-----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, b0dw7AE8zT1nCp3pUCAvTEX/PiUDBHGRyFUEfwiKaRZ7WtNeoFPxzgq327UG0tV+ y5VRh6OcXyg1GxstJYzjtg== 0000897732-95-000011.txt : 19950512 0000897732-95-000011.hdr.sgml : 19950512 ACCESSION NUMBER: 0000897732-95-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950511 SROS: NYSE SROS: PHLX FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONRAIL INC CENTRAL INDEX KEY: 0000897732 STANDARD INDUSTRIAL CLASSIFICATION: RAILROADS, LINE-HAUL OPERATING [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: 95536632 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 March 31, 1995 -------------- 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 common stock outstanding (as of April 28, 1995) 78,325,940 CONRAIL INC. INDEX Page Number PART I. FINANCIAL INFORMATION ----------- Item 1. Financial Statements: Condensed Consolidated Statements of Income - Quarters ended March 31, 1995 and 1994 3 Condensed Consolidated Balance Sheets - March 31, 1995 and December 31, 1994 4 Condensed Consolidated Statements of Cash Flows - Quarters ended March 31, 1995 and 1994 5 Notes to Condensed Consolidated Financial Statements 6 Report of Independent Accountants 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13 - 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 March 31, ------------------- 1995 1994 ----- ----- Revenues $ 889 $ 847 ----- ----- Operating expenses Way and structures 134 144 Equipment 201 210 Transportation 343 350 General and administrative 97 91 Early retirement program 84 ----- ----- Total operating expenses 775 879 ----- ----- Income (loss) from operations 114 (32) Interest expense (48) (47) Other income, net 25 26 ----- ----- Income (loss) before income taxes 91 (53) Income taxes (benefits) 36 (21) ----- ----- Net income (loss) $ 55 $ (32) ===== ===== Net income (loss) per common share Primary $ .66 $(.45) Fully diluted .61 (.45) Dividends per common share $.375 $.325 Weighted average number of shares used in computing earnings (loss) per share (thousands) Primary 79,095 79,629 Fully diluted 88,966 79,629 Ratio of earnings to fixed charges 2.39x - See accompanying notes.
- 3 - CONRAIL INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
($ In Millions) March 31, December 31, 1995 1994 ---------- ------------ ASSETS Current assets Cash and cash equivalents $ 36 $ 43 Accounts receivable 634 646 Deferred tax assets 249 249 Material and supplies 177 164 Other current assets 20 23 ------ ------ Total current assets 1,116 1,125 Property and equipment, net 6,564 6,498 Other assets 753 699 ------ ------ Total assets $8,433 $8,322 ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term borrowings 179 112 Current maturities of long-term debt 128 130 Accounts payable 148 119 Wages and employee benefits 153 169 Casualty reserves 96 103 Accrued and other current liabilities 546 568 ------ ------ Total current liabilities 1,250 1,201 Long-term debt 1,977 1,940 Casualty reserves 210 212 Deferred income taxes 1,242 1,203 Special income tax obligation 495 513 Other liabilities 327 328 ------ ------ Total liabilities 5,501 5,397 ------ ------ Stockholders' equity Series A ESOP convertible junior preferred stock 283 283 Unearned ESOP compensation (240) (243) Common stock 80 80 Additional paid-in capital 1,852 1,848 Retained earnings 1,078 1,056 ------ ------ 3,053 3,024 Treasury stock (121) (99) ------ ------ Total stockholders' equity 2,932 2,925 ------ ------ Total liabilities and stockholders' equity $8,433 $8,322 ====== ====== See accompanying notes.
- 4 - CONRAIL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
($ In Millions) Quarters ended March 31, ---------------- 1995 1994 ----- ----- Cash flows from operating activities $ 137 $ 62 ----- ----- Cash flows from investing activities Property and equipment acquisitions (85) (68) Other (41) (2) ----- ----- Net cash used in investing activities (126) (70) ----- ----- Cash flows from financing activities Repurchase of common stock (22) (24) Net proceeds from short-term borrowings 67 33 Payment of capital lease and equipment obligations (17) (18) Proceeds from medium-term notes 50 Payment of medium-term notes (5) (5) Dividends paid on common stock (30) (26) Dividends paid on preferred stock (10) (5) Other (1) 8 ----- ----- Net cash provided by (used in) financing activities (18) 13 ----- ----- Increase (decrease) in cash and cash equivalents (7) 5 Cash and cash equivalents Beginning of period 43 38 ----- ----- End of period $ 36 $ 43 ===== ===== See accompanying notes.
- 5 - CONRAIL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The unaudited financial statements contained herein present the consolidated financial position of Conrail Inc. (the "Company") as of March 31, 1995 and December 31, 1994, and the consolidated results of operations and cash flows for the quarters ended March 31, 1995 and 1994. In the opinion of management, these financial statements include all adjustments, consisting of normal recurring adjustments 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, 1994, 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. In July 1994, the Board of Directors authorized a $100 million common stock repurchase program. During the first quarter of 1995, the Company acquired 396,060 shares for approximately $22 million under this program, and at March 31, 1995, approximately $70 million remained from the authorization. On April 19, 1995, the Board of Directors approved an additional $250 million multi- year stock repurchase program. The Board also approved the issuance of $250 million in the Company's common stock to a trust to fund certain employee benefits and other forms of compensation. 4. 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, 1994. There have been no material developments with respect to these matters during the first three months of 1995, except as disclosed in the Annual Report on Form 10-K. - 6 - 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 March 31, 1995 and the related condensed consolidated statements of income and cash flows for the three months ended March 31, 1995 and March 31, 1994. 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 informa- tion for it to be in conformity with generally accepted accounting principles. We previously audited in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1994, and the related consolidated statements of income, of stockholders' equity and of cash flows for the year then ended (not presented herein), and in our report dated January 23, 1995 we expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph describing the Company's change in methods of accounting for income taxes and postretirement benefits other than pensions in 1993. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1994, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. PRICE WATERHOUSE LLP Thirty South Seventeenth Street Philadelphia, PA 19103 April 19, 1995 - 7 - 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") for the first quarter of 1995 was $55 million ($.66 per share, primary and $.61 per share fully diluted basis) compared with a net loss of $32 million ($.45 per share, primary and fully diluted basis) for the first quarter of 1994. The first quarter of 1994 includes a one-time charge of $51 million (net of $33 million tax benefits) relating to a non-union voluntary early retirement program and related costs (see Note 2 to the Condensed Consolidated Financial Statements). Absent this one-time charge, the Company would have shown net income of $19 million for the first quarter of 1994 ($.20 primary and $.19 fully diluted). Traffic volume and revenues for the first quarter of 1995 increased 1.6% and 5.0%, respectively, as compared with the first quarter of 1994. Operating expenses decreased $20 million, or 2.5%, for the first three months of 1995 as compared with the comparable period of 1994 (excluding the 1994 one-time early retirement program charge). The Company's operating expenses for the first quarter of 1994 were unfavorably affected by difficult operating conditions primarily caused by adverse weather coincident with the Company's marketing department and certain of its operating functions being reorganized into four service groups. Due to a weakening economy and lower than expected volumes of less-than-truckload intermodal traffic, the Company has revised its 1995 projection of between a 2.5% and 3.5% increase in line- haul revenue to between 2.0% and 3.0% growth, and is currently in the process of further evaluating this estimate to determine if addtional downward adjustments are appropriate in light of recent traffic levels. Despite the lower revenue projections, the Company has not changed its goal of attaining a 79.5% operating ratio (operating expenses as a pecent of revenues) for 1995. The Company is continuing the process of evaluating certain portions of its route system and other facilities to determine the extent to which such assets effectively and economically - 8 - support Conrail's operations. It is not possible at this time to estimate the extent of asset rationalization and other changes that may ultimately result from this evaluation process or the effect that such actions may have on the Company's financial statements. First Quarter 1995 compared with First Quarter 1994 --------------------------------------------------- Net income for the first quarter of 1995 was $55 million compared with a net loss for the first quarter of 1994 of $32 million, after the effects of the one-time charge for the early retirement program (See Note 2 to the Condensed Consolidated Financial Statements). Operating revenues (primarily freight and line-haul revenues, but also including switching, demurrage and incidental revenues) increased $42 million, or 5.0%, from $847 million in the first quarter of 1994 to $889 million in the first quarter of 1995. A 1.6% increase in traffic volume in units (freight cars and intermodal trailers and containers) resulted in a $13 million increase in revenues. Average revenue per unit also increased for the quarter, resulting from increases in average rates, $27 million, partially offset by an unfavorable traffic mix and other miscellaneous factors, $5 million. Switching, demurrage and incidental revenues increased $7 million. Operating expenses decreased $104 million, or 11.8%, from $879 million in the first quarter of 1994, which included the $84 million charge related to the non-union voluntary early retirement program and related costs, to $775 million in the first quarter of 1995. The following table sets forth the operating expenses for the two periods: First Quarter ------------- Increase ($ In Millions) 1995 1994 (Decrease) ---- ---- ---------- Compensation and benefits $332 $341 $ (9) Fuel 46 47 (1) Material and supplies 56 62 (6) Equipment rents 85 91 (6) Depreciation and amortization 73 70 3 Casualties and insurance 39 45 (6) Other 144 139 5 Early retirement program 84 (84) ---- ---- ------ $775 $879 $ (104) ==== ==== ====== - 9 - Compensation and benefits as a percent of revenues was 37.4% in the first quarter of 1995 as compared with 40.3% in the first quarter of 1994. The decrease in labor costs of $9 million, or 2.6%, was primarily due to savings from lower employment levels and a decrease in payroll taxes, partially offset by increases in fringe benefit costs. The decrease of $6 million, or 9.7%, in material and supplies cost was mostly attributable to a lower level of expenditures for repairs and maintenance of locomotives. Equipment rents decreased $6 million, or 6.6%, principally as a result of improvements in equipment utilization. Casualties and insurance costs decreased by $6 million, or 13.3%, primarily due to a lower frequency of employee injuries. In the first quarter of 1994, the Company incurred a one-time charge of $84 million for the non-union voluntary early retirement program and related costs (see Note 2 to the Condensed Consolidated Financial Statements). The Company's operating ratio was 87.2% for the first quarter of 1995 compared with 103.8% for the first quarter of 1994. Without the one-time charge for the early retirement program, the operating ratio for the first quarter of 1994 would have been 93.8%. Liquidity and Capital Resources ------------------------------- The Company's cash and cash equivalents decreased $7 million in the first quarter of 1995, from $43 million at December 31, 1994 to $36 million at March 31, 1995. Cash generated from operations, primarily from its wholly-owned subsidiary, Consolidated Rail Corporation, and borrowings have been the Company's principal sources of liquidity and are used primarily for capital expenditures, debt service and dividends. In the first quarter of 1995, operating activities provided cash of $137 million and net short-term borrowings provided $67 million. The principal uses of cash during the quarter were for: property and equipment acquisitions, $85 million; cash dividends on common and preferred stock, $40 million; repurchase of common stock, $22 million; and payment of capital lease and equipment obligations, $17 million. - 10 - A working capital (current assets less current liabilities) deficiency of $134 million existed at March 31, 1995 as compared with a deficiency of $76 million at December 31, 1994. 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. In July 1994, the Company announced a third common stock repurchase program of up to $100 million. During the first quarter of 1995, 396,060 shares were acquired for $22 million, bringing the total acquired under this program through March 31, 1995 to 571,560 shares at a cost of $30 million. On April 19, 1995, the Board of Directors approved an additional $250 million multi-year stock repurchase program. The Board also approved the issuance of $250 million in the Company's common stock to a trust to fund certain employee benefits and other forms of compensation. During the first quarter of 1995, Consolidated Rail Corporation issued $45 million of commercial paper and repaid $8 million. At March 31, 1995, $249 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. During March 1995, Consolidated Rail Corporation borrowed $30 million under its uncollateralized bank credit agreement at an interest rate of 6.4%, which was repaid in April 1995. - 11 - PART II. OTHER INFORMATION CONRAIL INC. Item 6. Exhibits and Reports on Form 8-K. -------------------------------- (a) Exhibits 11 Statement of earnings (loss) per share computations. 12 Computations of the ratio of earnings to fixed charges. 15 Letter re unaudited interim financial information from Price Waterhouse LLP. 27 Financial data schedule. (b) Reports on Form 8-K None - 12 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CONRAIL INC. Registrant /s/ Bruce B. Wilson ------------------------------ Bruce B. Wilson Senior Vice President - Law /s/ H. W. Brown ------------------------------ H. W. Brown Senior Vice President - Finance and Administration (Principal Financial Officer) Date: May 11, 1995 - 13 - EXHIBIT INDEX ------------- Exhibit No. ------- 11 Statement of earnings (loss) per share computations. 12 Computations of the ratio of earnings to fixed charges. 15 Letter re unaudited interim financial information from Price Waterhouse LLP. 27 Financial data schedule. EX-11 2 Exhibit 11 ---------- CONRAIL INC. ----------- EARNINGS (LOSS) PER SHARE COMPUTATIONS --------------------------------------
($ In Millions Except Per Share) Quarters ended March 31, ------------------ 1995 1994 ---- ---- Net income (loss) ----------------- Primary Net income (loss) $ 55 $(32) Dividends declared on Series A ESOP convertible junior preferred stock (ESOP Stock), net of tax benefits (3) (3) ---- ---- $ 52 $(35) ==== ==== Fully diluted Income (loss) 55 (32) Dividends declared on ESOP Stock, net of tax benefits (3) Nondiscretionary adjustment (1) (1) ---- ---- $ 54 $(35) ==== ==== Weighted average number of shares --------------------------------- Primary Weighted average number of common shares outstanding 78,598,669 79,628,510 Effect of shares issuable under employee stock compensation plans (2) 496,599 - ---------- ---------- 79,095,268 79,628,510 ========== ========== Fully diluted Weighted average number of common shares outstanding 78,598,669 79,628,510 Series A ESOP convertible junior preferred (3) 9,821,354 - Effect of shares issuable under employee stock compensation plans (2) 545,607 - ---------- ---------- 88,965,630 79,628,510 ========== ========== Net income (loss) per common share Primary $ .66 $(.45) Fully diluted .61 (.45)
Page 1 of 2 Exhibit 11 ---------- CONRAIL INC. ------------ EARNINGS (LOSS) PER SHARE COMPUTATIONS -------------------------------------- Notes: 1. Represents the increase, net of income tax benefits, in ESOP-related expenses assuming conversion of all ESOP Stock to common stock. 2. The effects of shares issuable under employee stock compensation plans were antidilutive for the first quarter of 1994 and were excluded from the per share calculations. 3. The effects of the assumed conversion of Series A ESOP convertible junior preferred stock were antidilutive for the first quarter of 1994 and were excluded from the per share calculation. Page 2 of 2 EX-12 3 Exhibit 12 ---------- CONRAIL INC. ----------- COMPUTATIONS OF THE RATIO OF EARNINGS TO FIXED CHARGES ------------------------------------------------------ ($ In Millions) Quarters ended March 31, -------------- 1995 1994 ---- ---- Earnings -------- Pre-tax income (loss) $ 91 $(53) Add: Interest expense 48 47 Rental expense interest factor 14 9 Less equity in undistributed earnings of 20-50% owned companies (5) (3) ---- ---- Earnings available for fixed charges 148 - ==== ==== Fixed charges ------------- Interest expense 48 47 Rental expense interest factor 14 9 ---- ---- Fixed charges $ 62 $ 56 ==== ==== Ratio of earnings to fixed charges 2.39x - 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 of 20% to 50% owned companies. Fixed charges represent interest expense together with interest capitalized and a portion of rent under long-term operating leases representative of an interest factor. After the one-time charge in the first quarter of 1994, earnings were insufficient by $56 million to cover fixed charges for the quarter.
EX-15 4 Exhibit 15 ---------- May 11 , 1995 Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549 Dear Sirs: We are aware that Conrail Inc. has incorporated by reference our report dated April 19, 1995 (issued pursuant to the provisions of Statement on Auditing Standards No. 71) in the following registration statements: * Registration Statement on Form S-8 No. 33-19155 * Registration Statement on Form S-8 No. 33-44140 * Registration Statement on Form S-8 No. 33-57717 * Registration Statement on Form S-3 No. 33-64670. We are also aware of our responsibilities under the Securities Act of 1933 and that pursuant to Rule 436(c) our report dated April 19, 1995 shall not be considered part of a registration statement prepared or certified by us or a report prepared or certified by us within the meaning of Sections 7 and 11 of the Securities Act of 1933. Very truly yours, PRICE WATERHOUSE LLP Thirty South Seventheenth Street Philadelphia, PA 19103 EX-27 5
5 Exhibit 27 ---------- CONRAIL INC. FINANCIAL DATA SCHEDULE ($ In Millions Except Per Share)
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q. 1,000,000 Dec-31-1995 Jan-01-1995 Mar-31-1995 3-MOS 36 0 634 0 177 1,116 6,564 0 8,433 1,250 1,977 0 283 80 2,569 8,433 0 889 0 775 0 0 48 91 36 55 0 0 0 55 .66 .61
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