Attached files
| file | filename |
|---|---|
| EX-32 - EXHIBIT 32 - PROVIDENCE & WORCESTER RAILROAD CO/RI/ | exhibit_32.htm |
| EX-32.1 - EXHIBIT 32.1 - PROVIDENCE & WORCESTER RAILROAD CO/RI/ | exhibit_32-1.htm |
| EX-31.2 - EXHIBIT 31.2 - PROVIDENCE & WORCESTER RAILROAD CO/RI/ | exhibit_31-2.htm |
| EX-31.1 - EXHIBIT 31.1 - PROVIDENCE & WORCESTER RAILROAD CO/RI/ | exhibit_31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q/A
(Amendment No. 1)
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X
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QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2011
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TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _______________ to _______________
Commission file number 0-16704
PROVIDENCE AND WORCESTER RAILROAD COMPANY
(Exact name of registrant as specified in its charter)
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Rhode Island
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05-0344399
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_____________________________
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__________________________
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(State or other jurisdiction of
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I.R.S. Employer Identification No.
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incorporation or organization)
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75 Hammond Street, Worcester, Massachusetts
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01610
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_____________________________
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__________________________
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(Address of principal executive offices)
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(Zip Code)
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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 by check mark whether the registrant has submitted electronically and posted on its website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such fields). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ¨
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Accelerated filer ¨
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Non-accelerated filer ¨
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Smaller reporting company x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of November 9, 2011, the registrant had 4,830,503 shares of common stock, par value $.50 per share, outstanding.
PROVIDENCE AND WORCESTER RAILROAD COMPANY
Explanatory Note
The purpose of this Amendment No. 1 (the “Amendment”) to the Providence and Worcester Railroad Company Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011, filed with the Securities and Exchange Commission on November 14, 2011 (the “Form 10-Q”), is to correct certain typographical and inadvertent errors in Item 2 of Part I. The amendment did not have impact on our financial results. This Amendment No. 1 does not reflect subsequent events occurring after the original filing date of the Form 10-Q.
Index to Quarterly Report on Form 10-Q
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Part I – Financial Information
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Item 1 –Financial Statements (Unaudited):
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Condensed Balance Sheets – September 30, 2011 and December 31, 2010
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3
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Condensed Statements of Operations – Three and Nine Months Ended September 30, 2011 and 2010
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4
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Condensed Statements of Cash Flows – Nine Months Ended September 30, 2011 and 2010
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5
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Notes to Condensed Financial Statements
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6-10
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Item 2 –Management’s Discussion and Analysis of Financial Condition and Results of Operations
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11-16
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Item 3 –Quantitative and Qualitative Disclosures about Market Risk
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16
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Item 4 –Controls and Procedures
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17
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Part II – Other Information:
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Item 5 – Other Information
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18
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Item 6 Exhibits
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18
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Signatures
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19
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Part I – Financial Information
Item 1. Financial Statements
PROVIDENCE AND WORCESTER RAILROAD COMPANY
CONDENSED BALANCE SHEETS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
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ASSETS
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September 30,
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December 31,
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2011
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2010
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Current Assets:
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Cash and cash equivalents
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$ 515
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$ 1,517
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Receivables:
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Trade receivable, net of allowance for doubtful accounts of $55 in 2011 and 2010
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3,638
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2,849
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Note receivable, less allowance of $60 in 2011 and 2010
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309
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37
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Materials and supplies
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634
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552
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Prepaid expenses and other current assets
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600
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382
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Deferred income taxes
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240
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240
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Total Current Assets
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5,936
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5,577
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Note receivable, less current portion
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—
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347
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Property and Equipment, net
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84,309
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79,595
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Land Held for Development
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12,457
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12,457
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Total Assets
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$ 102,702
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$ 97,976
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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Current Liabilities:
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Borrowings under line of credit
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$ 400
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$ 900
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Current portion of long term debt
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118
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—
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Accounts payable
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3,941
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3,029
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Accrued expenses
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1,551
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1,751
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Total Current Liabilities
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6,010
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5,680
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Long term debt, net of current portion
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3,852
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—
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Deferred Income Taxes
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12,391
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11,596
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Deferred Grant Income
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7,865
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8,063
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Other
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39
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40
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Commitments and Contingent Liabilities
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Shareholders’ Equity:
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Preferred stock, 10% noncumulative, $50 par value; authorized, issued and outstanding 640 shares in 2011 and 2010
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32
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32
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Common stock, $.50 par value; authorized 15,000,000 shares; issued and outstanding 4,830,503 shares in 2011 and 4,822,650 shares in 2010
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2,415
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2,411
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Additional paid-in capital
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37,247
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37,045
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Retained earnings
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32,851
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33,109
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Total Shareholders’ Equity
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72,545
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72,597
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Total Liabilities and Shareholders’ Equity
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$ 102,702
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$ 97,976
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The accompanying notes are an integral part of the financial statements.
PROVIDENCE AND WORCESTER RAILROAD COMPANY
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
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Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
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2011
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2010
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2011
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2010
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Revenues:
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Operating Revenues
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$8,321
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$7,467
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$22,945
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$21,244
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Other Income
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1,380
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286
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1,860
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697
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Total Revenues
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9,701
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7,753
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24,805
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21,941
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Operating Expenses:
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Maintenance of way and structures
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999
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1,017
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3,016
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3,688
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Maintenance of equipment
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921
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865
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2,944
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2,426
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Transportation
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2,671
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2,141
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8,054
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6,618
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General and administrative
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1,216
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1,471
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3,850
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4,062
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Depreciation
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817
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776
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2,392
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2,328
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Taxes, other than income taxes
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606
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577
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1,755
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1,807
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Car hire, net
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230
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238
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820
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612
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Employee retirement plans
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59
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60
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182
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173
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Track usage fees
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200
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198
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585
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449
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Total Operating Expenses
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7,719
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7,343
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23,598
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22,163
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Operating income (loss) before Income Taxes
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1,982
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410
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1,207
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(222)
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Interest expense
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40
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9
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56
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38
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Income (loss) from operations prior to income taxes
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1,942
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401
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1,151
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(260)
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Provision for Income Taxes (Benefit)
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360
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171
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825
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(67)
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Net Income (Loss)
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1,582
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230
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326
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(193)
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Preferred Stock Dividends
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—
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—
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3
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3
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Net Income (Loss) Available to Common Shareholders.
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$1,582
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$230
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$323
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$(196)
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Basic and Diluted Income (Loss) Per Common Share
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$.32
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$.05
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$.07
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$(.04)
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Weighted-Average Common Shares Outstanding:
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For basic
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4,828,286
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4,818,312
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4,826,126
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4,816,276
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For diluted
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4,897,901
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4,888,517
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4,898,442
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4,816,276
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The accompanying notes are an integral part of the financial statements.
PROVIDENCE AND WORCESTER RAILROAD COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
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Nine Months Ended September 30,
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2011
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2010
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Cash Flows from Operating Activities:
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Net income (loss)
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$ 326
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$ (193)
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Adjustments to reconcile the net income (loss) to cash flows from operating activities:
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Depreciation
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2,392
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2,328
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Amortization of deferred grant income
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(198)
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(194)
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(Gains) losses from sale and disposal of property, equipment and easements
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(1,921)
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350
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Note receivable
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—
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(486)
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Deferred income tax benefit
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807
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(98)
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Share-based compensation
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113
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94
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Increase (decrease) in cash from:
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Trade receivable
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(789)
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(542)
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Materials and supplies
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(82)
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177
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Prepaid expenses and other
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(218)
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(208)
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Accounts payable and accrued expenses
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308
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539
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Net cash flows from operating activities
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738
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1,767
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Cash flows from Investing Activities:
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Purchase of property and equipment
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(6,715)
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(1,732)
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Proceeds from note receivable
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75
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10
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Proceeds from sale of property, equipment and easements
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1,921
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350
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Net cash flows used in investing activities
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(4,719)
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(1,372)
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Cash Flows from Financing Activities:
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Borrowings (payments) under line of credit
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(500)
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1,000
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Proceeds from long term debt
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4,000
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—
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Repayments of long term debt
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(30)
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—
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Dividends paid
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(584)
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(582)
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Issuance of common shares for stock options exercised and employee stock purchases
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93
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52
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Net cash flows from financing activities
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2,979
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470
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Increase (decrease) in Cash and Cash Equivalents
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(1,002)
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865
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Cash and Cash Equivalents, Beginning of Period
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1,517
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157
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Cash and Cash Equivalents, End of Period
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$ 515
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$ 1,022
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Supplemental Disclosures:
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Cash paid for interest
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$ 104
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$ 37
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Property and equipment included in accounts payable and accrued expenses
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$ 391
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$ —
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The accompanying notes are an integral part of the financial statements.
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)
(Dollars in Thousands Except Per Share Amounts)
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1.
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In the opinion of management, the accompanying interim financial statements of Providence and Worcester Railroad Company (the “Company”) contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position as of September 30, 2011, the results of operations for the three and nine months ended September 30, 2011 and 2010 and cash flows for the nine months ended September 30, 2011 and 2010. Results for interim periods may not be necessarily indicative of the results to be expected for the full 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, 2010 filed with the Securities and Exchange Commission.
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Certain amounts in the 2010 financial statements have been reclassified to conform with the current presentation.
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2.
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Recent Accounting Pronouncements:
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The Company reviews new accounting standards as issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any standards that it believes merit further discussion. The Company expects none of the recent accounting pronouncements will have a significant impact on its financial statements.
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3.
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Note Receivable and Subsequent Event:
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In conjunction with a settlement agreement with an existing customer, the Company accepted an unsecured promissory note in the face amount of $486 thousand, whereby the Company receives monthly installments of $10 thousand including interest at 3.91% through January 2015, the maturity date. In October 2011, the customer and the Company agreed to settle the remaining amounts outstanding for $300 thousand. The Company received payment of $300 thousand in October 2011, and executed a release concurrently.
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4.
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Changes in Shareholders’ Equity:
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Additional
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Total
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||||
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Preferred
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Common
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Paid-in
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Retained
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Shareholders’
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Stock
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Stock
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Capital
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Earnings
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Equity
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Balance December 31, 2010
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$32
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$2,411
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$37,045
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$33,109
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$72,597
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Issuance of 7,082 common shares for stock options exercised, employee stock purchases and employee stock awards
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4
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100
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104
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Share-based compensation, options granted
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102
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102
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Dividends:
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|||||
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Preferred stock, $5.00 per share
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(3)
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(3)
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Common stock, $.12 per share
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(581)
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(581)
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Net income for the period
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326
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326
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Balance September 30, 2011
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$32
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$2,415
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$37,247
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$32,851
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$72,545
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5.
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Debt:
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Revolving Line of Credit
In June 2011, the Company extended its revolving line of credit facility in the amount of $5 million from a commercial bank. The line of credit facility matures on June 25, 2013. Borrowings under this line of credit are unsecured, due on demand and bear interest at either the bank's prime rate or one and three-quarters percent over the thirty, sixty or ninety day London Interbank Offered Rate ("LIBOR") with a LIBOR floor of one and one-quarter percent. The Company pays no commitment fee on this line of credit and has no compensating balance requirements. It is subject to financial and non-financial covenants including maintenance of a minimum net worth and restrictions on the incurrence of additional indebtedness, as well as the sale or encumbrance of its assets. At September 30, 2011, $400 thousand was outstanding under this line of credit.
Long term debt
In December 2010, the Company entered into an unsecured loan agreement with the same commercial bank as the revolving line of credit in order to borrow up to $4 million for rehabilitation of the Willimantic Branch (“Construction Loan”). The Construction Loan requires payments of interest only for the first six months accruing at the bank’s prime rate. After the initial six month period, the Construction Loan converted to a 10 year term loan with a 20 year amortization period and bears interest at the Federal Home Loan Bank of Boston 5/20 rate plus 3% (5.18% as of the conversion date). The Company has the right to prepay the balance or any part thereof out of internally-generated funds without penalty. No amounts were outstanding as of December 31, 2010. The outstanding balance of the Construction Loan converted to a term loan under the terms stated above during June 2011 and the first payment on the term loan was made during July 2011. The Construction Loan is subject to financial and non-financial covenants, including maintenance of minimum net worth and minimum debt service coverage.
The carrying value of the Company’s debt facilities approximated its fair value at September 30, 2011 which was estimated using current borrowing rates available to the Company.
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6.
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Other Income:
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Three Months Ended
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Nine Months Ended
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||||
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September 30,
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September 30,
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||||
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2011
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2010
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2011
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2010
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Gains (losses) from sale and disposal of property, equipment and easements, net
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$ —
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$(350)
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$ 1
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$(350)
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Proceeds from legal settlement
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1,242
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—
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1,242
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—
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Rentals
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77
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147
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431
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497
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Interest
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5
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—
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12
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1
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Other
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56
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489
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174
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549
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$1,380
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$286
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$1,860
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$697
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The Company received $1.2 million in July 2011 for settlement of certain legal proceedings and the grant of a permanent easement.
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7.
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Track Maintenance Agreement:
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In the second quarter of 2011, the Company entered into a track maintenance agreement with an unrelated third party customer (“Shipper”). The Shipper paid for qualifying railroad track maintenance expenditures during 2011 in consideration of the assignment of railroad track miles which permits the Shipper to claim certain federal tax credits pursuant to Internal Revenue Code Section 45G. During 2011, the Company received $869 thousand, net of related expenses and credits, which offsets maintenance of way expenses. Since the authorizing federal legislation for 2010 track maintenance credits was not renewed by Congress until December 2010, no amounts were received during the three and nine months ended September 30, 2010 for 2010 track maintenance credits.
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8.
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Income (Loss) per Common Share:
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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 and stock options except where such items would be antidilutive.
A reconciliation of weighted-average shares used for the basic computation and that used for the diluted computation is as follows:
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Three Months Ended
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Nine Months Ended
|
||||
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September 30,
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September 30,
|
||||
|
2011
|
2010
|
2011
|
2010
|
||
|
Weighted-average shares for basic
|
4,828,286
|
4,818,312
|
4,826,126
|
4,816,276
|
|
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Dilutive effect of convertible preferred stock and stock options
|
69,615
|
70,205
|
72,316
|
—
|
|
|
Weighted-average shares for diluted
|
4,897,901
|
4,888,517
|
4,898,442
|
4,816,276
|
|
Options to purchase 59,244 shares of common stock were outstanding for the three and nine-month periods ended September 30, 2011. Options to purchase 55,952 shares of common stock were outstanding for the three and nine-month periods ended September 30, 2010. For the three month periods ended September 30, 2011 and 2010, 5,615 and 6,205 of outstanding options to purchase common shares were included in the computation of diluted earnings per share (EPS). The remaining outstanding options to purchase common stock were not included in the computation of diluted EPS because the options exercise price was greater than the average market prices of the Company’s common stock.
For the nine month period ended September 30, 2011, 8,316 of outstanding options to purchase common shares were included in the computation of diluted earnings per share (EPS). The remaining outstanding options to purchase common stock were not included in the computation of diluted EPS because the options exercise price was greater than the average market prices of the Company’s common stock. The options, which expire at various times, were still outstanding at September 30, 2011.
Preferred stock convertible into 64,000 shares of common stock was outstanding for the three and nine-month periods ended September 30, 2011 and 2010. For the three month periods ended September 30, 2011 and 2010 and for the nine month period ended September 30, 2011, 64,000 shares of the Company’s common stock were included in the diluted EPS. For the nine month period ended September 30, 2010, the 64,000 shares of the Company’s common stock were not included as the effect would be anitdilutive.
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9.
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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.
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On January 29, 2002, the Company received a “Notice of Potential Liability” from the United States Environmental Protection Agency (“EPA”) regarding an existing Superfund Site (“the Site”) that includes the J.M. Mills Landfill in Cumberland, Rhode Island. EPA sends these “Notice” letters to potentially responsible parties (“PRPs”) under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). EPA identified the Company as a PRP based on its status as an owner and/or operator because its railroad property traverses the Site. Via these Notice letters, EPA makes a demand for payment of past costs (identified in the letter as $762) and future costs associated with the response actions taken to address the contamination at the Site, and requests PRPs to indicate their willingness to participate and resolve their potential liability at the Site. The Company has responded to EPA by stating that it does not believe it has any liability for this Site, but that it is interested in cooperating with EPA to address issues concerning liability at the Site. 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). 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. The Company believes that none of its activities caused contamination at the Site, and will contest this claim by EPA and therefore no liability has been accrued for this matter.
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|
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In connection with the EPA claim described above, the two parties who have committed to conduct the RI/FS at the Site filed a complaint in the U.S. District Court of Rhode Island against the Company, in an action entitled CCL Custom Manufacturing, Inc. v. Arkwright Incorporated, et al (consolidated with Unilever Bestfoods v. American Steel & Aluminum Corp. et al), C.A. No. 01-496/L, on December 18, 2002. The Company was one of about sixty parties named by Plaintiffs, in this suit, to recover response costs incurred in investigating and responding to the releases of hazardous substances at the Site. Plaintiffs alleged that the Company is liable under 42 U.S.C. § 961(a)(3) of CERCLA as an “arranger” or “generator” of waste that ended up at the Site. The Company entered into a Generator Cooperation Agreement with other defendants to allocate costs in responding to this suit, and to share technical costs and information in evaluating the Plaintiffs’ claims. Although the Company does not believe it generated any waste that ended up at this Site, or that its activities caused contamination at the Site, the Company paid $45 thousand to settle this suit in March 2006.
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|
10.
|
Dividends:
|
On October 26, 2011, the Company declared a dividend of $.04 per share on its outstanding Common Stock payable November 23, 2011 to shareholders of record on November 9, 2011.
|
|
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. We continue to monitor our accounting policies to ensure proper application of current rules and regulations. There have been no significant changes to these policies as discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements, including, without limitations, statements concerning the conditions in our industry and our operations, economic performance and financial condition, including, in particular, statements relating to our business and strategy. The words “may,” “might,” “should,” “estimate,” “project,” “plan,” “anticipate,” “expect,” “intend,” “outlook,” “believe,” and other similar expressions are intended to identify forward-looking statements and information although not all forward-looking statements include these identifying words. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are based on estimates and assumptions by our management that, although we believe to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties.
In particular, our business might be affected by uncertainties affecting the railroad and transportation industry generally as well as the following, among other factors:
|
·
|
general economic, financial and political conditions, including downturns affecting the railroad industry and credit markets;
|
|
·
|
our ability to comply with financial and non-financial covenants contained in our revolving line of credit and long term debt;
|
|
·
|
limitations and restrictions on the operation of our business contained in the documents governing our indebtedness;
|
|
·
|
increases in transportation costs, including fuel prices, which in some instances may not be passed on to customers;
|
|
·
|
competitive pressures, including changes in competitors’ pricing;
|
|
·
|
our ability to generate cash flows to invest in the operation of our business;
|
|
·
|
our dependence upon our key customers, executives and other key employees and our ability to renegotiate our union contracts.
|
Recent Accounting Pronouncements
The Company reviews new accounting standards as issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any standards that it believes merit further discussion. The Company expects none of the recent accounting pronouncements will have a significant impact on its financial statements.
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 September 30,
|
Nine Months Ended September 30,
|
|||||||
|
2011
|
2010
|
2011
|
2010
|
|||||
|
(In thousands, except percentages)
|
||||||||
|
Freight Revenues:
|
||||||||
|
Conventional carloads
|
$7,791
|
93.6%
|
$7,133
|
95.5%
|
$21,130
|
92.1%
|
$19,624
|
92.4%
|
|
Containers
|
179
|
2.2
|
208
|
2.8
|
570
|
2.5
|
515
|
2.4
|
|
Other freight related
|
152
|
1.8
|
54
|
0.7
|
485
|
2.1
|
431
|
2.0
|
|
Other Operating Revenues
|
199
|
2.4
|
72
|
1.0
|
760
|
3.3
|
674
|
3.2
|
|
Total
|
$8,321
|
100.0%
|
$7,467
|
100.0%
|
$22,945
|
100.0%
|
$21,244
|
100.0%
|
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 September 30,
|
Nine Months Ended September 30,
|
|||||||
|
2011
|
2010
|
2011
|
2010
|
|||||
|
(In thousands, except percentages)
|
||||||||
|
Salaries, wages, payroll taxes and employee benefits
|
$4,097
|
49.2%
|
$4,147
|
55.5%
|
$11,994
|
52.3%
|
$11,811
|
55.6%
|
|
Casualties and insurance
|
214
|
2.6
|
119
|
1.6
|
524
|
2.3
|
710
|
3.3
|
|
Depreciation
|
817
|
9.8
|
776
|
10.4
|
2,392
|
10.4
|
2,328
|
11.0
|
|
Diesel fuel
|
911
|
10.9
|
626
|
8.4
|
3,026
|
13.2
|
1,896
|
8.9
|
|
Car hire, net
|
230
|
2.8
|
238
|
3.2
|
820
|
3.6
|
612
|
2.9
|
|
Purchased services, including legal and professional fees
|
860
|
10.3
|
792
|
10.6
|
2,336
|
10.2
|
1,951
|
9.2
|
|
Repair and maintenance of equipment
|
204
|
2.5
|
276
|
3.7
|
899
|
3.9
|
848
|
4.0
|
|
Track and signal materials
|
798
|
9.6
|
353
|
4.7
|
1,225
|
5.3
|
1,084
|
5.1
|
|
Track usage fees
|
200
|
2.4
|
198
|
2.6
|
585
|
2.5
|
449
|
2.1
|
|
Other materials and supplies
|
289
|
3.5
|
288
|
3.9
|
895
|
3.9
|
634
|
3.0
|
|
Other
|
492
|
5.9
|
429
|
5.7
|
1,546
|
6.7
|
1,404
|
6.6
|
|
Total
|
9,112
|
109.5
|
8,242
|
110.3
|
26,242
|
114.3
|
23,727
|
111.7
|
|
Less capitalized and recovered costs
|
1,393
|
16.7
|
899
|
12.0
|
2,644
|
11.5
|
1,564
|
7.4
|
|
Total
|
$7,719
|
92.8%
|
$7,343
|
98.3%
|
$23,598
|
102.8%
|
$22,163
|
104.3%
|
Nine Months Ended September 30, 2011 Compared to Nine Months Ended September 30, 2010
Operating Revenues:
Operating revenues increased $1.7 million, or 8%, to $22.9 million in the nine months ended September 30, 2011 from $21.2 million in 2010. This increase is the result of a $1.5 million (7.7%) increase in conventional freight revenues, a $55,000 (10.7%) increase in container freight revenues, a $54,000 (12.5%) increase in other freight-related revenues, and an $86,000 (12.8%) increase in other operating revenues.
The increase in conventional freight revenues results from a 1.4% rise in traffic volume and a 6.3% increase in the average revenue received per conventional carloading. The Company’s conventional carloadings increased by 357 to 26,395 in the nine-month period ended September 30, 2011 from 26,038 in 2010.
The number of shipments of most commodities handled by the Company was relatively constant except for increases in automobile shipments during the first nine months of 2011. There was a decrease in coal shipments due to a power plant customer being offline during a substantial portion of the period. The increase in the average revenue received per conventional carloading is due to a shift in the mix of commodities, as well as some rate changes.
The increase in container freight revenues is the result of a 4.7% increase in traffic volume and a 4.9% increase in the average revenue received per container. Container traffic volume increased by 373 to 8,251 in the first nine months of 2011 from 7,878 containers in 2010. This increase in traffic, along with improved economic conditions, contributed to the increase in the average revenue received per container.
The increase in other freight-related revenues and other operating revenues result primarily from overall increase in the number of shipments handled by the Company.
Other Income:
Other income increased by $1.163 million to $1.86 million in the nine-month period ended September 30, 2011 from $697,000 in 2010. The settlement of certain legal proceedings and the granting of a permanent easement for $1.2 million account for the increase.
Operating Expenses:
Operating expenses for the nine-month period ended September 30, 2011 increased by $1.4 million, or 6.5%, to $23.6 million from $22.2 million in 2010. The increase was mainly caused by higher diesel fuel prices and usage ($1.1 million), maintenance of way costs which were offset by tax maintenance credits ($869 thousand) and scrap recoveries ($500 thousand), repair parts for maintenance of equipment ($350 thousand), car hire expenses ($208 thousand), and track usage fees ($136 thousand), which were all associated with changes in the traffic mix, volume and routing.
Interest Expense
Interest expense increased due to the long term debt the Company incurred in order to complete improvements to the Company’s Willimantic Branch.
Provision for Income Tax Benefit/Expense:
The income tax benefit for the nine months ended September 30, 2011 is equal to 72% of the Company’s pre-tax income. This effective rate reflects the federal income tax rate increased by the effect of non-deductible expenses and by the allowance against tax credit carryovers that are reserved based upon the reversal pattern of the Company’s deferred tax assets and liabilities.
Three Months Ended September 30, 2011 Compared to Three Months Ended September 30, 2010
Operating Revenues:
Operating revenues increased $854,000, or 11.4%, to $8.3 million in the third quarter of 2011 from $7.5 million in the third quarter of 2010. The increase is the result of a $658,000 (9.2%) increase in conventional freight revenues, a $98,000 (181.5%) increase in other freight related revenue, and a $127,000 (176%) increase in other operating revenues, offset by a $29,000 (13.9%) decrease in container freight revenues.
The increase in conventional freight revenues is attributable to a 8.4% increase in the average revenue received per conventional carloading and a 1.8% increase in conventional traffic volume. Conventional carloading increased by 176 to 9,949 in the third quarter of 2011 from 9,773 in the third quarter of 2010. The reasons for the increase in average revenue received per carloading and the increase in conventional traffic volume are the same as for the nine-month period ended September 30, 2011, as previously discussed.
The decrease in container freight revenues for the quarter is the result of a 16.8% decrease traffic volume offset by a 3.4% increase in the average revenue received per container. Container traffic volume decreased by 523 to 2,592 in the third quarter of 2011 from 3,115 in the third quarter of 2010. The reason for the decrease in container traffic volume is a shift in the traffic pattern to utilize water-based routes.
The reason for the increase in other freight-related revenues is the same as for the nine-month period ended September 30, 2011, as previously discussed.
Other Income:
Other income increased by $1.1 million to $1.4 million in the third quarter of 2011 from $286,000 in the third quarter 2010. The settlement of certain legal proceedings and the granting of a permanent easement for $1.2 million account for the increase.
Operating Expenses:
Operating expenses for the third quarter of 2011 increased by $376 thousand, or 5.1%, to $7.7 million from $7.3 million in the third quarter of 2010. The principal reasons for this overall increase in costs were associated with the rise of traffic volume as previously discussed for the nine-month period ended September 30, 2011.
Interest Expense
Interest expense increased due to the long term debt the Company incurred in order to complete improvements along the Company’s Willimantic Branch.
Provision for Income Tax Benefit/Expense:
The income tax provision for the third quarter of 2011 is equal to 19% of pre-tax income for reasons discussed for the nine-month period ended September 30, 2011.
Liquidity and Capital Resources
During the nine months ended September 30, 2011, the Company generated $738,000 of cash from operating activities. The Company utilized cash of approximately $4.7 million, the majority of which related to the improvement of the Willimantic Branch. The Company funded the majority of this capital improvement project with its $4 million long term debt obligation and from operating cash flows.
The long term debt requires monthly payments of principal and interest of approximately $30 thousand.
On October 26, 2011, the Company declared a quarterly dividend of approximately $193 thousand ($.04 per common share) to be paid on November 23, 2011. The declaration of future dividends and the amount thereof will depend on the Company’s future earnings, financial factors and other events.
The Company assigned, in the second quarter of 2011, its federal income tax credit under Internal Revenue Code Section 45G to a qualified shipper under substantially similar terms and conditions as it has done in prior years. Net cash proceeds were $869 thousand. The Company expects to assign the remainder of its credits during the fourth quarter of 2011.
The Company’s $5 million revolving line of credit expires June 25, 2013. As of September 30, 2011, $4.6 million remained available.
During October 2011, the Company received $300,000 in full settlement of the outstanding note receivable obligation due to the Company. Concurrent with receipt of the funds accepted in satisfaction of the note receivable, the Company released the customer from its obligations under the promissory note.
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 due to winter weather conditions.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Cash and Equivalents
As of September 30, 2011, the Company is exposed to market risks which primarily include changes in U.S. interest rates and the purchase price of diesel fuel.
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 three- quarters percent over the thirty, sixty or ninety day London Interbank Offered Rates (“LIBOR”) with a LIBOR floor of one and one-quarter percent. The Company pays no commitment fee on this line, and has no compensating balance requirements. The Company’s Construction Loan provides a 10 year loan with a 20 year amortization period bearing interest at 5.18%. The Company has the right to prepay the balance or any part thereof out of internally-generated funds without penalty. The Company had no borrowings outstanding pursuant to the Construction Loan at December 31, 2010. 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.
The Company purchases in excess of one million gallons of diesel fuel each year to operate its locomotives. Fuel prices and supplies are influenced significantly by political and economic circumstances. Fuel shortages or price volatility could continue to increase our fuel costs and adversely affect our results of operations.
Inflation
In recent years, with the exception of the cost of diesel fuel, inflation has not had a significant impact on the Company’s operations.
Item 4. Controls and Procedures
Management with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in rule 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934) as of September 30, 2011. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2011, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weakness described below.
As discussed in Part II, Item 9 “Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2010, we identified a material weakness in our internal control over financial reporting because we did not maintain effective controls over the accounting for income taxes, including the determination and reporting of deferred income taxes and the related income tax provision. Specifically, we did not have adequate personnel and other resources to enable us to (i) properly consider and apply U.S. generally accepted accounting principles providing guidance over accounting for income taxes, and (ii) review and monitor the accuracy and completeness of the components of the income tax provision calculations and the related deferred taxes. In addition, until remediated, this material weakness could result in a misstatement described above that would result in a material misstatement to our interim or annual financial statements and disclosures that would not be prevented or detected.
As of September 30, 2011, we have not yet completely remediated the material weakness in our internal control over financial reporting with respect to our processes to accurately report our income tax provision as discussed above. Since the material weakness has been identified, we have undertaken an evaluation of our available resources deployed for the accounting for income taxes and have identified necessary changes to our processes and our allocation of resources as required. Other than as described in this Item 4, there have been no significant changes in our internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during our last fiscal quarter, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – Other Information
|
Item 5.
|
Other information
|
None.
|
Item 6.
|
Exhibits
|
|
(31.1)
|
Rule 13a-14(a) Certification of Chairman of the Board and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
(31.2)
|
Rule 13a-14(a) Certification of Treasurer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
(32)
|
Certifications of Chairman of the Board and Chief Executive Officer and Treasurer and Principal Financial Officer pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
(32.1) Certification Pursuant to 18 U.S.C Section 1350, as adopted Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
|
|
|
101†
|
The following financial information from the Company’s Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2011, filed with the Securities and Exchange Commission on November 18, 2011, formatted in eXtensible Business Reporting Language:
|
|
(i)
|
Balance Sheets as of September 30, 2011 and December 31, 2010;
|
|
(ii)
|
Statements of Operations for the Three and Nine Months ended September 30, 2011 and 2010;
|
|
(iii)
|
Statements of Cash Flows for the Nine Months ended September 30, 2011 and 2010; and
|
|
(iv)
|
Notes to Financial Statements.
|
†This exhibit will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C.78r), or otherwise subject to the liability of that section. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or Securities Exchange Act, except to the extent that the Company specifically incorporates it by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PROVIDENCE AND WORCESTER
RAILROAD COMPANY
|
By: /s/ Robert H. Eder
|
|
|
_____________________________________
|
|
|
Robert H. Eder
|
|
|
Chairman of the Board and Chief Executive Officer
|
|
By: /s/ Daniel T. Noreck
|
|
|
_____________________________________
|
|
|
Daniel T. Noreck
|
|
|
Treasurer and Chief Financial Officer
|
DATED: November 18, 2011
EXHIBIT 31.1
Providence and Worcester Railroad Company
Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, ROBERT H. EDER, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Providence and Worcester Railroad Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
DATE: November 18, 2011
|
By: /s/ Robert H. Eder
|
|
|
_____________________________________
|
|
|
Robert H. Eder
|
|
|
Chairman of the Board and Chief Executive Officer
|
EXHIBIT 31.2
Providence and Worcester Railroad Company
Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, DANIEL T. NORECK certify that:
1. I have reviewed this quarterly report on Form 10-Q of Providence and Worcester Railroad Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
DATE: November 18, 2011
|
By: /s/ Daniel T. Noreck
|
|
|
_____________________________________
|
|
|
Daniel T. Noreck
|
|
|
Treasurer and Chief Financial Officer
|
EXHIBIT 32
PROVIDENCE AND WORCESTER RAILROAD COMPANY
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Providence and Worcester Railroad Company (the Company) on form 10-Q for the quarterly period ended September 30, 2011, 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
|
|
|
November 18, 2011
|
EXHIBIT 32.1
PROVIDENCE AND WORCESTER RAILROAD COMPANY
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Providence and Worcester Railroad Company (the Company) on form 10-Q for the quarterly period ended September 30, 2011, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Daniel T. Noreck, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and
|
|
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ Daniel T. Noreck
|
|
|
_____________________________________
|
|
|
Daniel T. Noreck
|
|
|
Treasurer and Chief Financial Officer
|
|
|
November 18, 2011
|
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