-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, QF528j0yoisc3iJAM3HLrCDde+K/kzMWYkQ0/sdXe3rYCz2SqiEdtwZxDuppNv2X iQEYrtaaxJ6GLuqVIhRU1Q== 0000897732-94-000006.txt : 19940801 0000897732-94-000006.hdr.sgml : 19940801 ACCESSION NUMBER: 0000897732-94-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940729 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONRAIL INC CENTRAL INDEX KEY: 0000897732 STANDARD INDUSTRIAL CLASSIFICATION: 4011 IRS NUMBER: 232728514 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12184 FILM NUMBER: 94540757 BUSINESS ADDRESS: STREET 1: TWO COMMERCE SQ STREET 2: P O BOX 41417 CITY: PHILADELPHIA STATE: PA ZIP: 19101-1417 BUSINESS PHONE: 2152094434 MAIL ADDRESS: STREET 1: P.O. BOX 41429 STREET 2: 2001 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19101-1429 10-Q 1 10Q -BODY 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, 1994 or ( ) 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 1-12184 CONRAIL INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Pennsylvania 23-2728514 ------------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2001 Market Street, Philadelphia, Pennsylvania 19101 --------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (215) 209-4000 --------------------------------------------------------------------- (Registrant's telephone number, including area code) --------------------------------------------------------------------- (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 Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Number of shares of Conrail Inc. common stock outstanding (as of July 15, 1994) 78,821,747 CONRAIL INC. INDEX Page Number ----------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Condensed Consolidated Statements of Income - Quarters and six months ended June 30, 1994 and 1993 3 Condensed Consolidated Balance Sheets - June 30, 1994 and December 31, 1993 4 Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 1994 and 1993 5 Notes to Condensed Consolidated Financial Statements 6 Reports of Independent Accountants 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 16 Item 6. Exhibits and Reports on Form 8-K 18 SIGNATURES 19 2 PART I. FINANCIAL INFORMATION CONRAIL INC. Item 1. Financial Statements. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
($ In Millions Except Per Share Data) Quarters Ended Six Months Ended June 30, June 30, -------------- ----------------- 1994 1993 1994 1993 ---- ---- ------ ------ Revenues $951 $873 $1,798 $1,689 Operating expenses Way and structures 121 122 265 258 Equipment 209 178 419 354 Transportation 342 320 692 642 General and administrative 90 95 181 192 Early retirement program 84 ---- ---- ------ ------ Total operating expenses 762 715 1,641 1,446 ---- ---- ------ ------ Income from operations 189 158 157 243 Interest expense (48) (46) (95) (90) Other income, net 25 25 51 57 ---- ---- ------ ------ Income before income taxes and the cumulative effect of changes in accounting principles 166 137 113 210 Income taxes 65 52 44 79 ---- ---- ------ ------ Income before the cumulative effect of changes in accounting principles 101 85 69 131 Cumulative effect of changes in accounting principles (74) ---- ---- ------ ------ Net income $101 $ 85 $ 69 $ 57 ==== ==== ====== ====== Income (loss) per common share Before the cumulative effect of changes in accounting principles Primary $1.24 $1.01 $.79 $ 1.53 Fully diluted 1.12 .92 .74 1.40 Cumulative effect of changes in accounting principles Primary (.91) Fully diluted (.81) Net income per common share Primary $1.24 $1.01 $.79 $ .62 Fully diluted 1.12 .92 .74 .59 Dividends per common share $.325 $.275 $.65 $ .55 Weighted average number of shares used in computing earnings per share (thousands) Primary 79,632 80,730 80,033 80,855 Fully diluted 89,547 90,687 89,962 90,814 Ratio of earnings to fixed charges 3.84x 3.65x 1.94x 2.96x See accompanying notes.
3 CONRAIL INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
($ In Millions) June 30, December 31, 1994 1993 -------- ------------ ASSETS Current assets Cash and cash equivalents $ 28 $ 38 Accounts receivable 673 644 Deferred tax assets 238 227 Material and supplies 157 132 Other current assets 25 21 ------ ------ Total current assets 1,121 1,062 Property and equipment, net 6,349 6,313 Other assets 667 573 ------ ------ Total assets $8,137 $7,948 ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term borrowings 185 79 Current maturities of long-term debt 118 146 Accounts payable 61 62 Wages and employee benefits 194 185 Casualty reserves 96 93 Accrued and other current liabilities 545 510 ------ ------ Total current liabilities 1,199 1,075 Long-term debt 1,971 1,959 Casualty reserves 204 132 Deferred income taxes 1,128 1,081 Special income tax obligation 544 575 Other liabilities 338 342 ------ ------ Total liabilities 5,384 5,164 ====== ====== Stockholders' equity Series A ESOP convertible junior preferred stock 286 286 Unearned ESOP compensation (248) (253) Common stock 80 80 Additional paid-in capital 1,832 1,819 Retained earnings 868 857 ------ ------ 2,818 2,789 Treasury stock (65) (5) ------ ------ Total stockholders' equity 2,753 2,784 ------ ------ Total liabilities and stockholders' equity $8,137 $7,948 ====== ====== See accompanying notes.
4 CONRAIL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
($ In Millions) Six Months Ended June 30, ------------------- 1994 1993 ----- ----- Cash flows from operating activities $ 223 $ 117 Cash flows from investing activities Property and equipment acquisitions (181) (202) Loans to and investments in affiliates (5) (24) Proceeds from disposals of properties 11 7 Other (26) (27) ----- ----- Net cash used in investing activities (201) (246) ----- ----- Cash flows from financing activities Repurchase of common stock (60) (32) Net proceeds from (repayment of) short-term borrowings 105 (67) Net proceeds from (payment of) medium-term notes 10 (1) Proceeds from long-term debt 305 Payment of capital lease and equipment obligations (37) (44) Dividends paid on common stock (51) (44) Dividends paid on preferred stock (11) (11) Other 12 7 ----- ----- Net cash from (used in) financing activities (32) 113 ----- ----- Decrease in cash and cash equivalents (10) (16) Cash and cash equivalents Beginning of period 38 40 ----- ----- End of period $ 28 $ 24 ===== ===== See accompanying notes.
5 CONRAIL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The unaudited financial statements contained herein present Conrail Inc.'s (the "Company") consolidated financial position as of June 30, 1994 and December 31, 1993, the consolidated results of operations for the three and six-month periods ending June 30, 1994 and 1993 and the consolidated cash flows for the six-month periods ended June 30, 1994 and 1993. In the opinion of management, these financial statements include all adjustments, consisting of normal recurring adjustments, and the cumulative effects of changes in accounting principles mentioned in Note 3, necessary to present fairly the results for the interim periods included. The rules and regulations of the Securities and Exchange Commission permit certain information and footnote disclosures, ordinarily required by generally accepted accounting principles, to be condensed or omitted from interim financial reports. Accordingly, the financial statements included herein should be read in conjunction with the audited financial statements and notes for the year ended December 31, 1993, presented in the Company's Annual Report on Form 10-K. 2. During the first quarter of 1994, the Company recorded a charge of $51 million (after tax benefits of $33 million) for a non-union employee voluntary early retirement program and related costs. The majority of the cost of the early retirement program will be paid from the Company's overfunded pension plan. 3. Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." As a result, the Company recorded cumulative after tax charges totalling $74 million in the first quarter of 1993. 4. In July 1993, the Board of Directors authorized a $100 million common stock repurchase program. During the first six months of 1994, the Company acquired 1,027,571 shares for approximately $60 million under this program, and at June 30, 1994 approximately $26 million remained available from the authorization. On July 20, 1994, the Company's Board of Directors authorized an additional $100 million common stock repurchase program. 6 5. In June 1994, Consolidated Rail Corporation, the Company's principal subsidiary, issued $15 million of Medium-Term Notes with an interest rate of 6.33%, maturing in 1996, pursuant to a registration statement on Form S-3. In July 1994, Consolidated Rail Corporation issued approximately $49 million of 1994 Equipment Trust Certificates, Series A, with interest rates ranging from 5.5% to 7.6%, maturing annually from 1995 to 2009. The certificates were used to finance approximately 85% of the total purchase price of 36 locomotives. 6. Information regarding contingent liabilities and litigation was included in Note 12 to Consolidated Financial Statements and Part I, Item 3 - Legal Proceedings in the Company's Annual Report on Form 10-K for the year ended December 31, 1993. There have been no material developments with respect to these matters during the first six months of 1994, except as disclosed in that Annual Report on Form 10-K and the quarterly report on Form 10-Q for the three months ended March 31, 1994. 7 REPORT OF INDEPENDENT ACCOUNTANTS The Stockholders and Board of Directors of Conrail Inc. We have reviewed the accompanying condensed consolidated balance sheet of Conrail Inc. and its subsidiaries (the "Company") as of June 30, 1994 and the related condensed consolidated statements of income for the three and six months ended June 30, 1994 and the condensed consolidated statement of cash flows for the six months ended June 30, 1994. The condensed consolidated statements of income for the three and six months ended June 30, 1993 and the condensed consolidated statement of cash flows of Consolidated Rail Corporation for the six months ended June 30, 1993 were reviewed by other independent accountants, whose report dated July 21, 1993, disclosed that no material modifications should have been made to the interim financial information for it to be in conformity with generally accepted accounting principles. This financial information is the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with generally accepted accounting principles. The Company's consolidated balance sheet as of December 31, 1993 and the related consolidated statements of income, stockholders' equity and cash flows for the year then ended (not presented herein) were audited by other independent accountants, whose report dated January 24, 1994 expressed an unqualified opinion on those statements and included an explanatory paragraph describing the Company's change in methods for accounting for income taxes and postretirement benefits other than pensions in 1993. PRICE WATERHOUSE Thirty South Seventeenth Street Philadelphia, PA 19103 July 20, 1994 8 REPORT OF INDEPENDENT ACCOUNTANTS The Stockholders and Board of Directors of Conrail Inc. We have made a review of the condensed consolidated balance sheet of Consolidated Rail Corporation and subsidiaries as of June 30, 1993, and the related condensed consolidated statements of income for the three and six-month periods ended June 30, 1993, and the condensed consolidated statement of cash flows for the six-month period ended June 30, 1993, in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of obtaining an understanding of the system for the preparation of interim financial information, applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1993, and the related consolidated statements of income, stockholders' equity and cash flows for the year then ended (not presented herein); and in our report, dated January 24, 1994, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1993, is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived. COOPERS & LYBRAND 2400 Eleven Penn Center Philadelphia, Pennsylvania January 24, 1994 9 CONRAIL INC. Item 2. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operations. ----------------------------------- Results of Operations --------------------- Overview -------- Net income for Conrail Inc. ("Conrail" or "the Company") was $101 million for the second quarter of 1994 compared with $85 million for the second quarter of 1993. Net income for the first six months of 1994 was $69 million compared with $57 million for the first six months of 1993. Results for the first six months of 1994 include a one-time charge of $51 million (net of tax benefits of $33 million) relating to a non- union early retirement program and related costs that the Company recorded in the first quarter of 1994 (see Note 2 to the Condensed Consolidated Financial Statements). Results for the first six months of 1993 include one-time charges in the first quarter of $74 million (net of tax benefits of $14 million) for adoption of required changes in accounting for income taxes and postretirement benefits other than pensions (see Note 3 to the Condensed Consolidated Financial Statements). Absent these one-time charges, Conrail would have net income of $120 million and $131 million for the first six months of 1994 and 1993, respectively. Net income per common share for the second quarter of 1994 was $1.24 on a primary basis and $1.12 on a fully diluted basis, compared with $1.01 and $.92 on the respective bases for the second quarter of 1993. Net income per common share for the first six months of 1994 was $.79 on a primary basis and $.74 on a fully diluted basis, compared with $.62 and $.59 on the respective bases for the first six months of 1993. Excluding the one-time charges, net income per common share for the first six months of 1994 would have been $1.43 on a primary basis and $1.31 on a fully-diluted basis compared with $1.53 and $1.40 on the respective bases for the first six months of 1993. Traffic volume increased in each of the four Service Groups, Intermodal, Automotive, Unit Train and Core, for both the second quarter and six months ended June 30, 1994, compared with these same periods in 1993. Conrail believes that the economy will continue to grow during the remainder of 1994 and has modestly increased its projections for traffic volume and revenue during this period. 10 The Company is continuing to assess its existing capital resources required for the Service Groups and expects to complete the assessment by year end. In anticipation of continued traffic growth, the Company is increasing its locomotive fleet and hiring train and engine employees to meet the demand for transportation services. Second Quarter 1994 compared with Second Quarter 1993 ----------------------------------------------------- Net income for the second quarter of 1994 was $101 million, an increase of $16 million, or 18.8%, from $85 million for the second quarter of 1993. Operating revenues (primarily freight line-haul revenues, but also including switching, demurrage and incidental revenues) increased $78 million, or 8.9%, from $873 million in the second quarter of 1993 to $951 million in the second quarter of 1994. A 10.1% increase in traffic volume in units (freight cars and intermodal trailers and containers) resulted in an $84 million increase in revenues that was partially offset by a 1.0% decrease in average revenue per unit which reduced revenues by $9 million. The decline in average revenue per unit is attributable to an unfavorable traffic mix which decreased revenues by $17 million, partially offset by an increase in average rates which increased revenues $8 million. Other revenues increased by $3 million. Operating expenses for the quarter increased $47 million, or 6.6%, from $715 million in 1993 to $762 million in 1994. The following table sets forth the operating expenses for the two periods: Second Quarter -------------- ($ In Millions) 1994 1993 Increase ---- ---- -------- Compensation and benefits $311 $309 $ 2 Fuel 47 44 3 Material and supplies 51 50 1 Equipment rents 102 75 27 Depreciation and amortization 69 69 - Casualties and insurance 39 31 8 Other 143 137 6 ---- ---- --- $762 $715 $47 ==== ==== === Compensation and benefits as a percent of revenues were 32.6% in the second quarter of 1994 and 35.4% in the second quarter of 1993. 11 The increase of $27 million, or 36%, in equipment rents primarily reflects an increase in the number of cars handled and the congestion in the yards, both caused by increased traffic volume. The effects of new operating leases also increased equipment rents in 1994 versus 1993. Casualties and insurance costs increased $8 million, or 25.8%, due to an increase in personal injury claims expense based on the increase in estimated costs to settle such claims. The Company continues to experience increasing costs associated with the resolution of personal injury and occupational illness claims, despite the recent decline in the actual number of lost- time injuries. As a result, the Company has formed a new Risk Management Department to consolidate all facets of personal injury risk management and to review its safety practices, the process by which it resolves claims, and the costs of such claims. The Company is continuing the process of reviewing the adequacy of its personal injury reserves. The Company's operating ratio (operating expenses as a percent of revenues) was 80.1% for the second quarter of 1994, compared with 81.9% for the second quarter of 1993. First Six Months of 1994 compared with First Six Months of 1993 --------------------------------------------------------------- Net income for the first six months of 1994 was $69 million, an increase of $12 million, or 21.1%, from $57 million for the first six months of 1993. Net income for the first six months of 1994 includes the effects of a one-time charge of $51 million (net of tax benefits of $33 million) relating to a non- union voluntary early retirement program and related costs which the Company recorded during the first quarter of 1994 (see Note 2 to the Condensed Consolidated Financial Statements). Net income for the first six months of 1993 includes the effects of one-time charges in the first quarter of $74 million (net of tax benefits of $14 million) for adoption of required changes in accounting for income taxes and postretirement benefits other than pensions (see Note 3 to the Condensed Consolidated Financial Statements). Operating revenues increased $109 million, or 6.5%, to $1,798 million from $1,689 million for the first six months of 1993. A 9.0% increase in traffic volume resulted in a $145 million increase in revenues that was partially offset by a 1.9% decrease in average revenue per unit which reduced revenues by $34 million. The decline in average revenue per unit was caused by an unfavorable traffic mix and decreases in average rates, which lowered revenues by $24 million and $10 million, respectively. Other revenues decreased $2 million. 12 Operating expenses increased $195 million, including $84 million related to the non-union voluntary early retirement program and related costs, or 13.5%, to $1,641 million from $1,446 million for the first six months of 1993. The following table shows the operating expenses for the periods: First Six Months ---------------- Increase ($ In Millions) 1994 1993 (Decrease) ------ ------ ---------- Compensation and benefits $ 652 $ 632 $ 20 Fuel 94 87 7 Material and supplies 113 107 6 Equipment rents 193 150 43 Depreciation and amortization 139 141 (2) Casualties and insurance 84 65 19 Other 282 264 18 Early retirement program 84 - 84 ------ ------ ---- $1,641 $1,446 $195 ====== ====== ==== Compensation and benefits as a percent of revenues were 36.2% in the first six months of 1994 and 37.4% in the first six months of 1993. The compensation and benefits increase of $20 million, or 3.2%, was attributable primarily to increased overtime caused by the adverse weather conditions and service disruptions experienced in the first quarter of 1994. The increase of $43 million, or 28.7%, in equipment rents is primarily attributable to increased traffic volume and new operating leases, as well as the effects of crowded serving yards and train delays caused by adverse weather conditions experienced in the first quarter of 1994. Casualties and insurance costs increased $19 million, or 29.2%, due to an increase in personal injury claims expense based on higher expected costs to settle claims along with an increase in the number of personal injury claims, which increase occurred in the first quarter of 1994. Other operating expenses increased $18 million, or 6.8%, primarily due to increases in lease rentals and property and corporate taxes, as well as higher snow removal costs in the first quarter of 1994. In the first quarter of 1994, the Company incurred a one-time pre-tax charge of $84 million for the non-union voluntary early retirement program and related costs (see Note 2 to the Condensed Consolidated Financial Statements). 13 Conrail's operating ratio was 91.3% for the first six months of 1994, compared with 85.6% for the first six months of 1993. Without the $84 million one-time charge for the early retirement program, the operating ratio for the first six months of 1994 would have been 86.6%. The Company's financial goal of achieving an 81.5 % operating ratio (excluding non- recurring charges) for the full year has not changed but continues to be evaluated as the year progresses. Liquidity and Capital Resources ------------------------------- The Company's cash and cash equivalents decreased $10 million in the first six months of 1994, from $38 million at December 31, 1993 to $28 million at June 30, 1994. Cash generated from operations, primarily from its wholly-owned subsidiary, Consolidated Rail Corporation, and borrowings are the Company's principal sources of liquidity and are used primarily for capital expenditures, debt service and dividends. In the first six months of 1994, operating activities provided cash of $223 million and net proceeds from short-term borrowings and medium-term notes provided $115 million. The principal uses of cash were for property and equipment acquisitions, $181 million; repurchases of common stock, $60 million; payment of capital lease and equipment obligations, $37 million; and cash dividends on common and preferred stock, $62 million. A working capital (current assets less current liabilities) deficiency of $78 million existed at June 30, 1994 as compared with a deficiency of $13 million at December 31, 1993. Management believes that the Company's financial position allows it sufficient access to credit sources on investment grade terms, and, if necessary, additional intermediate or long- term debt could be obtained for working capital requirements. During the first six months of 1994, Consolidated Rail Corporation issued $169 million of commercial paper and repaid $64 million. At June 30, 1994, $285 million of commercial paper remained outstanding, of which $100 million is classified as long-term debt since it is expected to be refinanced through subsequent issuances of commercial paper and is supported by a long-term credit facility. In June 1994, Consolidated Rail Corporation issued $15 million of Medium-Term Notes with an interest rate of 6.33%, maturing in 1996, pursuant to a registration statement on Form S-3. 14 In July 1994, Consolidated Rail Corporation issued approximately $49 million of 1994 Equipment Trust Certificates, Series A, with interest rates ranging from 5.5% to 7.6%, maturing annually from 1995 to 2009. The certificates were used to finance approximately 85% of the total purchase price of 36 locomotives. In July 1993, the Company began a third common stock repurchase program of up to $100 million. During the first six months of 1994, 1,027,571 shares were acquired for $60 million, bringing the total acquired under this program through June 30, 1994 to 1,265,426 shares at a cost of approximately $74 million. At June 30, 1994, approximately $26 million remained from this program, and on July 20, 1994, the Board of Directors authorized an additional $100 million common stock repurchase program. Also on July 20, 1994, the Company's Board of Directors approved an increase of $.05 per share, or 15.4%, in the Company's quarterly dividend to $.375 per common share commencing with the dividend payable September 15, 1994 to shareholders of record on August 31, 1994. Other Matters ------------- The United Transportation Union ("UTU") is currently involved in a work stoppage that is confined to the Soo Line Railroad. The Company has been advised that the strike may spread in the near future to the Delaware & Hudson Railroad (an affiliate of the Soo Line), a carrier with which Conrail shares facilities and which has trackage rights over Conrail. In such event, Conrail's operations may be adversely affected or Conrail may be the subject of secondary picketing which, in turn, could result in Conrail's operations in those areas being severely curtailed for the duration of the picketing. 15 PART II. OTHER INFORMATION CONRAIL INC. Item 4. Submission of Matters to a Vote of Security Holders. --------------------------------------------------- (a) The Registrant held its Annual Meeting of Shareholders on May 18, 1994. (b) Proxies for the meeting were solicited pursuant to Regulation 14A; there was no solicitation in opposition to management's nominees for directors as listed in such Proxy Statement and all such nominees were elected. (c) Listed below is each matter voted on at the Registrant's Annual Meeting as fully described in the Registrant's Proxy Statement solicited pursuant to Rule 14A. Following are the results of the voting and the number of votes cast for each matter. (i) The election of four directors in Class I to serve until the Annual Meeting of Shareholders in 1997 and until their successors are elected and take office. All nominees were elected by majority vote and the number of votes cast for each follows (there were no broker non-votes): Common Preferred ---------- --------- H. Furlong Baldwin For 69,552,669 8,314,526 Withheld 163,004 350,494 Shares not voted 9,929,617 1,277,209 ---------- --------- Total 79,645,290 9,942,229 ========== ========= James A. Hagen For 69,544,218 8,286,738 Withheld 171,455 378,282 Shares not voted 9,929,617 1,277,209 ---------- --------- Total 79,645,290 9,942,229 ========== ========= 16 Common Preferred ---------- --------- Michael H. Moskow For 69,543,953 8,275,417 Withheld 171,720 389,603 Shares not voted 9,929,617 1,277,209 ---------- --------- Total 79,645,290 9,942,229 ========== ========= David H. Swanson For 69,536,326 8,259,321 Withheld 179,347 405,699 Shares not voted 9,929,617 1,277,209 ---------- --------- Total 79,645,290 9,942,229 ========== ========= (ii) Ratification of the appointment of Price Waterhouse as the independent accountants for the year 1994. The appointment of Price Waterhouse was ratified by majority vote and the number of votes cast follows (there were no broker non-votes): Common Preferred ---------- --------- For 69,160,535 8,236,750 Against 178,581 299,994 Abstentions 376,557 128,276 Shares not voted 9,929,617 1,277,209 ---------- --------- Total 79,645,290 9,942,229 ========== ========= 17 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 11 Statement of earnings per share computations. 12 Computations of the ratio of earnings to fixed charges. 15.a Letter re unaudited interim financial information from Price Waterhouse. 15.b Letter re unaudited interim financial information from Coopers & Lybrand. (b) Reports on Form 8-K None 18 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. CONRAIL INC. Registrant /s/ Bruce B. Wilson Bruce B. Wilson Senior Vice President - Law /s/ H. W. Brown H. W. Brown Senior Vice President - Finance and Administration (Principal Financial Officer) Date: July 29, 1994 19 EXHIBIT INDEX ------------- Exhibit Page Number in No. SEC Sequential Numbering System ------- ---------------- 11 Statement of earnings per share computations. 12 Computations of the ratio of earnings to fixed charges. 15.a Letter re unaudited interim financial information from Price Waterhouse. 15.b Letter re unaudited interim financial information from Coopers & Lybrand. EX-11 2 Exhibit 11 ---------- CONRAIL INC. ----------- EARNINGS PER SHARE COMPUTATIONS ------------------------------- ($ In Millions Except Per Share)
Quarters Ended Six Months Ended June 30, June 30, -------------- ---------------- 1994 1993 1994 1993 ---- ---- ---- ---- Primary - ------- Income before the cumulative effect of changes in accounting principles (1) $101 $85 $69 $131 Dividends declared on Series A ESOP convertible junior preferred stock (ESOP Stock), net of tax benefits (3) (3) (6) (7) ---- --- --- ---- 98 82 63 124 Charges relative to the cumulative effect of changes in accounting principles (1) (74) ---- --- --- ---- Adjusted net income $ 98 $82 $63 $ 50 ==== === === ==== Fully Diluted - ------------- Income before the cumulative effect of changes in accounting principles (1) 101 85 69 131 Nondiscretionary adjustment (2) (2) (2) (4) (4) ---- --- --- ---- 99 83 65 127 Charges relative to the cumulative effect of changes in accounting principles (1) (74) ---- --- --- ---- Adjusted net income $ 99 $83 $65 $ 53 ==== === === ==== Page 1 of 3
Exhibit 11 ---------- CONRAIL INC. ----------- EARNINGS PER SHARE COMPUTATIONS ------------------------------- ($ In Millions Except Per Share)
Quarters Ended Six Months Ended June 30, June 30, --------------------- --------------------- 1994 1993 1994 1993 ---------- ---------- ---------- ---------- Weighted average number of shares Primary Weighted average number of common shares outstanding 79,005,858 79,728,103 79,306,171 79,800,724 Effect of shares issuable under stock option plans 625,930 1,001,751 726,475 1,054,546 ---------- ---------- ---------- ---------- 79,631,788 80,729,854 80,032,646 80,855,270 ========== ========== ========== ========== Fully diluted Weighted average number of common shares outstanding 79,005,858 79,728,103 79,306,171 79,800,724 ESOP Stock 9,915,237 9,957,004 9,929,331 9,958,757 Effect of shares issuable under stock option plans 625,930 1,001,751 726,475 1,054,546 ---------- ---------- ---------- ---------- 89,547,025 90,686,858 89,961,977 90,814,027 ========== ========== ========== ========== Income (loss) per common share Before the cumulative effect of changes in accounting principles Primary $1.24 $1.01 $.79 $1.53 Fully diluted 1.12 .92 .74 1.40 Cumulative effect of changes in accounting principles Primary (.91) Fully diluted (.81) Net income Primary $1.24 $1.01 $.79 $ .62 Fully diluted 1.12 .92 .74 .59
Page 2 of 3 Exhibit 11 ---------- CONRAIL INC. ----------- EARNINGS PER SHARE COMPUTATIONS ------------------------------- ($ In Millions Except Per Share) Notes: 1. Conrail adopted Statement of Financial Accounting Standards No. 106 ("Employers' Accounting for Postretirement Benefits Other Than Pensions") and Statement of Financial Accounting Standards No. 109 ("Accounting for Income Taxes") effective January 1, 1993. As a result, Conrail recorded cumulative after tax charges of $22 million and $52 million, respectively. 2. Represents the increase, net of income tax benefits, in ESOP-related expenses assuming conversion of all ESOP stock to common stock. Page 3 of 3 EX-12 3 Exhibit 12 ---------- CONRAIL INC. ----------- COMPUTATIONS OF THE RATIO OF EARNINGS TO FIXED CHARGES ------------------------------------------------------ ($ In Millions)
Quarters Ended Six Months Ended June 30, June 30, -------------- ---------------- 1994 1993 1994 1993 ---- ---- ---- ---- Earnings - -------- Pre-tax income $166 $137 $113 $210 Add: Interest expense 48 46 95 90 Rental expense interest factor 9 5 18 12 Less equity in undistributed (earnings) loss of 20-50% owned companies (4) 2 (7) (7) ---- ---- ---- ---- Earnings available for fixed charges $219 $190 $219 $305 ==== ==== ==== ==== Fixed charges - ------------- Interest expense 48 46 95 90 Rental expense interest factor 9 5 18 12 Capitalized interest 1 1 ---- ---- ---- ---- Fixed charges $ 57 $ 52 $113 $103 ==== ==== ==== ==== Ratio of earnings to fixed charges 3.84x 3.65x 1.94x 2.96x For purposes of computing the ratio of earnings to fixed charges, earnings represent income before income taxes plus fixed charges, less equity in undistributed (earnings) loss of 20% to 50% owned companies. Fixed charges represent interest expense together with any interest capitalized and a portion of rent under long-term operating leases representative of an interest factor.
EX-15 4 Exhibit 15.a ------------ July 29, 1994 Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549 Dear Sirs: We are aware that Conrail Inc. has incorporated by reference our report dated July 20, 1994 (issued pursuant to the provisions of Statement of Auditing Standards No. 71) in the following registration statements: Registration Statement on Form S-8 No. 33-19155 Registration Statement on Form S-8 No. 33-44140 Registration Statement on Form S-3 No. 33-64670. We are also aware of our responsibilities under the Securities Act of 1933 and that pursuant to Rule 436(c) our report dated July 20, 1994 shall not be considered part of a registration statement prepared or certified by us or a report prepared or certified by us within the meaning of Sections 7 and 11 of the Securities Act of 1933. Very truly yours, PRICE WATERHOUSE Thirty South Seventeenth Street Philadelphia, PA 19103 EX-15 5 Exhibit 15.b ------------ July 29, 1994 Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549 Re: Conrail Inc. Registration on Form S-8 (Registration Form No. 33-19155 and Registration Form No. 33-44140) Registration on Form S-3 (Registration Form No. 33-64670) We are aware that our report dated January 24, 1994 on our review of interim financial information of Conrail Inc. and subsidiaries for the three and six-month periods ended June 30, 1993 and included in the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1994 will be incorporated by reference in the registration statements. Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not be considered a part of the registration statements prepared or certified by us within the meaning of Sections 7 and 11 of that Act. COOPERS & LYBRAND -----END PRIVACY-ENHANCED MESSAGE-----