Providence & Worcester Railroad (PWX) 10-Q 2015 Q1 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

¨ 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

(Exact name of registrant as specified in its charter)

Rhode Island	05-0344399
(State or other jurisdiction of incorporation or organization)	I.R.S. Employer Identification No.
75 Hammond Street, Worcester, Massachusetts	01610
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (508) 755-4000

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 files).    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 “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (do not check if a smaller reporting company)	Smaller reporting company	x

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 May 5, 2015, the registrant has 4,860,861 shares of common stock, par value $.50 per share, outstanding.

PROVIDENCE AND WORCESTER RAILROAD COMPANY

Index to Quarterly Report on Form 10-Q

Part I – Financial Information
Item 1 – Financial Statements (Unaudited):
Condensed Balance Sheets – March 31, 2015 (Unaudited) and December 31, 2014	3
Condensed Statements of Operations – Three Months Ended March 31, 2015 and 2014 (Unaudited)	4
Condensed Statements of Cash Flows – Three Months Ended March 31, 2015 and 2014 (Unaudited)	5
Notes to Condensed Financial Statements (Unaudited)	6-9
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	10-13
Item 4 – Controls and Procedures	13
Part II – Other Information:
Item 5 Other Information	14
Item 6 Exhibits	14
Signatures	15

2

Part I – Financial Information

Item 1. Financial Statements

PROVIDENCE AND WORCESTER RAILROAD COMPANY

CONDENSED BALANCE SHEETS (Unaudited)

(Dollars in Thousands Except Per Share Amounts)

	MARCH 31, 2015		DECEMBER 31, 2014
ASSETS
Current Assets:
Cash and cash equivalents	$	6,687	$	6,414
Accounts receivable, net of allowance for doubtful accounts of $160 in 2015 and 2014, respectively		4,761		5,007
Materials and supplies		1,057		1,067
Prepaid expenses and other current assets		294		634
Deferred income taxes		399		399
Total Current Assets		13,198		13,521
Property and Equipment, net		85,530		85,955
Land Held for Development		12,457		12,457
Total Assets	$	111,185	$	111,933
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	4,062	$	3,872
Current portion of deferred grant and other revenue		424		230
Accrued expenses		2,165		1,810
Total Current Liabilities		6,651		5,912
Deferred Income Taxes		13,176		13,623
Deferred Grant and Other Income		12,877		12,986
Shareholders’ Equity:
Preferred stock, 10% noncumulative, $50 par value; authorized, issued and outstanding 640 shares in 2015 and 2014		32		32
Common stock, $.50 par value; authorized 15,000,000 shares; issued and outstanding 4,860,635 shares in 2015 and 4,859,871 shares in 2014		2,430		2,430
Additional paid-in capital		38,001		37,891
Retained earnings		38,018		39,059
Total Shareholders’ Equity		78,481		79,412
Total Liabilities and Shareholders’ Equity	$	111,185	$	111,933

The accompanying notes are an integral part of the condensed financial statements.

3

PROVIDENCE AND WORCESTER RAILROAD COMPANY

CONDENSED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in Thousands Except Per Share Amounts)

	Three Months Ended March 31,
	2015			2014
Operating Revenue	$	7,261		$	6,514
Operating Expenses:
Maintenance of way and structures		1,533			1,352
Maintenance of equipment		762			912
Transportation		2,792			2,471
General and administrative		1,382			1,238
Depreciation		876			900
Taxes, other than income taxes		733			657
Car hire, net		383			226
Employee retirement plans		57			57
Track usage fees		40			29
Total Operating Expenses		8,558			7,842
Loss from Operations		(1,297	)		(1,328	)
Other income, net		7			10
Loss from operations prior to income taxes		(1,290	)		(1,318	)
Provision from Income Tax (Benefit)		(447	)		(641	)
Net Loss		(843	)		(677	)
Preferred Stock Dividends		3			3
Net Loss Available to Common Shareholders	$	(846	)	$	(680	)
Basic and Diluted Loss Per Common Share	$	(.17	)	$	(.14	)
Weighted-Average Common Shares Outstanding
For basic		4,859,879			4,850,938
For diluted		4,859,879			4,850,938

The accompanying notes are an integral part of the condensed financial statements.

4

PROVIDENCE AND WORCESTER RAILROAD COMPANY

CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in Thousands)

	Three Months Ended March 31,
	2015			2014
Cash Flows from Operating Activities:
Net loss	$	(843	)	$	(677	)
Adjustments to reconcile net loss to net cash flows provided by operating activities:
Depreciation		876			900
Amortization of deferred grant income		(235	)		(140	)
Deferred grant and other income		288			195
Deferred income taxes benefit		(447	)		(641	)
Share-based compensation		98			114
Increase (decrease) in cash from:
Accounts receivable		278			1,325
Materials and supplies		10			39
Prepaid expenses and other		340			249
Accounts payable and accrued expenses		444			(689	)
Net cash flows provided by operating activities		809			675
Cash flows from Investing Activities:
Purchase of property and equipment		(350	)		(275	)
Net cash flows used in investing activities		(350	)		(275	)
Cash Flows from Financing Activities:
Dividends paid		(198	)		(197	)
Issuance of common shares for stock options exercised and employee stock purchases		12			31
Net cash flows used in financing activities		(186	)		(166	)
Increase in Cash and Cash Equivalents		273			234
Cash and Cash Equivalents, Beginning of Period		6,414			2,614
Cash and Cash Equivalents, End of Period	$	6,687		$	2,848
Supplemental Disclosures:
Property and equipment included in accounts payable	$	217		$	61
Cash paid for income taxes	$	385		$	55

The accompanying notes are an integral part of the condensed financial statements.

5

PROVIDENCE AND WORCESTER RAILROAD COMPANY

NOTES TO FINANCIAL STATEMENTS (Unaudited)

THREE MONTHS ENDED MARCH 31, 2015 AND 2014

(Dollars in Thousands Except Per Share Amounts)

1. In the opinion of management, the accompanying interim condensed financial statements of the Providence and Worcester Railroad Company (the “Company”) contain all adjustments (consisting solely of normal and recurring adjustments) necessary to present fairly the financial position as of March 31, 2015 and the results of operations and cash flows for the three months ended March 31, 2015 and 2014 in accordance with accounting principles generally accepted in the United States. The accompanying condensed balance sheet as of December 31, 2014, has been derived from audited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. 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, 2014 filed with the Securities and Exchange Commission. Results for interim periods may not be necessarily indicative of the results to be expected for the full year.

2. Recent Accounting Pronouncements:

In May 2014, the FASB issued Accounting Standards Update No. 2014-09,Revenue from Contracts with Customers(“ASU 2014-09”), which supersedes previous revenue recognition guidance. The new standard requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. ASU 2014-09 anticipates companies using more judgment and estimates than under the current guidance. ASU 2014-09 permits the use of retrospective application to period presented or a cumulative effect transition adjustment. The Company is currently evaluating the impact of adopting this new guidance on its financial statements and related disclosures.

3. Changes in Shareholders’ Equity:

	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings			Total Shareholders’ Equity
Balance December 31, 2014	$	32	$	2,430	$	37,891	$	39,059		$	79,412
Issuance of 764 common shares for employee stock purchases, stock options exercised and employee stock awards						14					14
Share-based compensation, options granted						96					96
Dividends
Preferred stock, $5.00 per share								(3	)		(3	)
Common stock, $.04 per share								(195	)		(195	)
Net loss for the period								(843	)		(843	)
Balance March 31, 2015	$	32	$	2,430	$	38,001	$	38,018		$	78,481

6

PROVIDENCE AND WORCESTER RAILROAD COMPANY

NOTES TO FINANCIAL STATEMENTS (Unaudited) — (Continued)

(Dollars in Thousands Except Per Share Amounts)

4. Debt

The Company has a revolving line of credit facility in the amount of $5,000 from a commercial bank expiring on June 25, 2015. 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 as to the incurrence of additional indebtedness, as well as the sale or encumbrance of its assets. At March 31, 2015 and December 31, 2014, no amounts were outstanding.

5. Loss per Common Share:

Loss per common share is computed using the weighted average number of common shares outstanding during each quarter. Diluted income (loss) per common share reflects the effect of the Company’s outstanding convertible preferred stock (using the if-converted method) and options (using the treasury stock method), except where such items would be anti-dilutive.

A reconciliation of weighted average shares used for the basic computation and that used for the diluted computation is as follows:

	2015								2014
	Net Loss			Shares		Per Share Amount			Net Loss			Shares		Per Share Amount
Basic Earnings per Share
Net Loss available to Common Shareholders	$	(846	)						$	(680	)
Basic loss per share	$	(846	)		4,860	$	(.17	)	$	(680	)		4,851	$	(.14	)
Diluted Earnings per Share
Net Loss available to Common Shareholders	$	(846	)						$	(680	)
Effect of Dilutive Securities							—						—
Diluted loss per Share	$	(846	)		4,860	$	(.17	)	$	(680	)		4,851	$	(.14	)

Options to purchase 67,289 and 67,695 shares of common stock were outstanding at March 31, 2015 and 2014, respectively. No outstanding options were included in the computation of diluted loss per common share for 2015 and 2014 as the effect would be antidilutive. Shares of preferred stock convertible into 64,000 shares of common stock were outstanding at March 31, 2015 and 2014. These shares were not included in the computation of diluted (loss) earnings per common share for 2015 and 2014 because of the anti-dilutive effect.

7

PROVIDENCE AND WORCESTER RAILROAD COMPANY

NOTES TO FINANCIAL STATEMENTS (Unaudited) — (Continued)

(Dollars in Thousands Except Per Share Amounts)

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 condensed 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 (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 demanded payment of past costs (identified in the letter as $762 thousand) 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 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. 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 has not yet been completed. 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 (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 its interest 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.

In connection with the EPA claim described above, on December 28, 2002 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. 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 the Site, or that its activities caused contamination at the Site, the Company paid $45 thousand to settle this suit in March 2006.

7. Amtrak Agreement

On April 4, 2012, the Company and National Railroad Passenger Corporation (“Amtrak”) entered into the 2012 Settlement and Amendment Agreement (the “2012 Agreement”) which settles certain disputes between the parties and amends, in part, both an Agreement dated January 3, 1978 (the “1978 Agreement”) and an Agreement dated July 9, 1979 by and between Amtrak and the Company. Under the 1978 Agreement, Amtrak obtained the right to remove certain Company trackage subject to the requirement of providing replacement facilities.

8

PROVIDENCE AND WORCESTER RAILROAD COMPANY

NOTES TO FINANCIAL STATEMENTS (Unaudited) — (Continued)

(Dollars in Thousands Except Per Share Amounts)

Pursuant to the Agreement, the Company received a credit for mileage traveled along the Northeast Corridor. The Company recognizes the expense offset relative to Track Usage Fees as the expenses are incurred. As such, the Company did not record any related assets or liabilities relative to the mileage credit. The Company has recorded the following offsets to Track Usage expense and has the following track mileage credit remaining:

	Three Months Ended March 31,
	2015		2014
Mileage credit available, beginning	$	418	$	1,219
Operating rights offset		130		104
Mileage credit remaining, ending	$	288	$	1,115

8. Subsequent Events:

On April 29, 2015, the Company declared a dividend of $.04 per share on its outstanding Common Stock payable May 27, 2015 to shareholders of record on May 13, 2015.

During May 2015, the Company entered into a loan agreement with its commercial bank for $5 million. The loan requires payment of interest only for twelve months whereupon it converts to a ten year term loan with payments based upon a twenty year amortization. The loan will bear interest at 4.11% per annum for the life of the loan. The loan will be unsecured but will subject the Company to certain financial and non-financial covenants, including the maintenance of certain tangible net worth levels. The Company and its commercial bank extended the revolving credit line through June 2017. Borrowings under this line of credit are unsecured, due on demand and bear interest at one and one half percent over the thirty, sixty or ninety day London Interbank Offered Rate (“LIBOR”). The Company pays no commitment fee on this line and has no compensating balance requirements.

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. The following discussion should be read in conjunction with the Condensed Financial Statements and applicable notes to the Condensed Financial Statements, Item 1.

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 onForm 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, 2014 and during the first three months of 2015.

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 relationships with Class I railroads and other carriers;

• legislative and regulatory developments by the Surface Transportation Board, Railroad Retirement Board or the Federal Railroad Administration;

• our ability to comply with financial and non-financial covenants contained in the documents governing our indebtedness;

• 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; and

10

• our dependence upon our key customers, executives and other key employees and our ability to renegotiate our union contracts.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes previous revenue recognition guidance. The new standard requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. ASU 2014-09 anticipates companies using more judgment and estimates than under the current guidance. ASU 2014-09 permits the use of retrospective application to period presented or a cumulative effect transition adjustment. The Company is currently evaluating the impact of adopting this new guidance on its financial statements and related disclosures.

Results of Operations

The following table sets forth the Company’s operating revenues, exclusive of rental revenues of $170 and $160 for the first three months in 2015 and 2014, respectively, by category in dollars and as a percentage of operating revenues:

	Three Months Ended March 31,
	2015				2014
	(In thousands, except percentages)
Freight Revenues:
Conventional carloads	$	6,485	91.4	%	$	5,549	87.3	%
Containers		302	4.3			355	5.6
Other freight related		178	2.5			169	2.7
Other operating revenues		126	1.8			281	4.4
Total	$	7,091	100.0	%	$	6,354	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, exclusive of rental revenues:

	Three Months Ended March 31,
	2015				2014
	(In thousands, except percentages)
Salaries, wages, payroll taxes and employee benefits	$	4,084	57.6	%	$	3,968	62.4	%
Casualties and insurance		529	7.5			436	6.9
Depreciation		876	12.4			900	14.2
Diesel fuel		742	10.5			598	9.4
Car hire, net		383	5.4			226	3.6
Purchased services, including legal and professional fees		541	7.6			533	8.4
Repair and maintenance of equipment		204	2.9			433	6.8
Track and signal materials		228	3.2			359	5.6
Track usage fees		170	2.4			133	2.1
Other materials and supplies		386	5.4			303	4.8
Other		802	11.3			612	9.6
Total		8,945	126.2			8,501	133.8
Less capitalized and recovered costs, including amounts relating to the Amtrak Agreement		387	5.5			659	10.4
Total	$	8,558	120.7	%	$	7,842	123.4	%

11

Operating Revenues:

Operating revenues increased $740 thousand, or 11.7%, to $7.09 million in the first quarter of 2015 from $6.35 million in the first quarter of 2014.

The increase in conventional freight revenues is attributable to a 24.4% increase in traffic volume, offset by a 6.1% decrease in the average revenue received per conventional carload. The Company’s conventional carloads increased by 1,382 to 7,036 in the first quarter of 2015 from 5,654 in 2014.

Shipments of most commodities increased in the first quarter of 2015, as compared to the first quarter of 2014, especially in the Company’s ethanol, plastic, and automobile business. The decrease in the average revenue received per conventional carload is due to a shift of the mix of commodities, the origin of the shipments, decrease in fuel surcharge revenue, as well as some rate changes.

The decrease in container freight revenues is the result of a 13.3% decrease in traffic volume and a 0.3% decrease in the average revenue received per container. Container traffic volume decreased by 664 containers to 4,311 in the first quarter of 2015 from 4,975 in 2014.

Other freight-related revenues remains even with the same period of prior year. The decrease in other operating revenues mainly reflects a decrease in billings for flagging services performed by the Company.

Operating Expenses:

Operating expenses for the first quarter of 2015 increased by $720 thousand, or 9.2%, to $8.56 million from $7.84 million in the first quarter of 2014. The increase is attributable to increases in payroll related expense ($116 thousand), casualty expense ($93 thousand), diesel fuel ($144 thousand), car hire expense ($157 thousand), other materials and supplies ($83 thousand), and other expenses ($190 thousand). These increases were offset in part by decreases in repairs and maintenance expenses ($229 thousand) through billings for services performed by the Company’s Mechanical department, as well as decreases in purchased services and track and signal material purchases ($131 thousand) related to reimbursable projects performed by the Company’s Maintenance of Way department for various state agencies. The decrease in recovered costs relates to these same reimbursable projects.

Income Tax Benefit:

The income tax benefit for the first quarter of 2015 and 2014 is approximately (35%), absent any changes to the valuation allowance against the Company’s deferred tax assets, and (49%) of the pre-tax loss, respectively. The income tax rate for 2015 represents the effective tax benefit which the Company expects. The income tax rate for 2014 represents the effective tax benefit after giving effect for a decrease in the Company’s valuation allowance against its deferred tax assets.

Liquidity and Capital Resources

During the first quarter of 2014, the Company generated $809 thousand of cash from operating activities, used $350 thousand in investing activities and $186 thousand in financing activities.

On April 30, 2015, the Company declared a quarterly dividend of approximately $195 thousand ($.04 per common share) to be paid on May 28, 2015. The declaration of future dividends and the amount thereof will depend on the Company’s future earnings, financial factors and other events.

During May 2015, the Company entered into a loan agreement with its commercial bank for $5 million. The loan requires payment of interest only for twelve months whereupon it converts to a ten year term

12

loan with payments based upon a twenty year amortization. The loan bears interest at 4.11% per annum for the life of the loan. The loan is unsecured but subjects the Company to certain financial and non-financial covenants, including the maintenance of certain tangible net worth levels. The majority of the proceeds from the loan will be utilized to rehabilitate four and replace one main line bridges. Once the rehabilitation and replacement are complete, the Company will have the ability to haul freight with a lading of 286,000 pounds on its main line from Worcester, MA to Davisville/Providence RI.

At the same time, the Company and its commercial bank extended the Company’s $5 million revolving credit line to June 25, 2017. Borrowings under the line of credit are unsecured, due on demand and bear interest at one and one half percent over the thirty, sixty or ninety day London Interbank Offered Rate (“LIBOR”). The Company pays no commitment fee on the line and has no compensating balance requirements. At March 31, 2015, no amounts were outstanding.

Seasonality

Historically, the Company’s operating revenues are lowest for the first quarter due to the reduction in construction aggregate shipments during a portion of this period and to winter weather conditions.

Item 4. Controls and Procedures

Our management with the participation of our 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 March 31, 2015. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2015, our disclosure controls and procedures were 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 affect, the Company’s internal control over financial reporting. The Company continues to enhance its internal controls over financial reporting, primarily by evaluating and enhancing process and control documentation. Management discusses with and discloses these matters to the Audit Committee of the Board of Directors and the Company’s auditors.

13

PART II – Other Information

Item 5. Other Information

(a) Reports on Form 8-K were appropriately filed during the quarter ended March 31, 2015.

Item 6. Exhibits

  4.1 Notice of long-term debt of the Company that is less than 10% of the assets of the Company.

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 the Sarbanes-Oxley Act of 2002.

101 The following financial information from the Company’s Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2015, filed with the Securities and Exchange Commission on May 13, 2015, formatted in eXtensible Business Reporting Language:

(i) Balance Sheets as of March 31, 2015 and December 31, 2014;

(ii) Statements of Operations for the Three Months ended March 31, 2015 and 2014;

(iii) Statements of Cash Flows for the Three Months ended March 31, 2015 and 2014; and

(iv) Notes to Financial Statements.

14

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 Principal Financial Officer

DATED: May 13, 2015

15