UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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 1-6324
THE BURLINGTON NORTHERN AND SANTA FE RAILWAY 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)
2650 Lou Menk Drive
Fort Worth, Texas 76131-2830
(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
Shares Outstanding
Class as of July 31, 1997
Common Stock, par value $1.00* 1,000 shares
*The Burlington Northern and Santa Fe Railway Company is a wholly-owned
subsidiary of Santa Fe Pacific Corporation (SFP) which is a wholly-owned
subsidiary of Burlington Northern Santa Fe Corporation and there is no market
data with respect to registrant's 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>
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN MILLIONS)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues $2,072 $2,024 $4,107 $4,051
Operating expenses:
Compensation and benefits 652 638 1,345 1,306
Purchased services 220 216 448 439
Equipment rents 216 200 431 392
Depreciation and amortization 180 177 361 355
Fuel 186 184 382 352
Materials and other 166 202 367 426
------ ------ ------ ------
Total operating expenses 1,620 1,617 3,334 3,270
------ ------ ------ ------
Operating income 452 407 773 781
Interest expense 28 22 54 45
Interest income, related parties 7 7 14 17
Other income (expense), net (4) (2) (5) (1)
------ ------ ------ ------
Income before income taxes 427 390 728 752
Income tax expense 160 149 274 288
------ ------ ------ ------
Net income $ 267 $ 241 $ 454 $ 464
====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS)
(UNAUDITED)
June 30, December 31,
1997 1996
-------- -------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 106 $ 95
Accounts receivable, net 642 674
Materials and supplies 205 222
Current portion of deferred income taxes 324 306
Other current assets 46 30
--------- -------
Total current assets 1,323 1,327
Property and equipment, net 17,736 17,164
Intercompany notes receivable 212 529
Other assets 577 559
--------- -------
Total assets $ 19,848 $19,579
========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities $ 2,032 $ 2,338
Long-term debt due within one year 86 157
--------- -------
Total current liabilities 2,118 2,495
Long-term debt 1,303 1,243
Deferred income taxes 4,660 4,473
Casualty and environmental liabilities 518 543
Employee, merger and separation costs 440 466
Other liabilities 950 957
--------- -------
Total liabilities 9,989 10,177
--------- -------
Commitments and contingencies (See note 4)
Stockholder's equity:
Common stock, $1 par value,(1,000 shares
authorized, issued and outstanding) and
paid-in capital 10,438 10,312
Retained earnings 3,364 2,910
Capital contribution receivable (3,943) (3,820)
--------- -------
Total stockholder's equity 9,859 9,402
--------- -------
Total liabilities and stockholder's
equity $ 19,848 $19,579
========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
Six Months Ended
June 30,
1997 1996
----- -----
Operating Activities:
<S> <C> <C>
Net income $ 454 $ 464
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 361 355
Deferred income taxes 169 126
Employee, merger and separation costs paid (55) (98)
Other, net (53) (100)
Sale of accounts receivable 320 30
Changes in working capital (564) (30)
----- -----
Net cash provided by operating activities 632 747
----- -----
Investing Activities:
Cash used for capital expenditures (853) (822)
Other, net (77) 15
----- -----
Net cash used for investing activities (930) (807)
----- -----
Financing Activities:
Net increase (decrease) in commercial paper - (224)
Proceeds from issuance of long-term debt 114 -
Payments on long-term debt (123) (39)
Net decrease in intercompany note receivable 317 332
Other, net 1 -
----- -----
Net cash provided by financing activities 309 69
----- -----
Increase in cash and cash equivalents 11 9
Cash and cash equivalents:
Beginning of period 95 54
----- -----
End of period $ 106 $ 63
===== =====
Supplemental cash flow information:
Interest paid, net of amounts capitalized $ 47 $ 43
Income taxes paid, net of refunds 178 2
Assets financed through capital lease obligations - 32
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Accounting policies and interim results
The consolidated financial statements should be read in conjunction with the
Burlington Northern and Santa Fe Railway Company ("Railway" or "Company")
Annual Report on Form 10-K for the year ended December 31, 1996. The Company
was formerly known as Burlington Northern Railroad Company ("BNRR"). On
December 31, 1996, the Atchison, Topeka and Santa Fe Railway Company ("ATSF")
merged with and into BNRR and the name of the surviving entity, BNRR, was
changed to The Burlington Northern and Santa Fe Railway Company. Railway
is a wholly-owned subsidiary of Santa Fe Pacific Corporation ("SFP") which
in turn is a wholly-owned subsidiary of Burlington Northern Santa Fe
Corporation ("BNSF"). All significant intercompany accounts and transactions
have been eliminated.
The results of operations for any interim period are not necessarily
indicative of the results of operations to be expected for the entire year.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments, except as disclosed) necessary to present fairly
Railway's consolidated financial position as of June 30, 1997 and December 31,
1996 and the consolidated results of operations for the three and six month
periods ended June 30, 1997 and 1996 have been included.
For accounting purposes, the merging of BNRR and ATSF was treated as a
combination of subsidiaries for the periods they were under common control.
Accordingly, the results of operations and cashflows for the six months ended
June 30, 1996 represent the combined results of Railway and will differ from
amounts reported in the BNRR Form 10-Q for the six months ended June 30, 1996.
Certain comparative prior year amounts in the consolidated financial
statements and notes have been reclassified to conform with the current year
presentation.
2. Employee, merger and separation costs
Current and long-term employee merger and separation liabilities totaling $527
million are included in the consolidated balance sheet at June 30, 1997.
During the first six months of 1997, the Company paid $55 million of employee,
merger and separation costs.
At June 30, 1997, approximately $87 million of the total liability is included
within current liabilities for anticipated costs to be paid over the next
twelve months. The remaining costs are anticipated to be paid over the next
five years, except for certain costs related to conductors, trainmen and
locomotive engineers which will be paid upon the employees' separation or
retirement, as well as certain benefits for clerical employees which may be
paid on an installment basis, generally over five to ten years.
In addition to the above, certain merger and separation costs, including
relocation costs associated with clerical employees, have been recorded as
operating expenses in 1997 and will be in future periods. The Company
anticipates recording additional charges to operating expense within the next
twelve months principally related to voluntary separations of clerical
employees; however, the magnitude of such future expense is presently unknown.
3. Accounts receivable, net
As discussed in Note 7 to the consolidated financial statements included in
The Burlington Northern and Santa Fe Railway Company Annual Report on Form
10-K for the year ended December 31, 1996, the Company had an accounts
receivable sale agreement effective through 1999. In June 1997, this
agreement was replaced by an amended and restated agreement which allows
Railway, through a special purpose subsidiary, to sell up to $600 million of
variable rate certificates which mature in 2002 evidencing undivided interests
in an accounts receivable master trust. The master trust's assets include an
ownership interest in a revolving portfolio of Railway's accounts receivable
which are used to support the certificates. At June 30, 1997, the maximum of
$600 million of certificates sold were outstanding and were supported by
receivables of approximately $1.2 billion in the master trust. Railway has
retained the collection responsibility with respect to the accounts receivable
held in trust. Railway is exposed to credit loss related to collection of
accounts receivable to the extent that the amount of receivables in the master
trust exceeds the amount of certificates sold. Costs related to such
agreements vary on a monthly basis and are generally related to certain
interest rates. These costs are included in Other income (expense), net.
4. Environmental and other contingencies
The Company's operations, as well as those of its competitors, are subject to
extensive federal, state and local environmental regulation. Railway's
operating procedures include practices to protect the environment from the
environmental risks inherent in railroad operations, which frequently involve
transporting chemicals and other hazardous materials. Additionally, many of
Railway's land holdings are and have been used for industrial or
transportation-related purposes or leased to commercial or industrial
companies whose activities may have resulted in discharges onto the property.
As a result, Railway is subject to environmental clean-up and enforcement
actions. In particular, the Federal Comprehensive Environmental Response
Compensation and Liability Act of 1980, also known as the "Superfund" law, as
well as similar state laws generally impose joint and several liability for
clean-up and enforcement costs without regard to fault or the legality of the
original conduct on current and former owners and operators of a site.
Railway is involved in a number of administrative and judicial proceedings and
other mandatory clean-up efforts at approximately 340 sites, at which it is
being asked to participate in the study or clean-up, or both, of alleged
environmental contamination. Railway paid approximately $20 million during
the first six months of 1997 for mandatory clean-up efforts, including amounts
expended under federal and state voluntary clean-up programs. Railway has
accruals of approximately $214 million for remediation and restoration of all
known sites. Railway anticipates that the majority of the accrued costs at
June 30, 1997 will be paid over the next five years. No individual site is
considered to be material.
Liabilities recorded for environmental costs represent Railway's best
estimates for remediation and restoration of these sites and include both
asserted and unasserted claims. Unasserted claims are not considered to be a
material component of the liability. Although recorded liabilities include
Railway's best estimates of all costs, without reduction for anticipated
recoveries from third parties, Railway'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
parties' 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, future charges to income for environmental liabilities
could 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;
therefore, management believes that it is unlikely that any identified
matters, either individually or in the aggregate, will have a material adverse
effect on Railway's consolidated financial position or liquidity.
The railroad industry, including Railway, will become subject to future
requirements regulating air emissions from diesel locomotives that may
increase their operating costs. Proposed regulations applicable to new
locomotive engines were issued by the Environmental Protection Agency in early
1997, with final regulations to be promulgated by the end of the year. It is
anticipated that these regulations will be effective for new locomotive
engines installed after 1999 and through 2010 and will preempt state
regulation of locomotive emission standards. Under some interpretations of
federal law, older locomotive engines may be regulated by states based on
standards and procedures which the State of California ultimately adopts. At
this time, the State of California has indicated to the Environmental
Protection Agency that it will support the proposed federal rule subject to
slight technical modifications.
Other claims and litigation
Railway and its subsidiaries are parties to a number of legal actions and
claims, various governmental proceedings and private civil suits arising in
the ordinary course of business, including those related to environmental
matters and personal injury claims. While the final outcome of these items
cannot be predicted with certainty, considering among other things the
meritorious legal defenses available, it is the opinion of management that
none of these items, when finally resolved, will have a material adverse
effect on the annual results of operations, financial position or liquidity of
Railway, although an adverse resolution of a number of these items could have
a material adverse effect on the results of operations in a particular quarter
or fiscal year.
5. Hedging activities
Fuel
Railway 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 various commodity swap and collar transactions which
are accounted for as hedges. Any gains or losses associated with changes in
market value of these hedges are deferred and recognized as a component of
fuel expense in the period in which the hedged fuel is purchased and used. To
the extent Railway hedges portions of its fuel purchases, it may not fully
benefit from decreases in fuel prices.
As of June 30, 1997, Railway had entered into forward purchases for
approximately 110 million gallons at an average price of approximately 58
cents per gallon, and fuel swaps for approximately 740 million gallons at an
average price of approximately 54 cents per gallon.
The above prices do not include taxes, fuel handling costs, certain
transportation costs and, except for forward contracts, any differences which
may occur from time to time between the prices of commodities hedged and the
purchase price of Railway's diesel fuel.
These contracts have expiration dates ranging from September 1997 to December
1999, with 370 million gallons expiring during the last six months of 1997,
430 million gallons expiring in 1998 and 50 million gallons expiring in 1999.
Railway's current fuel hedging program covers approximately 70 percent of
projected fuel purchases for the remaining six months of 1997, approximately
40 percent of estimated 1998 fuel purchases and approximately 5 percent of
estimated 1999 fuel purchases. Hedge positions are closely monitored to
ensure that they will not exceed actual fuel requirements in any period.
Unrecognized losses from Railway's fuel hedging transactions were
approximately $1 million at June 30, 1997. Railway also monitors its hedging
positions and credit ratings of its counterparties and does not anticipate
losses due to counterparty nonperformance.
6. Related party transactions
Railway is involved with BNSF and certain of its subsidiaries in related party
transactions in the ordinary course of business which include payments made on
each other's behalf and performance of services. During the six months of
1997 Railway made intercompany payments to SFP of $178 million for state and
federal income taxes, which are reflected in changes in working capital in the
consolidated statement of cashflows.
Additionally, during the first quarter of 1997 Railway had net borrowings from
BNSF of $317 million used to fund capital expenditures, payments of taxes and
other operating activities. These borrowings reduced intercompany notes
receivable from $529 million to $212 million. Interest is paid on
intercompany notes receivable at a rate of 1.0% above the monthly average of
the daily effective Federal Funds rate. Interest income is reflected in
Interest income, related parties. The notes are due on demand.
<PAGE>
THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
Management's narrative analysis relates to the financial condition and results
of operations of The Burlington Northern and Santa Fe Railway Company
("Railway", "Registrant" or "Company"). Railway was formerly known as
Burlington Northern Railroad Company ("BNRR"). On December 31, 1996, the
Atchison, Topeka and Santa Fe Railway Company ("ATSF") merged with and into
BNRR and the name of the surviving entity, BNRR, was changed to The Burlington
Northern and Santa Fe Railway Company.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1996
Railway recorded net income for the first six months of 1997 of $454 million
compared with net income of $464 million for the first six months of 1996.
The decrease in net income is primarily due to severe weather in the first
quarter of 1997 which affected Railway's operations throughout the Northern
Plains and Pacific Northwest ("PNW") for large portions of the first quarter,
partially offset by improved second quarter 1997 results. The financial
impact of recurring and protracted outages on many parts of the system, the
cost of repairing track, signals and equipment, and the operating
inefficiencies caused by the weather is virtually impossible to measure with
precision. However, the Company estimates that the severe weather in the
first quarter of 1997 resulted in lost revenue opportunities of approximately
$100 million and increased operating expenses of at least $50 million.
REVENUES
The following table presents Railway's revenue information by commodity for
the six months ended June 30, 1997 and 1996 and includes certain
reclassifications of prior year information to conform to current year
presentation.
<TABLE>
<CAPTION>
Revenue
Revenue Per Thousand
Revenues Ton Miles Ton Miles
1997 1996 1997 1996 1997 1996
(In Millions) (In Millions)
------ ------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Intermodal $1,090 $ 994 37,902 34,187 $28.76 $29.08
Coal 971 968 81,707 82,696 11.88 11.71
Agricultural Commodities 531 607 27,821 31,772 19.09 19.10
Chemicals 403 386 14,966 14,455 26.93 26.70
Forest Products 283 273 12,659 12,180 22.36 22.41
Consumer Goods 246 237 9,326 8,833 26.38 26.83
Automotive 215 208 3,322 3,137 64.72 66.31
Metals 206 208 9,238 10,038 22.30 20.72
Minerals 165 154 6,488 5,761 25.43 26.73
------ ------ ------- ------- ------ ------
Total Freight Revenues 4,110 4,035 203,429 203,059 20.20 19.87
Other Revenues (3) 16 - - - -
------ ------ ------- ------- ------ ------
Total Operating Revenues $4,107 $4,051 203,429 203,059 $20.20 $19.87
====== ====== ======= ======= ====== ======
</TABLE>
Intermodal revenues of $1,090 million for the first six months of 1997
increased by $96 million compared to revenues for the same period of 1996.
The increase was due to improved results in all segments. The direct segment
benefited from increased units shipped for UPS, Yellow Freight, Roadway and
Consolidated Freightways. Truckload revenue increased due to volume growth
from J.B. Hunt and Schneider. International revenues were up due to volume
gains for OOCL, Hanjin, Hyundai, and Cosco.
Agricultural Commodities revenues of $531 million for the first half of 1997
were $76 million lower than revenues for the 1996 first six months. This
decrease was due primarily to first quarter weather-related service problems
in the Northern Plains and PNW which principally affected corn shipments and a
decrease in shipments of wheat for export due to United States
uncompetitiveness in the world market.
Chemicals revenues of $403 for the first half of 1997 were $17 million or 4
percent higher than the first half of 1996 and were led primarily by growth in
petroleum and plastics revenues.
Forest Products revenues of $283 million for the six months ended June 30,
1997 increased $10 million or 4 percent compared to the same period of 1996.
The increase was due primarily due to increased demand in the paper and
construction industries.
Minerals revenues of $165 for the first half of 1997 were $11 million or 7
percent higher than the first half of 1996 led primarily by increased revenues
in the clay and sodium compound segments.
EXPENSES
Total operating expenses for the first six months of 1997 were $3,334 million,
an increase of $64 million or 2 percent, compared with operating expenses for
the first six months of 1996 of $3,270 million. The operating ratio was 81.2
percent for the first six months of 1997, compared with an 80.7 percent
operating ratio for the same 1996 period.
Compensation and benefit expenses of $1,345 million were $39 million or 3
percent higher than the first six months of 1996. A majority of the increase
was due to higher costs associated with weather-related repairs to track and
equipment and slower operations. Additionally, wages were higher because of
1997 wage increases to both salaried and union employees. These increases
were partially offset by lower salaried employee incentive compensation
expense due to the Company's first quarter 1997 performance relative to
certain goals.
Equipment rents expenses for the first six months of 1997 of $431 million were
$39 million or 10 percent higher than the first six months of 1996. The
increase was primarily due to poor railcar utilization in the first quarter
caused by adverse weather and higher leased railcar expense.
Fuel expenses of $382 million for the first six months of 1997 were $30
million higher than fuel expenses for the first six months of 1996 due to an 6
cent or 9 percent increase in the average price paid per gallon of diesel
fuel.
Materials and other expenses of $367 million for the first six months of 1997
were $59 million or 14 percent lower than the first six months of 1996. The
decrease was primarily due to lower derailment and personal injury expenses.
Interest expense for the first six months of 1997 was $54 million compared
with interest expense of $45 million for the first six months of 1996. The
increase is primarily due to higher debt levels partially offset by lower
interest rates.
OTHER MATTERS
UNITED PARCEL SERVICE STRIKE
United Parcel Service of America ("UPS") is Railway's largest intermodal
customer. On Monday, August 4, 1997, a strike against UPS by members of the
International Brotherhood of Teamsters was initiated. As of August 14, 1997,
this labor dispute has not been resolved.
As the timing of a settlement is currently unknown, it is impossible to
determine the ultimate effect of the strike on Railway intermodal revenues or
results of operations; however, the Company estimates that lost revenues
through August 13 were approximately $8 million. If the strike continues, it
is expected that there will be additional reductions in Railway's revenues and
results of operations; however, the Company does not believe that the strike
will significantly affect its financial condition.
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
CROW RESERVATION CROSSING ACCIDENT CASE
Reference is made to the discussion in Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1996 and in its Current Report on Form
10-Q for the quarter ended March 31, 1997 of the lawsuit filed in Crow Tribal
Court (Estates of Red Wolf, Red Horse and Bull Tail v. Burlington Northern
Railroad Company, Case No. 94-31) arising out of a 1993 accident at a Railway
crossing located within the boundaries of the Crow reservation in which three
members of the Crow tribe were killed. The lawsuit was filed on behalf of
the estates of the driver of the vehicle and the two passengers in the
vehicle involved. One of the passenger cases was severed and has yet to go
to trial. The other two cases proceeded to trial in January 1996. On
February 6, 1996, a Crow Tribal Court jury rendered a verdict against Railway
for compensatory damages in the total amount of $250 million. Subsequently,
the plaintiffs filed a Notice and Request with the Tribal Appellate Court
requesting, among other things, the entry of an order reducing the amount of
the judgment from $250 million to $25 million in compensatory damages and, on
June 17, 1997, the Tribal Appellate Court issued an order remanding the
matter to the trial court for the limited purpose of reducing the judgment in
accordance with the request.
On February 26, 1996, the Federal District Court for the District of
Montana entered an order enjoining any action by the Tribal Court plaintiffs
to enforce the judgment pending appeal through the tribal court and federal
court systems. Upon appeal of that decision by the Tribal Court plaintiffs
to the United States Court of Appeals for the Ninth Circuit, the Ninth
Circuit issued an opinion on January 29, 1997 which reversed the district
court and remanded the matter to the trial court with instructions to
dissolve the injunction. The basis for the appellate court's decision was
that Railway had failed to exhaust its remedies in the tribal court. On
April 10, 1997, the Ninth Circuit denied Railway's petition for rehearing and
on April 17, 1997, issued an order granting a stay of its mandate to the
district court. Railway petitioned the United States Supreme Court for a
writ of certiorari on May 16, 1997 with respect to the Ninth Circuit's
decision. The Supreme Court has not issued a ruling on that petition.
COAL TRANSPORTATION CONTRACT LITIGATION
Reference is made to the discussion in Registrant's Report on Form 10-K
for the year ended December 31, 1996 of the action filed by Southwestern
Electric Power Company ("SWEPCO") against Railway in the 102nd Judicial
District Court for Bowie County, Texas seeking a reduction of the coal
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 judgment in which case was reversed on April 30, 1996
by the Court of Appeals for the Sixth Court of Appeals District of Texas,
Texarkana, Texas (Burlington Northern Railroad Company v. Southwestern
Electric Power Company, No. 06-95-00024-CV). On October 14, 1996, SWEPCO
applied for discretionary review of the Court of Appeals decision by the
Texas Supreme Court. On June 12, 1997, the Texas Supreme Court granted
SWEPCO's application for writ of error. Oral argument on the case is set for
October 8, 1997.
ICC MERGER CASE
Reference is made to the discussion in Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1996 to the challenges to the railroad
merger and control order served by the Interstate Commerce Commission ("ICC")
on August 23, 1995 in Finance Docket No. 32549 (Burlington Northern Inc. and
Burlington Northern Railroad Company--Control and Merger--Santa Fe Pacific
Corporation and The Atchison, Topeka and Santa Fe Railway Company). Several
petitions for reconsideration or to reopen the ICC's decision were filed by
parties to the proceeding and all were denied. The principal appellate
challenges to the ICC decision were rejected by the United States Court of
Appeals for the District of Columbia on March 28, 1997, and the remaining
challenge was voluntarily dismissed by the petitioner on June 16, 1997. This
matter is now considered terminated.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
See Index to Exhibits on page E-1 for a description of the exhibits
filed as part of this report.
B. Reports on Form 8-K
The Registrant filed the following Current Reports on Form 8-K
during the six months ended June 30, 1997:
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE BURLINGTON NORTHERN
AND SANTA FE RAILWAY COMPANY
(Registrant)
By: /s/ THOMAS N. HUND
Thomas N. Hund
Vice President and Controller
(On behalf the Registrant and as
principal accounting officer)
Schaumburg, Illinois
August 14, 1997
EXHIBIT INDEX
12 Computation of ratio of earnings to fixed charges.
27 Financial Data Schedule.
E-1
<TABLE>
<CAPTION>
EXHIBIT 12
THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS, EXCEPT RATIO AMOUNTS)
(UNAUDITED)
Six Months
Ended June 30,
1997 1996
------- -------
Earnings:
<S> <C> <C>
Pre-tax income $ 728 $ 752
Add:
Interest and fixed charges,
excluding capitalized interest 54 45
Portion of rent under long-term
operating leases representative
of an interest factor 106 99
Amortization of capitalized interest 2 1
Less: Undistributed equity in earnings
of investments accounted for
under the equity method 11 6
------- -------
Total earnings available for fixed charges $ 879 $ 891
======= =======
Fixed charges:
Interest and fixed charges $ 62 $ 52
Portion of rent under long-term operating
leases representative of an interest
factor 106 99
------- -------
Total fixed charges $ 168 $ 151
======= =======
Ratio of earnings to fixed charges 5.23x 5.90x
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
The Burlington Northern Santa Fe Railway company's Consolidated Financial
Statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> Jun-30-1997
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0
0
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</TABLE>
