UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
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_ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-16704
PROVIDENCE AND WORCESTER RAILROAD COMPANY
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(Exact name of registrant as specified in its charter)
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Rhode Island 05-0344399
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(State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization)
75 Hammond Street, Worcester, Massachusetts 01610
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 755-4000
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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 ___
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Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Act).
YES ___ NO X
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of August 1, 2004, the registrant has 4,474,875 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 - June 30, 2004 (Unaudited)
and December 31, 2003.......................................3
Statements of Income (Loss) (Unaudited) -
Three and Six Months Ended June 30, 2004
and 2003....................................................4
Statements of Cash Flows (Unaudited) - Six
Months Ended June 30, 2004 and 2003.........................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 4 -Submission of Matters to a Vote of Security Holders.......14
Item 6 -Exhibits and Reports on Form 8-K..........................14
Signatures.............................................................15
EXHIBIT 31-Certification Pursuant To
Section 302 of The Sarbanes-Oxley
Act of 2002...............................................16-17
EXHIBIT 32- 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
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PROVIDENCE AND WORCESTER RAILROAD COMPANY
BALANCE SHEETS
(Dollars in Thousands Except Per Share Amounts)
ASSETS
JUNE 30,DECEMBER 31,
2004 2003
(Unaudited)
------- -------
Current Assets:
Cash and equivalents ................................ $ 924 $ 1,232
Accounts receivable, net of allowance for
doubtful accounts of $125 in 2004 and 2003 ......... 3,334 3,820
Materials and supplies .............................. 1,821 1,771
Prepaid expenses and other .......................... 542 239
Deferred income taxes ............................... 243 191
------- -------
Total Current Assets ............................... 6,864 7,253
Property and Equipment, net .......................... 71,409 71,408
Land Held for Development ............................ 11,958 11,958
------- -------
Total Assets ......................................... $90,231 $90,619
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable .................................... $ 2,264 $ 2,019
Accrued expenses .................................... 1,175 1,378
------- -------
Total Current Liabilities .......................... 3,439 3,397
------- -------
Profit-Sharing Plan Contribution ..................... -- 119
------- -------
Deferred Grant Income ................................ 8,052 8,154
------- -------
Deferred Income Taxes ................................ 10,495 10,258
------- -------
Commitments and Contingent Liabilities................
Shareholders' Equity:
Preferred stock, 10% noncumulative, $50 par
value; authorized, issued and outstanding
645 shares in 2004 and 2003 ........................ 32 32
Common stock, $.50 par value; authorized
15,000,000 shares; issued and outstanding
4,474,328 shares in 2004 and 4,457,494
shares in 2003 ..................................... 2,237 2,229
Additional paid-in capital .......................... 29,855 29,709
Retained earnings ................................... 36,121 36,721
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Total Shareholders' Equity ......................... 68,245 68,691
------- -------
Total Liabilities and Shareholders' Equity ........... $90,231 $90,619
======= =======
The accompanying notes are an integral part of the financial statements.
3
PROVIDENCE AND WORCESTER RAILROAD COMPANY
STATEMENTS OF INCOME (LOSS) (Unaudited)
(Dollars in Thousands Except Per Share Amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
------- ------- ------- -------
Revenues:
Operating Revenues - Freight
and Non-Freight .................... $ 6,493 $6,256 $ 11,560 $11,115
Other Income ........................ 142 109 263 262
------- ------ -------- -------
Total Revenues .................... 6,635 6,365 11,823 11,377
------- ------ -------- -------
Operating Expenses:
Maintenance of way and
structures ......................... 954 810 1,984 1,835
Maintenance of equipment ............ 659 558 1,349 1,148
Transportation ...................... 1,899 1,723 3,501 3,288
General and administrative .......... 1,061 924 2,049 1,834
Depreciation ........................ 660 720 1,348 1,435
Taxes, other than income
taxes .............................. 558 566 1,142 1,148
Car hire, net ....................... 222 218 349 400
Employee retirement plans ........... 56 56 113 113
Track usage fees .................... 224 201 333 343
------- ------ -------- -------
Total Operating Expenses ........... 6,293 5,776 12,168 11,544
------- ------ -------- -------
Income (Loss) before Income
Taxes (Benefit) ..................... 342 589 (345) (167)
Provision for Income Taxes
(Benefit) ........................... 120 200 (105) (50)
------- ------ -------- -------
Net Income (Loss) .................... 222 389 (240) (117)
Preferred Stock Dividends ............ -- -- 3 3
------- ------ -------- -------
Net Income (Loss) Available to
Common Shareholders ................. $ 222 $ 389 $ (243) $ (120)
======= ====== ======== =======
Basic and Diluted Income
(Loss) Per Common Share ............. $ .05 $ .09 $ (.05) $ (.03)
======= ====== ======== =======
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)
Six Months Ended June 30,
2004 2003
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Cash flows from operating activities:
Net loss ............................................. $ (240) $ (117)
Adjustments to reconcile net loss to net cash
flows from operating activities:
Depreciation ........................................ 1,348 1,435
Amortization of deferred grant income ............... (114) (110)
Gains from sale of property, equipment and
easements, net ..................................... (21) (12)
Deferred income taxes ............................... 185 115
Other, net .......................................... -- 14
Increase (decrease) in cash from:
Accounts receivable ................................ 341 (1,054)
Materials and supplies ............................. (50) 18
Prepaid expenses and other ......................... (303) 59
Accounts payable and accrued expenses .............. 47 (344)
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Net cash flows from operating activities ............. 1,193 4
------- -------
Cash flows from Investing Activities:
Purchase of property and equipment ................... (1,389) (2,182)
Proceeds from sale of properties, equipment
and easements ....................................... 56 30
Proceeds from deferred grant income .................. 157 173
------- -------
Net cash flows used in investing activities .......... (1,176) (1,979)
------- -------
Cash Flows from Financing Activities:
Dividends paid ....................................... (360) (359)
Issuance of common shares for stock options
exercised and employee stock purchases .............. 35 36
------- -------
Net cash flows used in financing activities .......... (325) (323)
------- -------
Decrease in Cash and Equivalents ..................... (308) (2,298)
Cash and Equivalents, Beginning of Period ............ 1,232 2,888
------- -------
Cash and Equivalents, End of Period .................. $ 924 $ 590
======= =======
Non-cash transactions are described in Note 3.
The accompanying notes are an integral part of the financial statements.
5
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS (Unaudited)
SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(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 June 30, 2004 and
the results of operations and cash flows for the interim periods ended June
30, 2004 and 2003. Results for interim periods may not necessarily be
indicative of the results to be expected for the year. These interim
financial statements should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended December 31, 2003 filed with
the Securities and Exchange Commission.
2. 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 income (loss) and net income (loss) per
share would have been reported as follows:
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Net income (loss) available
to common shareholders:
As reported ................ $ 222 $ 389 $ (243) $ (120)
Less impact of stock
option expense ............ 9 12 17 24
------ ------- ------- -------
Pro forma .................. $ 213 $ 377 $ (260) $ (144)
====== ======= ======= =======
Basic income (loss) per share:
As reported ................ $ .05 $ .09 $ (.05) $ (.03)
Less impact of stock
option expense ........... -- .01 .01 --
------ ------- ------- -------
Pro forma .................. $ .05 $ .08 $ (.06) $ (.03)
====== ======= ======= =======
Diluted income (loss) per share:
As reported ................ $ .05 $ .09 $ (.05) $ (.03)
Less impact of stock
option expense ........... -- .01 .01 --
------ ------- ------- -------
Pro forma .................. $ .05 $ .08 $ (.06) $ (.03)
====== ======= ======= =======
6
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS (Unaudited) -- (Continued)
(Dollars in Thousands Except Per Share Amounts)
3. Changes in Shareholders' Equity:
Total
Additional Share
Preferred Common Paid-in Retained holders'
Stock Stock Capital Earnings Equity
------- ------- ------- ------- -------
Balance December 31,2003. $ 32 $ 2,229 $29,709 $36,721 $68,691
Issuance of 4,206
common shares for stock
options exercised and
employee stock purchases. 2 33 35
Issuance of 12,628
common shares to
fund the Company's
2003 profit-sharing
plan contribution
(non-cash transaction).. 6 113 119
Dividends:
Preferred stock,
$5.00 per share ........ (3) (3)
Common stock, $.08
per share .............. (357) (357)
Net loss for the
period ................. (240) (240)
----- ------- ------- ------- -------
Balance June 30, 2004 ... $ 32 $ 2,237 $29,855 $36,121 $68,245
===== ======= ======= ======= =======
4. Other Income:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------
2004 2003 2004 2003
------ ------ ------ ------
Gains from sale of
property, equipment and
easements, net ...... $ 1 $ (1) $ 21 $ 12
Rentals .............. 140 108 240 243
Interest ............. 1 2 2 7
---- ---- ---- ----
$142 $109 $263 $262
==== ==== ==== ====
5. Income (Loss) per Common Share:
Basic income (loss) per common share is computed using the weighted average
number of common shares outstanding during each period. Diluted income
(loss) per common share reflects the effect of the Company's outstanding
convertible preferred stock, options and warrants except where such items
would be antidilutive.
A reconciliation of weighted average shares used for the basic computation
and that used for the diluted computation is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Weighted average shares
for basic ............ 4,470,566 4,446,718 4,464,091 4,445,251
Dilutive effect of
convertible preferred
stock, options and
warrants ............. 75,511 64,558 -- --
--------- --------- --------- ---------
Weighted average shares
for diluted .......... 4,546,077 4,511,276 4,464,091 4,445,251
========= ========= ========= =========
7
Options and warrants to purchase 12,559 and 121,665 shares of common stock
were outstanding for the three-month periods ended June 30, 2004 and 2003,
respectively, but were not included in the computation of income per share
because their effect would be antidilutive.
Preferred stock convertible into 64,500 shares of common stock was
outstanding for the six-month periods ended June 30, 2004 and 2003 and
options and warrants to purchase 56,854 and 128,274 shares of common stock
were outstanding for the six-month periods ended June 30, 2004 and 2003,
respectively. These common stock equivalents were not included in the
computation of the diluted loss per share for these periods because their
effect would be antidilutive.
6. Commitments and Contingent Liabilities:
The Company is a defendant in certain lawsuits relating to casualty losses,
many of which are covered by insurance subject to a deductible. The Company
believes that adequate provision has been made in the financial statements
for any expected liabilities which may result from disposition of such
lawsuits.
On January 29, 2002, the Company received a "Notice of Potential Liability"
from the United States Environmental Protection Agency ("EPA") regarding an
existing Superfund Site 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 and others, 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. ss. 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
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.
8
On December 15, 2003, the EPA issued a second "Notice of Potential
Liability" letter to the Company regarding the Site. EPA again identified
the Company as a PRP, this time because EPA "believes that [the Company]
accepted hazardous substance for transport to disposal or treatment
facilities and selected the site for disposal." The Company responded again
to EPA stating that it is interested in cooperating with EPA but that it
does not believe it has engaged in any activities that caused contamination
at the Site.
During the second quarter of 2004 a decision was rendered in the case of
George W. O'Leary v. Providence and Worcester Railroad Company, et al.,
C.A. No. 99-560. The jury found the Company liable for compensatory and
punitive damages which, along with accrued interest through June 30, 2004,
amount to approximately $325. The Company is appealing this judgment to the
Rhode Island Supreme Court and has accrued a liability of $275 to provide
for the possible loss.
7. Dividends:
On July 28, 2004, the Company declared a dividend of $.04 per share on its
outstanding Common Stock payable August 19, 2004 to shareholders of record
August 5, 2004.
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") defines critical accounting
policies as those that require application of management's most difficult,
subjective or complex judgments, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain and may change in
subsequent periods.
The Company's significant accounting policies are described in Note 1 of the
Notes to Financial Statements in its Annual Report on Form 10-K. Not all of
these significant accounting policies require management to make difficult,
subjective or complex judgments or estimates. Management believes that the
Company's policy for the evaluation of long-lived asset impairment is a critical
accounting policy.
The Company evaluates long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. When factors indicate that assets should be evaluated for
possible impairment, the Company uses an estimate of the related undiscounted
future cash flows over the remaining lives of the assets in measuring whether
the carrying amounts of the assets are recoverable.
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 June 30, Six Months Ended June 30,
---------------------------- -----------------------------
2004 2003 2004 2003
------------- ------------- -------------- --------------
(In thousands, except percentages)
Freight Revenues:
Conventional
carloads ...... $5,486 84.5% $5,308 84.8% $9,686 83.8% $9,181 82.6%
Containers ..... 653 10.0 769 12.3 1,261 10.9 1,418 12.8
Non-Freight
Operating
Revenues:
Transportation
services ...... 167 2.6 106 1.7 320 2.8 314 2.8
Other .......... 187 2.9 73 1.2 293 2.5 202 1.8
------ ----- ------ ----- ------- ----- ------- -----
Total ........ $6,493 100.0% $6,256 100.0% $11,560 100.0% $11,115 100.0%
====== ===== ====== ===== ======= ===== ======= =====
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 June 30, Six Months Ended June 30,
---------------------------- -----------------------------
2004 2003 2004 2003
------------- ------------- -------------- --------------
(In thousands, except percentages)
Salaries, wages,
payroll taxes and
employee benefits $3,292 50.7% $3,233 51.7% $6,675 57.7% $6,522 58.7%
Casualties and
insurance ...... 522 8.0 336 5.4 774 6.7 544 4.9
Depreciation .... 660 10.2 720 11.5 1,348 11.7 1,435 12.9
Diesel fuel ..... 284 4.4 319 5.1 533 4.6 557 5.0
Car hire, net ... 222 3.4 218 3.5 349 3.0 400 3.6
Purchased
services,
including legal
and professional
fees ........... 327 5.0 332 5.3 563 4.9 594 5.4
Repair and
maintenance of
equipment ...... 300 4.6 192 3.1 601 5.2 440 4.0
Track and signal
materials ...... 416 6.4 782 12.5 605 5.2 1,071 9.6
Track usage fees. 224 3.5 201 3.2 333 2.9 343 3.1
Other materials
and supplies ... 235 3.6 302 4.8 445 3.9 579 5.2
Other ........... 450 6.9 403 6.4 882 7.6 825 7.4
------ ----- ------ ----- ------- ----- ------- -----
Total .......... 6,932 106.7 7,038 112.5 13,108 113.4 13,310 119.8
Less capitalized
and recovered
costs ......... 639 9.8 1,262 20.2 940 8.1 1,766 15.9
------ ----- ------ ----- ------- ----- ------- -----
Total ........ $6,293 96.9% $5,776 92.3% $12,168 105.3% $11,544 103.9%
====== ===== ====== ===== ======= ===== ======= =====
Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003
Operating Revenues:
Operating revenues increased $445,000, or 4.0%, to $11.6 million in the six
months ended June 30, 2004 from $11.1 million in 2003. This increase is the net
result of a $505,000 (5.5%) increase in conventional freight revenues and a
$97,000 (18.8%) increase in non-freight operating revenues partially offset by a
$157,000 (11.1%) decrease in container freight revenues.
The increase in conventional freight revenues is the result of a 5.2% increase
in conventional carloadings, and a small (.3%) increase in the average revenue
received per conventional carloading. The Company's conventional carloadings
increased by 711 to 14,410 in the first six months of 2004 from 13,699 in 2003.
This increase in traffic volume consists of carloadings of coal and certain
other commodities partially offset by a decrease in carloadings of construction
aggregates. The increase in the average revenue per carloading is largely
attributable to a shift in the mix of commodities.
The decrease in container revenues is primarily attributable to a decrease in
traffic volume. Intermodal containers handled during the six-month period
decreased by 2,540, or 7.9%, to 29,715 in 2004 from 32,255 in 2003. The average
revenue received per container decreased by 3.5% as a result of a shift in the
mix of containers handled and contractual price adjustments.
The increase in non-freight operating revenues for the six-month period results
from an increase in maintenance department billings.
11
Operating Expenses:
Operating expenses for the six-month period increased $624,000, or 5.4%, to
$12.2 million in 2004 from $11.5 million in 2003. The provision of $275,000 to
cover a lawsuit judgment against the Company in 2004 accounts for a significant
portion of this increase. In addition the Company capitalized or recovered more
of its track and signal maintenance costs in 2003 than in 2004.
Three Months Ended June 30, 2004 Compared to Three Months Ended June 30, 2003
Operating Revenues:
Operating revenues increased $237,000, or 3.8% to $6.5 million in the second
quarter of 2004 from $6.3 million in the second quarter of 2003. This increase
is the net result of a $178,000 (3.4%) increase in conventional freight revenues
and a $175,000 (97.8%) increase in non-freight operating revenues partially
offset by a $116,000 (15.1%) decrease in container freight revenues.
The increase in conventional freight revenues is the result of a 1.0% increase
in conventional carloadings and a 2.3% increase in the average revenue received
per conventional carloading. The Company's conventional carloadings increased by
93 to 9,109 in the second quarter of 2004 from 9,016 in the second quarter of
2003. Increased carloadings of coal and certain other commodities during the
quarter were partially offset by a decrease in construction aggregate
carloadings. The increased revenue per carloading is largely attributable to
this shift in traffic mix.
The decrease in container revenues is attributable to a 9.7% decrease in traffic
volume and a 6.0% decrease in the average revenue received per container.
Intermodal containers handled during the second quarter of 2004 decreased by
1,674 to 15,625 from 17,299 in the second quarter of 2003. The average revenue
received per container results from a shift in the mix of containers handled and
contractual price adjustments.
The increase in non-freight operating revenues for the quarter results from an
increase in maintenance department billings and demurrage and secondary
switching charges. Revenues of this nature typically vary from period to period
depending upon the needs of freight customers and other parties.
Operating Expenses:
Operating expenses increased $517,000, or 9.0%, to $6.3 million in the second
quarter of 2004 from $5.8 million in the second quarter of 2003. The provision
of $275,000 to cover a lawsuit judgment against the Company during the second
quarter of 2004 accounts for the largest portion of this increase. In addition,
the Company capitalized or recovered more of its track and signal maintenance
costs in 2003 than in 2004.
Liquidity and Capital Resources
- -------------------------------
During the first six months of 2004 the Company generated $1.2 million of cash
from its operations. Total cash and equivalents decreased by $308,000 for the
period. The principal utilization of cash during the period, other than for
operations, was for expenditures for property and equipment, of which $810,000
was for additions and improvements to track structure, and for the payment of
dividends.
12
In management's opinion, cash generated from operations during the remainder of
2004 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------------------------------------------------------------------
Cash and Equivalents
As of June 30, 2004, 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 June 30, 2004. 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
- -------------------------------
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Company carried out an evaluation of the effectiveness
of the design and operation of the Company's disclosure controls and procedures
as of the end of the period covered by this report. This evaluation was carried
out under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and the Company's
Treasurer and Chief Financial Officer. Based upon that evaluation, the Chief
Executive Officer and the Treasurer and Chief Financial Officer concluded that
the Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission
rules and forms.
There was no significant change in the Company's internal control over financial
reporting that occurred during the Company's most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
13
PART II - Other Information
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Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Annual Meeting of Stockholders was held on April 28, 2004. Of the
4,457,593 shares of common stock entitled to vote, 4,128,527 shares
were present, in person or by proxy. Of the 645 shares of preferred
stock entitled to vote, 503 shares were present, in person or by
proxy.
All directors of the Company are elected on an annual basis and the
following were so elected at this Annual Meeting:
Richard W. Anderson, Robert H. Eder and John J. Healy were elected
Common Stock Directors. Mr. Anderson received 4,066,053 affirmative
votes and 62,474 votes withheld, Mr. Eder received 4,037,163
affirmative votes and 91,364 votes withheld and Mr. Healy received
4,048,333 affirmative votes and 80,194 votes withheld of common
shares.
Frank W. Barrett, John H. Cronin, J. Joseph Garrahy, Orville R.
Harrold and Charles M. McCollam, Jr. were elected Preferred Stock
Directors. Each director received 503 affirmative votes and no votes
withheld of preferred shares.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(b) A report on Form 8-K was filed on June 1, 2004 reporting that by
press release dated May 27, 2004 the Registrant announced to the
general public that a decision had been rendered in the case of
George W. O'Leary vs. Providence and Worcester Railroad Company,
et al.
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 Chief
Financial Officer
DATED: August 13, 2004
15
EXHIBIT 31.1
Providence and Worcester Railroad Company
Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, ROBERT H. EDER, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Providence and
Worcester Railroad Company;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15 (e)) for the registrant and we
have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report, based on our evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors:
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
DATE: August 13, 2004
By: /s/ Robert H. Eder
-------------------------------------
Robert H. Eder
Chairman of the Board
and Chief Executive Officer
16
EXHIBIT 31.2
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 report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15 (e)) for the registrant and we
have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report, based on our evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors:
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
DATE: August 13, 2004
By: /s/ Robert J. Easton
-------------------------------------
Robert J. Easton
Treasurer and Chief
Financial Officer
17
EXHIBIT 32
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 June 30,
2004, 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
August 13, 2004
In connection with the Quarterly Report of Providence and Worcester Railroad
Company ("the Company") on form 10-Q for the quarterly period ended June 30,
2004, 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
August 13, 2004