Microsoft Word 10.0.2627;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, 2003
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
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PROVIDENCE AND WORCESTER RAILROAD COMPANY
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
- ---------------------------------------------------------------------------
Rhode Island 05-0344399
----------------------------- --------------------------
(State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization)
75 Hammond Street, Worcester, Massachusetts 01610
----------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 755-4000
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.)
YES X NO ___
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of May 1, 2003, the registrant has 4,446,686 shares of common stock, par
value $.50 per share, outstanding.
PROVIDENCE AND WORCESTER RAILROAD COMPANY
Index
Part I - Financial Information
Item 1 - Financial Statements:
Balance Sheets - March 31, 2003
(Unaudited) and December 31, 2002............................3
Statements of Operations (Unaudited) -
Three Months Ended March 31, 2003 and 2002...................4
Statements of Cash Flows (Unaudited) -
Three Months Ended March 31, 2003 and 2002...................5
Notes to Financial Statements (Unaudited)..................6-9
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.............10-13
Item 3 -Quantitative and Qualitative Disclosures About Market Risk....13
Item 4 -Controls and Procedures.......................................13
Part II - Other Information:
Item 6 Exhibits and Reports on Form 8-K...............................14
Signatures ................................................................15
Certificates Pursuant To Section 302, of The
Sarbanes-Oxley Act of 2002.................................16-17
EXHIBIT 99 - Certification Pursuant To 18 U.S.C. Section 1350,
as Adopted Pursuant To Section 906 of The
Sarbanes-Oxley Act of 2002....................................18
2
Item 1. Financial Statements
- -----------------------------
PROVIDENCE AND WORCESTER RAILROAD COMPANY
BALANCE SHEETS
(Dollars in Thousands Except Per Share Amounts)
ASSETS
MARCH 31, DECEMBER 31,
2003 2002
(Unaudited)
------- -------
Current Assets:
Cash and equivalents ................................ $ 1,490 $ 2,888
Accounts receivable, net of allowance for
doubtful accounts of $125 in 2003 and 2002 ......... 3,177 3,304
Materials and supplies .............................. 1,825 1,634
Prepaid expenses and other .......................... 684 536
Deferred income taxes ............................... 78 126
------- -------
Total Current Assets ............................... 7,254 8,488
Property and Equipment, net .......................... 70,245 70,057
Land Held for Development ............................ 11,959 11,955
------- -------
Total Assets ......................................... $89,458 $90,500
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable .................................... $ 2,823 $ 3,017
Accrued expenses .................................... 737 964
------- -------
Total Current Liabilities .......................... 3,560 3,981
------- -------
Deferred Grant Income ................................ 7,925 7,980
------- -------
Deferred Income Taxes ................................ 10,000 9,898
------- -------
Commitments and Contingent Liabilities
Shareholders' Equity:
Preferred stock, 10% noncumulative, $50 par
value; authorized, issued and outstanding
645 shares in 2003 and 2002 ........................ 32 32
Common stock, $.50 par value; authorized
15,000,000 shares; issued and outstanding
4,446,686 shares in 2003 and 4,443,380
shares in 2002 ..................................... 2,224 2,222
Additional paid-in capital .......................... 29,636 29,619
Retained earnings ................................... 36,081 36,768
------- -------
Total Shareholders' Equity ......................... 67,973 68,641
------- -------
Total Liabilities and Shareholders' Equity ........... $89,458 $90,500
======= =======
The accompanying notes are an integral part of the financial statements.
3
PROVIDENCE AND WORCESTER RAILROAD COMPANY
STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in Thousands Except Per Share Amounts)
Three Months Ended March 31,
2003 2002
------- ------
Revenues:
Operating Revenues - Freight and Non-
Freight .......................................... $ 4,859 $ 4,956
Other Income ...................................... 153 331
------- -------
Total Revenues ................................... 5,012 5,287
------- -------
Operating Expenses:
Maintenance of way and structures ................. 1,025 1,094
Maintenance of equipment .......................... 590 537
Transportation .................................... 1,565 1,471
General and administrative ........................ 910 1,007
Depreciation ...................................... 715 662
Taxes, other than income taxes .................... 582 629
Car hire, net ..................................... 182 261
Employee retirement plans ......................... 57 57
Track usage fees .................................. 142 47
------- -------
Total Operating Expenses ........................ 5,768 5,765
------- -------
Loss before Income Tax Benefit ..................... (756) (478)
Income Tax Benefit ................................. (250) (165)
======= =======
Net Loss ........................................... (506) (313)
Preferred Stock Dividends .......................... 3 3
------- -------
Net Loss Available to Common Shareholders .......... $ (509) $ (316)
======= =======
Basic Loss Per Common Share ........................ $ (.11) $ (.07)
======= =======
Diluted Loss Per Common Share ...................... $ (.11) $ (.07)
======= =======
The accompanying notes are an integral part of the financial statements.
4
PROVIDENCE AND WORCESTER RAILROAD COMPANY
STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in Thousands)
Three Months Ended March 31,
2003 2002
------- ------
Cash flows from operating activities:
Net loss ............................................. $ (506) $ (313)
Adjustments to reconcile net loss to net cash
flows from (used in) operating activities:
Depreciation ........................................ 715 662
Amortization of deferred grant income ............... (55) (53)
Gains from sale and disposal of property,
equipment and easements, net ....................... (13) (167)
Deferred income tax expense ......................... 150 85
Increase (decrease) in cash from:
Accounts receivable ................................ (51) 959
Materials and supplies ............................. (191) --
Prepaid expenses and other ......................... (148) (44)
Accounts payable and accrued expenses .............. (522) (417)
------- -------
Net cash flows from (used in) operating
activities .......................................... (621) 712
------- -------
Cash flows from Investing Activities:
Purchase of property and equipment ................... (806) (824)
Proceeds from sale of property, equipment and
easements ........................................... 18 199
Proceeds from deferred grant income .................. 173 203
------- -------
Net cash flows used in investing activities .......... (615) (422)
------- -------
Cash Flows from Financing Activities:
Dividends paid ....................................... (181) (180)
Issuance of common shares for stock options
exercised and employee stock purchases .............. 19 24
------- -------
Net cash flows used in financing activities .......... (162) (156)
------- -------
Increase (Decrease) in Cash and Equivalents .......... (1,398) 134
Cash and Equivalents, Beginning of Period ............ 2,888 3,804
------- -------
Cash and Equivalents, End of Period .................. $ 1,490 $ 3,938
======= =======
The accompanying notes are an integral part of the financial statements.
5
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS (Unaudited)
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(Dollars in Thousands Except Per Share Amounts)
1. In the opinion of management, the accompanying interim financial statements
contain all adjustments (consisting solely of normal recurring adjustments)
necessary to present fairly the financial position as of March 31, 2003 and
the results of operations and cash flows for the three months ended March
31, 2003 and 2002. Certain prior period amounts have been reclassified to
be consistent with current period presentation. Results for interim periods
may not be necessarily indicative of the results to be expected for the
year. These interim financial statements should be read in conjunction with
the Company's 2002 Annual Report on Form 10-K for the year ended December
31, 2002 filed with the Securities and Exchange Commission.
2. Changes in Shareholders' Equity:
Total
Additional Share
Preferred Common Paid-in Retained holders'
Stock Stock Capital Earnings Equity
------- ------- ------- ------- -------
Balance December 31,2002. $ 32 $ 2,222 $29,619 $36,768 $68,641
Issuance of 3,306
common shares for
employee stock
purchases and stock
options exercised ...... 2 17 19
Dividends:
Preferred stock,
$5.00 per share ........ (3) (3)
Common stock, $.04
per share .............. (178) (178)
Net loss for the
period ................. (506) (506)
------- ------- ------- ------- -------
Balance March 31, 2003... $ 32 $ 2,224 $29,636 $36,081 $67,973
======= ======= ======= ======= =======
3. Other Income:
2003 2002
---- ----
Gains from sale and disposal of
property, equipment and easements,
net ........................................... $ 13 $167
Rentals ........................................ 135 148
Interest ....................................... 5 16
---- ----
$153 $331
==== ====
4. Loss per Common Share:
Basic loss per common share is computed using the weighted average number
of common shares outstanding during the period. Diluted loss per common
share reflects the effect of the Company's outstanding convertible
preferred stock, options and warrants except where such items would be
antidilutive.
6
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS (Unaudited) -- (Continued)
(Dollars in Thousands Except Per Share Amounts)
A reconciliation of weighted average shares used for the basic computation
and that used for the diluted computation is as follows:
2003 2002
--------- ---------
Weighted average shares for basic .......... 4,443,768 4,411,484
Dilutive effect of convertible preferred
stock, options and warrants ............... -- --
--------- ---------
Weighted average shares for diluted ........ 4,443,768 4,411,484
========= =========
Preferred Stock convertible into 64,500 shares of Common Stock was
outstanding during the quarters ended March 31, 2003 and 2002. In addition,
options and warrants to purchase 228,274 and 228,396 shares of common stock
were outstanding during the quarters ended March 31, 2003 and 2002
respectively. These Common Stock equivalents were not included in the
computation of the diluted loss per share in either of the quarters because
their effect would be antidilutive.
5. 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 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 Superfund Site. Via these Notice
letters, EPA makes a demand for payment of past costs (identified in the
letter as $762) and future costs associated with the response actions taken
to address the contamination at the Site, and requests PRPs to indicate
their willingness to participate and resolve their potential liability at
the Site. The Company has responded to EPA by stating that it does not
believe it has any liability for this Site, but that it is interested in
cooperating with EPA to address issues concerning liability at the Site. At
this point, two other parties have already committed via a consent order
with EPA to pay for the Remedial Investigation/Feasibility Study ("RI/FS")
phase of the clean-up at the Site, which will take approximately two or
more years to complete. After that, EPA will likely seek to negotiate the
cost of the Remedial Design and implementation of the remedy at the Site
with the PRPs it has identified via these Notice Letters (which presently
includes over sixty parties, and is likely to increase after EPA completes
its investigation of the identity of PRPs). The Company believes that none
of its activities caused contamination at the Site, and will contest this
claim by EPA.
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 is one of about
sixty parties named thus far by Plaintiffs, who seek to recover response
costs incurred in investigating and responding to the releases of hazardous
substances at the Site. Plaintiffs allege that the Company is liable under
42 U.S.C. section 961(a)(3) of CERCLA as an "arranger" or "generator" of
waste that ended up at the Site. The Company has entered into a Generator
Cooperation Agreement with other defendants to allocate costs in responding
7
to this suit, and to share technical costs and information in evaluating
the Plaintiffs' claims. 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 will contest this suit.
6. Dividends:
On April 30, 2003, the Company declared a dividend of $.04 per share on its
outstanding Common Stock payable May 22, 2003 to shareholders of record May
8, 2003.
7. Stock Based Compensation:
The Company accounts for stock-based compensation awards to employees using
the intrinsic value method in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees". Had the Company
used the fair value method to value compensation, as set forth in Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", the Company's net loss and net loss per share would have
been reported as follows:
Three Months Ended March 31,
2003 2002
------- ------
Net loss available to common
shareholders:
As reported .......................... $ (509) $ (316)
Less impact of stock option expense .. 12 9
------- ------
Pro forma ............................ $ (521) $ (325)
======= ======
Basic loss per share:
As reported .......................... $ (.11) $ (.07)
Less impact of stock option expense .. .01 --
------- ------
Pro forma ............................ $ (.12) $ (.07)
======= ======
Diluted loss per share:
As reported .......................... $ (.11) $ (.07)
Less impact of stock option expense .. .01 --
------- ------
Pro forma ............................ $ (.12) $ (.07)
======= ======
8. Recently Issued Financial Accounting Standards:
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". This statement establishes accounting standards
for recognition and measurement of a liability for an asset retirement
obligation and the associated costs. Under this statement, an entity must
recognize the fair value of a liability for an asset retirement obligation
in the period in which it is incurred or in a period in which a reasonable
estimate of fair value may be made. This statement is effective for
financial statements issued for fiscal years beginning after June 15, 2002.
The Company adopted this Statement on January 1, 2003 and there was no
effect on the Company's financial statements.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". This statement rescinds FASB Statement No. 4, "Reporting
8
Gains and Losses from Extinguishment of Debt," and an amendment of that
Statement, FASB Statement No. 64, "Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements". This statement also rescinds FASB Statement No.
44, "Accounting for Intangible Assets of Motor Carriers". This statement
amends FASB Statement No. 13, "Accounting for Leases," to eliminate an
inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications
that have economic effects that are similar to sale-leaseback transactions.
This statement also amends other existing authoritative pronouncements to
make various technical corrections, clarify meanings, or describe their
applicability under changed conditions. This statement is effective for
financial statements issued on or after May 15, 2002. The Company adopted
this Statement on January 1, 2003 and there was no effect on the Company's
financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". This statement addresses
financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)". This statement is effective for exit or disposal
activities that are initiated after December 31, 2002. The Company adopted
this Statement on January 1, 2003 and there was no effect on the Company's
financial statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure-an Amendment of FASB Statement No.
123". SFAS No. 148 provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for
stock-based employee compensation. The Company does not currently intend to
adopt the fair value based method of measuring compensation associated with
stock awards and grants. As a consequence of continuing to utilize the
intrinsic value method of measuring such compensation, the Company has
provided additional disclosures in its quarterly financial statements which
reflect the impact on net income and earnings per share on a pro forma
basis as if it had applied the fair value method to stock-based employee
compensation.
9
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.
Critical Accounting Policies
- ----------------------------
The Securities and Exchange Commission ("SEC") recently issued guidance for the
disclosure of "critical accounting policies." The SEC defines such 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. None of
these significant accounting policies require management to make difficult,
subjective or complex judgments or estimates, and therefore do not meet the
SEC definition of "critical."
Results of Operations
- ---------------------
The following table sets forth the Company's operating revenues by category
in dollars and as a percentage of operating revenues:
Three Months Ended March 31,
-----------------------------------
2003 2002
-----------------------------------
(In thousands, except percentages)
Freight Revenues:
Conventional carloads ............... $3,873 79.7% $4,038 81.5%
Containers .......................... 649 13.4 604 12.2
Non-Freight Operating Revenues:
Transportation services ............. 208 4.3 239 4.8
Other ............................... 129 2.6 75 1.5
------ ----- ------ -----
Total ............................ $4,859 100.0% $4,956 100.0%
====== ===== ====== =====
10
The following table sets forth a comparison of the Company's operating
expenses expressed in dollars and as a percentage of operating revenues:
Three Months Ended March 31,
-----------------------------------
2003 2002
-----------------------------------
(In thousands, except percentages)
Salaries, wages, payroll taxes
and employee benefits ................ $3,289 67.7% $3,248 65.5%
Casualties and insurance .............. 208 4.3 191 3.9
Depreciation and amortization ......... 715 14.7 662 13.4
Diesel fuel ........................... 238 4.9 227 4.6
Car hire, net ......................... 182 3.8 261 5.3
Purchased services, including
legal and professional fees .......... 262 5.4 375 7.6
Repair and maintenance of
equipment ............................ 248 5.1 197 4.0
Track and signal materials ............ 289 5.9 428 8.6
Track usage fees ...................... 142 2.9 47 .9
Other materials and supplies .......... 277 5.7 243 4.9
Other ................................. 422 8.7 394 7.9
------ ----- ------ -----
Total ............................... 6,272 129.1 6,273 126.6
Less capitalized and
recovered costs .................... 504 10.4 508 10.3
------ ----- ------ -----
Total ............................ $5,768 118.7% $5,765 116.3%
====== ===== ====== =====
Operating Revenues:
Operating revenues decreased $97,000, or 2.0%, to $4.9 million in the first
quarter of 2003 from $5.0 million in the first quarter of 2002. This
decrease is the net result of a $165,000 (4.1%) decrease in conventional
freight revenues partially offset by a $45,000 (7.5%) increase in container
freight revenues and a $23,000 (7.3%) increase in non-freight operating
revenues.
The decrease in conventional freight revenues is the result of an 11.4% decrease
in conventional carloadings, partially offset by an 8.3% increase in the average
revenue received per conventional carloading. The Company's conventional
carloadings decreased by 603 to 4,683 in the first quarter of 2003 from 5,286 in
2002. The decline in conventional traffic during the quarter is largely
attributable to extreme winter weather conditions which had a particular impact
on the volume of construction aggregate traffic. Shipments of this seasonal
commodity did not commence until late March of 2003. The increase in the average
revenue received per conventional carloading is the result of a shift in traffic
mix away from construction aggregates, a lower rated commodity, toward higher
rated freight.
The increase in container freight revenues is the result of a 1.7% increase
in traffic volume and a 5.6% increase in the average revenue received per
container. Intermodal containers handled during the quarter increased by 251
to 14,956 in 2003 from 14,705 in 2002. The increase in the average revenue
received per container is largely the result of a contractual rate increase.
The increase in non-freight operating revenues for the quarter results from
increased maintenance department billings partially offset by decreased
billings for demurrage charges. Revenues of this type typically vary from
period to period depending upon the needs of freight customers and other
outside parties.
11
Other Income:
Other income decreased by $178,000 to $153,000 in the first quarter of 2003 from
$331,000 in 2002. This decrease is primarily due to lower gains from the sale of
property, equipment and easements. Income of this nature can vary significantly
from period to period.
Operating Expenses:
Operating expenses for the first quarter of 2003 increased by just $3,000
from 2002. Increased track usage fees of $95,000 resulting from the June 2002
Amtrak arbitration decision were largely offset by overall decreases in other
expense categories.
Liquidity and Capital Resources
- -------------------------------
During the first quarter of 2003 the Company used $621,000 of cash in its
operations. Total cash and equivalents decreased by $1.4 million for the
quarter. The principal utilization of cash during the quarter, other than
for operations, was for expenditures for property and equipment, of which
$566,000 was for additions and improvements to track structure, and for the
payment of dividends.
In management's opinion cash generated from operations during the remainder
of 2003 will be sufficient to enable the Company to meet its operating
expenses and capital expenditure and dividend requirements.
Seasonality
- -----------
Historically, the Company's operating revenues are lowest for the first
quarter due to the absence of construction aggregate shipments during a
portion of this period and to winter weather conditions.
Recent Accounting Pronouncements
- --------------------------------
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". This statement establishes accounting standards for
recognition and measurement of a liability for an asset retirement obligation
and the associated costs. Under this statement, an entity must recognize the
fair value of a liability for an asset retirement obligation in the period in
which it is incurred or in a period in which a reasonable estimate of fair
value may be made. This statement is effective for financial statements
issued for fiscal years beginning after June 15, 2002. The Company adopted
this statement on January 1, 2003 and there was no effect on the Company's
financial statements.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections".
This statement rescinds FASB Statement No. 4, "Reporting Gains and Losses from
Extinguishment of Debt," and an amendment of that Statement, FASB Statement No.
64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements". This
statement also rescinds FASB Statement No. 44, "Accounting for Intangible Assets
of Motor Carriers". This statement amends FASB Statement No. 13, "Accounting for
Leases," to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. This statement also amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. This statement is
effective for financial statements issued on or after May 15, 2002. The Company
adopted this statement on January 1, 2003 and there was no effect on the
Company's financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". This statement addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other
12
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)". This statement is effective for exit or disposal activities
that are initiated after December 31, 2002. The Company adopted this
Statement on January 1, 2003 and there was no effect on the Company's
financial statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure-an Amendment of FASB Statement No. 123".
SFAS No. 148 provides alternative methods of transition for a voluntary change
to the fair value based method of accounting for stock-based employee
compensation. The Company does not currently intend to adopt the fair value
based method of measuring compensation associated with stock awards and grants.
As a consequence of continuing to utilize the intrinsic value method of
measuring such compensation, the Company has provided additional disclosures in
its quarterly financial statements which reflect the impact on net income and
earnings per share on a pro forma basis as if it had applied the fair value
method to stock-based employee compensation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------------------------------------------------------------------
Cash and Equivalents
As of March 31, 2003, the Company is exposed to market risks which primarily
include changes in U.S. interest rates.
The Company invests cash balances in excess of operating requirements in
short-term securities, generally with maturities of 90 days or less. In
addition, the Company's revolving line of credit agreement provides for
borrowings which bear interest at variable rates based on either prime rate
or one and one half percent over either the one or three month London
Interbank Offered Rates. The Company had no borrowings outstanding pursuant
to the revolving line of credit agreement at March 31, 2003. The Company
believes that the effect, if any, of reasonably possible near-term changes in
interest rates on the Company's financial position, results of operations,
and cash flows should not be material.
Item 4. Controls and Procedures
- -------------------------------
Based on their evaluation of the effectiveness of the Company's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report, the undersigned officers of the Company have concluded
that such disclosure controls and procedures are designed to provide a
reasonable level of assuarance. There were no significant changes in internal
controls or in other factors that could significantly affect internal controls,
including any corrective actions with regard to significant deficiencies and
material weaknesses, subsequent to the date of the most recent evaluation by the
undersigned officers of the Company of the design and operation of internal
controls which could adversely affect the Company's ability to record, process,
summarize and report financial data.
13
PART II - Other Information
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(b) No reports on Form 8-K were filed during the quarter ended March
31, 2003.
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/ Robert J. Easton
----------------------------
Robert J. Easton
Treasurer and Principal
Financial Officer
DATED: May 12, 2003
15
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 quarterly 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 quarterly
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-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entries, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors:
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
DATE: May 12, 2003
By: /s/ Robert H. Eder
----------------------------
Robert H. Eder,
Chairman of the Board
And Chief Executive Officer
16
Providence and Worcester Railroad Company
Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Robert J. Easton 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 quarterly 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 quarterly
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-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entries, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors:
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
DATE: May 12, 2003
By: /s/ Robert J. Easton
----------------------------
Robert J. Easton
Treasurer and Principal
Financial Officer
17
EXHIBIT 99
PROVIDENCE AND WORCESTER RAILROAD COMPANY
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Providence and Worcester Railroad
Company (the Company) on form 10-Q for the quarterly period ended September 30,
2002, 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, 2003
In connection with the Quarterly Report of Providence and Worcester Railroad
Company (the Company) on form 10-Q for the quarterly period ended September 30,
2002, as filed with the Securities and Exchange Commission on the date hereof
(the Report), I, Robert J. Easton, 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/ Robert J. Easton
-----------------------------
Robert J. Easton,
Treasurer and Chief Financial Officer
May 12, 2003