<PAGE>
Filing under Rule 425
---------------------
Filer: Burlington Northern Santa Fe Corporation
Companies that are the subject of the filing:
Canadian National Railway Company
North American Railways, Inc.
Registration Statement No. 333-94397
BNSF's ABILITY TO OFFER COMPETITIVE, EFFICIENT AND SAFE
SERVICE TO SHIPPERS
BN and Santa Fe have been able to meet fully the representations made in
their October 13, 1994 merger application that the combined BNSF would provide
shippers with superior service. As discussed below, BN and Santa Fe represented
that, as BNSF, they would be able to improve substantially their ability to
benefit shippers and employees in a number of critical areas -- including
safety, customer service, efficiency and financial performance -- and BNSF has
done just that.
In this part of the Report, we provide statistical and financial analyses
of BNSF performance based upon BNSF's internal data restated on a pro forma
basis for 1994 and 1995, prior to the actual merger which took place on
September 22, 1995. We have decided to use 1994 as the base year for these
analyses because, as stated above, the merger was announced June 30, 1994. We
have been successful in producing comparable data over the 1994-99 period in all
cases except for on-time performance and velocity. Prior to the implementation
of the TSS information system in mid-1997, on-time performance was measured
differently on the BN portion of the system, and comparisons are not meaningful.
We would be the first to admit that service slipped in the pre-1998 period
as we rolled out the new TSS system across our railroad, while at the same time
keeping the BN and Santa Fe's legacy systems running, and trying to ensure data
consistency and accuracy. Our data shows service degradation in 1997 and in the
first part of 1998, as we
<PAGE>
took on unprecedented amounts of additional business, primarily because of the
UP/SPmerger implementation difficulties. Fortunately, we benefitted from the
increased capital investment program initiated in 1996, and we were able to keep
our system fluid. In many cases, we acted as an escape valve for western
shippers. As a result, the West was able to avoid the type of difficulties most
recently experienced in the Northeast when shippers were left with no
alternative except trucks. As the data indicate, our continuation of capital
infusion at unprecedented levels in rail history has brought BNSF to the point
where we are now handling even greater volumes of traffic with 91 percent
dock-to-dock, on-time results.
The following statistical information should dispel two "conventionally
held" views. First, that rail systems cannot continue to improve their results
while going through the merger process -- or conversely, that a merger will
cause management to take their "eye off the ball" and the companies will
flounder during the period between merger announcement and consummation. In
fact, both BN and Santa Fe achieved record years in 1995, and, as the pro forma
results show, the improvements made in all categories between 1994 and 1995 were
impressive.
Second, there is the general perception that railroads have not captured
the synergies identified in their STB applications or made good on their
promises to shippers. BNSF was the first of the most recent major mergers, and
we can demonstrate that we have done what we said we would for our shippers.
They have clearly benefitted from the merger. In every category of safety,
business growth, customer service, transportation value, efficiencies,
employment security, financial performance, expanded capacity and
2
<PAGE>
investment in equipment and facilities, we have achieved demonstrable and
quantifiable, and in many instances, dramatic improvements. Admittedly, not all
of the improvements are directly attributable to the merger. Some of the
benefits, especially as they pertain to growth, are a result of the
opportunities afforded us by the UP/SP trackage rights. There can be no
question, however, that the merger is responsible for the lion's share of our
improvements.
A. Safety
Initially, and perhaps most importantly, BNSF promised the Interstate
Commerce Commission5/ that it would become more competitive, and would achieve
all of the anticipated improvements and efficiencies that would establish a new
standard of service and expanded market access for shippers, while at the same
time operating a safer railroad. In 1994, Santa Fe's chief operating officer
testified that "running a safe railroad is part of our vision of industry
leadership."6/ He further stated that BNSF would be committed to leadership in
the rail industry in achieving the goal of attaining an injury-free workplace.
As shown on Charts 1, 2 and 3, employee injury frequency and severity
ratios have dropped 38 percent and 65 percent, respectively. Most striking,
employee days lost due to injury have gone from 53,900 to 18,500 during this
time period (see Chart 4). Besides
- --------
5/ The Interstate Commerce Commission Termination Act of 1995 abolished the
- -
ICC and created the Surface Transportation Board.
6/ Finance Docket No. 32549, Verified Statement of Donald G. McInnes, BN/SF-8,
- -
at 278.
3
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eliminating countless unnecessary pain and suffering, this 66 percent reduction
is the equivalent of about 170 rail workers who can be available to provide
services for the benefit of our customers and owners.
4
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Safety
As Charts 5 and 6 show, train accidents per million train miles are down 32
percent since the 1995 peak, and the average annual reduction in accidents over
the 1997-99 period is 140 compared with 1995. Similarly, as Charts 7 and 8 show,
highway/rail crossing incidents per million train miles have dropped 40 percent
since 1995. For both 1998 and 1999, the reduction is about 250 incidents per
year, compared with 1995.
Besides benefitting our employees and the communities we serve, our
improved safety performance has had a positive effect upon our ability to
deliver our shippers' goods damage free. In fact, as Chart 9 reflects, our ratio
of loss/damage to total freight revenue has dropped 34 percent since 1995.
5
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Safety
Chart No. 1
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Burlington Northern Santa Fe
Personal Injuries per 200,000 Manhours
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999E
Pro Forma Pro Forma
3.67 2.68 2.01 1.74 2.20 2.27
Note: 1998 and 1999 reflect change in FRA definitions
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Since 1994, reportable injury frequency has dropped 38%. The lowest ratio is a
53% reduction from 1994's results and a 35% reduction from 1995's results. After
1997, there was a 30% increase in the ratio, due principally to a change in the
FRA reportable definition.
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6
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Safety
Chart No. 2
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Burlington Northern Santa Fe
Personal Injuries - Total
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999E
Pro Forma Pro Forma
1,168 1,181 879 789 1,014 979
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Reported injuries have dropped by 39% since 1994. Again, the low point was 1997
when the 789 reportable injuries constituted a 51% reduction from 1994.
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7
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Safety
Chart No. 3
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Burlington Northern Santa Fe
Lost Workdays per 200,000 Manhours
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999E
Pro Forma Pro Forma
122.3 88.3 59.8 46.0 43.6 43.0
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8
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Safety
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A key measure of severity is the ratio of lost work days per 200,000 hours
worked because the size of BNSF's workforce and the number of hours worked
fluctuate each year. Lost workday frequency has improved every year since the
merger was announced. 1999's 43 lost workday ratio represents a 65% reduction
compared to 1994.
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Chart No. 4
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Burlington Northern Santa Fe
Lost Workdays - Total in Thousands
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
53.9 39.1 26.2 20.9 20.1 18.5
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9
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Safety
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Total lost work days have dropped by about 35,400. This is a 66% reduction.
Besides the elimination of human pain and suffering, the improvement represents
the equivalent of 170 yearly full-time employees who can be available to serve
our customers.
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Chart No. 5
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Burlington Northern Santa Fe
Train Accidents per Million Train Miles (MTM)
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
3.64 3.98 3.43 2.84 2.67 2.72
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10
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Safety
- --------------------------------------------------------------------------------
This rate peaked in 1995. Since then it has dropped 32%.
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11
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Safety
Chart No. 6
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Burlington Northern Santa Fe
Train Accidents - Total
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
Number of Accidents
515 580 454 439 435 442
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Between 1995 and 1999, we have reduced the number of accidents by about 140 a
year, or 24%.
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12
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Safety
Chart No. 7
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Burlington Northern Santa Fe
Highway/Rail Crossing Incidents per Million Train Miles (MTM)
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
Incidents/MTM
5.15 5.41 4.38 3.79 3.33 3.26
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13
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Safety
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A highly visible view of safety to the public is incidents between motor
vehicles and trains at highway-rail crossings. Looking only at the number of
highway/rail crossing incidents does not provide the full picture of our safety
progress in this area. The increase in rail traffic on BNSF must be considered.
The ratio of highway/rail crossing incidents to millions of train miles operated
peaked in 1995. Since that time, it has dropped 40%.
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Chart No. 8
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Burlington Northern Santa Fe
Highway/Rail Crossing Incidents - Total
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
Number of Incidents
729 789 632 611 540 531
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14
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Safety
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Over the last two years, the number of highway/rail crossing incidents has
dropped about 250 incidents per year. This is a 32% reduction compared to 1995.
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15
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Safety
Chart No. 9
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Burlington Northern Santa Fe
Loss/Damage % of Freight Revenue
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
%
0.33 0.35 0.36 0.31 0.27 0.23
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Since the merger in 1995, our loss/damage ratio has dropped by 34%.
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16
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B. Customer Service
In our 1994 merger application, BN and Santa Fe said that the new railroad
would grow, improve and expand its transportation services, open new markets for
shippers through its expanded network, and provide shippers the best
transportation value for their dollar. In this section, we will demonstrate the
strong progress we have made in these areas.
In the introduction to this part of our Report, we mentioned customer
volume and service. Since 1994, units, tons, and freight revenues have all
increased about 20 percent. Intermodal units across selected major routes are up
an impressive 40 to 70 percent, and we have exploited new intermodal lanes made
possible by our merged system and the UP/SP rights. Grain traffic over
single-line routes from the upper Midwest to Mexico and California is up an
aggregate 40 percent. These growth increases were possible because of our focus
on customer service, the scope of our network and the continued investment in
locomotives, rail cars, track capacity and facilities.
Service consistency is critical to all business sectors from coal to
intermodal to carload customers. On-time performance has shown substantial
improvement since 1997 and now exceeds 90 percent on a daily basis. BNSF's
record-setting 91 percent on-time, system-wide performance in 1999 has never
been achieved by a railroad of our size.
Cycle times for unit coal trains are comparable to pre-merger levels in
spite of a 34 percent increase in sets in service. Consistency for coal is
measured by cycle
performance against an historic benchmark of 100 percent. Chart 18 illustrates
how our
17
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Customer Service
coal cycle performance has varied within a small range since 1994. In 1999,
because of our $2.3 billion investment in locomotives since the merger, we
recorded our first improvement in coal cycle performance. At the same time, the
number of coal train sets in service in 1999 was over 34 percent greater than in
1994. At the 117 percent cycle performance level for 1999, BNSF met all of its
customer requirements amounting to 236 million tons of coal delivered with a
virtual 100 percent on-time performance.
For the intermodal/automotive area, service consistency is reflected by the
relationship between total volume and service goals, including on-time
performance as we show in Chart 14. UPS business has grown about 36 percent to
almost 380,000 units/year, and in 1999 we achieved a 99.8 percent on-time UPS
performance.
While service has been improving, our customers are continuing to get a
better value for their transportation dollar. Since rail deregulation began in
1980, the rail industry has provided a more than 50 percent reduction in real
rail rates for shippers. Providing shippers with the best transportation value
for their dollar has been part of BNSF's vision since our merger became
effective. Comparing 1999 with 1994, unadjusted system revenue per ton has
dropped 11 percent and, adjusted for inflation (approximately 11 percent CPI),
revenue per ton is down 20 percent. The most dramatic drops have been in coal --
18 percent and 27 percent, respectively. Agricultural products revenue per ton
is actually up 2 percent since 1994, but in adjusted terms has dropped 9
percent. The numbers for intermodal are similarly up 1 percent and down 10
percent. Carload revenue per ton drops are almost as impressive as coal. Current
revenue per ton is down 10
18
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Customer Service
percent, and, adjusted for inflation, rates have dropped 20 percent. We believe
that these revenues have been positively influenced by BNSF's aggressive actions
to capture business available as a result of the UP/SP rights. This information
is reflected in Charts 28 to 32.
Two of the most impressive areas of growth are business to and from Mexico
and business handled over the UP/SP rights. BNSF gained access to the Mexican
gateway of Eagle Pass as part of our settlement with SP in the BNSF merger case.
We gained access to Laredo and Brownsville as a result of the rights we gained
in the UP/SP merger. Since that time, our volume of business has grown to a
level of over 10,000 loads a month, which has more than tripled since 1996.
Volumes over the UP/SP routes are approaching 30,000 units a month and are
still growing. The 1999 revenues resulting from the rights have exceeded $400
million, almost twice the threshold for a Class I railroad and greater than
Wisconsin Central's 1998 domestic revenues.
19
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Customer Service
Chart No. 10
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Burlington Northern Santa Fe
Total Units and Originated Tons
1994-1999
[LINE GRAPH OF TOTAL UNITS AND ORIGINATED TONS]
Units in Millions Tons in Millions
<TABLE>
<S> <C> <C> <C> <C> <C>
6.81 units 7.10 units 6.99 units 7.34 units 7.88 units 8.06 units
363 tons 388 tons 381 tons 385 tons 429 tons 444 tons
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
</TABLE>
- --------------------------------------------------------------------------------
Since 1994, units and tons on the BNSF system have increased about 20%.
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20
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Customer Service
Chart No. 11
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Burlington Northern Santa Fe
Freight Revenue
1994-1999
[LINE GRAPH OF FREIGHT REVENUE]
<TABLE>
<CAPTION>
BNSF Industry
$ in Billions $ in Billions
<S> <C> <C> <C> <C> <C>
7.7 BNSF 8.1 BNSF 8.1 BNSF 8.4 BNSF 8.9 BNSF 9.1 BNSF
30.8 Industry 32.3 Industry 32.7 Industry 33.1 Industry 33.2 Industry
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
</TABLE>
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- --------------------------------------------------------------------------------
Freight revenue has grown by 20%, about triple that of the industry.
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21
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Customer Service
Chart No. 12
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Burlington Northern Santa Fe
Financial Performance
Merger Application Revenue Projections 1995 - 1998
[CHART]
$ in Billions
$8.08 Actual $8.11 Actual $8.21 Actual $8.57 Actual
$8.08 Application $8.26 Application $8.34 Application $8.37 Application
*$0.16 UPSP *$0.37 UPSP
1995 1996 1997* 1998*
Pro Forma
*Incremental new UPSP traffic
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BNSF exceeded the revenue projections in its merger application in 1997 and
1998.
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22
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Customer Service
Chart No. 13
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Burlington Northern Santa Fe
On-Time Performance - System
1994-1999
[LINE GRAPH OF ON-TIME PERFORMANCE - SYSTEM]
<TABLE>
<CAPTION>
Units in Millions % on Time
<S> <C> <C> <C> <C> <C>
6.807 units 7.103 units 6.991 units 7.345 units 7.884 units 8.064 units
79 on-time 82 on-time 91 on-time
performance performance performance
1994 1995 1996 1997 1998 1999
</TABLE>
Comparable data available for 1997 forward
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Comparable data is available only since 1997 when TSS was installed systemwide.
On-time performance for all business groups has increased since then to the
point where system on-time performance exceeds 90% on-time daily for all cars
and intermodal units, dock-to-dock.
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23
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Customer Service
Chart No. 14
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Burlington Northern Santa Fe
On-Time Performance - Intermodal/Automotive
1994-1999
[LINE GRAPH OF ON-TIME PERFORMANCE - INTERMODAL/AUTOMOTIVE]
<TABLE>
<CAPTION>
Units in Millions % on Time
<S> <C> <C> <C> <C> <C>
2.718 units 2.791 units 2.822 units 3.118 units 3.316 units 3.453 units
76 on-time 75 on-time 89 on-time
performance performance performance
1994 1995 1996 1997 1998 1999
</TABLE>
Comparable data available for 1997 forward
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BNSF has achieved its high intermodal/automotive on-time performance while
increasing unit volumes 27% from 1994 to 1999.
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24
<PAGE>
Customer Service
Chart No. 15
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Burlington Northern Santa Fe
Increases in Intermodal Traffic
1995-1999
[MAP OF USA]
Chicago to PNW +40%
MN to/from CA, AZ and NM +170%
Chicago to Texas +54%
Chicago to California +49%
Memphis +68%
Texas to California +56%
FL, GA, AL, MS and TN +57%
Corridor Volume Change
----------------------
1995 1999 % Change
---- ---- -------- --------------------
New Orleans
1,859,000 2,841,000 +52% New Route
These increases speak for themselves. Intermodal traffic increases range from
40% upwards to 70% in major lanes. New lanes like Minnesota to California and
the Southwest to and from New Orleans have been achieved due to our merger and
UP/SP rights opportunities.
25
<PAGE>
Customer Service
Chart No. 16
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Burlington Northern Santa Fe
UPS Service Failures as a % of UPS Units
1994-1999
[LINE GRAPH OF UPS SERVICE FAILURES AS A % OF UPS UNITS]
<TABLE>
<CAPTION>
% Failures Units
(000,000)
<S> <C> <C> <C> <C> <C>
1.1% Failures 0.5% Failures 0.7% Failures 1.3% Failures 1.3% Failures 0.3% Failures
270.1 Units 276.0 Units 298.0 Units 313.0 Units 351.0 Units 388.0 Units
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
</TABLE>
- --------------------------------------------------------------------------------
BNSF now handles UPS traffic over virtually every major western transportation
lane. Our volumes have grown from about 250,000 units in 1994 to 380,000 units
in 1999. Our percentage on-time was 99.8% in 1999, and we handled UPS's peak
during the 28 days preceding Christmas without a single operations failure for
the third consecutive year.
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26
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Customer Service
27
<PAGE>
Customer Service
Chart No. 17
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Burlington Northern Santa Fe
On-Time Performance - Coal
1994-1999
[LINE GRAPH OF ON-TIME PERFORMANCE - COAL]
Units in Millions % on Time
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1.947 Units 1.878 Units 1.854 Units 1.862 Units 2.078 Units 2.123 Units
93.6 on-time 97.6 on-time 99.5 on-time
performance performance performance
1994 1995 1996 1997 1998 1999
</TABLE>
Comparable data available for 1997 forward
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In 1999, BNSF met all of its customer requirements amounting to 236 million tons
of coal delivered with a virtual 100% on-time performance.
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28
<PAGE>
Customer Service
Chart No. 18
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Burlington Northern Santa Fe
Coal Cycle Performance and Sets in Service
1994-1999
[LINE GRAPH OF COAL CYCLE PERFORMANCE AND SETS IN SERVICE]
<TABLE>
<CAPTION>
Cycle % Sets
<S> <C> <C> <C> <C> <C>
117.7 cycle% 117.0 cycle% 116.9 cycle% 121.3 cycle% 123.1 cycle% 116.7 cycle%
245 sets 267 sets 264 sets 271 sets 319 sets 326 sets
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
</TABLE>
- --------------------------------------------------------------------------------
Coal cycle performance, measured as a percentage of theoretical minimums, has
remained comparable to 1994-95 levels, even with a 34% increase in unit train
sets in service.
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29
<PAGE>
Customer Service
Chart No. 19
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Burlington Northern Santa Fe
Increases in Coal Traffic
1995-1999
[MAP OF USA]
PRB to Washington +90%
PRB to Michigan +19%
PRB to Alabama +250%
PRB to Arizona New Business
Corridor Volume Change
----------------------
1995 1999 % Change
---- ---- --------
190,000 300,000 +58%
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BNSF has handled significant increases in coal traffic in several corridors.
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30
<PAGE>
Customer Service
Chart No. 20
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Burlington Northern Santa Fe
On-Time Performance - Ag
1994 - 1999
[CHART]
Units in Millions % on time
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
0.603 Units 0.664 Units 0.585 Units 0.577 Units 0.689 Units 0.715 Units
80 on-time 79 on-time 88 on-time
performance performance performance
1994 1995 1996 1997 1998 1999
</TABLE>
Comparable data available for 1997 forward
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- --------------------------------------------------------------------------------
BNSF has significantly increased on-time performance for agricultural shippers
since 1997.
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31
<PAGE>
Customer Service
Chart No. 21
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Burlington Northern Santa Fe
Post Merger Grain Moves
1995-1999
[MAP OF USA]
Corn Dakotas to California +490%
Wheat Montana to California +210%
Whole Grains Midwest to California +30%
Beans Midwest to California New Market
Canola meal from North Dakota +100%
Malt and malting barley from North Dakota New Market
Whole Grains Midwest to Texas +34%
Corridor Volume Change
----------------------
1995 1999 % Change
---- ---- --------
54,770 76,750 +40%
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One of the merger's benefits identified in our case was opening new markets for
grain shippers in the upper Midwest. Traffic volumes on the routes identified
her have grown 40% to 76,750 units.
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32
<PAGE>
Customer Service
Chart No. 22
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Burlington Northern Santa Fe
On-Time Performance - Carload
1994-1999
[LINE GRAPH OF ON-TIME PERFORMANCE - CARLOAD]
<TABLE>
<CAPTION>
Units in Millions % on Time
<S> <C> <C> <C> <C> <C>
1.54 Units 1.77 Units 1.73 Units 1.79 Units 1.80 Units 1.77 Units
73 On-Time 77 On-Time 86 On-Time
performance performance performance
1994 1995 1996 1997 1998 1999
</TABLE>
Comparable data available for 1997 forward
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BNSF has significantly increased on-time performance for carload shippers since
1997.
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33
<PAGE>
Customer Service
Chart No. 23
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Burlington Northern Santa Fe
Increases in Carload Traffic
1995-1999
[MAP OF INCREASES IN CARLOAD TRAFFIC]
Forest Products Outbound from PNW
I-5 Corridor
Aggregate Traffic Southern Calif. and Texas
Steel Products
Carload Volume Change
---------------------
1995 (Est.) 1999 %Change
----------- ---- -------
1,712,575 1,854,620 8.3%
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BNSF has significantly increased on-time performance for carload shippers since
1997.
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34
<PAGE>
Customer Service
Chart No. 24
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Burlington Northern Santa Fe
Mexico Volume
[LINE GRAPH OF MEXICO VOLUME]
Daily Moving
Total
January January January
1997 1998 1999
*1994-1996 data not available
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The BNSF system gained access to the Eagle Pass Mexican gateway as part of its
settlement with SP in the BNSF merger case. We gained access to Laredo and
Brownsville as part of the trackage rights agreement in the UP/SP case. Since
1997, loads to and from Mexico have increased to almost 120,000 units on an
annual basis.
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35
<PAGE>
Customer Service
Chart No. 25
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Burlington Northern Santa Fe
Mexico Annual Units and Revenue
1997 - 1999
[CHART]
Units (000s) Units (000s)
and and
$ in Millions $ in Millions
82.9 Units 108.2 Units 120.0 Units
125.3 Revenue 178.5 Revenue 210.8 Revenue
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
*1994 - 1996 data not available
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Over $200 million in annual revenue is derived from traffic flowing into and out
of Mexico on BNSF.
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36
<PAGE>
Customer Service
Chart No. 26
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
UPSP Volume
[LINE GRAPH OF UPSP VOLUME]
Moving Total
January January January Dec.31
1997 1998 1999 1999
*1994 - 1996 data not available
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Volumes over UP/SP lines are now approaching 30,000 carloads a month. Revenue
has exceeded $400 million in 1999, and it's still growing.
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37
<PAGE>
Customer Service
Chart No. 27
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Burlington Northern Santa Fe
UPSP Annual Units and Revenue
1997-1999
[CHART OF UPSP ANNUAL UNITS AND REVENUE]
Units (000s) Units (000s)
and and
$ in Millions $ in Millions
121.4 Units 226.6 Units 280.6 Units
183.2 Revenue 332.7 Revenue 404.3 Revenue
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
*1994-1996 data not available
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BNSF units and revenue have been steadily rising on UP/SP lines with units
nearly tripling during the 1997-1999 period.
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38
<PAGE>
Customer Servive
Chart No. 28
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Burlington Northern Santa Fe
Total - Revenue per Thousand RTMs
1994-1999
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
$
Current 20.8 19.8 19.6 19.7 19.0 18.6
CPI Adjusted 20.8 19.3 18.6 18.2 17.3 16.6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Between 1994 and 1999, rail rates have continued to drop both in current and
adjusted (for inflation) terms. Current rates are down 11% in that time period,
and adjusted rates are 20% lower.
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39
<PAGE>
Customer Servive
Chart No. 28
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Burlington Northern Santa Fe
Intermodal - Revenue per Thousand RTMs
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
$
Current 31.1 31.5 31.5 31.1 30.7 31.4
CPI Adjusted 31.1 30.6 29.8 28.7 27.9 28.0
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1999 current and adjusted intermodal revenue/1000 RTMs are about 1% higher and
10% lower, respectively, compared with the 1994 levels.
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40
<PAGE>
Customer Service
Chart No. 30
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Burlington Northern Santa Fe
Coal - Revenue per Thousand RTMs
1994-1999
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
$
Current 12.9 11.9 11.7 11.6 11.1 10.6
CPI Adjusted 12.9 11.6 11.0 10.7 10.1 9.4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Current coal revenue/1000 RTMs is down 18%, and adjusted revenue/1000 RTMs is
down 27% since 1994.
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41
<PAGE>
Customer Service
Chart No. 31
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Ag Products - Revenue per Thousand RTMs
1994-1999
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
$
Current 21.4 19.2 19.7 19.1 19.9 21.8
CPI Adjusted 21.4 18.6 18.6 17.6 18.1 19.4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Current ag products revenue per 1000 RTMs rose 2%, and adjusted revenue/1000
RTMs is down 9% since 1994.
- --------------------------------------------------------------------------------
42
<PAGE>
Customer Service
Chart No. 32
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Carload - Revenue per Thousand RTMs
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
Current 24.9 24.4 23.8 23.5 22.9 22.5
CPI Adjusted 24.9 23.7 22.5 21.7 20.8 20.0
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Current carload revenue/1000 RTMs fell 10%, and adjusted revenue per 1000 RTMs
slipped 20% since 1994.
- --------------------------------------------------------------------------------
43
<PAGE>
Customer Service
Chart No. 33
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Rate Reductions
1995-1999
[MAP OF USA]
Lumber -17%
Petroleum -25%
Barley -17%
Malting Barley -5%
Steel -16%
Industrial Chemicals -23%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Between 1995 and 1999, BNSF rates on a number of specific commodities moving on
single-line routes have been decreased between 5% and 23% in order to stimulate
traffic.
- --------------------------------------------------------------------------------
44
<PAGE>
C. Efficiency
One of our greatest accomplishments is BNSF's reduction in cost of
operating our network between 1994 and 1999. Among the efficiencies BNSF
projected in 1994 which would lead to such a reduction were improved equipment
utilization due to integrated dispatching and scheduling; consolidation and
specialization of mechanical shops; more efficient utilization of personnel,
lower equipment maintenance and maintenance of way costs; integrated train
operations, and consolidation of duplicative yard and terminal functions. All of
these projections have become a reality.
At the macro level, operating expense per 1000 GTMs has dropped 22 percent.
When we adjust for inflation -- using a 1994-99 cumulative RCAF factor, the
real improvement is more than 27 percent. As we have already pointed out,
service was improving while BNSF was reducing its operating costs. Obviously,
this significant increase in efficiency is what has allowed BNSF to reduce real
rail costs for our customers during this time period.
Equally important, these improvements were not made at the expense of our
employees. Although employment has been reduced from 45,700 employees in 1994 to
42,600 employees in 1999, BNSF has hired about 16,300 employees during that
time, about 90 percent into various union crafts. Train, engine and yard crews
and maintenance employment have now stabilized at pre-merger levels. We have
made little or no reductions in those fundamental areas that could affect safety
or service. Since 1995, executive, professional and administrative employment on
the other hand has been
45
<PAGE>
Efficiency
reduced 27 percent and accounts for most of the reductions. We were able to do
this because of two actions: centralization of clerical activities on the former
BN which probably would have occurred absent a merger, and the combination of
staff functions that led to elimination of redundant positions as a result of
the merger. As Chart 45 shows, BNSF has continued to improve its efficiency as
measured in GTMs per employee, which have risen 46 percent since 1994.
Efficiency improvements have also been made as a result of our large
investment in new locomotives. Without an adequate supply of well-maintained
road locomotives, BNSF would not have been able to meet the volume demands of
our shippers and their expectations for consistent, damage-free and on-time
service. In response to business increases, BNSF has grown its locomotive fleet
by some 900 units, or 22 percent, since 1994 while total available horsepower
has grown by about 40 percent, as shown in Chart 46. Older, less efficient units
have been replaced with new, higher horsepower and more environmentally
efficient locomotives.
Having enough locomotives is not enough; they must be used efficiently.
BNSF tracks fleet efficiency several ways. One is locomotive utilization, which
indicates the percentage of time a road locomotive is utilized in train service.
Chart 47 shows that the time locomotives spend performing work has risen from
79.7 percent to 85.3 percent, a 7 percent improvement, between 1994 and 1999.
Another measure of efficiency is road locomotive velocity, reported in miles per
day, which BNSF began tracking in 1996. Road
46
<PAGE>
Efficiency
locomotive velocity has increased 13 percent in the last three years, as
indicated in Chart
48.
BNSF began tracking "trains held for power" during the period of rail
congestion in 1997 and 1998. Chart 49 shows that the number of trains held for
power each day in the second half of 1999 dropped 66 percent from peak 1998
levels. We also have been able to put locomotives in storage in order to respond
to peak volume demands. During the second half of 1999, we had many days when no
trains were held for power.
Providing consistent service to customers also requires an adequate car
supply and efficient utilization of car inventory. In our 1994 merger
application, BN and Santa Fe pointed out that customers on both railroads would
realize benefits from combining car fleets and improving utilization for the
benefit of the customer's supply requirements. This has happened. BNSF's
carfleet in 1999 was slightly larger than it was at merger, as Chart 50 shows.
Improved cycle times have allowed us to store a significant portion of the
fleet, at times as much as 10 percent. As a result, the car fleet inventory
decreased by 1 percent since 1996, while we have added approximately $1 billion
of revenue. Between 1996 and 1999, active car velocity has increased almost 30
percent as Chart 53 points out.
47
<PAGE>
Efficiency
Chart No. 34
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Total GTMs - BNSF and Industry
1994-1999
[LINE GRAPH OF TOTAL GTMs - BNSF AND INDUSTRY]
<TABLE>
GTMS in Billions
<S> <C> <C> <C> <C> <C>
2,257 Industry 2,421 Industry 2,462 Industry 2,559 Industry 2,623 Industry
less BNSF less BNSF less BNSF less BNSF less BNSF
639 BNSF 749 BNSF 748 BNSF 776 BNSF 851 BNSF 872 BNSF
1994 1995 1996 1997 1998 1999E
Pro Forma Pro Forma
</TABLE>
- --------------------------------------------------------------------------------
BNSF has been handling increased GTMs relative to the other Class 1 railroads.
- --------------------------------------------------------------------------------
48
<PAGE>
Efficiency
Chart No. 35
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Operating Expense per 1,000 GTM's
1994-1999
[LINE GRAPH OF OPERATING EXPENSE PER 1,000 GTM'S]
<TABLE>
$
<S> <C> <C> <C> <C>
11.77 Industry 12.77 Industry 11.65 Industry 11.65 Industry 11.92 Industry
less BNSF less BNSF less BNSF less BNSF less BNSF
10.12 BNSF 8.74 BNSF 8.51 BNSF 8.39 BNSF 7.97 BNSF 7.87 BNSF
1994 1995 1996 1997 1998 1999E
Pro Forma Pro Forma
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BNSF's operating expense per 1000 GTMs has been reduced about 22% since 1994,
while the industry has shown little or no improvement.
- --------------------------------------------------------------------------------
49
<PAGE>
Efficiency
Chart No. 36
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Current and Adjusted Operating Expense per 1,000 GTM's
1994-1999
[LINE GRAPH OF CURRENT AND ADJUSTED OPERATING EXPENSE PER 1,000 GTM'S]
$
<TABLE>
<S> <C> <C> <C> <C>
10.1 Expense 8.7 Expense 8.5 Expense 8.4 Expense 8.0 Expense 7.9 Expense
10.1 RCAF 8.4 RCAF 8.2 RCAF 7.8 RCAF 7.5 RCAF 7.4 RCAF
Adjusted Adjusted Adjusted Adjusted Adjusted Adjusted
1994 1995 1996 1997 1998 1999E
Pro Forma Pro Forma
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Since 1994, BNSF's operating expense per 1000 GTMs has been steadily decreasing,
22% and 27% in real and adjusted terms respectively, and is now the lowest in
the industry.
- --------------------------------------------------------------------------------
50
<PAGE>
Efficiency
Chart No. 37
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Total Operating Expense*
1994-1999
[LINE GRAPH OF TOTAL OPERATING EXPENSE*]
$ in Billions
<TABLE>
<S> <C> <C> <C> <C> <C>
6.47 Expense 6.55 Expense 6.36 Expense 6.51 Expense 6.78 Expense 6.86 Expense
6.47 RCAF 6.32 RCAF 6.14 RCAF 6.07 RCAF 6.38 RCAF 6.45 RCAF
Adjusted Adjusted Adjusted Adjusted Adjusted Adjusted
1994 1995 1996 1997 1998 1999E
Pro Forma Pro Forma
</TABLE>
* Reflects continuing operations adjusted for special items.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Although total operating expenses have risen about $400 million since 1994, more
than $1 billion of new revenue has been added. On an inflation adjusted basis,
operating expenses have been flat.
- --------------------------------------------------------------------------------
51
<PAGE>
Efficiency
Chart No. 38
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Operating Expense*
1994-1999
[CHART]
1994 Expense Volume Inflation Initiatives 1999 Expense
6.47 1.19 .49 1.29 6.86 E
* Volume amount based on 18.5% increase in loaded units. Inflation of 6.5%
(RCAF - U).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This waterfall chart shows that BNSF's efficiency reduced overall expenses
almost 2.5 times as much as the 6.5% inflation (RCAF factor) added.
- --------------------------------------------------------------------------------
52
<PAGE>
Efficiency
Chart No. 39
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Total Employees
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
(000)
45.7 45.7 43.7 43.5 44.3 42.6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Employment has dropped 3,100 since 1994-95, a 7% reduction.
- --------------------------------------------------------------------------------
53
<PAGE>
Efficiency
Chart No. 40
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
New Hires
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
Exempt and 3,349 2,521 2,221 3,947 3,258 955
Scheduled
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Over the 1994-99 period, we have hired about 16,000 employees, about five times
the overall workforce reduction of 3,100 that occurred during that time period.
About 90% of the new hires were in the union ranks.
- --------------------------------------------------------------------------------
54
<PAGE>
Efficiency
Chart No. 41
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Total TE&Y Employees
1994 - 1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
(000)
16.5 16.9 16.7 17.2 17.6 16.9
- --------------------------------------------------------------------------------
After a small reduction in 1996, TY&E employee count rose steadily through 1998.
It has returned to 1995 levels, and now is even with 1995's level. Meanwhile,
the railroad has become more efficient and a great number of 12-hour tieups,
dead heads, held away payments, and other penalties have been eliminated.
- --------------------------------------------------------------------------------
55
<PAGE>
Efficiency
Chart No. 42
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Maintenance of Way and Structure Employees
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
(000)
10.7 10.6 10.6 10.5 10.9 10.0
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Maintenance of way employment has been static with a 600, or 6%, reduction
occurring in 1999 compared with 1995.
- --------------------------------------------------------------------------------
56
<PAGE>
Efficiency
Chart No. 43
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Maintenance of Equipment Employees
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
(000)
8.7 8.7 8.4 8.2 8.8 8.9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
After a drop in 1996 and 1997, maintenance of equipment employment has risen
about 2% compared with pre-merger levels.
- --------------------------------------------------------------------------------
57
<PAGE>
Efficiency
Chart No. 44
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Executive, Professional and Administrative Employees
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
(000)
9.8 9.5 8.0 7.6 7.1 6.9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The brunt of employee reductions has come in the executive, professional and
administrative areas, due to clerical consolidation and elimination of redundant
staff positions resulting from the merger. Since 1995, employment in this
category has dropped by 2,600 jobs or 27%.
- --------------------------------------------------------------------------------
58
<PAGE>
Efficiency
Chart No. 45
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
GTMs per Employee
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
GTMs per Employee (000,000)
14.0 16.4 17.1 17.9 19.2 20.5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GTMs per employee have increased 46% since 1994.
- --------------------------------------------------------------------------------
59
<PAGE>
Efficiency
Chart No. 46
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Locomotives and Total Horsepower
1994-1999
[LINE CHART OF LOCOMOTIVES AND TOTAL HORSEPOWER]
<TABLE>
<CAPTION>
Locomotives Horsepower
(000,000)
<S> <C> <C>
4,121 Locomotives 4,473 Locomotives 5,013 Locomotives
11.7 Horsepower 13.0 Horsepower 15.7 Horsepower
4,316 Locomotives 4,736 Locomotives 5,097 Locomotives
12.3 Horsepower 14.5 Horsepower 16.3 Horsepower
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
</TABLE>
- --------------------------------------------------------------------------------
The road locomotive fleet has grown by 900 units, or 22% since 1994. Available
horsepower has grown by about 40%.
- --------------------------------------------------------------------------------
60
<PAGE>
Efficiency
Chart No. 47
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Locomotive Utilization
1994 - 1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
79.7 80.3 79.2 83.4 87.8 85.3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
After peaking during the power shortage years of 1997 and 1998, the percentage
of time that locomotives are actually pulling trains in 1999 has risen about 7%
since merger.
- --------------------------------------------------------------------------------
61
<PAGE>
Efficiency
Chart No. 48
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Road Locomotive Velocity, 3,000+ Hp
1994-1999
[CHART]
1997 1998 1999
Miles/Day
251 277 283
- --------------------------------------------------------------------------------
Over the last two years, road locomotive velocity has increased 13%.
- --------------------------------------------------------------------------------
62
<PAGE>
Efficiency
Chart No. 49
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Average Trains Held for Power*
1994-1999
[CHART]
1997 1998 1999
84 94 50 32
- --------------------------------------------------------------------------------
After reaching a peak in 1998, the number of trains held for power in the second
half of 1999 dropped 66%.
- --------------------------------------------------------------------------------
63
<PAGE>
Efficiency
Chart No. 50
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Cars Owned/Leased
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
(000)
95 97 96 94 97 98
- --------------------------------------------------------------------------------
While the number of cars owned or leased has varied slightly from year to year,
the total at year-end 1999 was 1,000 cars higher than in 1995.
- --------------------------------------------------------------------------------
64
<PAGE>
Efficiency
Chart No. 51
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Total and Active Car Inventory
1994-1999
[LINE CHART OF TOTAL AND ACTIVE CAR INVENTORY]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
190 Total
Inventory
177 Active
Inventory 206 Total 198 Total 211 Total 203 Total
Inventory Inventory Inventory Inventory
193 Active 185 Active 184 Active 182 Active
Inventory Inventory Inventory Inventory
1994 1995 1996 1997 1998 1999
</TABLE>
- --------------------------------------------------------------------------------
Since 1996, total car inventory has decreased 1% and active car inventory has
decreased 6%, while BNSF moved an additional 1.1 million units, a 15% increase.
- --------------------------------------------------------------------------------
65
<PAGE>
Efficiency
Chart No. 52
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
GTMs/Active Car
1994-1999
[LINE GRAPH OF GTMS/ACTIVE CAR]
In Millions
4.23 3.88 4.19 4.63 4.79
1994 1995 1996 1997 1998 1999
Pro Forma
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Since merger, GTMs per active car have increased about 20%.
- --------------------------------------------------------------------------------
66
<PAGE>
Efficiency
Chart No. 53
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Active Car Velocity
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999
Miles/Day
0 0 132 147 154 170
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In the three years since 1996, active car velocity has increased 29%.
- --------------------------------------------------------------------------------
67
<PAGE>
D. Financial Performance
The increased business brought on by capacity enhancements, improved
service and more efficient operations has led to improved financial performance,
which is key to our continuing to meet our shippers' expectations.
Operating income reached an estimated $2.24 billion in 1999 and has
compounded at a 13.5 percent rate since 1994. Our operating ratio has decreased
9 points since 1994, reflecting the efficiencies and improvements discussed
earlier. Net income has increased at a compounded rate of 16 percent per year.
Earnings per share has increased at a compounded 19 percent rate. When we
announced our merger in 1994, we said that we would spend about $1.5 billion in
capital investment in the first full year of operation. Our steadily improving
financial performance allowed BNSF to exceed that figure in 1996, and we have
spent almost $10 billion in capital for the benefit of its customers in the four
years since the merger. The level of spending and the improvements we have made
are unprecedented in recent rail history and are 2.5 times the amount spent in
the four years prior to the merger.
Of course, all capital spending provides benefits, either direct or
indirect, to shippers. What is especially important for shippers is that in the
four-year period since merger we have spent almost $1.6 billion to increase rail
plant capacity, which directly benefits shippers. Improvements have been made to
all BNSF major routes and have been targeted to improve service for all business
segments, intermodal/ automotive, coal, grain, and merchandise. The
unprecedented acquisition of locomotives in the 1996-99 period, 1407 units for
more than $2 billion, also has benefitted all business segments. An impressive
statistic regarding our locomotive capacity is that since 1995 about 75 percent
68
<PAGE>
Financial Performance
of the road fleet is either new or has undergone rehabilitation. Car overhauls
and acquisitions have for the last two years been running ahead of pre-merger
levels.
Not surprisingly, capital invested in the business has increased
significantly. This increase was deliberate and was done expressly to improve
our ability to take care of shippers. The numbers are staggering -- an increase
in capital invested of 44 percent since 1995. In spite of the increase, returns
on capital have exceeded pre-merger returns in every year. BNSF's current return
on capital of 9.3 percent is above our current blended cost of capital but must
improve, probably by several hundred basis points, if we are to continue to
justify continued capital infusions to our owners.
BNSF's financial position has improved steadily since merger. Our
debt-to-capital ratio has decreased by 420 basis points, and pre-tax interest
coverage has increased by 1.2 times since 1995. BNSF is a solid investment grade
company, and in 1998 we received an upgrade from Standard and Poor's to BBB+.
Free cash flow after dividends, which was increasingly negative since merger,
based on our conscious decision to improve shipper service, improved in 1998 and
was positive in 1999. It should increase significantly in future years.
69
<PAGE>
Financial Performance
Chart No. 54
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Operating Income*
1994 - 1999
[CHART]
1994 1995 1996 1997 1998 1999E
Pro Forma Pro Forma
$ in Billions
1.19 1.53 1.75 1.86 2.16 2.24
* Reflects continuing operations adjusted for special items.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Operating income has increased at a compounded 13.5% rate since 1994.
- --------------------------------------------------------------------------------
70
<PAGE>
Financial Performance
Chart No. 55
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Financial Performance*
Operating Ratio 1994 - 1999
[CHART]
1994 1995 1996 1997 1998 1999E
Pro Forma Pro Forma
84.4 81.0 78.4 77.8 75.9 75.4
* Reflects continuing operations adjusted for special items.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The 9 point drop in operating ratio is worth $820 million, based upon revenues
of $9.1 billion in 1999.
- --------------------------------------------------------------------------------
71
<PAGE>
Financial Performance
Chart No. 56
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Financial Performance*
Net Income 1994 - 1999
[CHART]
1994 1995 1996 1997 1998 1999E
Pro Forma Pro Forma
$ in Millions
543 733 889 942 1,123 1,130
* Reflects continuing operations adjusted for special items.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net income has increased at a compounded 16% rate since 1994.
- --------------------------------------------------------------------------------
72
<PAGE>
Financial Performance
Chart No. 57
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Financial Performance*
Earnings per Share (Diluted) 1994 - 1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma Consensus
$1.03 $1.61 $1.91 $2.00 $2.36 $2.41
* Reflects continuing operations adjusted for special items.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Earnings per share has increased at a compounded 19% rate since 1994.
- --------------------------------------------------------------------------------
73
<PAGE>
Financial Performance
Chart No. 58
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Capital Spending
1994-1999
[CHART]
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
$ in Millions
1,493 1,761 2,334 2,258 2,520 2,265
- --------------------------------------------------------------------------------
Capital spending in the 1996-1999 period is roughly 2.5 times capital spending
in the 4 previous years. In the 1996-1999 time period, almost $1.6 billion has
been spent on expansion projects.
- --------------------------------------------------------------------------------
74
<PAGE>
Financial Performance
75
<PAGE>
Financial Performance
Chart No. 59
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Top Capital Investments
1994-1999
[MAP OF USA]
Stampede Pass $135M
Hi-Line Double Track $127M
Double/Triple Track Coal Loop $334M
Transcon - Double Track/Signaling $500M
Willow Springs/Corwith Intermodal $108M
Argentine Yard Carload $104M
Los Angeles/Hobart Yard Intermodal $122M
Alliance Yard Intermodal/Carload $63M
UPSP Purchase $151M
- --------------------------------------------------------------------------------
BNSF has made significant investments in yards and facilities across its system.
- --------------------------------------------------------------------------------
76
<PAGE>
Financial Performance
Chart No. 60
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Investments to Improve Customer Service
1996-1999
Total Average/Year % of Total
----------- -------------- ------------
Rail retied (track miles) 11,500 2,875 28
Rail relayed (track miles) 3,200 800 8
Resurfacing (track miles) 47,300 11,825 116
New rail (miles)* 496 124 12
Additional intermodal life capacity 924,000 231,000 11
Locomotives acquired 1,407 352 41
*Double and triple track
- --------------------------------------------------------------------------------
BNSF has made significant on-going investments in track, rail and intermodal
capacity.
- --------------------------------------------------------------------------------
77
<PAGE>
Financial Performance
Chart No. 61
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Locomotives Acquired and Overhauled
1994-1999
[LINE GRAPH OF LOCOMOTIVES ACQUIRED AND OVERHAULED]
<TABLE>
<S> <C> <C> <C> <C> <C>
339 Overhauled 354 Overhauled 515 Overhauled 487 Overhauled 455 Overhauled 436 Overhauled
210 Acquired 254 Acquired 226 Acquired 299 Acquired 407 Acquired 476 Acquired
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
</TABLE>
- --------------------------------------------------------------------------------
BNSF has spent more than $2 billion to acquire locomotives in the 4 years since
merger. The 1407 new locomotives and 1850 locomotives overhauled are about 75%
of the current road fleet.
- --------------------------------------------------------------------------------
78
<PAGE>
Financial Performance
Chart No. 62
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Cars Acquired and Overhauled
1994-1999
[LINE GRAPH OF CARS ACQUIRED AND OVERHAULED]
<TABLE>
<S> <C> <C> <C> <C> <C>
3,103 Acquired 3,632 Acquired 543 Acquired 705 Acquired 4,159 Acquired 5,231 Acquired
1,249 Overhauled 1,059 Overhauled 394 Overhauled 1,368 Overhauled 2,700 Overhauled 2,329 Overhauled
1994 1995 1996 1997 1998 1999
Pro Forma Pro Forma
</TABLE>
- --------------------------------------------------------------------------------
During the first 2 years after the merger, BNSF concentrated its capital on main
line capacity improvements and locomotives. In the last 2 years, car
acquisitions and overhauls have exceeded pre-merger levels.
- --------------------------------------------------------------------------------
79
<PAGE>
Financial Performance
Chart No. 63
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Financial Performance*
Total Invested Capital 1994 - 1999
[CHART]
1994 1995 1996 1997 1998 1999E
Pro Forma Pro Forma
$ in Billions
11.4 11.3 12.7 14.4 15.6 16.3
*Reflects continuing operations adjusted for special items.
Invested capital has increased 44% since merger.
80
<PAGE>
Financial Performance
Chart No. 64
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Financial Performance*
Return on Invested Capital 1994 - 1999
[CHART]
1994 1995 1996 1997 1998 1999E
Pro Forma Pro Forma
7.2 9.1 9.8 9.3 9.7 9.3
* Reflects continuing operations adjusted for special items.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Return on invested capital is slightly better than 1995 in spite of the 44%
increase in invested capital.
- --------------------------------------------------------------------------------
81
<PAGE>
Financial Performance
Chart No. 65
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Financial Performance*
Pre-Tax Interest Coverage 1994 - 1999
[CHART]
1994 1995 1996 1997 1998 1999E
Pro Forma Pro Forma
4.3 4.5 5.8 5.3 6.0 5.7
* Reflects continuing operations adjusted for special items.
- --------------------------------------------------------------------------------
Even with record company spending and a stock buyback initiated in 1998, pre-tax
interest coverage has improved since merger.
- --------------------------------------------------------------------------------
82
<PAGE>
Financial Performance
Chart No. 66
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Financial Performance*
Debt to Capital Ratio 1994 - 1999
[CHART]
1994 1995 1996 1997 1998 1999E
Pro Forma Pro Forma
32.9 45.7 44.1 43.7 41.3 41.5
* Reflects continuing operations adjusted for special items.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Since merger, debt to capital has dropped by 420 basis points. The company is
solid investment grade and in 1998 Standard and Poor's upgraded BNSF from BBB to
BBB+.
- --------------------------------------------------------------------------------
83
<PAGE>
Financial Performance
Chart No. 67
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Financial Performance*
Free Cash Flow, After Dividends 1994 - 1999
[CHART]
1994 1995 1996 1997 1998 1999E
Pro Forma Pro Forma
$ in Millions
-25 -110 -557 -701 -398 260
- --------------------------------------------------------------------------------
Negative free cash flow of $1.656 billion in the first 3 years after merger
reflects the capital program undertaken to provide shippers with improved
service. Cash flow turned positive in 1999, and should increase significantly in
future years.
- --------------------------------------------------------------------------------
84
<PAGE>
**************
Any statements in this presentation concerning future economic
performance or business outlook, predictions or expectations of financial or
operational results, and other expressions as to matters which are not
historical facts, are "forward-looking statements" within the meaning of the
federal securities laws. Forward-looking statements involve a number of risks
and uncertainties that could cause actual results to differ materially from
those projected in those statements. Important factors that could cause such
differences include, but are not limited to, general economic downturns, which
may limit demand and pricing; changes in fuel prices; labor matters and
stoppages, which may affect the costs and feasibility of operations; competition
and commodity concentrations, which may affect traffic and pricing levels;
severe weather conditions and natural occurrences such as floods and
earthquakes; regulatory and political developments, including the process of, or
conditions imposed in connection with, obtaining regulatory approvals for the
proposed combination with Canadian National Railway Company (CN) and the ability
of the combined companies to realize the synergies expected as a result of the
proposed combination. The Company assumes no obligation to update forward-
looking information to reflect actual results or changed assumptions or other
factors. We refer you to the documents that BNSF files from time to time with
the U.S. Securities and Exchange Commission, such as reports on Form 10-K, Form
10-Q, and Form 8-K, and the registration statement for the securities to be
issued in the proposed combination that has been filed by North American
Railways, Inc. and CN, which contain additional important factors that could
cause results to differ from current expectations and the forward-looking
statements contained in this presentation.
North American Railways, Inc. and CN have filed a registration
statement on Form F-4/S-4 with the Securities and Exchange Commission (SEC) in
connection with the securities to be issued in the combination. The registration
statement has not been declared effective. This filing also includes the
preliminary proxy statement for the shareholders meetings to be held for
approval of the combination. Investors should read this document, and other
documents filed with the SEC by BNSF, CN and North American Railways, Inc.
regarding the combination, because they contain important information. These
documents may be obtained for free at the SEC's Web site, www.sec.gov. Other
filings made by BNSF on Forms 10-K, 10-Q and 8-K may be obtained for free from
the BNSF Corporate Secretary's office at (817) 352-6856. Other filings made by
CN on Forms 40-F and 6-K may be obtained for free from the CN Corporate
Secretary's office at (514) 399-6569. For information concerning participants in
BNSF's solicitation for proxies for approval of the combination, see "Certain
Information Concerning Participants" filed by BNSF under SEC Rule 14a-12.
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