Exhibit 99.5
NSR UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial information set forth below gives effect
to the Conrail Spin Off Transactions and the assumptions described in the
accompanying notes. This unaudited pro forma financial information is not
necessarily indicative of the results of future operations and should be read in
conjunction with the discussion under the heading "Management's Narrative
Analysis of the Results of Operations" in NSR's Annual Report on Form 10-K for
the year ended December 31, 2003, and in NSR's Quarterly Report on Form 10-Q for
the six months ended June 30, 2004 which are incorporated by reference into the
prospectus and consent solicitation statement, and the "Capitalization" and the
selected financial data and related notes included in the prospectus and
consent solicitation.
The unaudited pro forma consolidated balance sheet presented below adjusts
the historical consolidated balance sheet of NSR, giving effect to the merger of
PRR with and into NSR as contemplated by the Conrail Spin Off Transactions as if
such merger had occurred on June 30, 2004. The unaudited pro forma consolidated
income statements presented below adjust the historical consolidated income
statement of NSR as if the merger of PRR with and into NSR as contemplated by
the Conrail Spin Off Transactions had occurred on January 1, 2003. NSR has
adjusted the historical consolidated financial information to give effect to pro
forma events that are (1) directly attributable to the merger, (2) factually
supportable, and (3) with respect to the income statement, expected to have a
continuing impact on the combined results. You should read this information in
conjunction with the:
-- Accompanying notes to the Unaudited Pro Forma Financial Information;
and
-- Separate historical consolidated financial statements of NSR as of
and for the six months ended June 30, 2004 and for the year ended
December 31, 2003 incorporated by reference into the prospectus and
consent solicitation statement.
The unaudited pro forma financial information is presented for
informational purposes only. The unaudited pro forma financial information is
not necessarily indicative of what the financial position or results of
operations actually would have been had the merger of PRR with and into NSR as
contemplated by the Conrail Spin Off Transactions been completed at the dates
indicated. In addition, the unaudited pro forma financial information does not
purport to project the future financial position or operating results of the
combined company.
The following unaudited pro forma financial information has been prepared
assuming that the fair value of the direct ownership interest in PRR being
obtained by NSC (and ultimately NSR) equals the carrying amount of the indirect
ownership interests in NYC being forgone by NSC as a result of the Conrail Spin
Off Transactions. NSC and CSX are progressing toward ascertaining the fair value
effects of the Conrail Spin Off Transactions, which will be reflected in the
accounting for the Conrail Spin Off Transactions once consummated and that
analysis has been completed. Accordingly, the amounts ultimately reflected in
NSR's financial statements could differ materially from the amounts shown in the
following unaudited pro forma information. Based on the preliminary results of
an appraisal of the PRR assets, the ultimate fair value recorded upon
consummation of the Conrail Spin Off Transactions will likely exceed the amounts
shown in the following unaudited pro forma financial information.
We have excluded pro forma per share information from the tables below
because all of the outstanding shares of NSR are held by NSC and therefore, such
per share information would not be meaningful.
NSR UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<Table>
<Caption>
AS OF JUNE 30, 2004
-----------------------------------------
ACTUAL ADJUSTMENTS PRO FORMA
------- ----------- ---------
($ IN MILLIONS)
ASSETS
Current assets:
Cash and cash equivalents............................... $ 159 $ 3(a) $ 162
Accounts receivable--net................................ 131 -- 131
Materials and supplies.................................. 99 -- 99
Deferred income taxes................................... 175 -- 175
Other current assets.................................... 149 24(b) 173
------- ------ -------
Total current assets................................. 713 27 740
Investments............................................... 879 237(c) 1,116
Properties less accumulated depreciation.................. 11,489 7,822(d) 19,311
Other assets.............................................. 711 -- 711
------- ------ -------
Total assets......................................... $13,792 $8,086 $21,878
======= ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 862 $ -- $ 862
Income and other taxes.................................. 182 11(e) 193
Due to NSC--net......................................... 863 -- 863
Due to Conrail.......................................... 80 (31)(f) 49
Other current liabilities............................... 124 -- 124
Current maturities of long-term debt.................... 102 35(g) 137
------- ------ -------
Total current liabilities............................ 2,213 15 2,228
Long-term debt............................................ 750 767(g),(h) 1,517
Other liabilities......................................... 1,037 46(i) 1,083
Due to Conrail............................................ 797 (797)(f) --
Deferred income taxes..................................... 4,516 2,660(j) 7,176
------- ------ -------
Total liabilities.................................... 9,313 2,691 12,004
Stockholders' equity:
Common stock............................................ 167 -- 167
Additional paid-in capital.............................. 721 5,395(k) 6,116
Accumulated other comprehensive income.................. 385 -- 385
Retained income......................................... 3,206 -- 3,206
------- ------ -------
Total stockholders' equity........................... 4,479 5,395 9,874
------- ------ -------
Total liabilities and stockholders' equity........... $13,792 $8,086 $21,878
======= ====== =======
</Table>
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The following adjustments record various assets and liabilities of PRR that
will be received by NSR as a result of the Conrail Spin Off Transactions and the
effects of the exchange offer and consent solicitation. The amounts related to
the assets and liabilities of PRR are estimated based on the current carrying
amounts of NSC's investment in Conrail. The amounts recorded upon consummation
of the Conrail Spin Off Transactions will reflect the fair value of the assets
and liabilities received, and as a result, could differ from these estimates.
(a) To record the cash and cash equivalents of PRR received by NSR.
(b) To record the other current assets of PRR received by NSR, which are
primarily a receivable from CRC for advances made by PRR.
(c) To record investments of PRR received by NSR, principally a partial
ownership interest in an equipment leasing company.
(d) To record the properties of PRR received by NSR. This amount is estimated
based on NSC's basis of its investment in Conrail, but will ultimately be
recorded based on: (1) NSC's basis for the 58% indirect interest currently
held by NSC and (2) the fair value for
the 42% interest being received through the Conrail Spin Off Transactions.
Accordingly, the amount recorded upon consummation of the Conrail Spin Off
Transactions could be different. Based on the preliminary results of an
appraisal of the PRR assets, the ultimate fair value recorded upon
consummation of the Conrail Spin Off Transactions will likely exceed this
amount.
(e) To record miscellaneous tax liabilities, primarily franchise taxes, assumed
by NSR.
(f) To record the extinguishment of amounts due from NSR to PRR as a result of
the Conrail Spin Off Transactions.
(g) To record $35 million of current maturities and $151 million of long-term
debt for liabilities incurred through the Conrail Spin Off Transactions
related to the restructuring of Conrail's secured debt.
(h) To record the issuance of the New NSR Notes in exchange for existing Conrail
Debentures as contemplated by the Conrail Spin Off Transactions assuming all
holders of Conrail Debentures validly tender, and do not withdraw, their
Conrail Debentures. The amount of this adjustment, $616 million, reflects
the estimated fair value of the $464 million aggregate principal amount of
the New NSR Notes.
(i) To record other liabilities of PRR, principally environmental remediation
liabilities, assumed by NSR.
(j) To record the estimated deferred tax effects of the Conrail Spin Off
Transactions and the deferred taxes assumed by NSR as a result of the
Conrail Spin Off Transactions.
(k) To record the net impact of the Conrail Spin Off Transactions as a capital
contribution from NSC.
Certain of the above adjustments would be different if less than all holders
of Conrail Debentures validly tender, and do not withdraw, their Conrail
Debentures. If 51% of holders validly tender, and do not withdraw, their Conrail
Debentures, the amount for adjustment (h) would be reduced to $314 million, the
amount for adjustment (j) would be increased to $2,690 million, and the amount
for adjustment (k) would be increased to $5,667 million. If 75% of holders
validly tender, and do not withdraw, their Conrail Debentures, the amount for
adjustment (h) would be reduced to $462 million, the amount for adjustment
(j) would be increased to $2,675 million, and the amount for adjustment
(k) would be increased to $5,534 million.
NSR UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
<Table>
<Caption>
SIX MONTHS ENDED JUNE 30, 2004 YEAR ENDED DECEMBER 31, 2003
------------------------------------ ------------------------------------
ACTUAL ADJUSTMENTS PRO FORMA ACTUAL ADJUSTMENTS PRO FORMA
---------- ----------- --------- ---------- ----------- ---------
($ IN MILLIONS) ($ IN MILLIONS)
Railway operating revenues... $3,405 $ -- $3,405 $6,290 $ -- $6,290
Railway operating expenses:
Compensation and
benefits................ 840 -- 840 1,636 -- 1,636
Materials, services and
rents................... 944 6(a) 950 1,970 13(a) 1,983
Conrail rents and
services................ 236 (177)(b) 59 477 (348)(b) 129
Depreciation............... 253 119(c) 372 498 245(c) 743
Diesel fuel................ 213 -- 213 380 -- 380
Casualties and other
claims.................. 78 -- 78 183 -- 183
Other...................... 163 -- 163 290 -- 290
------ ---- ------ ------ ----- ------
Total railway operating
expenses.............. 2,727 (52) 2,675 5,434 (90) 5,344
------ ---- ------ ------ ----- ------
Income from railway
operations............ 678 52 730 856 90 946
Other income
(expenses)--net............ (159) -- (159) (220) -- (220)
Interest expense on debt..... (14) (17)(d) (31) (24) (38)(d) (62)
------ ---- ------ ------ ----- ------
Income before income taxes
and accounting changes..... 505 35 540 612 52 664
Provision for income taxes... 182 11(e) 193 229 17(e) 246
------ ---- ------ ------ ----- ------
Income before accounting
changes............... $ 323 $ 24 $ 347 $ 383 $ 35 $ 418
====== ==== ====== ====== ===== ======
</Table>
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The following adjustments record the various income and expense effects of the
Conrail Spin Off Transactions. These amounts are estimated based on the current
carrying amounts of NSC's investment in Conrail except for the interest expense
on debt which is at estimated fair value. The amounts recorded upon consummation
of the Conrail Spin Off Transactions will reflect the fair value of the assets
and liabilities received, and as a result, could differ from these estimates.
(a) To record expenses for various operating leases entered into as a result of
the Conrail Spin Off Transactions, and to record the equity earnings from a
partial ownership interest in an equipment leasing company received by NSR
as a result of the Conrail Spin Off Transactions.
(b) To eliminate expenses related to the operating and lease agreements between
NSR and PRR which will be extinguished as a result of the Conrail Spin Off
Transactions.
(c) To record additional depreciation expense related to the PRR assets received
by NSR as a result of the Conrail Spin Off Transactions. This amount is
estimated based on the current carrying amount and related depreciation of
NSC's investment in Conrail. The actual amount will reflect the fair value
of the related assets upon consummation of the Conrail Spin Off
Transactions. Based on the preliminary results of an appraisal of the PRR
assets, the ultimate amount for depreciation upon consummation of the
Conrail Spin Off Transactions will likely exceed this amount.
(d) To record additional interest expense related to liabilities assumed by NSR
and the debt exchange contemplated by the Conrail Spin Off Transactions,
assuming all holders of Conrail Debentures validly tender, and do not
withdraw, their Conrail Debentures. This amount is based on the estimated
fair value of these liabilities and debt. The actual amount will reflect the
fair value of these liabilities and debt upon consummation of the Conrail
Spin Off Transactions.
(e) To record the tax effects of the above adjustments at NSR's statutory rate
of 39.3% (including 20% of the equity earnings included in adjustment (a)
above).
Certain of the above adjustments would be different if less than all holders of
Conrail Debentures validly tender, and do not withdraw, their Conrail Debentures
in this exchange offer and consent solicitation. If 51% of holders validly
tender, and do not withdraw, their Conrail Debentures in this exchange offer and
consent solicitation, the amount for adjustment (d) would be reduced to $9
million for the six months ended June 30, 2004, and to $21 million for the year
ended December 31, 2003, and the amount for adjustment (e) would be increased to
$15 million for the six months ended June 30, 2004, and to $24 million for the
year ended December 31, 2003. If 75% of holders validly tender, and do not
withdraw, their Conrail Debentures in this exchange offer and consent
solicitation, the amount for adjustment (d) would be reduced to $13 million for
the six months ended June 30, 2004, and to $29 million for the year ended
December 31, 2003, and the amount for adjustment (e) would be increased to $13
million for the six months ended June 30, 2004, and to $20 million for the year
ended December 31, 2003.