Exhibit 99.4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
($ In Millions Except Per Share Data)
Quarters ended
March 31,
-------------------
1997 1996
---- ----
Revenues $906 $889
---- ----
Operating expenses
Way and structures 124 140
Equipment 202 219
Transportation 354 362
General and administrative 110 99
---- ----
Total operating expenses 790 820
---- ----
Income from operations 116 69
Interest expense (45) (47)
Other income, net 27 28
---- ----
Income before income taxes 98 50
Income taxes 37 19
---- ----
Net income $ 61 $ 31
==== ====
Net income per common share
Primary $ .74 $ .36
Fully diluted .70 .35
Dividends per common share $.475 $.425
Weighted average number of shares used in
computing earnings per share (thousands)
Primary 80,025 78,002
Fully diluted 86,842 87,759
Ratio of earnings to fixed charges 2.52x 1.75x
See accompanying notes.
CONRAIL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
($ In Millions) March 31, December 31,
1997 1996
--------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 32 $ 30
Accounts receivable 662 630
Deferred tax assets 293 293
Material and supplies 141 139
Other current assets 34 25
------ ------
Total current assets 1,162 1,117
Property and equipment, net 6,599 6,590
Other assets 709 695
------ ------
Total assets $8,470 $8,402
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ 65 $ 99
Current maturities of long-term debt 82 130
Accounts payable 148 135
Wages and employee benefits 167 143
Casualty reserves 140 141
Accrued and other current liabilities 476 444
------ ------
Total current liabilities 1,078 1,092
Long-term debt 1,889 1,876
Casualty reserves 195 190
Deferred income taxes 1,520 1,478
Special income tax obligation 330 346
Other liabilities 306 313
------ ------
Total liabilities 5,318 5,295
------ ------
Stockholders' equity
Series A ESOP convertible junior
preferred stock 183 211
Unearned ESOP compensation (221) (222)
Common stock 89 88
Additional paid-in capital 2,430 2,404
Employee benefits trust (357) (384)
Retained earnings 1,376 1,357
------ ------
3,500 3,454
Treasury stock (348) (347)
------ ------
Total stockholders' equity 3,152 3,107
------ ------
Total liabilities and
stockholders' equity $8,470 $8,402
====== ======
See accompanying notes.
CONRAIL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ In Millions)
Quarters ended
March 31,
------------------
1997 1996
----- ----
Cash flows from operating activities $ 170 $ 121
----- -----
Cash flows from investing activities
Property and equipment acquisitions (41) (18)
Other (4) (16)
----- -----
Net cash used in investing activities (45) (34)
----- -----
Cash flows from financing activities
Net proceeds from (repayment of)
short-term borrowings (34) 45
Payment of long-term debt (63) (97)
Repurchase of common stock - (41)
Dividends paid on common stock (40) (35)
Dividends paid on preferred stock (3) (10)
Other 17 5
----- -----
Net cash used in financing activities (123) (133)
----- -----
Increase (decrease) in cash and cash equivalents 2 (46)
Cash and cash equivalents
Beginning of period 30 73
----- -----
End of period $ 32 $ 27
===== =====
See accompanying notes.
CONRAIL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The unaudited financial statements contained herein present the
consolidated financial position of Conrail Inc. (the "Company") as of March
31, 1997 and December 31, 1996, and the consolidated results of operations
and cash flows for the three-month periods ended March 31, 1997 and 1996.
In the opinion of management, these financial statements include all
adjustments, consisting of normal recurring adjustments, necessary to
present fairly the results for the interim periods included.
The rules and regulations of the Securities and Exchange Commission permit
certain information and footnote disclosures, ordinarily required by
generally accepted accounting principles, to be condensed or omitted from
interim financial reports. Accordingly, the financial statements included
herein should be read in conjunction with the audited financial statements
and notes for the year ended December 31, 1996, presented in the Company's
Annual Report on Form 10-K.
2. In January 1997, Consolidated Rail Corporation ("CRC") assumed $31
million of Equipment Trust Certificates, at an interest rate of 8.31%, due
2012, to finance the lease buyout of 20 locomotives from Locomotive
Management Services, a general partnership of which CRC holds a fifty
percent interest.
3. Effective April 1, 1997, the Company's Board of Directors authorized the
vesting of all stock options and performance shares outstanding in
connection with the proposed acquisition of the Company by CSX Corporation
and Norfolk Southern Corporation. The vesting of the performance shares
will result in an $18 million charge to operating expenses in April 1997,
while the vesting of stock options will not have an income statement
effect.
4. During February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
(SFAS 128), which establishes new standards for computing and presenting
earnings per share ("EPS"). SFAS 128 replaces the presentation of primary
EPS with a presentation of basic EPS. It also requires dual presentation of
basic and diluted EPS on the face of the income statement for all entities
with a complex capital structure. This Statement is effective for financial
statements issued for periods ending after December 15, 1997, with earlier
application not permitted. The EPS included in the Company's financial
statements is computed in accordance with APB Opinion No. 15, "Earnings per
Share". However, had the Company adopted the provisions of SFAS 128 in the
first quarter of 1997, basic EPS and diluted EPS would be approximately the
same as the current computations of primary EPS and fully diluted EPS,
respectively, included in the Company's financial statements.
5. Information regarding contingent liabilities and litigation was included
in Note 13 to Consolidated Financial Statements and Part I, Item 3 - Legal
Proceedings in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996. There have been no material developments with respect to
these matters during the first three months of 1997, except as disclosed in
the Annual Report on Form 10-K or elsewhere herein.
REPORT OF INDEPENDENT ACCOUNTANTS
The Stockholders and Board of Directors of
Conrail Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Conrail Inc. and its subsidiaries (the "Company") as of March 31, 1997 and
the related condensed consolidated statements of income and cash flows for
the three months ended March 31, 1997 and March 31, 1996. This financial
information is the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying interim financial information for it to
be in conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1996, and the
related consolidated statements of income, of stockholders' equity and of
cash flows for the year then ended (not presented herein), and in our report
dated January 21, 1997, except as to Note 2 to the consolidated financial
statements, which is as of March 7, 1997, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 1996, is fairly stated in all material respects in
relation to the consolidated balance sheet from which it has been derived.
/s/ PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, PA 19103
April 16, 1997