. The Company’s conventional carloads increased by 174 to 7,210 in the first quarter of 2016 from 7,036 in 2015.

Shipments of most commodities remained constant in the first quarter of 2016, as compared to the first quarter of 2015, except decreases in the Company’s ethanol and automobile business. The decrease in the average revenue received per conventional carload is due to a shift of the mix of commodities, the origin of the shipments, decrease in fuel surcharge revenue, as well as some rate changes.  

The decrease in container freight revenues is the result of a 35.9% decrease in traffic volume, offset by a 1.0% increase in the average revenue received per container. Container traffic volume decreased by 1,546 containers to 2,765 in the first quarter of 2016 from 4,311 in 2015.  

The increase in other freight-related revenues and in other operating revenues mainly reflects a increase in billings for flagging services performed by the Company.

Operating Expenses:

Operating expenses for the first quarter of 2016 increased by $200 thousand, or 2.3%, to $8.76 million from $8.56 million in the first quarter of 2015. The increase is attributable to increases in payroll related expense ($111 thousand), depreciation expense ($83 thousand), repairs and maintenance expenses ($267 thousand), track usage fees ($85 thousand), and a decrease of mileage credit received from Amtrak ($124 thousand). These increases were offset in part by decreases in casualty expense ($162 thousand), diesel fuel ($278 thousand), and other expenses ($90 thousand).

Provision for Income Taxes (Benefit):

The income tax benefit for the first quarter of 2016 and 2015 is both approximately (35%) of the pre-tax loss. The income tax rate for 2016 represents the effective tax benefit after giving effect for a decrease in the Company’s valuation allowance against its deferred

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tax assets. The income tax rate for 2015 represents the effective tax benefit, absent any changes to the valuation allowance against the Company’s deferred tax assets.

Liquidity and Capital Resources

During the first quarter of 2016, the Company generated $345 thousand of cash from operating activities, used $822 thousand in investing activities and $185 thousand in financing activities.

On April 27, 2016, the Company declared a quarterly dividend of approximately $195 thousand ($.04 per common share) to be paid on May 25, 2016. The declaration of future dividends and the amount thereof will depend on the Company’s future earnings, financial factors and other events

The Company entered into a loan agreement with its commercial bank for $5 million in 2014, the majority of which was or will be utilized to rehabilitate four and replace one main line bridges. Once the rehabilitation and replacement are complete, the Company will have the ability to haul freight with a lading of 286,000 pounds on its main line from Worcester, MA to Davisville/Providence RI. As provided in the agreement, the loan requires payments of interest only for twelve months whereupon it converts to a ten year term loan with payments based upon a twenty year amortization. The loan will bear interest at 4.11% per annum for the life of the loan. The loan is unsecured and subjects the Company to certain financial and non-financial covenants, including the maintenance of certain tangible net worth levels. The Company drew down the remaining $4 million in April 2016.

The Company’s $5 million revolving credit line expires on June 25, 2017.  

Seasonality

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

Item 4. Controls and Procedures

Our management with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rule 13a–15(e) and 15d-15(e) under the Securities 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.

13

PART II – Other Information

Item 5. Other information

(a)Reports on Form 8-K were appropriately filed during the quarter ended March 31, 2016.

Item 6. Exhibits

4.1 Notice of long-term debt of the Company that is less than 10% of the assets of the Company

(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 March 31, 2016, filed with the Securities and Exchange Commission on May 12, 2016, formatted in eXtensible Business Reporting Language:

(i) Balance Sheets as of March 31, 2016 and December 31, 2015;

(ii) Statements of Operations for the Three Months ended March 31, 2016 and 2015;

(iii) Statements of Cash Flows for the Three Months ended March 31, 2016 and 2015; and

(iv) Notes to Financial Statements.

14

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:  May 12, 2016

15

EX-4.1

EXHIBIT 4.1

May 12, 2016

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Re: Providence and Worcester Railroad Company – Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2016

Ladies and Gentlemen:

Providence and Worcester Railroad Company, a Rhode Island corporation (the “Registrant”), is today filing its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2016 (the “Form 10-Q”).

Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of certain instruments defining the rights of holders of certain long-term debt obligations of the Registrant under which the total amount of long-term debt authorized does not exceed ten percent (10%) of the total assets of the Registrant and its subsidiaries on a consolidated basis are not filed with the 10-Q. In accordance with the provisions of Item 601(b)(4)(iii) of Regulation S-K, the Registrant hereby agrees to furnish to the Securities and Exchange Commission, upon request, a copy of each such instrument or agreement.

Very truly yours,

PROVIDENCE AND WORCESTER RAILROAD COMPANY

/s/ Daniel T. Noreck

Name: Daniel T. Noreck

Title: Treasurer and Chief Financial Officer

EX-31.1

EXHIBIT 31.1

Providence and Worcester Railroad Company

Certification Pursuant to

Section 302 of the Sarbanes‑Oxley Act of 2002

I, ROBERT H. EDER, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Providence and Worcester Railroad Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

DATE:  May 12, 2016

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

EX-31.2

EXHIBIT 31.2

Providence and Worcester Railroad Company

Certification Pursuant to

Section 302 of the Sarbanes‑Oxley Act of 2002

I, DANIEL T. NORECK certify that:

1. I have reviewed this quarterly report on Form 10-Q of Providence and Worcester Railroad Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

DATE:  May 12, 2016

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 March 31, 2016, 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

May 12, 2016

EX-32.1

EXHIBIT 32.1

PROVIDENCE AND WORCESTER RAILROAD COMPANY

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Providence and Worcester Railroad Company (the Company) on form 10-Q for the quarterly period ended March 31, 2016, 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

May 12, 2016

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 05, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Trading Symbol	PWX
Entity Registrant Name	PROVIDENCE & WORCESTER RAILROAD CO/RI/
Entity Central Index Key	0000831968
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		4,865,737

XML

Condensed Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current Assets:
Cash and cash equivalents	$ 5,619	$ 6,281
Accounts receivable, net of allowance for doubtful accounts of $160 in 2016 and 2015	4,167	4,977
Materials and supplies	942	911
Prepaid expenses and other current assets	303	621
Total Current Assets	11,031	12,790
Property and Equipment, net	88,508	88,910
Land Held for Development	12,457	12,457
Total Assets	111,996	114,157
Current Liabilities:
Accounts payable	3,495	4,251
Current portion of long-term debt	20	20
Current portion of deferred grant and other income	447	319
Accrued expenses	1,839	1,653
Total Current Liabilities	5,801	6,243
Long-Term Debt, net of current portion	980	980
Deferred Income Taxes	13,066	13,602
Deferred Grant and Other Income	12,639	12,714
Shareholders’ Equity:
Preferred stock, 10% noncumulative, $50 par value; authorized, issued and outstanding 640 shares in 2016 and 2015	32	32
Common stock, $.50 par value; authorized 15,000,000 shares; issued and outstanding 4,865,737 shares in 2016 and 4,862,693 shares in 2015	2,433	2,432
Additional paid-in capital	38,140	38,050
Retained earnings	38,905	40,104
Total Shareholders’ Equity	79,510	80,618
Total Liabilities and Shareholders’ Equity	$ 111,996	$ 114,157

XML

Condensed Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Statement Of Financial Position [Abstract]
Allowance for doubtful accounts	$ 160	$ 160
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	4,865,737	4,862,693
Common stock, shares outstanding	4,865,737	4,862,693

XML

Condensed Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Statement [Abstract]
Operating Revenues	$ 7,223	$ 7,261
Operating Expenses:
Maintenance of way and structures	1,543	1,533
Maintenance of equipment	1,097	762
Transportation	2,291	2,792
General and administrative	1,368	1,382
Depreciation	959	876
Taxes, other than income taxes	806	733
Car hire, net	387	383
Employee retirement plans	56	57
Track usage fees	255	40
Total Operating Expenses	8,762	8,558
Loss from operations	(1,539)	(1,297)
Other income	9	7
Interest expense	5
Loss from operations prior to income taxes	(1,535)	(1,290)
Provision for income taxes	(536)	(447)
Net Loss	(999)	(843)
Preferred Stock Dividends	3	3
Net Loss Attributable to Common Shareholders	$ (1,002)	$ (846)
Net Loss Per Common Share
Basic	$ (0.21)	$ (0.17)
Diluted	$ (0.21)	$ (0.17)
Weighted-Average Common Shares Outstanding:
For basic	4,865	4,860
For diluted	4,865	4,860

XML

Condensed Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash Flows from Operating Activities:
Net Loss	$ (999)	$ (843)
Adjustments to reconcile the net loss to cash flows from operating activities:
Depreciation	959	876
Amortization of deferred grant and other income	(246)	(235)
Deferred grant and other income	316	288
Deferred income taxes	(536)	(447)
Share-based compensation	76	98
Increase (decrease) in cash from:
Accounts receivable	793	278
Materials and supplies	(31)	10
Prepaid expenses and other current assets	318	340
Accounts payable and accrued expenses	(305)	444
Net cash flows provided by operating activities	345	809
Cash Flows from Investing Activities:
Purchase of property and equipment	(822)	(350)
Net cash flows used in investing activities	(822)	(350)
Cash Flows from Financing Activities:
Dividends paid	(200)	(198)
Issuance of common shares for stock options exercised and employee stock purchases	15	12
Net cash flows used in financing activities	(185)	(186)
(Decrease) Increase in Cash and Cash Equivalents	(662)	273
Cash and Cash Equivalents, Beginning of Period	6,281	6,414
Cash and Cash Equivalents, End of Period	5,619	6,687
Supplemental Disclosures:
Cash paid for income taxes	310	385
Deferred grant income in accounts receivable	17
Property and equipment included in accounts payable	$ 265	$ 217

XML

Basis of Presentation

3 Months Ended

Mar. 31, 2016

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation

1. In the opinion of management, the accompanying interim condensed financial statements of Providence and Worcester Railroad Company (the “Company”) contain all adjustments (consisting solely of normal and recurring adjustments) necessary to present fairly the financial position as of March 31, 2016 and the results of operations and cash flows for the three months ended March 31, 2016 and 2015 in accordance with accounting principles generally accepted in the United States.  The accompanying condensed balance sheet as of December 31, 2015, 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, 2015 filed with the Securities and Exchange Commission.  Results for interim periods may not be necessarily indicative of the results to be expected for the full year.

XML

Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2016

Accounting Changes And Error Corrections [Abstract]

Recent Accounting Pronouncements

2. Recent Accounting Pronouncements:

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes previous revenue recognition guidance. The new standard requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services.  ASU 2014-09 anticipates companies using more judgment and estimates than under the current guidance. On July 9, 2015, the FASB approved a one year deferral of the effective date of ASU 2014-09. ASU 2014-09 permits the use of retrospective application to period presented or a cumulative effect transition adjustment. The Company is currently evaluating the impact and method of implementing this new guidance on its financial statements and related disclosures.

In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which, effective for annual and interim reporting periods beginning after December 15, 2016, simplifies the presentation of deferred income taxes, requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. Since early application is permitted, the new standard has been applied in the Company’s financial statements as of December 31, 2015. Prior periods were not retrospectively adjusted.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.The Company is currently evaluating the impact of our pending adoption of the new standard on our financial statements.

XML

Changes in Shareholders' Equity

3 Months Ended

Mar. 31, 2016

Equity [Abstract]

Changes in Shareholders' Equity

3. Changes in Shareholders’ Equity:

					Additional					Total
	Preferred		Common		Paid-in		Retained			Shareholders’
	Stock		Stock		Capital		Earnings			Equity
Balance, December 31, 2015	$	32	$	2,432	$	38,050	$	40,104		$	80,618
Issuance of 1,049 common shares for stock options exercised, employee stock purchases, and other				1		14					15
Share based compensation – options granted						76					76
Dividends paid:
Preferred stock, $5.00 per share								(3	)		(3	)
Common stock, $.04 per share								(197	)		(197	)
Net loss								(999	)		(999	)
Balance, March 31, 2016	$	32	$	2,433	$	38,140	$	38,905		$	79,510

XML

Debt

3 Months Ended

Mar. 31, 2016

Debt Disclosure [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, 2017. 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. The Company is subject to financial and non-financial covenants including maintenance of a minimum net worth and restrictions as to the incurrence of additional indebtedness, as well as the sale or encumbrance of its assets. At March 31, 2016 and December 31, 2015, no amounts were outstanding.

Long-term Debt

The Company entered into a loan agreement with its commercial bank for $5 million in 2014, the majority of which was or will be utilized to rehabilitate four and replace one main line bridges. Once the rehabilitation and replacement are complete, the Company will have the ability to haul freight with a lading of 286,000 pounds on its main line from Worcester, MA to Davisville/Providence RI. As provided in the agreement, the loan requires payments of interest only for twelve months whereupon it converts to a ten year term loan with payments based upon a twenty year amortization.  The loan will bear interest at 4.11% per annum for the life of the loan. The loan is unsecured and subjects the Company to certain financial and non-financial covenants, including the maintenance of certain tangible net worth levels. The Company drew down the remaining $4 million in April 2016.

XML

Net Loss per Common Share

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Net Loss per Common Share

5. Net Loss per Common Share:

Basic income per common share is computed using the weighted-average number of common shares outstanding during each period.  Diluted income 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:

	2016								2015
	Net Loss			Shares		Per Share Amount			Net Loss			Shares		Per Share Amount
Basic Loss per Share
Net Loss Attributable to Common Shareholders	$	(1,002	)						$	(846	)
Basic Loss per share	$	(1,002	)		4,865	$	(0.21	)	$	(846	)		4,860	$	(0.17	)
Diluted Loss per Share
Net Loss Attributable to Common Shareholders	$	(1,002	)						$	(846	)
Effect of Dilutive Securities					-							-
Diluted Loss per Share	$	(1,002	)		4,865	$	(0.21	)	$	(846	)		4,860	$	(0.17	)

Options to purchase 114,312 and 67,289 shares of common stock were outstanding at March 31, 2016 and 2015, respectively. No outstanding options were included in the computation of diluted loss per common share for 2016 and 2015 as the effect would be antidilutive. Shares of preferred stock convertible into 64,000 shares of common stock were outstanding at March 31, 2016 and 2015. These shares were not included in the computation of diluted loss per common share for 2016 and 2015 because of the anti-dilutive effect.

XML

Commitments and Contingent Liabilities

3 Months Ended

Mar. 31, 2016

Commitments And Contingencies Disclosure [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 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.

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. This settlement covered investigation costs; not cleanup costs.

The Government has now selected a remedy for the Site and has indicated that it will negotiate with all of the PRPs at the site to take over and or pay for the cleanup. As it did before, the Company responded 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.

XML

Amtrak Agreement

3 Months Ended

Mar. 31, 2016

Agreement With Related Party [Abstract]

Amtrak Agreement

7. 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.

Pursuant to the Agreement, the Company received a credit for mileage travelled along the Northeast Corridor.  The Company recognized the expense offset relative to Track Usage Fees as the expenses were 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. No credits remained outstanding as of March 31, 2016.

	Three Months Ended
	March 31,
	2016		2015
Mileage credit available	$	-	$	418
Utilized		-		130
Mileage credit remaining	$	-	$	288

XML

Share-Based Compensation

3 Months Ended

Mar. 31, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Share-Based Compensation

8. Share-Based Compensation:

In April 2015, the Company’s shareholders approved the Providence and Worcester Railroad Company 2015 Equity Incentive Plan (“Plan”), which replaced the Company’s non-qualified stock option plan (“SOP”). In January 2016, 54,000 options and 70,500 restricted stock units (“RSU”) were awarded under the Plan. The option awards vest in accordance with the term of the option awards (mainly time vested over a 5 year period) and the RSU are performance based. Options issued but not exercised under the SOP totaling 114,312 remain outstanding until they are either exercised or expire.

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Subsequent events

3 Months Ended

Mar. 31, 2016

Subsequent Events [Abstract]

Subsequent events

9. Subsequent events:

On April 27, 2016, the Company declared a dividend of $.04 per share on its outstanding common stock payable May 25, 2016 to shareholders of record as of May 11, 2016.

In April 2016, the Company drew down $4,000 from an unsecured loan bearing interest at 4.11% per annum for the life of the loan.

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Recent Accounting Pronouncements (Policies)

3 Months Ended

Mar. 31, 2016

Accounting Changes And Error Corrections [Abstract]

Recent Accounting Pronouncements

2. Recent Accounting Pronouncements:

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes previous revenue recognition guidance. The new standard requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services.  ASU 2014-09 anticipates companies using more judgment and estimates than under the current guidance. On July 9, 2015, the FASB approved a one year deferral of the effective date of ASU 2014-09. ASU 2014-09 permits the use of retrospective application to period presented or a cumulative effect transition adjustment. The Company is currently evaluating the impact and method of implementing this new guidance on its financial statements and related disclosures.

In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which, effective for annual and interim reporting periods beginning after December 15, 2016, simplifies the presentation of deferred income taxes, requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. Since early application is permitted, the new standard has been applied in the Company’s financial statements as of December 31, 2015. Prior periods were not retrospectively adjusted.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.The Company is currently evaluating the impact of our pending adoption of the new standard on our financial statements.

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Changes in Shareholders' Equity (Tables)

3 Months Ended

Mar. 31, 2016

Equity [Abstract]

Changes in Shareholders' Equity

					Additional					Total
	Preferred		Common		Paid-in		Retained			Shareholders’
	Stock		Stock		Capital		Earnings			Equity
Balance, December 31, 2015	$	32	$	2,432	$	38,050	$	40,104		$	80,618
Issuance of 1,049 common shares for stock options exercised, employee stock purchases, and other				1		14					15
Share based compensation – options granted						76					76
Dividends paid:
Preferred stock, $5.00 per share								(3	)		(3	)
Common stock, $.04 per share								(197	)		(197	)
Net loss								(999	)		(999	)
Balance, March 31, 2016	$	32	$	2,433	$	38,140	$	38,905		$	79,510

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Net Loss per Common Share (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per 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:

	2016								2015
	Net Loss			Shares		Per Share Amount			Net Loss			Shares		Per Share Amount
Basic Loss per Share
Net Loss Attributable to Common Shareholders	$	(1,002	)						$	(846	)
Basic Loss per share	$	(1,002	)		4,865	$	(0.21	)	$	(846	)		4,860	$	(0.17	)
Diluted Loss per Share
Net Loss Attributable to Common Shareholders	$	(1,002	)						$	(846	)
Effect of Dilutive Securities					-							-
Diluted Loss per Share	$	(1,002	)		4,865	$	(0.21	)	$	(846	)		4,860	$	(0.17	)

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Amtrak Agreement (Tables)

3 Months Ended

Mar. 31, 2016

Agreement With Related Party [Abstract]

Schedule Of Remaining Track Mileage Credit

The Company has recorded the following offsets to Track Usage expense. No credits remained outstanding as of March 31, 2016

	Three Months Ended
	March 31,
	2016		2015
Mileage credit available	$	-	$	418
Utilized		-		130
Mileage credit remaining	$	-	$	288

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Changes in Shareholders' Equity - Changes in Shareholders' Equity (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Beginning Balance	$ 80,618
Issuance of 1,049 common shares for stock options exercised, employee stock purchases, and other	15
Share based compensation – options granted	76
Dividends paid:
Preferred stock, $5.00 per share	(3)
Common stock, $.04 per share	(197)
Net loss	(999)	$ (843)
Ending Balance	79,510
Preferred Stock [Member]
Beginning Balance	32
Dividends paid:
Ending Balance	32
Common Stock [Member]
Beginning Balance	2,432
Issuance of 1,049 common shares for stock options exercised, employee stock purchases, and other	1
Dividends paid:
Ending Balance	2,433
Additional Paid-in Capital [Member]
Beginning Balance	38,050
Issuance of 1,049 common shares for stock options exercised, employee stock purchases, and other	14
Share based compensation – options granted	76
Dividends paid:
Ending Balance	38,140
Retained Earnings [Member]
Beginning Balance	40,104
Dividends paid:
Preferred stock, $5.00 per share	(3)
Common stock, $.04 per share	(197)
Net loss	(999)
Ending Balance	$ 38,905

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Changes in Shareholders' Equity - Changes in Shareholders' Equity (Parenthetical) (Detail) shares in Thousands	3 Months Ended
	Mar. 31, 2016 $ / shares shares
Issuance of common shares for stock options exercised | shares	1,049
Preferred stock dividends per share	$ 5.00
Common stock dividends per share	$ 0.04
Common Stock [Member]
Issuance of common shares for stock options exercised | shares	1,049
Additional Paid-in Capital [Member]
Issuance of common shares for stock options exercised | shares	1,049
Retained Earnings [Member]
Preferred stock dividends per share	$ 5.00
Common stock dividends per share	$ 0.04

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Debt - Additional Information (Detail) - Unsecured Debt [Member]	1 Months Ended	3 Months Ended	12 Months Ended
	Apr. 30, 2016 USD ($)	Mar. 31, 2016 USD ($)	Dec. 31, 2014 USD ($) lb	Dec. 31, 2015 USD ($)
Commercial Loan [Member]
Debt Instrument [Line Items]
Commercial bank loan			$ 5,000,000
Freight lading capacity | lb			286,000
Interest only loan payment period			12 months
Debt instrument maturity term			10 years
Amortization period			20 years
Loan interest rate			4.11%
Subsequent Events [Member] | Commercial Loan [Member]
Debt Instrument [Line Items]
Loan interest rate	4.11%
Loan drawn amount	$ 4,000,000
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Extended revolving line of credit facility		$ 5,000,000
Line of credit facility maturity date		Jun. 25, 2017
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
Compensating balance amount		0
Outstanding line of credit		$ 0		$ 0

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Net Loss Per Common Share - Reconciliation of Weighted-Average Shares Used for the Basic Computation and that Used for the Diluted Computation (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Basic Loss per Share
Net Loss Attributable to Common Shareholders	$ (1,002)	$ (846)
Number of basic shares	4,865	4,860
Basic Loss per share	$ (0.21)	$ (0.17)
Diluted Loss per Share
Net Loss Attributable to Common Shareholders	$ (1,002)	$ (846)
Number of diluted shares	4,865	4,860
Diluted Loss per Share	$ (0.21)	$ (0.17)
Net Income available to Common Shareholders	$ (999)	$ (843)

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Net Loss Per Common Share - Additional Information (Detail) - shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Earnings Per Share [Abstract]
Options outstanding for the purchase of common stock	114,312	67,289
Number of shares relating to options included in the calculation of diluted earnings per share	0	0
Preferred stock convertible into common stock at rate of shares of common stock	64,000	64,000
Shares attributable to conversion of preferred stock included in computation of earnings per share	0	0

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Commitments and Contingent Liabilities - Additional Information (Detail)	1 Months Ended	3 Months Ended
	Mar. 31, 2006 USD ($)	Mar. 31, 2016 USD ($) Plaintiff
Commitments And Contingencies Disclosure [Abstract]
Payment of past costs demand		$ 762,000
Number of parties named by Plaintiff | Plaintiff		60
Amount paid to settle suit	$ 45,000
Accrued liability from United States Environmental Protection Agency		$ 0

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Amtrak Agreement - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Commitments And Contingencies Disclosure [Abstract]
Dispute Settlement Gross Amount Remaining	$ 0	$ 288,000

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Amtrak Agreement - Schedule of Remaining Track Mileage Credit (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Agreement With Related Party [Abstract]
Mileage credit available		$ 418,000
Utilized		130,000
Mileage credit remaining	$ 0	$ 288,000

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Share-Based Compensation - Additional Information (Detail) - shares	1 Months Ended
	Jan. 31, 2016	Mar. 31, 2016	Mar. 31, 2015
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Options outstanding for the purchase of common stock		114,312	67,289
2015 Equity Incentive Plan [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Number of options awarded by company	54,000
2015 Equity Incentive Plan [Member] | Restricted Stock Units [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Number of shares awarded by company	70,500
2015 Equity Incentive Plan [Member] | Stock Option [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Option awards vesting period	5 years
Non-qualified Stock Option Plan [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Options outstanding for the purchase of common stock	114,312

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Subsequent Events - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions		1 Months Ended	12 Months Ended
	Apr. 27, 2016	Apr. 30, 2016	Dec. 31, 2014
Commercial Loan [Member] | Unsecured Debt [Member]
Subsequent Event [Line Items]
Loan interest rate			4.11%
Subsequent Events [Member]
Subsequent Event [Line Items]
Dividend declared	$ 0.04
Dividend payable declared	Apr. 27, 2016
Outstanding common stock payable date	May 25, 2016
Dividend payable date on record	May 11, 2016
Subsequent Events [Member] | Commercial Loan [Member] | Unsecured Debt [Member]
Subsequent Event [Line Items]
Loan drawn amount		$ 4
Loan interest rate		4.11%