UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
XX QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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 1-6324
BURLINGTON NORTHERN RAILROAD COMPANY
(Exact name of registrant as specified in its charter)
Delaware 41-6034000
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3800 Continental Plaza, 777 Main St.
Fort Worth, Texas 76102-5384
(Address of principal executive offices) (Zip Code)
(817) 333-2000
(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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding
Common stock, without par value
as of April 30, 1995* 1,000 shares
*Burlington Northern Railroad Company is a wholly owned subsidiary of
Burlington Northern Inc. (BNI) and there is no market data with respect to
such shares.
Registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced
disclosure format permitted by General Instruction H(2).
<PAGE>
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION Page
Item 1. Financial Statements......................... 1
Item 2. Management's Narrative Analysis of Results of
Operations................................. 7
PART II OTHER INFORMATION
Item 1. Legal Proceedings............................ 15
Item 6. Exhibits and Reports on Form 8-K............. 19
(i)
<PAGE>1
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Millions)
(Unaudited)
Three Months Ended
March 31,
1995 1994
Revenues............................................... $1,347 $1,210
Costs and expenses:
Compensation and benefits............................ 488 445
Fuel................................................. 98 83
Materials............................................ 80 85
Equipment rents...................................... 129 116
Purchased services................................... 106 118
Depreciation......................................... 92 81
Other................................................ 117 104
Total costs and expenses........................... 1,110 1,032
Operating income...................................... 237 178
Interest expense....................................... 18 21
Other income, net...................................... 4 2
Income before income taxes and cumulative effect of
change in accounting method.......................... 223 159
Income tax expense..................................... 88 62
Income before cumulative effect of change in accounting
method............................................... 135 97
Cumulative effect of change in accounting method,
net of tax........................................... - (10)
Net income............................................. $ 135 $ 87
See accompanying notes to consolidated financial statements.
<PAGE>2
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars In Millions)
(Unaudited)
ASSETS March 31, December 31,
1995 1994
Current assets:
Cash and cash equivalents................... $ 24 $ 27
Accounts receivable, net.................... 674 702
Materials and supplies...................... 136 100
Current portion of deferred income taxes.... 146 157
Other current assets........................ 38 27
Total current assets...................... 1,018 1,013
Property and equipment, net................... 5,891 5,848
Investments in and advances to affiliates..... 259 94
Other assets.................................. 136 133
Total assets.............................. $7,304 $7,088
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable............................ $ 556 $ 539
Compensation and benefits payable........... 238 263
Casualty and environmental reserves......... 240 248
Taxes payable............................... 119 130
Accrued interest............................ 25 19
Other current liabilities................... 42 64
Commercial paper............................ 209 90
Current portion of long-term debt........... 22 25
Total current liabilities................. 1,451 1,378
Long-term debt................................ 711 719
Deferred income taxes......................... 1,434 1,421
Casualty and environmental reserves........... 419 415
Other liabilities............................. 201 202
Total liabilities......................... 4,216 4,135
Common stockholder's equity:
Common stock, without par value (1,000
shares authorized, issued and outstanding) 1,191 1,191
Retained earnings........................... 1,897 1,762
Total common stockholder's equity......... 3,088 2,953
Total liabilities and stockholder's equity $7,304 $7,088
See accompanying notes to consolidated financial statements.
<PAGE>3
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Millions)
(Unaudited)
Three Months Ended
March 31,
1995 1994
Cash flows from operating activities:
Net income ...................................... $ 135 $ 87
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in accounting
method..................................... - 10
Depreciation................................. 92 81
Deferred income taxes........................ 24 20
Changes in current assets and liabilities:
Accounts receivable, net................... 28 (3)
Materials and supplies..................... (36) (29)
Other current assets....................... (11) (18)
Accounts payable........................... 17 28
Compensation and benefits payable.......... (25) (33)
Casualty and environmental reserves........ (8) (17)
Taxes payable.............................. (11) (15)
Accrued interest........................... 6 12
Other current liabilities.................. (22) (20)
Changes in long-term casualty and
environmental reserves..................... 4 1
Other, net................................... (5) (25)
Net cash provided by operating activities.......... 188 79
Cash flows from investing activities:
Additions to property and equipment.............. (137) (99)
Advances to affiliates, net...................... (165) (61)
Proceeds from property and equipment dispositions 6 5
Other, net....................................... (2) (5)
Net cash used in investing activities (298) (160)
Cash flows from financing activities:
Net increase in commercial paper................. 119 101
Payments on long-term debt....................... (12) (14)
Net cash provided by financing activities.......... 107 87
Increase (decrease) in cash and cash equivalents... (3) 6
Cash and cash equivalents:
Beginning of period.............................. 27 17
End of period.................................... $ 24 $ 23
Supplemental cash flow information:
Interest paid, net of amounts capitalized........ $ 12 $ 9
Income taxes paid, primarily to parent........... 63 43
See accompanying notes to consolidated financial statements.
<PAGE>4
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Accounting policies
The 1994 Annual Report on Form 10-K for Burlington Northern Railroad
Company (Railroad), a wholly owned subsidiary of Burlington Northern Inc.
(BNI), includes a summary of significant accounting policies and should
be read in conjunction with this Form 10-Q. The statements for the
periods presented are condensed and do not contain all information
required by generally accepted accounting principles to be included in a
full set of financial statements. In the opinion of management, all
adjustments (consisting of only normal recurring adjustments) necessary
to present fairly Railroad's financial position as of March 31, 1995 and
December 31, 1994 and the results of operations and cash flows for the
three months ended March 31, 1995 and 1994 have been included. The
results of operations for any interim period are not necessarily
indicative of the results of operations to be expected for the entire
year. Certain prior year data has been reclassified to conform to the
current year presentation.
2. Environmental reserves and other contingencies
Railroad's operations, as well as those of its competitors, are subject
to extensive federal, state and local environmental regulation. In order
to comply with such regulation and to be consistent with Railroad's
corporate environmental policy, Railroad's operating procedures include
practices to protect the environment. Amounts expended relating to such
practices are inextricably contained in the normal day-to-day costs of
Railroad's business operations.
Under the requirements of the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (Superfund) and certain
other laws, Railroad is potentially liable for the cost of clean-up of
various contaminated sites identified by the United States Environmental
Protection Agency and other agencies. Railroad has been notified that it
is a potentially responsible party (PRP) for study and clean-up costs at
approximately 80 sites (the PRP sites) and, in many instances, is one of
several PRPs. Railroad generally participates in the clean-up of these
sites through cost-sharing agreements with terms that vary from site to
site. Costs are typically allocated based on relative volumetric
contribution of material, the amount of time the site was owned or
operated, and/or the portion of the total site owned or operated by each
PRP. However, under Superfund and certain other laws, as a PRP, Railroad
can be held jointly and severally liable for all environmental costs
associated with a site.
Environmental costs include initial site surveys and environmental
studies of potentially contaminated sites as well as costs for
remediation and restoration of sites determined to be contaminated.
Liabilities for environmental clean-up costs are initially recorded when
Railroad's liability for environmental clean-up is both probable and a
reasonable estimate of associated costs can be made. Adjustments to
<PAGE>5
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
initial estimates are recorded as necessary based upon additional
information developed in subsequent periods. Railroad conducts an ongoing
environmental contingency analysis, which considers a combination of
factors, including independent consulting reports, site visits, legal
reviews, analysis of the likelihood of participation in and ability to pay
for clean-up by other PRPs, and historical trend analyses.
Railroad is involved in a number of administrative and judicial
proceedings and other mandatory clean-up efforts at approximately 160
sites, including the PRP sites, at which Railroad is being asked to
participate in the clean-up of the sites contaminated by material
discharged into the environment. Railroad paid approximately $5 million
during the three months ended March 31, 1995 relating to mandatory
clean-up efforts, including amounts expended under federal and state
voluntary clean-up programs. Recoveries received from insurance
companies, net of legal costs incurred, were approximately $5 million
during the three months ended March 31, 1995. At this time, Railroad
estimates that it will spend approximately $110 million in future years to
remediate and restore all known sites, including $105 million pertaining
to mandated sites, of which approximately $75 million relates to the PRP
sites. Of the $110 million, Railroad estimates that it will spend $25
million during the remainder of 1995. Also, Railroad anticipates that the
majority of the $110 million will be paid out over a period of less than
seven years; however, some costs will be paid out over a longer period, in
some cases up to 40 years. At March 31, 1995, 24 sites accounted for
approximately $80 million of the accrual and no individual site was
considered to be material.
Liabilities for environmental costs represent Railroad's best estimates
for remediation and restoration of these sites and include asserted and
unasserted claims. At March 31, 1995, Railroad had accrued approximately
$110 million for estimated future environmental costs and believes it is
reasonably possible, although not probable, that actual environmental
costs could be lower than the recorded reserve or as much as 50 percent
higher. Railroad's best estimate of unasserted claims was approximately
$5 million as of March 31, 1995. Although recorded liabilities include
Railroad's best estimates of all costs, without reduction for anticipated
recovery from insurance, Railroad's total clean-up cost at these sites
cannot be predicted with certainty due to various factors such as the
extent of corrective actions that may be required, evolving environmental
laws and regulations, advances in environmental technology, the extent of
other PRPs' participation in clean-up efforts, developments in ongoing
environmental analyses related to sites determined to be contaminated, and
developments in environmental surveys and studies of potentially
contaminated sites. As a result, charges to income for environmental
liabilities could possibly have a significant effect on results of
operations in a particular quarter or fiscal year as individual site
studies and remediation and restoration efforts proceed or as new sites
arise. However, expenditures associated with such liabilities are
typically paid out over a long period, in some cases up to 40 years, and
are therefore not expected to have a material adverse effect on Railroad's
consolidated financial position, cash flow or liquidity.
<PAGE>6
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Hedging activities
Railroad has a program to hedge against fluctuations in the price of its
diesel fuel purchases. This program includes forward purchases for
delivery at fueling facilities and exchange-traded petroleum futures
contracts. The futures contracts are accounted for as hedges which are
marked to market with any gains or losses associated with changes in
market value being deferred and recognized as a component of fuel expense
in the period in which the designated fuel is purchased and used. As of
March 31, 1995, Railroad had entered into agreements with fuel suppliers
setting the price of fuel to be obtained by taking physical delivery
directly from such suppliers at a future date. The average price of the
approximately 105 million gallons which Railroad had committed to purchase
was approximately 51 cents per gallon, exclusive of taxes, certain
transportation costs and other charges. In addition, Railroad held
petroleum futures contracts representing approximately 86 million gallons
at an average price of approximately 49 cents per gallon. These contracts
have expiration dates ranging from April to November 1995.
Railroad's current fuel hedging program is designed to cover no more than
50 percent of projected fuel requirements for the subsequent 12-month
period; therefore, hedge positions will not exceed actual fuel
requirements. The current and future fuel delivery prices are monitored
continuously and hedge positions are adjusted accordingly. In order to
reduce risk associated with market movements, fuel hedging transactions do
not extend beyond a 12-month period. Railroad purchases petroleum futures
contracts only through regulated exchanges (e.g. New York Mercantile
Exchange). In order to effectively monitor the fuel hedging activities,
results of the program are summarized and reported to senior management on
a regular basis.
4. Other income, net
Other income, net includes the following (in millions):
Three Months Ended
March 31,
1995 1994
Interest income............................ $ 2 $ 2
Gain on property dispositions.............. 1 2
Loss on sale of receivables................ - (2)
Miscellaneous, net......................... 1 -
Total...................................... $ 4 $ 2
<PAGE>7
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
Item 2. Management's Narrative Analysis of Results of Operations
Results of Operations
Three months ended March 31, 1995 compared with three months ended March 31,
1994
Railroad recorded net income for the first quarter of 1995 of $135 million
compared with net income of $87 million for the same period in 1994. Results
for 1994 were reduced by a $10 million, net of tax, cumulative effect of an
accounting change for postemployment benefits.
Revenues
The following table presents Railroad's revenue information by Railroad
business unit and includes certain reclassifications of prior year information
to conform to current year presentation:
<TABLE>
<CAPTION>
Revenues Per
Revenues Revenue Ton Miles Revenue Ton Mile
Three months ended March 31, 1995 1994 1995 1994 1995 1994
(In Millions) (In Millions) (In Cents)
<S> <C> <C> <C> <C> <C> <C>
Coal.................... $ 454 $ 418 39,368 32,502 1.15 1.29
Agricultural Commodities 261 191 12,626 7,771 2.07 2.46
Intermodal.............. 189 178 6,359 5,897 2.97 3.02
Minerals................ 86 86 3,372 3,407 2.55 2.52
Food.................... 75 70 2,739 2,471 2.74 2.83
Metals.................. 75 65 3,222 2,932 2.33 2.22
Chemicals............... 72 65 2,673 2,289 2.69 2.84
Wood.................... 67 66 3,180 3,153 2.11 2.09
Paper................... 51 51 1,695 1,678 3.01 3.04
Vehicles & Machinery.... 47 47 691 628 6.80 7.48
Shortlines and other.... (30) (27) (2,930) (2,223) - -
Total................... $1,347 $1,210 72,995 60,505 1.85 2.00
</TABLE>
Total revenues for the first quarter of 1995 were $1,347 million compared with
$1,210 million for the same period in 1994. The $137 million increase was
primarily due to improved Agricultural Commodities and Coal revenues.
Coal revenues improved $36 million during the first quarter of 1995 due to
higher traffic levels caused primarily by increased demand for low-sulfur coal
from the Powder River Basin. Partially offsetting the increase was a decline
in yields as a result of continuing competitive pricing pressures in contract
negotiations and a change in traffic mix.
Revenues from the transportation of Agricultural Commodities during the first
quarter of 1995 were $70 million greater than the first quarter of 1994. The
increase was principally caused by improvements in corn and soybean revenues
of $70 million and $16 million, respectively, partially offset by decreases in
wheat and barley revenues of $14 million and $5 million, respectively. Both
corn and soybean revenues benefited primarily from volume increases. The
higher volumes resulted from increased crop production, stronger export demand
and favorable weather during the first quarter of 1995. Wheat revenues
declined due to weaker export demand while barley revenues decreased as corn
displaced barley in certain markets.
<PAGE>8
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
Item 2. Management's Narrative Analysis of Results of Operations
Intermodal and Metals revenues increased $11 million and $10 million,
respectively, when compared with the first quarter of 1994. The improvement
in Intermodal revenues was largely due to an $11 million increase in
Intermodal-international revenues which was the continued result of new
business and growth of existing business. The improvement in Metals revenues
resulted primarily from increased taconite and coal coke and steel revenues.
Taconite and coal coke revenues benefited from resumed production at a plant
that was closed during the first quarter of 1994 due to a labor strike.
Improved steel revenues resulted primarily from increases in price and average
length of haul.
Revenues for Food and Chemicals increased $5 million and $7 million,
respectively. The increase in Food revenues resulted primarily from higher
traffic levels for bulk food products, farm products and oils. Chemicals
revenues also benefited from higher volumes.
First quarter revenues for Minerals, Wood, Paper, and Vehicles & Machinery
were relatively flat compared with the first quarter of 1994. Shortlines and
other, which are a net reduction of revenues, were also relatively flat when
compared with the first quarter of 1994.
Expenses
Total operating expenses for the first quarter of 1995 were $1,110 million
compared with expenses of $1,032 million for the same period in 1994. The
operating ratio was 82 percent, an improvement of three percentage points
compared with an operating ratio of 85 percent for the first quarter of 1994.
Compensation and benefits expenses were $43 million greater compared with the
first quarter of 1994. Increased traffic levels as well as a 4 percent basic
wage increase for union represented employees effective July 1994 caused
increased wages and related payroll taxes of approximately $20 million. A $7
million increase in health and welfare costs for union employees, due to
increases in employment levels and insurance premium rates and increased
incentive compensation expense also contributed to the higher compensation and
benefits expenses.
Fuel expenses for the quarter were $15 million higher compared with 1994
primarily due to increased consumption on higher traffic levels. The average
price paid for diesel fuel increased 2.1 cents per gallon to 57.6 cents per
gallon in the first quarter of 1995 but this increase was offset by improved
operating efficiency.
Materials expenses for the first quarter of 1995 decreased $5 million compared
with 1994. This decrease was primarily due to a decrease in car repair expense
in 1995 and higher locomotive and track materials costs in 1994 resulting from
the severe winter weather.
<PAGE>9
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
Item 2. Management's Narrative Analysis of Results of Operations
Equipment rents expenses were $13 million higher than the first quarter of
1994 principally due to a larger fleet of leased freight cars in 1995, a
continued increase in the leasing of locomotives to meet power requirements
and increased equipment rentals from an affiliate. These increases were
partially offset by decreased payments for failure to achieve service
commitments compared with 1994 as Railroad improved its service in 1995.
Purchased services for the quarter decreased $12 million from the first
quarter of 1994. The most significant contributing factors were lower
environmental remediation expenses, net of recoveries received, higher car
repair billings to third parties and lower derailment-related expenses paid to
outside contractors.
Depreciation expense for the first three months of 1995 was $11 million higher
than the same period in 1994 due to higher traffic levels and an increase in
the asset base.
Other operating expenses were $13 million higher compared with the first
quarter of 1994. The most significant contributing factors were increased
derailment expenses of approximately $6 million and increased moving expenses,
due to the completion of the centralized train dispatching facility in the
first quarter of 1995. These increases were partially offset by a $5 million
decrease in costs associated with personal injury claims.
Interest expense for the quarter decreased $3 million compared with the first
quarter in 1994, due to a lower average outstanding debt balance in 1995.
Other income, net was $2 million higher in the first quarter of 1995 compared
with the same period in 1994. This increase in income was due primarily to
the elimination of losses on the sale of accounts receivable in 1995 as the
sales agreement expired in December 1994.
The effective tax rate was 39.2 percent for 1995 compared with 38.8 percent
for the first quarter of 1994.
Other Matters
Proposed merger
As of June 29, 1994, Burlington Northern Inc. (BNI) and Santa Fe Pacific
Corporation (Santa Fe) entered into an Agreement and Plan of Merger (the
Original Agreement) pursuant to which, on the terms and conditions set forth
in the Original Agreement, Santa Fe would merge (the Merger) with and into
BNI, and BNI would be the surviving corporation and each share of Santa Fe
common stock would be converted into 0.27 of a share of BNI common stock. The
Original Agreement was subsequently amended as of October 26, 1994, December
18, 1994 and January 24, 1995. The Original Agreement, as so amended, is
referred to as the Merger Agreement. Pursuant to the Merger Agreement, Santa
Fe is to merge with and into BNI with each share of Santa Fe common stock to
be exchanged for not less than 0.40 and not more than 0.4347 shares of BNI
common stock. The exchange ratio will vary based on the number of additional
shares of Santa Fe common stock repurchased by Santa Fe in the repurchase
<PAGE>10
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
Item 2. Management's Narrative Analysis of Results of Operations
program referred to below (the Repurchase Program). Stockholders of BNI and
Santa Fe approved the Merger Agreement at special stockholders' meetings held
on February 7, 1995.
Also pursuant to the Merger Agreement, on December 23, 1994, BNI and Santa Fe
commenced tender offers (together, the Tender Offer) to acquire 25 million and
38 million shares of Santa Fe common stock, respectively, at $20 per share in
cash. The Tender Offer expired at midnight, Eastern Standard Time, on
February 8, 1995, with approximately 111.6 million shares of Santa Fe common
stock tendered. As 63 million shares of Santa Fe common stock in the
aggregate were accepted for payment by BNI and Santa Fe, tenders by Santa Fe
stockholders were subject to proration. The final proration factor for the
Tender Offer was approximately 56.5 percent.
On February 6,1995, BNI entered into a five-year $500 million unsecured bank
credit facility (the Tender Offer Facility), whereby a group of banks agreed
to finance BNI's purchase of shares of Santa Fe common stock in the Tender
Offer. Funding of the Tender Offer was completed on February 21, 1995. At
BNI's option, borrowings and renewals thereof can be obtained either through a
competitive bid or a standby procedure. Rates for borrowing under the standby
procedure are, at BNI's option, based upon the selected term of the London
Interbank Offered Rate (LIBOR) or certificate of deposit rate, plus in either
case, a spread based upon BNI's senior unsecured debt ratings and the amount
borrowed under the Tender Offer Facility, or an alternative base rate.
As of March 31, 1995, Santa Fe had borrowed $1,000 million from a syndicate of
financial institutions under a new credit agreement, of which $760 million was
used for the Santa Fe tender offer and $240 million was used to replace
existing Santa Fe debt and pay related expenses.
Under the Repurchase Program as set forth in the Merger Agreement, Santa Fe is
permitted, at its discretion and subject to certain financial and performance
criteria of Santa Fe set forth in its credit agreement and the Merger
Agreement (including minimum cash flows, cash capital expenditures and maximum
total debt), to repurchase up to 10 million shares of Santa Fe common stock
prior to consummation of the Merger. The number of shares of BNI common stock
to be issued in the Merger will not be affected by the number of additional
shares of Santa Fe common stock repurchased by Santa Fe under the Repurchase
Program. Accordingly, the exchange ratio of BNI common shares to be offered
for each share of outstanding Santa Fe common stock upon consummation of the
Merger would be set at not less than 0.40 and not more than 0.4347 shares. As
of March 31, 1995, Santa Fe had repurchased approximately 1.4 million shares
which would result in an exchange ratio of 0.4044 shares.
Pursuant to the Merger Agreement, two possible structures are available to
complete the Merger. Using the current structure, each issued and outstanding
share of Santa Fe common stock (other than shares of Santa Fe common stock
held by Santa Fe as treasury stock or shares held by BNI, all of which will be
cancelled) will be exchanged for not less than 0.40 and not more than 0.4347
shares of BNI common stock depending upon the number of additional shares of
Santa Fe common stock repurchased by Santa Fe under the Repurchase Program
discussed above. BNI will be the surviving corporation. The Merger Agreement
<PAGE>11
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
Item 2. Management's Narrative Analysis of Results of Operations
provides that either BNI or Santa Fe may elect to effect the Merger through
the use of a holding company (the Alternative Transaction Structure) as
described below. BNI and Santa Fe have established BNSF Corporation (BNSF), a
Delaware corporation, for such purpose. Under the Alternative Transaction
Structure, BNSF would create two subsidiaries and one subsidiary would merge
into BNI and one into Santa Fe. Each holder of BNI common stock would receive
one share of BNSF common stock and each holder of Santa Fe common stock,
excluding the Santa Fe common stock acquired by BNI in the Tender Offer and
the Santa Fe common stock held by Santa Fe as treasury stock, would receive
not less than 0.40 and not more than 0.4347 shares of BNSF common stock
depending upon the number of additional shares of Santa Fe common stock
repurchased by Santa Fe under the Repurchase Program discussed above. The
Santa Fe common stock acquired by BNI in the Tender Offer would remain
outstanding and the Santa Fe common stock held by Santa Fe as treasury stock
would be cancelled. The rights of each stockholder of BNSF would be
substantially identical to the rights of a stockholder of BNI, and the
Alternative Transaction Structure would have the same economic effect with
respect to the stockholders of BNI and Santa Fe as the Merger in its current
structure. BNI and Santa Fe have included the option of effecting the
Alternative Transaction Structure in order to ensure that the transactions
contemplated by the Merger Agreement qualify as tax-free transactions for
United States federal income tax purposes. The Merger will be accounted for
under the purchase method of accounting upon consummation, and BNI's
investment will be included in the purchase price.
As is typical in the context of a merger, certain benefits of officers and
employees vested upon approval of the Merger by the stockholders of BNI and
Santa Fe. In particular, on February 7, 1995, restrictions previously placed
upon certain BNI stock grants lapsed and the previously unearned compensation
relating to such restricted stock, included in BNI stockholders' equity, was
charged to expense. The unearned compensation relating to restricted stock at
the time of vesting and related payroll taxes were approximately $24 million.
BNI expects to incur other costs related to the Merger, some of which will be
included in the determination of the total purchase price.
Consummation of the Merger is subject to approval by the Interstate Commerce
Commission (ICC), approval under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, and other customary conditions. In connection with the ICC
proceedings, on January 27, 1995, BNI and Santa Fe requested the ICC to adopt
an expedited procedural schedule for reviewing the merger, based on a
timetable the ICC had proposed to adopt for all major railroad mergers. On
March 9, 1995, the ICC issued a schedule providing for a final decision on the
merger application on or before August 23, 1995. Interested parties,
including other railroads, shippers and state agencies, indicated their intent
to participate in the ICC proceeding on April 10, 1995. Railroad and The
Atchison, Topeka and Santa Fe Railway Company have entered into agreements
with Union Pacific Railroad Company; Southern Pacific Transportation Company,
The Denver Rio Grande Western Railroad Company, St. Louis Southwestern Railway
Company and SPCSL Corp.; and Kansas City Southern Railway Company, among
others, whereby those carriers agreed not to oppose the ICC's approval of the
Merger in exchange for grants of certain trackage rights, haulage arrangements
or other such arrangements.
<PAGE>12
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
Item 2. Management's Narrative Analysis of Results of Operations
Environmental issues
Railroad's operations, as well as those of its competitors, are subject to
extensive federal, state and local environmental regulation. In order to
comply with such regulation and to be consistent with Railroad's corporate
environmental policy, Railroad's operating procedures include practices to
protect the environment. Amounts expended relating to such practices are
inextricably contained in the normal day-to-day costs of Railroad's business
operations.
Under the requirements of the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (Superfund) and certain other laws,
Railroad is potentially liable for the cost of clean-up of various
contaminated sites identified by the United States Environmental Protection
Agency and other agencies. Railroad has been notified that it is a
potentially responsible party (PRP) for study and clean-up costs at
approximately 80 sites (the PRP sites) and, in many instances, is one of
several PRPs. Railroad generally participates in the clean-up of these sites
through cost-sharing agreements with terms that vary from site to site. Costs
are typically allocated based on relative volumetric contribution of material,
the amount of time the site was owned or operated, and/or the portion of the
total site owned or operated by each PRP. However, under Superfund and
certain other laws, as a PRP, Railroad can be held jointly and severally
liable for all environmental costs associated with a site.
Environmental costs include initial site surveys and environmental studies of
potentially contaminated sites as well as costs for remediation and
restoration of sites determined to be contaminated. Liabilities for
environmental clean-up costs are initially recorded when Railroad's liability
for environmental clean-up is both probable and a reasonable estimate of
associated costs can be made. Adjustments to initial estimates are recorded
as necessary based upon additional information developed in subsequent
periods. Railroad conducts an ongoing environmental contingency analysis,
which considers a combination of factors, including independent consulting
reports, site visits, legal reviews, analysis of the likelihood of
participation in and ability to pay for clean-up by other PRPs, and historical
trend analyses.
Railroad is involved in a number of administrative and judicial proceedings
and other mandatory clean-up efforts at approximately 160 sites, including the
PRP sites, at which Railroad is being asked to participate in the clean-up of
the sites contaminated by material discharged into the environment. Railroad
paid approximately $5 million during the three months ended March 31, 1995
relating to mandatory clean-up efforts, including amounts expended under
federal and state voluntary clean-up programs. Recoveries received from
insurance companies, net of legal costs incurred, were approximately $5
million during the three months ended March 31, 1995. At this time, Railroad
estimates that it will spend approximately $110 million in future years to
remediate and restore all known sites, including $105 million pertaining to
mandated sites, of which approximately $75 million relates to the PRP sites.
Of the $110 million, Railroad estimates that it will spend $25 million during
the remainder of 1995. Also, Railroad anticipates that the majority of the
$110 million will be paid out over a period of less than seven years; however,
<PAGE>13
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
Item 2. Management's Narrative Analysis of Results of Operations
some costs will be paid out over a longer period, in some cases up to 40
years. At March 31, 1995, 24 sites accounted for approximately $80 million of
the accrual and no individual site was considered to be material.
Liabilities for environmental costs represent Railroad's best estimates for
remediation and restoration of these sites and include asserted and unasserted
claims. At March 31, 1995, Railroad had accrued approximately $110 million
for estimated future environmental costs and believes it is reasonably
possible, although not probable, that actual environmental costs could be
lower than the recorded reserve or as much as 50 percent higher. Railroad's
best estimate of unasserted claims was approximately $5 million as of March
31, 1995. Although recorded liabilities include Railroad's best estimates of
all costs, without reduction for anticipated recovery from insurance,
Railroad's total clean-up costs at these sites cannot be predicted with
certainty due to various factors such as the extent of corrective actions that
may be required, evolving environmental laws and regulations, advances in
environmental technology, the extent of other PRPs' participation in clean-up
efforts, developments in ongoing environmental analyses related to sites
determined to be contaminated, and developments in environmental surveys and
studies of potentially contaminated sites. As a result, charges to income for
environmental liabilities could possibly have a significant effect on results
of operations in a particular quarter or fiscal year as individual site
studies and remediation and restoration efforts proceed or as new sites
arise. However, expenditures associated with such liabilities are typically
paid out over a long period, in some cases up to 40 years, and are therefore
not expected to have a material adverse effect on Railroad's consolidated
financial position, cash flow or liquidity.
Hedging activities
Railroad has a program to hedge against fluctuations in the price of its
diesel fuel purchases. This program includes forward purchases for delivery
at fueling facilities and exchange-traded petroleum futures contracts. The
futures contracts are accounted for as hedges which are marked to market with
any gains or losses associated with changes in market value being deferred and
recognized as a component of fuel expense in the period in which the
designated fuel is purchased and used. As of March 31, 1995, Railroad had
entered into agreements with fuel suppliers setting the price of fuel to be
obtained by taking physical delivery directly from such suppliers at a future
date. The average price of the approximately 105 million gallons which
Railroad had committed to purchase was approximately 51 cents per gallon,
exclusive of taxes, certain transportation costs and other charges. In
addition, Railroad held petroleum futures contracts representing approximately
86 million gallons at an average price of approximately 49 cents per gallon.
These contracts have expiration dates ranging from April to November 1995.
Railroad's current fuel hedging program is designed to cover no more than 50
percent of projected fuel requirements for the subsequent 12-month period;
therefore, hedge positions will not exceed actual fuel requirements. The
current and future fuel delivery prices are monitored continuously and hedge
positions are adjusted accordingly. In order to reduce risk associated with
market movements, fuel hedging transactions do not extend beyond a 12-month
<PAGE>14
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
Item 2. Management's Narrative Analysis of Results of Operations
period. Railroad purchases petroleum futures contracts only through regulated
exchanges (e.g. New York Mercantile Exchange). In order to effectively
monitor the fuel hedging activities, results of the program are summarized and
reported to senior management on a regular basis.
Other
In December 1994, Railroad reached an agreement with the Railroad Yardmasters
Division (Yardmasters) of the United Transportation Union which is effective
through 1999 with respect to wages, work rules and all other matters except
health and welfare benefits. Any changes negotiated with the other unions
regarding health and welfare benefits on a national basis will also apply to
the Railroad Yardmasters. Approximately 250 Yardmasters were affected by this
agreement.
Labor agreements currently in effect for unions other than Yardmasters include
provisions which prohibited the parties from serving notices to change wages,
benefits, rules and working conditions prior to November 1, 1994. The next
wage adjustment stipulated by the existing agreements is scheduled for July
1995 unless new agreements are reached by the parties prior to that time. The
adjustment called for by the contract is a cost of living increase dependent
upon changes in the Consumer Price Index not to exceed three percent.
Railroad joined with the other railroads to negotiate with the unions on a
multi-employer basis on November 1, 1994. At that time, all unions were
served proposals for productivity improvements as well as other changes.
Thereafter, unions also served notices on the railroads which proposed not
only increasing wages and benefits but also restoring many of the restrictive
work rules and practices that were modified or eliminated under the current
agreements. A number of the unions are also challenging the railroads' right
to negotiate on a multi-employer basis and the issue is currently pending in
Federal District Court in Washington, D.C.
At this time, the railroads and most of the unions are proceeding in direct
negotiations on the proposals. Negotiations with three unions are in
mediation. The National Mediation Board has scheduled meetings with two of
the unions. The ultimate outcome of the negotiations cannot be predicted.
<PAGE>15
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Wheat and barley transportation rates
In September 1980 a class action lawsuit was filed against Railroad in United
States District Court for the District of Montana (District Court) challenging
the reasonableness of Railroad's export wheat and barley rates. The class
consists of Montana grain producers and elevators. The plaintiffs sought a
finding that Railroad's single car export wheat and barley rates for shipments
moving from Montana to the Pacific Northwest were unreasonably high and
requested damages in the amount of $64 million. In March 1981 the District
Court referred the rate reasonableness issue to the Interstate Commerce
Commission (ICC). Subsequently, the State of Montana filed a complaint at the
ICC challenging Railroad's multiple car rates for Montana wheat and barley
movements occurring after October 1, 1980.
The ICC issued a series of decisions in this case from 1988 to 1991. Under
these decisions, the ICC applied a revenue to variable cost test to the rates
and determined that Railroad owed $9,685,918 in reparations plus interest. In
its last decision, dated November 26, 1991, the ICC found Railroad's total
reparations exposure to be $16,559,012 through July 1, 1991. The ICC also
found that Railroad's current rates were below a reasonable maximum and
vacated its earlier rate prescription order.
Railroad appealed to the United States Court of Appeals for the District of
Columbia Circuit (D.C. Circuit) those portions of the ICC's decisions
concerning the post-October 1, 1980 rate levels. Railroad's primary
contention on appeal was that the ICC erred in using the revenue to variable
cost rate standard to judge the rates instead of Constrained Market
Pricing/Stand Alone Cost principles. The limited portions of decisions that
cover pre-October 1, 1980 rates were appealed to the Montana District Court.
On March 24, 1992, the Montana District Court dismissed plaintiffs' case as to
all aspects other than those relating to pre-October 1, 1980 rates. On
February 9, 1993, the D.C. Circuit served its decision regarding the appeal of
the several ICC decisions in this case. The Court held that the ICC did not
adequately justify its use of the revenue to variable cost standard as
Railroad had argued and remanded the case to the ICC for further
administrative proceedings.
On July 22, 1993, the ICC served an order in response to the D.C. Circuit's
February 9, 1993 decision. In its order, the ICC stated it would use the
Constrained Market Pricing/Stand Alone Cost Standards in assessing the
reasonableness of Railroad's wheat and barley rates moving from Montana to
Pacific Coast ports from 1978 forward. The ICC assigned the case to the
Office of Hearings to develop a procedural schedule. On October 28, 1994,
plaintiffs filed their opening evidence arguing that the revenue received by
Railroad exceeded the stand alone costs of transporting that traffic and that
Railroad's rates were unreasonably high. Railroad filed its evidence March
29, 1995, showing that the stand alone costs of transporting the traffic
exceeded the revenue derived by Railroad on that traffic and that
consequently, its rates were not unreasonably high. Plaintiffs are to file
their rebuttal evidence on July 27, 1995.
<PAGE>16
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
PART II OTHER INFORMATION
Coal Transportation Contract Litigation
On April 26, 1991, an action was filed against Railroad in the 102nd Judicial
District Court for Bowie County, Texas seeking a reduction of the
transportation rates required to be paid under two contracts (Southwestern
Electric Power Company v. Burlington Northern Railroad Company, No.
D-102-CV-91-0720). The plaintiff, Southwestern Electric Power Company
(SWEPCO), was challenging the contract rates for transportation of coal to its
electric generating facilities at Cason, Texas and Flint Creek, Arkansas.
SWEPCO contended that productivity gains achieved by Railroad constituted
unusual economic conditions giving rise to a "gross inequity" because
Railroad's costs of providing service have been reduced over the contracts'
terms. On August 2, 1994, plaintiff filed an amendment to its complaint to
further allege that Railroad had been unjustly enriched by retaining
differences between the rates actually charged and those that should have been
charged. SWEPCO sought both prospective rate relief and recovery of alleged
past overcharges.
Railroad's primary contention was that both parties anticipated productivity
gains in the rail industry when negotiating the contracts and agreed that
Railroad would retain most of its productivity gains. Railroad further
contended that there was no agreement that transportation rates paid by
SWEPCO would be based on Railroad's costs of providing service.
On November 18, 1994, the jury rendered a verdict denying plaintiff's request
for prospective rate relief and that plaintiff take nothing on its principal
claims of "gross inequity." However, Railroad was assessed damages
approximating $56 million relating to plaintiff's alternative claim of unjust
enrichment. On January 20, 1995, the trial court rendered a judgment on the
verdict in an amount approximating $74 million, which included attorneys' fees
and interest. The judgment further awarded post judgment interest at 10
percent per annum and issued declaratory orders pertaining to the two
contracts. Railroad has appealed. In the opinion of outside counsel,
Railroad has a substantial likelihood of prevailing on appeal, although no
assurances can be given due to the uncertainties inherent in litigation.
Railroad filed Notice of Appeal in the case on February 17, 1995 and posted a
bond to stay enforcement of the judgment pending prosecution of all appeals.
Environmental Proceedings
United States Department of Justice
On May 25, 1994, the United States Department of Justice (Department) filed
suit on behalf of the United States Environmental Protection Agency (EPA)
against Railroad in United States District Court for the Eastern District of
Wisconsin for the release of oil and hazardous substances into navigable
waters of the United States in the course of three derailments. Specifically
referenced are (1) the alleged release of hazardous substances into the
Nemadji River and its shoreline near Superior, Wisconsin, on June 30, 1992,
(2) the alleged release of oil into the North Platte River and its shoreline
near Guernsey, Wyoming, on January 9, 1993, and (3) the alleged release of oil
into a tributary of the Bighorn River near Worland, Wyoming, on May 6, 1993.
<PAGE>17
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
PART II OTHER INFORMATION
The suit claims that pursuant to 33 U.S.C. Section 1321(b)(7), Railroad is
liable to the United States for civil penalties of up to $25,000 per day of
violation or $1,000 per barrel of oil or per reportable quantity of each
hazardous substance discharged. The EPA initially calculated the statutory
maximum penalty associated with these three spills to be $10,137,000.
Railroad has answered the complaint and opposed the penalties sought by the
EPA.
On February 13, 1995, Railroad attended a settlement conference with the
Department. The settlement conference was called and conducted by the United
States Judge Magistrate for the Western District of Wisconsin. At the
conference, a settlement was achieved. Pursuant to the compromise, Railroad
will pay $1,500,000 to satisfy all claims by the United States for fines,
penalties, response costs and natural resource damages. Railroad will also
make a $100,000 contribution to a study (jointly approved by Railroad and the
Department) regarding methods or procedures to improve rail safety and prevent
derailments. In return for these payments, the United States will release
Railroad from all claims arising out of the three derailments and provide
Railroad contribution protection against claims by other responsible parties
who may later be pursued by the government for their liability arising from
the derailments.
A consent decree confirming the settlement has been drafted, agreed to and
signed by the parties. The consent decree has been submitted to the court for
approval and is subject only to the public comment procedure for settlements
of this kind. Railroad believes final approval of the settlement is highly
probable.
State of Illinois
By letter dated January 5, 1995, the State of Illinois (the State) notified
Railroad and Beazer East, Inc. (Beazer) that it was preparing to file a
complaint against them for the recovery of penalties associated with alleged
violations of the Resource Conservation and Recovery Act (RCRA) at the
Galesburg Wood Treating Superfund Site in Galesburg, Illinois. The State has
informally alleged that it is seeking penalties in excess of $100,000. The
exact amount of the State's demand is unknown as Railroad has not been
provided with formal notice or detail to support the State's demand.
The alleged RCRA violations stem from Railroad's responsibility at the site as
it relates to contamination resulting from the operation of the wood treating
facility from 1907 to 1966 and its status as owner from 1966 to the present.
Koppers Company, Inc. (now Beazer East, Inc.) and subsequently Koppers
Industries, Inc. operated the facility from 1966 to the present. In March
1985, under the Comprehensive Environmental Response Compensation and
Liability Act, Railroad and Koppers Company, Inc. entered into a Consent Order
to perform a Remedial Investigation and Feasibility Study (RI/FS). Following
completion and submission of a RI Report and FS Report, the Illinois
Environmental Protection Agency (IEPA) reached a final decision on a remedial
action plan on June 29, 1989, and obtained concurrence from the United States
Environmental Protection Agency on June 30, 1989. The IEPA then proceeded to
negotiate with Railroad and Beazer to implement the remedial action plan. In
June 1994, the IEPA settled its claims against Railroad and Beazer for
<PAGE>18
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
PART II OTHER INFORMATION
implementing the final remedial action plan in People v. Koppers Company,
Inc., No. 83-CH-92, (9th Circuit Court, Knox County, Illinois), by entering
into a Consent Order effective August 30, 1994. Railroad and Beazer agreed in
the Consent Order to undertake certain other obligations but specifically to
implement the final remedial action plan. However, the Consent Order did not
resolve certain alleged RCRA violations which occurred prior to 1985.
<PAGE>19
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
The following exhibits are filed as part of this report:
Designation Nature of Exhibit
10 Employment Agreement, dated January 5, 1995, between
Burlington Northern Railroad Company and the Honorable
Allan B. Swift.
27 Financial Data Schedule.
B. Reports on Form 8-K
During the period, a report on Form 8-K, dated January 19, 1995, was
filed attaching a press release of Burlington Northern Inc. (BNI)
dated January 19, 1995 announcing its fourth quarter and annual
earnings.
During the period, a report on Form 8-K, dated January 24, 1995, as
amended on Form 8-K/A, dated January 24, 1995, was filed attaching a
press release dated January 24, 1995 announcing the execution of
Amendment No. 3 to the Agreement and Plan of Merger (the Merger),
dated as of June 29, 1994, between BNI and Santa Fe Pacific
Corporation and announcing the agreement with Alleghany Corporation
and George McFadden to vote in favor of adoption of the Merger.
Supplemental joint proxy materials relating to the Merger which were
mailed to stockholders on or about January 26, 1995 were also
attached.
Items 2, 3, 4 and 5 of Part II were not applicable and have been
omitted.
<PAGE>20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Burlington Northern Railroad Company has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on this 10th day
of May, 1995.
BURLINGTON NORTHERN RAILROAD COMPANY
By: /s/ Don S. Snyder
Vice President, Controller and
Chief Accounting Officer
By: /s/ David C. Anderson
Executive Vice President,
Chief Financial Officer and
Director
<PAGE>
BURLINGTON NORTHERN RAILROAD COMPANY and SUBSIDIARIES
Exhibit Index
Sequentially
Exhibit Numbered
Number Description Page
10 Employment Agreement, dated January 5,
1995, between Burlington Northern Railroad
Company and the Honorable Allan B. Swift.
27 Financial Data Schedule.
BURLINGTON NORTHERN RAILROAD
3000 Continental Plaza
777 Main Street
Fort Worth, Texas 76102
Telephone (817) 878-3055
JAMES B. DAGNON
Executive Vice President
Employee Relations
January 5, 1995
PERSONAL AND CONFIDENTIAL
Honorable Al Swift
201 Federal Building
3002 Colby Avenue
Everett, Washington 98201
Dear Al:
This letter will confirm the agreement for your employment as Vice President
Government Affairs of Burlington Northern Railroad (the "Company").
1. Employment and Term. The Company agrees to your employment, and you agree
to act as its Vice President Government Affairs during the period
commencing January 5, 1995 (the "Employment Date") and ending January 5,
2000 (the fifth anniversary of the Employment Date), unless sooner
terminated by death, disability or agreement of the parties. In the event
that your employment hereunder is terminated because of your death or
disability, or by your voluntary resignation, or is terminated by the
Company for your breach of this Agreement, the salary provided for in this
Agreement will be paid to and including the end of the month in which such
termination of employment occurs. If the Agreement is terminated by the
Company for any other reason, the Company will pay you on the date of
termination a sum of money equal to your then current monthly salary times
the number of months remaining until January 5, 2000, (the fifth
anniversary of the Employment Date).
2. Basic Compensation. Commencing with your Date of Employment, your base
salary shall be $225,000 per annum or such rate as may be fixed from time
to time by the Board of Directors of the Company in connection with its
annual review of executive compensation.
3. Incentive Bonus. You will be a regular participant in the Incentive
Compensation Plan commencing on your Date of Employment, in accordance
with the plan.
4. Restricted Stock. You will be granted an initial award under the
Burlington Northern Inc. Restricted Stock Incentive Plan of 2,800 shares
to be effective upon approval by the Compensation & Nominating Committee
of the Board of Directors on your Date of Employment.
5. Stock Options. You will be granted an initial award under the Burlington
Northern Inc. Stock Option Incentive Plan of 11,700 Basic Options
effective upon approval by the Compensation & Nominating Committee of the
Board of Directors on your Date of Employment.
<PAGE>
Mr. Al Swift
January 5, 1995
Page -2-
6. Stock Options, Restricted Stock, Disability and Other Benefits. You will
participate with other executives of the Company in plans from time to
time in effect for Stock Options, Restricted Stock, short-term and
long-term disability benefits, change in control protection and
perquisites, including those available under the employee benefit plans of
the Company. See attachment for grade "E".
7. Relocation Benefits. The Company will be responsible for any normal and
reasonable costs associated with your relocation to the Washington, D.C.
area, in accordance with our standard policy for exempt employees.
8. Nonduplication of Benefits. Should you become eligible for benefits under
your Change in Control Letter Agreement and paragraph #1 of this
Agreement, you will be eligible to receive the greater of the two
benefits, but in no case will the benefits be duplicated.
This agreement is contingent upon your passing a physical examination, which
includes a drug screen.
In consideration of this compensation package, you agree to devote your full
time and effort to the Company, to perform in a capacity of a Vice President
Government Affairs and to perform to a standard suitable for such position and
compensation and to abide by all standards to which Company employees are
subject including those set forth in the Company Code of Ethics, a copy of
which is attached.
If this correctly sets forth our agreement, please sign the original and
return it to me, and keep the copy for your file.
Al, we are looking forward to your joining the Burlington Northern team!
Sincerely,
BURLINGTON NORTHERN RAILROAD
By: /s/James B. Dagnon
Executive Vice President Employee Relations
Accepted this 5th day of January, 1995
/s/Al Swift
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Burlington
Northern Railroad's consolidated financial statements as of and for the three
month period ended March 31, 1995 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-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 24
<SECURITIES> 0
<RECEIVABLES> 698
<ALLOWANCES> 24
<INVENTORY> 136
<CURRENT-ASSETS> 1018
<PP&E> 9706
<DEPRECIATION> 3815
<TOTAL-ASSETS> 7304
<CURRENT-LIABILITIES> 1451
<BONDS> 711
<COMMON> 1191
0
0
<OTHER-SE> 1897
<TOTAL-LIABILITY-AND-EQUITY> 7304
<SALES> 0
<TOTAL-REVENUES> 1347
<CGS> 0
<TOTAL-COSTS> 1110
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> 223
<INCOME-TAX> 88
<INCOME-CONTINUING> 135
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 135
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
