<PAGE> COVER
<PAGE> COVER
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] 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 1-01324
UNION PACIFIC RAILROAD COMPANY
(Exact name of Registrant as specified in its charter)
UTAH 13-6400825
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1416 DODGE STREET, OMAHA, NEBRASKA
(Address of principal executive offices)
68179
(Zip Code)
(402) 271-5000
(Registrant's telephone number, including area code)
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
_______ ________
As of April 30, 1997, the Registrant had outstanding 54,910,568 shares of
Common Stock, $10 par value, and 4,774,832 shares of Class A Stock, $10 par
value.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS
H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
<PAGE> INDEX
UNION PACIFIC RAILROAD COMPANY
INDEX
PART I. FINANCIAL INFORMATION
Page Number
ITEM 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION -
At March 31, 1997 and December 31, 1996. . . . . . . . . 1
CONDENSED STATEMENT OF CONSOLIDATED INCOME AND
RETAINED EARNINGS - For the Three Months Ended
March 31, 1997 and 1996. . . . . . . . . . . . . . . . . 3
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS - For
the Three Months Ended March 31, 1997 and 1996. . . . . 4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. . . . 5
MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE> 1
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
------------------------------------------------------
(Millions of Dollars)
(Unaudited)
March 31, December 31,
ASSETS 1997 1996
- ------ ---------- -----------
<S> <C> <C>
Current Assets:
Cash and temporary investments . . . . . . . $ 47 $ 85
Accounts receivable - net. . . . . . . . . . 380 230
Due from affiliated companies - net. . . . . 1,110 1,109
Materials and supplies . . . . . . . . . . . 250 214
Other current assets.. . . . . . . . . . . . 210 158
------- -------
Total Current Assets. . . . . . . . . . . 1,997 1,796
------- -------
Investments:
Investments in and advances to
affiliated companies. . . . . . . . . . . 389 379
Other investments. . . . . . . . . . . . . . 132 137
------- -------
Total Investments . . . . . . . . . . . . 521 516
------- -------
Properties:
Road . . . . . . . . . . . . . . . . . . . . 13,608 13,484
Equipment. . . . . . . . . . . . . . . . . . 5,507 5,372
Other. . . . . . . . . . . . . . . . . . . . 55 87
------- -------
Total Properties. . . . . . . . . . . . . 19,170 18,943
Accumulated depreciation and
amortization. . . . . . . . . . . . . . . (4,835) (4,740)
------- -------
Properties - Net. . . . . . . . . . . . . 14,335 14,203
------- -------
Intangible and Other Assets. . . . . . . . . . 109 85
------- -------
Total Assets. . . . . . . . . . . . . . . . $16,962 $16,600
======= =======
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
(Millions of Dollars)
(Unaudited)
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
- ------------------------------------ --------- -----------
<S> <C> <C>
Current Liabilities:
Accounts payable . . . . . . . . . . . . . $ 356 $ 335
Accrued wages and vacation . . . . . . . . 251 250
Income and other taxes payable . . . . . . 236 222
Casualty and other reserves. . . . . . . . 200 206
Debt due within one year . . . . . . . . . 108 71
Interest payable . . . . . . . . . . . . . 44 38
Other current liabilities. . . . . . . . . 247 248
------- -------
Total Current Liabilities . . . . . . . 1,442 1,370
------- -------
Debt Due After One Year. . . . . . . . . . . 1,191 1,230
------- -------
Deferred Income Taxes . . . . . . . . . . . 4,285 4,197
------- -------
Due to UPC - Long-Term . . . . . . . . . . . 3,099 3,034
------- -------
Retiree Benefits Obligation. . . . . . . . . 471 472
------- -------
Other Liabilities (Note 5) . . . . . . . . . 764 672
------- -------
Stockholders' Equity:
Common stock - $10.00 par value;
920,000,000 shares authorized
and 54,910,568 outstanding in
1997 and 1996 . . . . . . . . . . . . . 549 549
Class A stock - $10.00 par value;
8,000,000 shares authorized and
4,774,832 outstanding . . . . . . . . . 48 48
Capital surplus. . . . . . . . . . . . . . 1,885 1,885
Retained earnings. . . . . . . . . . . . . 3,228 3,143
------- -------
Total Stockholders' Equity . . . . . . . 5,710 5,625
------- -------
Total Liabilities and
Stockholders' Equity. . . . . . . . . $16,962 $16,600
======= =======
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED STATEMENT OF CONSOLIDATED INCOME AND RETAINED EARNINGS
For The Three Months Ended March 31, 1997 and 1996
(Millions of Dollars)
(Unaudited)
1997 1996
------- -------
<S> <C> <C>
Operating Revenues . . . . . . . . . . . $1,794 $1,667
------ ------
Operating Expenses:
Salaries, wages and employee
benefits . . . . . . . . . . . . . . 556 571
Equipment and other rents. . . . . . . 215 196
Fuel and utilities (Note 3) . . . . . 182 147
Depreciation and amortization. . . . . 163 153
Materials and supplies . . . . . . . . 99 104
Other costs. . . . . . . . . . . . . . 235 204
------ ------
Total . . . . . . . . . . . . . . . 1,450 1,375
------ ------
Operating Income . . . . . . . . . . . . 344 292
Other Income - Net . . . . . . . . . . . 45 33
Interest Expense (Note 3). . . . . . . . (92) (98)
------ ------
Income Before Income Taxes . . . . . . . 297 227
Income Taxes (Note 4). . . . . . . . . . 107 61
------ ------
Net Income . . . . . . . . . . . . $ 190 $ 166
====== ======
Retained Earnings:
Beginning of period. . . . . . . . . . 3,143 4,171
Net income . . . . . . . . . . . . . . 190 166
Dividends to parent. . . . . . . . . . (105) (96)
------ ------
End of Period . . . . . . . . . . . $3,228 $4,241
====== ======
Ratio of Earnings to Fixed
Charges (Note 7). . . . . . . . . . . 3.3 2.7
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
For the Three Months Ended March 31, 1997 and 1996
(Millions of Dollars)
(Unaudited)
1997 1996
------ ------
<S> <C> <C>
Cash from Operations:
Net Income . . . . . . . . . . . . . . $ 190 $ 166
Non-Cash Charges to Income:
Depreciation and amortization . . . 163 153
Deferred income taxes . . . . . . . 47 2
Other - net . . . . . . . . . . . . 39 74
Changes in Current Assets and
Liabilities. . . . . . . . . . . . . (167) 39
----- -----
Cash from Operations. . . . . . . . 272 434
----- -----
Investing Activities:
Capital Investments. . . . . . . . . . (309) (256)
Other - Net. . . . . . . . . . . . . . 42 (49)
----- -----
Cash Used in Investing Activities . . (267) (305)
----- -----
Financing Activities:
Debt Repaid . . . . . . . . . . . . . (80) (143)
Financings . . . . . . . . . . . . . 78 --
Dividends Paid to Parent . . . . . . . (105) (96)
Advances from Affiliated
Companies - Net. . . . . .. . . . . . 64 116
----- -----
Cash Used in Financing Activities . (43) (123)
----- -----
Net Change in Cash and Temporary
Investments . . . . . . . . . . . $ (38) $ 6
===== =====
</TABLE>
<PAGE> 5
UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
1. RESPONSIBILITIES FOR FINANCIAL STATEMENTS: The condensed consolidated
financial statements of Union Pacific Railroad Company (the Company) are
unaudited and reflect all adjustments (consisting only of normal and
recurring adjustments) that are, in the opinion of management, necessary
for a fair presentation of the financial position and operating results
for the interim periods. The condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements
and notes thereto, and the unaudited pro forma combined financial
statements and notes thereto, both contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996. The results
of operations for the three months ended March 31, 1997 are not
necessarily indicative of the results for the year ending December 31,
1997.
2. ACQUISITIONS AND REORGANIZATION
Missouri Pacific Railroad Company ("MPRR"): On January 1, 1997, MPRR
was merged with and into the Company (the "Merger"), with the Company
continuing as the surviving corporation. Immediately prior to the
Merger, MPRR was a wholly-owned, direct subsidiary of Union Pacific
Corporation (the "Corporation") and the Company was at that time and
currently is a wholly-owned, indirect subsidiary of the Corporation.
As a result of the Merger, all of the outstanding capital shares of
MPRR, which consisted of 920 shares of MPRR Common Stock and 80 shares
of MPRR Class A Stock, were converted into 19,152,560 shares of the
Company's Common Stock and 1,665,440 shares of the Company's Class A
Stock, respectively. In addition, in connection with the Merger, the
38,867,393 shares of the Company's Common Stock outstanding immediately
prior to the Merger were converted into 35,758,008 shares of the
Company's Common Stock and 3,109,392 shares of the Company's Class
A Stock.
The Merger has been accounted for in a manner similar to a pooling-of-
interests combination of entities under common control. As a result of
the Merger, the Company's and MPRR's statements of financial position as
of January 1, 1997 were combined, with an increase in Common Stock,
Class A Stock, capital surplus and retained earnings of $160 million,
$48 million, $811 million and $748 million, respectively.
The Condensed Statement of Consolidated Income and the Condensed Statement
of Consolidated Cash Flows for the three-months ended March 31, 1996
present the Company's results of operations and cash flows for such
period as if the Merger had occurred on January 1, 1996. The Condensed
Statement of Consolidated Financial Position as of December 31, 1996
presents the Company's financial position as of such date as though
the Merger had occurred on December 31, 1996.
Southern Pacific Rail Corporation ("Southern Pacific" or "SP"): In
September 1996, the Corporation consummated the acquisition of Southern
Pacific by acquiring the remaining 75% of Southern Pacific common shares
not previously owned by the Corporation for a combination of cash and
the Corporation's common stock.
<PAGE> 6
The business combination with Southern Pacific has been accounted for as a
purchase by the Corporation; however, SP's results are not currently
included in the Company's results. The rail operations of Southern Pacific
will be combined with the Company's rail operations in 1997 and 1998. The
Company and SP operate as a unified rail system which is hereafter
referred to as the "Railroad."
In connection with the integration of the Company's and Southern Pacific's
rail operations, the Company expects to incur approximately $250 million
in acquisition-related costs for severing or relocating its employees and
disposing of its facilities. Results for the quarter ended March 31, 1997
include $6 million in acquisition-related severance and relocation costs.
The Company anticipates charging the remaining acquisition-related payments
for its employees and facilities to operating expense in 1997 through 1999
as definitive plans are refined and communicated, relocation and other
costs are incurred, and labor negotiations are completed.
The estimated costs for severance, relocation and facility closings are
subject to refinement as more information becomes available and the
Company's management finalizes merger implementation plans. As a result,
the estimated integration costs could change. However, any revision
required is not expected to be material to the Company's financial
position or ongoing results of operations.
3. FINANCIAL INSTRUMENTS:
Risk Management: The Company uses derivative financial instruments in
limited instances for other than trading purposes to manage risk as it
relates to fuel prices and interest rates. Where the Company has fixed
interest rates or fuel prices through the use of swaps, futures or forward
contracts, the Company has mitigated the downside risk of adverse price
and rate movements; however, it has also limited future gains from
favorable movements.
The Company addresses market risk related to these instruments by
selecting instruments whose value fluctuations highly correlate with the
underlying item being hedged. Credit risk related to derivative financial
instruments, which is minimal, is managed by requiring minimum credit
standards for counterparties and monthly settlements. The total risk
associated with the Company's counterparties was $1 million at
March 31, 1997. The Company has not been required to provide, nor has
it received, any significant amount of collateral relating to its hedging
activity.
The fair market values of the Company's derivative financial instrument
positions were determined based upon current fair market values as quoted
by recognized dealers, or developed based on the present value of expected
future cash flows discounted at the applicable zero coupon U.S. treasury
rate and swap spread.
Fuel: Over the past three years, fuel costs approximated 10% of the
Company's total operating expenses. As a result of the significance of
the fuel costs and the historical volatility of fuel prices, the Company,
as a participant in the Railroad's fuel hedging program, periodically uses
swaps, futures and forward contracts to mitigate the impact of fuel price
volatility. The intent of this program is to protect the Company's
operating margins and overall profitability from adverse fuel price
changes.
<PAGE> 7
At March 31, 1997, the Company, as a participant in the
Railroad's fuel hedging program, had hedged 12% of its estimated remaining
1997 fuel consumption at $0.53 per gallon on a Gulf Coast basis and had
outstanding swap agreements covering its fuel purchases of $73 million,
with gross and net asset positions of $1 million. Fuel hedging had no
impact on the Company's first quarter 1997 fuel expense and lowered the
Company's first quarter 1996 fuel costs by $4 million.
Interest Rates: The Company controls its overall risk to fluctuations in
interest rates by managing the proportion of fixed and floating rate debt
instruments within its debt portfolio over a given period. Derivatives are
used in limited circumstances as one of the tools to obtain the targeted
mix. The mix of fixed and floating rate debt is largely managed through
the issuance of targeted amounts of such debt as debt maturities occur or
as incremental borrowings are required. The Company also obtains
additional flexibility in managing interest cost and the interest rate
mix within its debt portfolio by issuing callable fixed rate debt
securities.
At March 31, 1997, the Company had outstanding interest rate swaps on $76
million of notional principal amount of debt (6% of the total debt
portfolio, excluding obligations to the Corporation) with gross and net
liability positions of $6 million. These contracts mature over the next one
to eight years. Interest rate hedging activity increased interest expense
in both the first quarter of 1997 and 1996 by less than $1 million.
4. INCOME TAXES: In the first quarter of 1996, the Company reached a
settlement with the Appeals Office of the Internal Revenue Service for tax
years 1978 through 1982. The settlement resulted in a tax refund of
$20 million.
5. CONTINGENCIES: There are various lawsuits pending against the Company. The
Company is also subject to Federal, state and local environmental laws and
regulations, and is currently participating in the investigation and
remediation of numerous sites. Where the remediation costs can be
reasonably determined, and where such remediation is probable, the Company
has recorded a liability. The Company does not expect that the lawsuits or
environmental costs will have a material adverse effect on its consolidated
financial position or its results of operations.
6. ACCOUNTING PRONOUNCEMENTS: The Financial Accounting Standards Board (FASB)
issued Statement No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," which provides
consistent standards for determining if transfers of financial assets are
sales or secured borrowings and which revises the accounting rules for
liabilities extinguished by an in-substance defeasance. The Company adopted
Statement No. 125 on January 1, 1997 with no impact on the its operating
results or financial condition.
The American Institute of Certified Public Accountants issued Statement of
Position 96-1, "Environmental Remediation Liabilities," effective for 1997,
which clarifies the accounting for environmental remediation liabilities.
Adoption of this Statement of Position had no significant impact on the
Company's operating results or financial condition.
<PAGE> 8
7. RATIO OF EARNINGS TO FIXED CHARGES: The ratio of earnings to fixed charges
has been computed on a total enterprise basis. Earnings represent income
from continuing operations less equity in undistributed earnings of
unconsolidated affiliates, plus income taxes and fixed charges. Fixed
charges represent interest, amortization of debt discount and expense,
and the estimated interest portion of rental charges.
<PAGE> 9
UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 Compared to March 31, 1996
------------------------------------------------------------
On January 1, 1997, Missouri Pacific Railroad Company ("MPRR") was merged with
and into Union Pacific Railroad Company (the "Company"), with the Company
continuing as the surviving corporation (the "Merger"). The Merger has been
accounted for in a manner similar to a pooling-of-interests combination of
entities under common control (see Note 2 to the Condensed Consolidated
Financial Statements). As a result of the Merger, the Company's results of
operations for the three-months ended March 31, 1996 have been combined with
MPRR's results of operations as though the Merger had occurred on January 1,
1996. The following narrative analysis of the Company's results of operations
compares actual financial information for the Company for the three-months
ended March 31, 1997 with financial information for the Company and MPRR on a
combined basis for the three months ended March 31, 1996.
Net income increased $24 million (14%) to $190 million for 1997. Operating
income increased to $344 million in 1997 from $292 million in 1996. Operating
revenues for the Company increased $127 million (8%) to $1.79 billion, the
result of base business growth. Total carloadings grew 5% reflecting increased
agricultural products (1%), automotive (5%), chemicals (3%), energy (12%) and
intermodal (9%) traffic, partially offset by decreased industrial products (7%)
volumes.
Operating expenses increased $75 million compared to 1996 to $1.45 billion.
Fuel and utilities costs increased $35 million, the result of increased volumes
and a 21% increase in fuel prices. Equipment and other rents increased $19
million and other costs advanced $31 million due to increased volumes.
Salaries, wages and employee benefits decreased $15 million due primarily to
workforce consolidation and improved crew management. Depreciation expense
increased $10 million because of continued capital spending programs for track
and roadway. Materials and supplies expense decreased $5 million reflecting
improved inventory management.
Other income increased $12 million, primarily reflecting the Escanaba line sale
and increased rental activity, partially offset by reduced intercompany
interest income. Interest expense decreased $6 million, the result of debt
refinancing activities. Income taxes increased $46 million, reflecting higher
operating and other income and the absence of a 1996 tax settlement (see Note
4 to the Condensed Consolidated Financial Statements).
Cautionary Information
- ----------------------
Certain information included in this report contains, and other materials filed
or to be filed by the Company with the Securities and Exchange Commission (as
well as information included in oral statements or other written statements
made or to be made by the Company) contain or will contain, forward-looking
statements within the meaning of the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended. Such forward-looking
information may include, without limitation, statements that the Company does
not expect that lawsuits, environmental costs, commitments, contingent
liabilities, labor negotiations or other matters will have a material adverse
effect on its consolidated financial condition, results of operations or
<PAGE> 10
liquidity and other similar expressions concerning matters that are not
historical facts, and projections as to the Company's financial results. Such
forward-looking information is or will be based on information available at
that time and is or will be subject to risks and uncertainties that could cause
actual results to differ materially from those expressed in the statements.
Important factors that could cause such differences include but are not limited
to industry competition and regulatory developments, natural events such as
floods and earthquakes, the effects of adverse general economic conditions,
fuel prices and the ultimate outcome of environmental investigations or
proceedings and other types of claims and litigation.
<PAGE> 11
PART II. OTHER INFORMATION
-----------------
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
--------
12 - Ratio of Earnings to Fixed Charges
27 - Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
On January 16, 1997, the Company filed a Current Report on Form
8-K as a result of the merger of MPRR into the Company, and in
that Report indicated its intent to file the historic and pro
forma financial statements required by Form 8-K by amendment on
or prior to March 17, 1997. The historic financial information
set forth in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996 in response to Item 14(a)(1) and (2)
and the pro forma financial information set forth in Exhibit 99
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 are substantially the same as the information
required by Form 8-K. Therefore, pursuant to General Instruction
B.3 of Form 8-K, the Company was not required to file any further
information by amendment to its January 16, 1997 Form 8-K Report.
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized, on this 12th day of May, 1997.
UNION PACIFIC RAILROAD COMPANY
By /s/ James R. Young
----------------------------
James R. Young
Vice President-Finance
By /s/ Joseph E. O'Connor, Jr.
----------------------------
Joseph E. O'Connor, Jr.
Chief Accounting Officer
<PAGE>
UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
12 Computation of Ratio of Earnings to
Fixed Charges
27 Financial Data Schedule
Exhibit 12
UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
-------------------------------------------------
(In Thousands, Except Ratios)
(Unaudited)
Three Months
Ended March 31,
1997 1996
----------------------
Earnings:
[S] [C] [C]
Income from continuing operations . . . . . . . . . . $190,154 $166,455
Undistributed equity earnings . . . . . . . . . . . . (8,689) (12,018)
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . 181,465 154,437
-------- --------
Income Taxes . . . . . . . . . . . . . . . . . . . . . 106,912 60,450
-------- --------
Fixed Charges:
Interest expense including amortization
of debt discount . . . . . . . . . . . . . . . . . . 91,964 98,016
Portion of rentals representing an interest factor. . 35,538 27,373
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . 127,502 125,389
-------- --------
Earnings available for fixed charges . . . . . . . . . $415,879 $340,276
======== ========
Fixed Charges -- as above. . . . . . . . . . . . . . . $127,502 $125,389
Interest capitalized . . . . . . . . . . . . . . . . . -- --
-------- --------
Total fixed charges . . . . . . . . . . . . . . $127,502 $125,389
======== ========
Ratio of earnings to fixed charges (Note 7). . . . . . 3.3 2.7
======== ========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Schedule contains summary financial information extracted from the Condensed
Statement of Consolidated Financial Position and the Condensed Statement of
Consolidated Income and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 47
<SECURITIES> 0
<RECEIVABLES> 380
<ALLOWANCES> 0
<INVENTORY> 250
<CURRENT-ASSETS> 1,814
<PP&E> 19,170
<DEPRECIATION> 4,835
<TOTAL-ASSETS> 16,962
<CURRENT-LIABILITIES> 1,442
<BONDS> 1,191
0
0
<COMMON> 597
<OTHER-SE> 5,113
<TOTAL-LIABILITY-AND-EQUITY> 16,962
<SALES> 0
<TOTAL-REVENUES> 1,794
<CGS> 0
<TOTAL-COSTS> 1,450
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92
<INCOME-PRETAX> 297
<INCOME-TAX> 107
<INCOME-CONTINUING> 190
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 190
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
