<PAGE> COVER
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ___________ to ___________
Commission File Number 1-7817
MISSOURI PACIFIC RAILROAD COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 43-1118635
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1416 Dodge Street, Omaha, Nebraska 68179
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (402) 271-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- -------------------------
Missouri Pacific Railroad Company New York Stock Exchange
4-1/4% First Mortgage Bonds
due 2005
Missouri Pacific Railroad Company New York Stock Exchange
4-3/4% General (Income) Mortgage Bonds
due 2020 and 2030
Missouri Pacific Railroad Company New York Stock Exchange
5% Debentures due 2045
Texas and Pacific Railway Company New York Stock Exchange
5% First Mortgage Bonds due 2000
Missouri-Kansas-Texas Railroad Company New York Stock Exchange
5-1/2% Subordinated Income Debentures due 2033
Securities registered pursuant to Section 12(g) of the Act: None
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1) (a) AND
(b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE
FORMAT.
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ].
None of the Registrant's voting stock is held by non-affiliates. Registrant is
a wholly-owned, indirect subsidiary of Union Pacific Corporation.
As of March 3, 1994, the Registrant had outstanding 920 shares of Common Stock,
$1 par value, and 80 shares of Class A Stock, $1 par value.
DOCUMENTS INCORPORATED BY REFERENCE - None
<PAGE> 1
PART I
Item 1. Business
Missouri Pacific Railroad Company (the "Registrant") includes the
Registrant, a Class I Railroad incorporated in Delaware and a wholly-owned,
indirect subsidiary of Union Pacific Corporation (the "Corporation"), as well as
a number of wholly-owned and majority-owned subsidiaries of the Registrant
engaged in various railroad and related operations, and various terminal
companies in which the Registrant has minority interests. In addition to its
railroad operations, the Registrant performs truck freight services through its
wholly-owned subsidiary, Union Pacific Motor Freight Company ("UPMF").
The Registrant operates in the midwestern and southwestern states of
Arkansas, Colorado, Illinois, Kansas, Louisiana, Missouri, Nebraska, Oklahoma,
Tennessee and Texas. The Registrant maintains coordinated schedules with other
carriers for the handling of freight to and from the Atlantic seaboard, the
Pacific Coast, the Southeast, the Southwest, Canada and Mexico. Export and
import traffic is moved through Gulf Coast ports and across the Texas-Mexico
border. The Registrant's operations have been coordinated with those of Union
Pacific Railroad Company ("UPRR"), another wholly-owned, indirect subsidiary of
the Corporation. The two railroads operate as a unified system. See Note 2 to
the Registrant's financial statements for information on related party
transactions.
In 1993, the Registrant had transportation revenues of $2.1 billion,
approximately 98.2 percent of which were derived from rail freight operations.
Percentages of revenue ton-miles ("RTM") and rail freight revenue for major
commodities during 1993, 1992 and 1991 were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------------- ---------------- ----------------
Freight Freight Freight
RTM Revenue RTM Revenue RTM Revenue
------ ------- ------ ------- ------ -------
(Percent of Total)
<S> <C> <C> <C> <C> <C> <C>
Energy 29.0% 14.8% 26.7% 14.6% 29.2% 15.7%
Chemicals 22.3 29.1 22.6 30.1 22.6 29.9
Metals/Minerals/
Forest 17.7 20.2 19.0 20.6 18.4 20.0
Grain and Grain
Products 16.7 10.9 17.5 11.0 16.2 10.6
Intermodal 5.2 7.4 5.0 6.5 5.1 7.1
Automotive 4.6 12.1 4.4 11.7 3.7 11.0
Food/Consumer/
Government 4.5 5.5 4.8 5.5 4.8 5.7
------ ------ ------ ------ ------ ------
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ====== ======
Amount in
Billions 82.3 $2.059 78.2 $2.045 76.7 $1.984
</TABLE>
<PAGE> 2
The Registrant's trucking subsidiary principally serves rail
movements. UPMF has authority from the Interstate Commerce Commission ("ICC")
to operate between all points in the continental United States and also has
nationwide authority to provide contract services for the Corporation's motor
carrier broker, Union Pacific Freight Services Company.
Competition
- -----------
In its rail transportation business, the Registrant is subject to
competition from other railroads, motor carriers and barge operators. Most of
its railroad operations are conducted in corridors served by competing railroads
and by motor carriers. Motor carrier competition has been strengthened by
longer combination vehicles which are now allowed in a number of states in which
the Registrant operates. Because of the proximity of the Registrant's routes to
major inland and Gulf Coast waterways, seasonal barge competition can be
particularly pronounced.
Employees
- ---------
As is true with employees of all the principal railroads in the
country, the majority of the Registrant's employees are organized along craft
lines and represented by national labor unions. The Registrant continues to
adapt agreements from the previous round of national negotiations to meet local
requirements throughout its system. The Registrant has negotiated the ability
to operate all through-freight trains with two-person crews, and is currently
modifying operations to take full advantage of this ability.
On December 31, 1994, all outstanding labor contracts will reopen for
negotiation. Discussions concerning the Registrant's notices for contract
revisions will begin in October. The negotiations will likely continue through
1995 and management is optimistic that they will be completed in an expeditious
manner.
Governmental Regulation
- -----------------------
The Registrant's operations are subject to the regulatory
jurisdiction of the ICC, other Federal agencies and various state agencies. The
ICC has jurisdiction over rates charged on certain regulated traffic, freight
car compensation, issuance or guarantee of railroad and certain railroad holding
company securities, extension or abandonment of rail lines, and acquisitions of
control of rail common carriers and motor carriers by rail common carriers.
Other Federal agencies have jurisdiction over safety, movement of hazardous
materials, movement and disposal of hazardous waste, and equipment standards.
The state agencies regulate intrastate freight rates to the extent that they
have adopted Federal standards and procedures and continue to follow such
procedures. However, several states in which railroad operations are conducted
have ceded intrastate rail rate regulation to the ICC. Various state and local
agencies also have jurisdiction over disposal of hazardous wastes and seek to
regulate movement of hazardous materials.
<PAGE> 3
Item 2. Properties
Operating Equipment
- -------------------
At December 31, 1993 the Registrant owned or leased from others 1,264
locomotives, 29,953 freight cars and 2,003 units of work equipment.
Substantially all of the Registrant's railroad rolling stock is subject to the
liens of the Registrant's First Mortgage and General (Income) Mortgage as well
as the lien of the First Mortgage of the Texas and Pacific Railway Company, its
predecessor in interest (collectively the "Mortgages"). In addition, a portion
of this property is subject to various equipment obligations which are superior
to the liens of one or more of the Mortgages.
In connection with its motor freight operations, the Registrant
operated 92 tractors, 42 rampers, and 928 trailers at December 31, 1993.
Rail Property
- -------------
The Registrant operates approximately 9,700 miles of track, including
8,000 miles of main line and 1,700 miles of branch line. Approximately 10
percent of the main line track consists of trackage rights over track owned by
others. The Registrant's right-of-way and tracks are subject to one or more of
the Mortgages.
Item 3. Legal Proceedings
Registered Income Certificates
- ------------------------------
On June 7, 1991, Timothy O. Stuy, purporting to represent a class of all
certificateholders, filed an action in the United States District Court for the
District of Delaware (Civil Action No. 91-322) against the Registrant with
respect to the Certificates Representing a Charge on Income, dated January 1,
1958 (the "Certificates"), which had been issued by The Missouri-Kansas-Texas
Railroad Company (the "Katy"). The Registrant acquired the Katy in 1988 and
assumed the Katy's obligations with respect to the Certificates at that time.
The lawsuit asserted, among other things, that certain contingent sinking fund
payments were not made as a result of allegedly improper modifications to the
terms of the Certificates and other actions by the defendant, and sought an
unspecified amount of damages and injunctive relief. The Certificate
modifications were approved by the ICC in connection with the Katy acquisition.
The lawsuit was stayed pending resolution of a lawsuit previously filed in the
Delaware District Court that raised similar issues with respect to the Katy's
5 1/2% Subordinated Income Debentures due January 1, 2033 (the "Debentures").
In response to motions filed by the Registrant and other defendants, the
Debenture lawsuit was dismissed by the District Court for lack of subject matter
jurisdiction. On November 17, 1993, the Registrant filed a motion to dismiss
the Certificate lawsuit on similar grounds. On February 16, 1994, a Stipulation
and Order of Dismissal was entered by the District Court dismissing the
Certificate lawsuit with prejudice to the named plaintiff.
<PAGE> 4
Environmental
- -------------
In October 1992, the Registrant received a Complaint and Notice of
Opportunity for Hearing from Region VIII of the Environmental Protection Agency
("EPA") alleging various violations of the Toxic Substances Control Act at the
Clive, Utah and Timpe, Utah transfer facilities owned by USPCI, Inc., an
affiliate of the Registrant, including the failure to properly mark railcars
containing polychlorinated biphenyls ("PCB"), failure to properly dispose of PCB
waste, failure to properly contain or store PCB waste, and failure to properly
manifest PCB waste. The Complaint includes a proposed penalty totalling
$295,000. The Registrant has met with the EPA and expects to settle these
alleged violations for substantially less than the initial penalty demand.
In December 1992, the Texas Natural Resources Conservation Commission
("TNRCC") served the Registrant with a Notice of Violation for alleged
discharges and fuel spills at the Registrant's San Antonio, Texas railyard. The
TNRCC proposed penalties totalling $500,000. The Registrant and the TNRCC have
tentatively settled this matter for a penalty payment of $300,000 plus the
implementation of certain environmental projects in Texas costing $275,000.
In addition to the foregoing, the Registrant has received notices
from the EPA and state environmental agencies alleging that it is or may be
liable under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 and/or other Federal or state environmental legislation
for the remediation costs associated with alleged contamination or for
violations of environmental requirements at various sites throughout the United
States. There are approximately 12 sites for which such notices have been
received which are on the Superfund National Priorities List or state superfund
lists. Although specific claims have been made by the EPA and state regulators
with respect to some of these sites, the ultimate impact of these proceedings
and suits by third parties cannot be predicted at this time because of the
number of potentially responsible parties involved, the degree of contamination
by various wastes, the scarcity and quality of volumetric data related to many
of the sites and/or the speculative nature of remediation costs. Nevertheless,
at some of the superfund sites, the Registrant believes it will have little or
no exposure because no liability should be imposed under applicable law, one or
more other financially able parties generated all or most of the contamination,
or a settlement of the Registrant's exposure has been reached although
regulatory proceedings at the sites involved have not been formally terminated.
While the ultimate cost of resolution of the foregoing issues cannot
be fully determined, the Registrant does not believe that the resolution of such
issues will materially affect the Registrant's financial condition or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
Omitted in accordance with General Instruction J of Form 10-K.
<PAGE> 5
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
All of the Common Stock and Class A Stock of the Registrant is owned
by a wholly-owned indirect subsidiary of the Corporation. Accordingly, there is
no market for the Registrant's capital stock. Dividends on the Registrant's
Common Stock, which are paid on a quarterly basis, totalled $90 million in 1993
and $70 million in 1992. Through 1993, no dividends had been declared or paid
on the Registrant's Class A Stock; however, a $3.4 million special cash dividend
will be paid on the Class A Stock in 1994. See Notes 6 and 8 to the
Registrant's financial statements for a discussion of dividend restrictions on
the Common Stock and Class A Stock.
Item 6. Selected Financial Data
Omitted in accordance with General Instruction J of Form 10-K.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Omitted in accordance with General Instruction J of Form 10-K. In
lieu thereof, a narrative analysis is presented on Pages F-17 and F-18.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary information related
thereto, listed on the Index to Financial Statements, are incorporated herein by
reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Omitted in accordance with General Instruction J of Form 10-K.
Item 11. Executive Compensation
Omitted in accordance with General Instruction J of Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Omitted in accordance with General Instruction J of Form 10-K.
Item 13. Certain Relationships and Related Transactions
Omitted in accordance with General Instruction J of Form 10-K.
<PAGE> 6
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) and (2) Financial Statements and Schedules
See Index to Financial Statements.
(a) (3) Exhibits
(3)(a) - Registrant's Certificate of Incorporation,
amended effective as of August 12, 1988, is
incorporated herein by reference to Exhibit 3(i)
to the Registrant's Report on Form 10-Q for the
quarter ended June 30, 1988.
(3)(b) - Registrant's By-laws, amended effective as of
September 1, 1992, are incorporated herein by
reference to Exhibit 3 to the Registrant's Report
on Form 10-Q for the quarter ended September 30,
1992.
(4) - Pursuant to various indentures and other
agreements, the Registrant has issued long-term
debt, but no such agreement has securities or
obligations covered thereby which exceed 10% of
consolidated assets. The Registrant agrees to
furnish a copy of any such indenture or agreement
to the Securities and Exchange Commission upon
request.
(24) - Powers of attorney executed by the directors of
the Registrant.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the
quarter ended December 31, 1993.
<PAGE> 7
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on this 29th day of
March, 1994.
MISSOURI PACIFIC RAILROAD COMPANY
By /s/ Richard K. Davidson
-------------------------------------
(Richard K. Davidson,
Chairman and Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below, on this 29th day of March, 1994, by the
following persons on behalf of the Registrant and in the capacities indicated.
By /s/ Richard K. Davidson
------------------------------------
(Richard K. Davidson,
Chairman and Chief Executive Officer
and a Director)
/s/ L. White Matthews, III
------------------------------------
(L. White Matthews, III,
Chief Financial Officer)
/s/ James R. Young
------------------------------------
(James R. Young,
Vice President-Finance)
/s/ Charles E. Billingsley
------------------------------------
(Charles E. Billingsley,
Chief Accounting Officer)
<PAGE> 8
SIGNATURES - (Continued)
Robert P. Bauman* Drew Lewis*
Richard B. Cheney* Richard J. Mahoney*
E. Virgil Conway* Claudine B. Malone*
Spencer F. Eccles* John R. Meyer*
Elbridge T. Gerry, Jr.* Thomas A. Reynolds, Jr.*
William H. Gray III* James D. Robinson III*
Judith R. Hope* Robert W. Roth*
Lawrence M. Jones* Richard D. Simmons*
* By /s/ Judy L. Swantak
-----------------------------------
(Judy L. Swantak, Attorney-in-fact)
<PAGE> F-1
MISSOURI PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
INDEX TO FINANCIAL STATEMENTS
Page
------
Independent Auditors' Report F-2
Financial Statements:
Statement of Consolidated Financial Position -
December 31, 1993 and 1992 F-3 - F-4
Statement of Consolidated Income and Retained
Earnings - For the Years Ended December 31, 1993,
1992 and 1991 F-5
Statement of Consolidated Cash Flows - For the Years
Ended December 31, 1993, 1992 and 1991 F-6
Accounting Policies F-7
Notes to Consolidated Financial Statements F-8 - F-13
Financial Statement Schedules - For the Years Ended
December 31, 1993, 1992 and 1991:
V Property, Plant and Equipment F-14
VI Accumulated Depreciation and Amortization
of Properties F-15
X Supplementary Income Statement Information F-16
Management's Narrative Analysis of the
Results of Operations F-17 - F-18
Schedules other than those listed above are omitted because they are not
applicable or the required information is set forth in the financial
statements referred to above.
<PAGE> F-2
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Missouri Pacific Railroad Company
Omaha, Nebraska
We have audited the accompanying statements of consolidated financial position
of Missouri Pacific Railroad Company (a wholly-owned indirect subsidiary of
Union Pacific Corporation) and subsidiary companies (the "Registrant") as of
December 31, 1993 and 1992, and the related statements of consolidated income
and retained earnings and of consolidated cash flows for each of the three
years in the period ended December 31, 1993. Our audits also included the
financial statement schedules listed in the foregoing index to financial
statements. These financial statements and financial statement schedules are
the responsibility of the Registrant's management. Our responsibility is to
express an opinion on the financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Registrant at December 31,
1993 and 1992, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles. Also, in our opinion, such
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, the
Registrant changed its method of accounting for postretirement benefits other
than pensions, income taxes and transportation revenue and expense recognition
in January 1993.
/s/ DELOITTE & TOUCHE
Omaha, Nebraska
January 20, 1994
<PAGE> F-3
<TABLE>
<CAPTION>
MISSOURI PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
December 31, 1993 and 1992
(Thousands of Dollars)
ASSETS
1993 1992
---------- ----------
<S> <C> <C>
Current Assets:
Cash and temporary investments........... $ 7,131 $ 2,673
Accounts receivable - net (Note 4)....... 84,425 66,074
Materials and supplies................... 83,563 82,877
Other current assets..................... 72,293 63,120
Deferred Federal income taxes (Note 5)... 63,823 66,797
---------- ----------
Total Current Assets.................. 311,235 281,541
---------- ----------
Investments:
Investments in and advances to
affiliated companies.................. 42,588 41,079
Other investments........................ 12,743 12,651
---------- ----------
Total Investments..................... 55,331 53,730
---------- ----------
Properties, at cost (Notes 6 and 7):
Road..................................... 4,021,672 3,777,554
Equipment................................ 1,760,363 1,762,634
Other.................................... 76,050 74,733
---------- ----------
Total Properties...................... 5,858,085 5,614,921
Less accumulated depreciation and
amortization.......................... 1,752,358 1,664,409
---------- ----------
Properties - net...................... 4,105,727 3,950,512
---------- ----------
Intangible and Other Assets - net........... 82,787 87,454
---------- ----------
Total Assets.......................... $4,555,080 $4,373,237
========== ==========
The accompanying accounting policies and notes to consolidated financial
statements are an integral part of these statements.
</TABLE>
<PAGE> F-4
<TABLE>
<CAPTION>
MISSOURI PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
December 31, 1993 and 1992
(Thousands of Dollars)
LIABILITIES AND STOCKHOLDER'S EQUITY
1993 1992
---------- ----------
<S> <C> <C>
Current Liabilities:
Accounts payable........................... $ 26,266 $ 33,904
Accrued wages and vacation................. 125,974 119,845
Income and other taxes payable (Note 5).... 86,541 107,897
Interest payable........................... 17,525 20,990
Restructuring reserve (Note 3)............. 67,000 81,800
Debt due within one year (Notes 6 and 7)... 53,253 59,805
Due to affiliated companies - net (Note 2). 796,523 609,107
Casualty and other reserves................ 109,769 110,406
Other current liabilities.................. 93,669 91,979
---------- ----------
Total Current Liabilities............... 1,376,520 1,235,733
---------- ----------
Debt Due After One Year (Notes 6 and 7)....... 433,438 542,746
Deferred Income Taxes (Notes 1 and 5). 1,209,390 1,101,094
Retiree Benefit Obligations................... 160,564 48,761
Restructuring Reserve (Note 3)................ 44,432 140,629
Other Liabilities............................. 183,830 141,135
Stockholder's Equity (Notes 6 and 8):
Common stock - $1.00 par value; 920 shares
authorized and outstanding................ 1 1
Class A stock - $1.00 par value; 80
shares authorized and outstanding......... - -
Capital surplus............................ 205,342 205,342
Retained earnings.......................... 941,563 957,796
---------- ----------
Total Stockholder's Equity.............. 1,146,906 1,163,139
---------- ----------
Total Liabilities and
Stockholder's Equity................. $4,555,080 $4,373,237
========== ==========
The accompanying accounting policies and notes to consolidated financial
statements are an integral part of these statements.
</TABLE>
<PAGE> F-5
<TABLE>
<CAPTION>
MISSOURI PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED INCOME AND RETAINED EARNINGS
For the Years Ended December 31, 1993, 1992 and 1991
(Thousands of Dollars)
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Operating Revenues (Note 1)............ $2,149,104 $2,129,999 $2,085,187
---------- ---------- ----------
Operating Expenses (Note 2):
Salaries, wages and employee
benefits......................... 783,907 789,051 785,058
Equipment and other rents........... 220,738 219,527 238,531
Depreciation and amortization....... 206,987 204,264 195,497
Fuel and utilities.................. 152,091 154,792 159,248
Materials and supplies.............. 125,303 127,974 130,211
Other costs......................... 249,945 276,404 280,664
Special charge (Note 3)............. - - 366,000
---------- ---------- ----------
Total............................ 1,738,971 1,772,012 2,155,209
---------- ---------- ----------
Operating Income (Loss)................ 410,133 357,987 (70,022)
Other Income........................... 37,843 52,118 23,361
Interest Expense (Notes 2 and 6)....... (103,848) (120,005) (123,064)
---------- ---------- ----------
Income (Loss) Before Income Taxes and
the Cumulative Effect of Accounting
Changes............................. 344,128 290,100 (169,725)
Income Taxes (Note 5).................. 145,193 98,868 (62,118)
---------- ---------- ----------
Income (Loss) Before Cumulative Effect
of Changes in Accounting Principles. 198,935 191,232 (107,607)
Cumulative Effect to January 1, 1993 of
Changes in Accounting Principles
(Note 1)............................ (125,168) - -
---------- ---------- ----------
Net Income (Loss)................ $ 73,767 $ 191,232 $ (107,607)
========== ========== ==========
Retained Earnings:
Beginning of year................... $ 957,796 $ 836,564 $1,004,171
Net Income (Loss)................... 73,767 191,232 (107,607)
Dividends to parent (Notes 6 and 8). (90,000) (70,000) (60,000)
---------- ---------- ----------
End of year......................... $ 941,563 $ 957,796 $ 836,564
========== ========== ==========
The accompanying accounting policies and notes to consolidated financial statements
are an integral part of these statements.
</TABLE>
<PAGE> F-6
<TABLE>
<CAPTION>
MISSOURI PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED CASH FLOWS
For the Years Ended December 31, 1993, 1992 and 1991
(Thousands of Dollars)
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Net Income (Loss)............................. $ 73,767 $ 191,232 $(107,607)
Non-Cash Charges to Income:
Depreciation and amortization.............. 206,987 204,264 195,497
Deferred income taxes...................... 66,772 38,916 (20,294)
Cumulative effect of changes in accounting
principles (Note 1).................... 125,168 - -
Special charge (Note 3).................... - - 366,000
Other non-cash charges (credits)........... 18,344 (94,807) (174,817)
Changes in current assets and liabilities..... (71,865) 100,328 118,588
Cash used for special charge.................. (88,750) (47,345) (12,226)
--------- --------- ---------
Cash from Operations....................... 330,423 392,588 365,141
--------- --------- ---------
Investing Activities:
Capital investments........................ (315,192) (266,902) (196,462)
Other - net................................ (2,870) 84,462 (2,792)
--------- --------- ---------
Cash Used for Investing Activities......... (318,062) (182,440) (199,254)
--------- --------- ---------
Financing Activities:
Debt repaid................................ (105,319) (74,080) (103,151)
Dividends paid to parent................... (90,000) (70,000) (60,000)
Advances (to) from affiliated
companies - net.......................... 187,416 (77,024) 1,960
Other...................................... - 4,428 -
--------- --------- ---------
Cash Used in Financing Activities.......... (7,903) (216,676) (161,191)
--------- --------- ---------
Change in Cash and Temporary
Investments.............................. $ 4,458 $ (6,528) $ 4,696
========= ========= =========
Changes in Current Assets and Liabilities:
Accounts receivable........................ $ (18,351) $ (3,768) $ 37,209
Materials and supplies..................... (686) (11,755) 827
Federal income tax benefit................. - 23,637 26,177
Other current assets....................... (9,173) (13,170) 4,682
Deferred Federal income taxes.............. 2,974 9,253 (6,866)
Accounts payable........................... (7,638) 7,788 541
Other current liabilities.................. (38,991) 88,343 56,018
--------- --------- ---------
Total...................................... $ (71,865) $ 100,328 $ 118,588
========= ========= =========
The accompanying accounting policies and notes to consolidated financial statements
are an integral part of these statements.
</TABLE>
<PAGE> F-7
MISSOURI PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Missouri Pacific
Railroad Company and all subsidiaries (the "Registrant"). The Registrant is a
wholly-owned, indirect subsidiary of Union Pacific Corporation (the
"Corporation"). Investments in affiliated companies (20% to 50% owned) are
accounted for on the equity method. All material intercompany transactions are
eliminated.
MATERIALS AND SUPPLIES
Materials and supplies are carried at the lower of average cost or market.
REVENUE RECOGNITION
Transportation revenues are recognized on a percentage-of-completion basis,
while delivery costs are recognized as incurred (See Note 1).
PROPERTIES
Properties are stated at cost. Upon sale or retirement of units of depreciable
operating property, gains and losses are charged to accumulated depreciation.
With respect to all other property sold or retired (principally land sold for
industrial development or as surplus property), cost and any related accumulated
depreciation are removed from the accounts and gain or loss is recognized upon
disposition.
DEPRECIATION
Provisions for depreciation are computed principally on the straight-line method
based on estimated service lives of depreciable properties.
INTANGIBLE ASSETS
Intangible and other assets include the cost in excess of fair value of net
assets of acquired businesses associated with the Registrant's 1988 purchase of
The Missouri-Kansas-Texas Railroad Company (the "Katy"). Amortization is
recorded over 40 years on a straight-line basis. The Registrant regularly
assesses the recoverability of costs in excess of net assets of acquired
businesses through a review of cash flows and fair values of such businesses.
HEDGING TRANSACTIONS
The Registrant periodically hedges hydrocarbon purchases. Gains and losses from
these transactions are recognized upon receipt of the commodity.
CHANGE IN PRESENTATION
Certain prior year amounts have been reclassified to conform with the 1993
financial presentation.
<PAGE> F-8
MISSOURI PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting Changes
In January 1993, the Registrant adopted the following accounting changes with a
cumulative after-tax charge to earnings of $125.2 million.
Other Postretirement Benefits ("OPEB")
Statement of Financial Accounting Standards ("SFAS") No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions", requires that the
cost of non-pension benefits for retirees be accrued during their period of
employment. The adoption of this Statement will not affect future cash funding
requirements for these benefits. The OPEB component of the cumulative effect
adjustment is a $73.5 million charge. See Note 9.
Income Taxes
SFAS No. 109, "Accounting For Income Taxes", requires the balance sheet approach
of accounting for income taxes, whereby assets and liabilities are recorded at
the tax rates currently enacted. The Registrant's results were not
significantly affected by the adoption of this Statement; however, future
results may be affected by changes in the corporate income tax rate. 1993's
income tax expense (before accounting changes) rose $26.5 million as a result of
the Omnibus Budget Reconciliation Act of 1993 (the "1993 Tax Act") (See Note 5).
The income tax component of the cumulative effect adjustment is a $42.2 million
charge.
Revenue Recognition
The Registrant changed its method of transportation revenue and expense
recognition from accruing both revenues and expenses at the inception of service
to the industry practice of allocating revenues between reporting periods based
on relative transit time, while recognizing expenses as incurred. The
Registrant's results were not, and are not expected to be, significantly
affected by this accounting change. The revenue recognition component of the
cumulative effect adjustment is a $9.5 million charge.
2. Related Party Transactions
The Registrant is an affiliate of Union Pacific Railroad Company ("UPRR") and
has significant interline rail shipments, equipment rents, and fuel and diesel
power exchanges with that railroad. These transactions are settled in a manner
similar to that used for comparable transactions with nonaffiliated railroads.
Balances representing interline receivables and payables with UPRR are
classified as due to affiliated companies.
Certain management and staff functions of the Registrant have been combined with
those of UPRR. In addition, the affiliated railroads have centralized
purchasing and disbursing functions which are handled by UPRR. Also, repairs to
locomotives and freight cars are made on a system-wide basis without regard to
ownership or usage. Marketing, administrative and other expenses (including,
but not limited to, those discussed above) are allocated to the Registrant based
on revenue contribution, gross ton-miles or time in service.
A summary of directly-incurred and allocated costs included in operating
expenses (excluding the 1991 special charge - see Note 3) is as follows:
<TABLE>
<CAPTION>
(Millions of Dollars) 1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Directly-incurred..................... $1,339.0 $1,392.2 $1,412.0
Allocated............................. 400.0 379.8 377.2
-------- -------- --------
Total................................. $1,739.0 $1,772.0 $1,789.2
======== ======== ========
</TABLE>
<PAGE> F-9
Amounts due to and from affiliates, including the Corporation, bear interest at
an annually determined rate which considers the Corporation's cost of debt. Net
intercompany interest expense on such amounts was $65.5 million, $71.1 million,
and $65.9 million in 1993, 1992 and 1991, respectively.
3. Special Charge
In 1991, the Corporation announced a major restructuring program, including a
$366 million pretax ($241 million after-tax) charge relating to the Registrant.
Of the pretax amount, $221 million represented a provision for severance
payments and other costs associated with the reduction in the size of train
crews and administrative personnel. The remaining $145 million was for costs
related to the disposition of light density rail lines. The Registrant spent
$88.8 million and $47.3 million in 1993 and 1992, respectively, relating to the
restructuring program.
4. Accounts Receivable
The Registrant has sold, on a revolving basis, an undivided ownership interest
in a designated pool of the Registrant's accounts receivable to UPRR. The
undivided ownership interest has been sold by UPRR to third parties. Collection
risk on the pool of receivables is minimal. Under the terms of the agreement,
UPRR acts as a collection agent for the Registrant. At both December 31, 1993
and 1992, accounts receivable are presented net of $137 million in proceeds
generated from the receivables sold.
5. Income Taxes
The Registrant is included in the consolidated income tax return of the
Corporation. The consolidated income tax liability of the Corporation is
allocated among the parent and its subsidiaries on the basis of their separate
contributions to the consolidated income tax liability, with full benefit of tax
losses and credits made available through consolidation being allocated to the
individual companies generating such losses and credits.
In August 1993, President Clinton signed the 1993 Tax Act into law raising the
Federal corporate income tax rate to 35 percent from 34 percent retroactive to
January 1. As a result, 1993 income tax expense increased by $26.5 million:
$23.1 million for the one-time non-cash recognition of deferred income taxes
related to prior periods and $3.4 million of incremental current year Federal
income tax expense.
Components of income tax expense for the Registrant are as follows:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1993
--------
<S> <C>
Current: Federal $ 70,619
State 7,802
--------
Total Current 78,421
--------
Deferred: Federal 64,799
State 1,973
--------
Total Deferred 66,772
--------
Total $145,193
========
</TABLE>
Prior years' components of tax expense (benefit) (in thousands), which have not
been restated to reflect the adoption of SFAS No. 109 (see Note 1), were $59,952
in 1992 and $(41,824) in 1991 for current Federal income tax expense and $38,916
in 1992 and $(20,294) in 1991 for deferred Federal income tax expense.
The tax effect of differences in the timing of revenues and expenses for tax and
financial reporting purposes is as follows:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1993
----------
<S> <C>
Net current deferred tax asset -
Restructuring and other reserves... $ (63,823)
----------
Excess tax over book depreciation..... 1,087,992
State taxes - net..................... 114,566
Postretirement benefits............... (40,418)
Special charge........................ (61,173)
Other................................. 108,423
----------
Net long-term deferred tax liability.. 1,209,390
----------
Net deferred tax liability............ $1,145,567
==========
</TABLE>
<PAGE> F-10
A reconciliation between statutory and effective tax rates is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ -------
<S> <C> <C> <C>
Statutory tax rate................... 35.0% 34.0% (34.0)%
Cumulative effect of Federal rate
increase.......................... 6.7 - -
State taxes - net.................... 1.8 - -
Dividend exclusion................... (.6) (.9) (4.3)
Other................................ (.7) .9 1.7
------ ------ -------
Effective tax rate................... 42.2% 34.0% (36.6)%
====== ====== =======
</TABLE>
Payments of income taxes were $101.8 million in 1993. No taxes were paid for
the years 1992 or 1991. The Corporation believes it has adequately provided for
income taxes.
6. Debt
Long-term debt at December 31, 1993 and 1992 is summarized below:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1993 1992
-------- --------
<S> <C> <C>
Mortgage bonds, 4.25% to 5.00%, due through 2030..... $181,380 $183,206
Equipment obligations, 8.45% to 15.50%,
due through 2001.................................. 118,903 172,156
Mortgage, 11.50%, due through 2011................... 4,121 4,161
Notes Payable, Federal Financing Bank, 7.17% to
10.66%, guaranteed by United States of America,
due through 1997.................................. 14,045 16,185
Income debentures, 5.00%, due 2045 and 2054.......... 101,720 101,720
Subordinated income debentures, 5-1/2%, due 2033..... 27,965 51,665
Certificates constituting a charge on income -
non-interest bearing, payable only from available
income............................................ 29,348 29,348
Capitalized leases, 7.25% to 14.00%, due through 2003 31,381 40,814
Convertible installment note, 7.50%, guaranteed by
the Corporation and convertible into the
Corporation's common stock at a conversion price
of $31.68 per share............................... - 24,526
Other................................................ 2,330 206
Unamortized discount................................. (24,502) (21,436)
-------- --------
486,691 602,551
Less: Debt due within one year....................... 53,253 59,805
-------- --------
Total debt due after one year........................ $433,438 $542,746
======== ========
</TABLE>
Maturities of long-term debt (in thousands of dollars) for each year 1994
through 1998 are $53,253, $41,555, $23,652, $22,526 and $7,625, respectively.
Substantially all properties secure the outstanding equipment obligations and
mortgage bonds.
Certain debt agreements impose dividend restrictions on the Registrant. The
amount of retained earnings available for dividends at December 31, 1993 was
$822.2 million. See Note 8 for other dividend restrictions.
<PAGE> F-11
Terms of certain of the Registrant's mortgage bonds, the 5% income debentures
and the 5-1/2% subordinated income debentures require that interest be paid only
from "available income", as defined in the indenture agreements. The mortgage
bonds and 5% income debentures impose sinking fund and other restrictions in the
event all interest is not paid. All interest was paid on the mortgage bonds and
5% income debentures for each of 1993, 1992 and 1991.
The Registrant assumed the 5-1/2% subordinated income debentures (the
"Debentures") in connection with the Katy acquisition. Current interest must be
paid only to the extent that there is available income remaining after
allocation to a capital fund for the purpose of reimbursing the Registrant for
certain capital expenditures. Unpaid interest accumulates to an amount not in
excess of 16-1/2% of the principal amount of the Debentures and is paid only to
the extent that there is available income remaining after payment of the current
interest.
The certificates constituting a charge on income (the "Certificates"), which
were also assumed as part of the Katy acquisition, do not bear interest and
payments to a sinking fund for the Certificates are made only from available
income, as defined in such Certificates. Available income must be applied to
the capital fund, current and accumulated interest on the Debentures and a
sinking fund for the Debentures before any payment is made to the sinking fund
for the Certificates.
Available income of $15.2 million was generated in 1993 with respect to the
Debentures and the Certificates. As a result, an interest payment on the
Debentures of $2.6 million will be made in 1994, representing $1.5 million for
1993 interest and $1.1 million for remaining unpaid accumulated interest. In
addition, $6.9 million of available income will be applied to the capital fund,
$2.3 million will be applied to the sinking funds for the Debentures and the
Certificates, and $3.4 million will be applied as dividends on the Registrant's
Class A stock (See Note 8). Amounts applied to sinking funds may be covered by
the cost of securities previously repurchased by the Registrant or the Katy.
After the 1994 interest payment, all unpaid accumulated interest on the
Debentures will have been paid to debentureholders. Amounts in the capital fund
which are unused or unappropriated for the reimbursement of capital expenditures
may not exceed $4.0 million at any time, and after the application of 1993
available income there will be no unused or unappropriated capital fund balance.
During 1993, $23.7 million of the outstanding Debentures were reacquired,
principally in connection with a lawsuit settlement. In addition, in February
1993, the remaining $25 million of the 7.50% Exchangeable Guaranteed Notes due
2003, which were issued in conjunction with the acquisition of the Katy, were
exchanged for approximately 774,000 shares of the Corporation's common stock.
The Registrant's total interest payments approximate interest expense net of
intercompany interest described in Note 2.
At December 31, 1993, the carrying amount of the Registrant's long and
short-term debt exceeded its fair value by approximately 21%, estimated using
quoted market prices or the Registrant's current borrowing rates.
7. Lease Commitments
The Registrant leases a general office building, computer equipment and
transportation equipment under long-term and contingent lease agreements. The
following amounts relating to capital leases are included in properties:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1993 1992
-------- --------
<S> <C> <C>
Leased properties ......................... $ 88,960 $ 95,445
Accumulated amortization .................. (61,581) (59,744)
-------- --------
Net ....................................... $ 27,379 $ 35,701
======== ========
</TABLE>
Future minimum lease payments for capital and operating leases with initial or
remaining noncancellable lease terms in excess of one year as of December 31,
1993 are as follows:
<PAGE> F-12
<TABLE>
<CAPTION>
Operating Capital
(Thousands of Dollars) Leases Leases
--------- -------
<S> <C> <C>
1994 .................................. $22,048 $ 9,766
1995 .................................. 11,389 8,273
1996 .................................. 8,170 7,244
1997 .................................. 6,424 6,279
1998 .................................. 5,539 3,822
Later years ........................... 33,207 4,630
------- -------
Total minimum lease payments .......... $86,777 40,014
======= -------
Amount representing interest .......... 8,633
-------
Present value of net minimum
capital lease payments .............. $31,381
=======
</TABLE>
A summary of rental expense charged to operations is as follows:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Minimum rentals under long-term
operating leases ..................... $ 22,716 $ 22,907 $ 23,952
Contingent rentals under operating
leases (net):
Transportation equipment............ 213,070 211,405 221,278
Joint facility...................... (3,200) 12,814 22,999
Computer equipment.................. 8,065 6,381 4,651
-------- -------- --------
Total................................... $240,651 $253,507 $272,880
======== ======== ========
</TABLE>
8. Capital Stock
Concurrently with the acquisition of the Katy, 80 shares of the Registrant's
$1.00 par value common stock were exchanged for 80 shares of $1.00 par value
Class A stock. The remaining 920 shares of common stock outstanding and the 80
shares of Class A stock have identical voting rights and other privileges except
with respect to dividends.
The Class A stock is entitled to a cash dividend whenever a dividend is declared
on the common stock, in an amount which equals 8% of the sum of the dividends on
both the Class A stock and the common stock. However, dividends may be declared
and paid on the Class A stock only when there is unappropriated available income
in respect of prior calendar years which is sufficient to make a sinking fund
payment equal to 25% of such dividend for the benefit of the Debentures or the
Certificates. To the extent that dividends are paid on the common stock but not
the Class A stock because the amount of unappropriated available income is
insufficient to make such a sinking fund payment, a special cash dividend on the
Class A stock shall be paid when sufficient unappropriated available income
exists to make the sinking fund payment. Such insufficiency does not affect the
Registrant's right to declare dividends on the common stock. Available income
for 1993 will be sufficient to provide for a $3.4 million special cash dividend
on the Class A stock (see Note 6), to be paid in 1994. After such payment,
dividends in arrears on the Class A stock will total $25.1 million.
There are no other dividend restrictions on the Registrant's capital stock other
than those described in Note 6.
9. Retirement Plans
The Registrant participates in the Corporation's defined benefit pension plans
covering substantially all salaried employees. Pension plan benefits are based
on years of service and compensation during the last years of employment.
Company contributions to the plans are calculated based on the Projected Unit
Credit actuarial funding method and are not less than the minimum funding
standards set forth in the Employee Retirement Income Security Act of 1974, as
<PAGE> F-13
amended. Pension expense allocated to the Registrant under the Corporation's
plans amounted to $17.7 million in 1993, $14.8 million in 1992, and $11.6
million in 1991.
The Registrant provides postretirement health care and life insurance benefits
to substantially all salaried and certain hourly employees through participation
in the Corporation's postretirement benefit plans. The Corporation adopted the
provisions of SFAS No. 106 (See Note 1) in January 1993. Railroad agreement
employees' health care benefits are covered by a separate multiemployer plan and
therefore are not subject to the provisions of this Statement. The Registrant's
cash payments for these benefits (which were not affected by the adoption of
SFAS No. 106) were $5 million in 1993. The Registrant's Accumulated
Postretirement Benefit Obligation at December 31, 1993 and its 1993
postretirement benefit expense were $119 million and $9 million, respectively.
In late 1993, the Corporation amended its postretirement health care plans to
provide greater employee cost sharing. As a result, the Registrant's future
plan expense will be reduced. The Corporation does not currently pre-fund
health care and life insurance benefit costs.
10. Contingent Liabilities
There are various lawsuits pending against the Registrant. The Registrant is
also subject to Federal, state and local environmental laws and regulations, and
is currently participating in the investigation and remediation of numerous
sites. Where the remediation costs can be reasonably determined, and where such
remediation is probable, the Registrant has recorded a liability. The
Registrant does not expect that the lawsuits or environmental costs will have a
material adverse effect on its consolidated financial position or its results of
operations.
11. Supplemental Quarterly Financial Information (Unaudited)
Selected unaudited quarterly financial information for 1993 and 1992 are as
follows:
<TABLE>
<CAPTION>
First Second Third Fourth Total
-------- -------- -------- -------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Operating 1993 $527,474 $541,647 $529,843 $550,140 $2,149,104
Revenues: 1992 526,871 544,281 541,857 516,990 2,129,999
Operating 1993 84,891 114,528 98,948 111,766 410,133
Income: 1992 81,241 110,714 100,445 65,587 357,987
Net Income 1993 (84,521)(b) 61,644 26,966(c) 69,678 73,767(b)
(Loss): 1992 33,446 58,574 52,324 46,888(a) 191,232
(a) Includes an $18 million after-tax gain relating to the sale of a
non-operating property.
(b) Income before the cumulative effect of accounting changes (see Note 1) was
$40.6 million for the first quarter of 1993 and $198.9 million for the
total year 1993.
(c) Includes a $23.1 million increase in income tax expense resulting from the
retroactive portion of the 1993 Tax Act (see Note 5).
</TABLE>
<PAGE> F-14
<TABLE>
<CAPTION>
MISSOURI PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
For the Years Ended December 31, 1993, 1992 and 1991
(Thousands of Dollars)
Balance at Balance at
Beginning Additions Other End of
Classification of Year at Cost Retirements Changes Year
----------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
December 31, 1993:
Road ..................... $3,777,554 $279,929 $ (75,232) $ 39,421 $4,021,672
Railroad equipment ....... 1,762,634 35,183 (55,550) 18,096 1,760,363
Other .................... 74,733 80 (5,512) 6,749 76,050
---------- -------- --------- -------- ----------
Total ............... $5,614,921 $315,192 $(136,294) $ 64,266(A) $5,858,085
========== ======== ========= ======== ==========
December 31, 1992:
Road ..................... $3,612,094 $246,927 $ (77,461) $ (4,006) $3,777,554
Railroad equipment ....... 1,787,897 19,974 (47,339) 2,102 1,762,634
Other .................... 114,598 1 (46,043) 6,177 74,733
---------- -------- --------- -------- ----------
Total ............... $5,514,589 $266,902 $(170,843) $ 4,273 $5,614,921
========== ======== ========= ======== ==========
December 31, 1991:
Road ..................... $3,488,968 $189,352 $ (92,392) $ 26,166 $3,612,094
Railroad equipment ....... 1,798,014 7,110 (36,078) 18,851 1,787,897
Other .................... 110,975 - (6,414) 10,037 114,598
---------- -------- --------- -------- ----------
Total ............... $5,397,957 $196,462 $(134,884) $ 55,054 $5,514,589
========== ======== ========= ======== ==========
(A) Principally reflects adjustments required in the adoption of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes". See Note 1 to the Financial Statements.
</TABLE>
<PAGE> F-15
<TABLE>
<CAPTION>
MISSOURI PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTIES
For the Years Ended December 31, 1993, 1992 and 1991
(Thousands of Dollars)
Balance at Additions Balance at
Beginning Charged Other End of
Classification of Year to Expense Retirements Changes Year
----------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
December 31, 1993:
Road ......................... $ 787,564 $119,979 $ (87,379) $ 74,204 $ 894,368
Railroad equipment ........... 839,309 84,716 (39,418) (61,266) 823,341
Other ........................ 37,536 572 (3,448) (11) 34,649
---------- -------- --------- --------- ----------
Total ................... $1,664,409 $205,267 $(130,245) $ 12,927 $1,752,358
========== ======== ========= ========= ==========
December 31, 1992:
Road ......................... $ 756,970 $115,366 $ (84,872) $ 100 $ 787,564
Railroad equipment ........... 794,304 85,670 (41,335) 670 839,309
Other ........................ 40,644 1,719 (5,375) 548 37,536
---------- -------- --------- --------- ----------
Total .................... $1,591,918 $202,755 $(131,582) $ 1,318 $1,664,409
========== ======== ========= ========= ==========
December 31, 1991:
Road ......................... $ 685,563 $105,159 $ (96,098) $ 62,346 $ 756,970
Railroad equipment ........... 734,484 86,829 (27,468) 459 794,304
Other ........................ 27,983 2,177 (1,867) 12,351 40,644
---------- -------- --------- --------- ----------
Total ................... $1,448,030 $194,165 $(125,433) $ 75,156 (A) $1,591,918
========== ======== ========= ========= ==========
(A) Includes $49 million relating to the special charge. See Note 3 to the Financial Statements.
</TABLE>
<PAGE> F-16
<TABLE>
<CAPTION>
MISSOURI PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
For the Years Ended December 31, 1993, 1992 and 1991
(Thousands of Dollars)
Item 1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Maintenance and repairs ................ $377,993 $399,049 $378,116
======== ======== ========
Taxes other than payroll and
income taxes:
Property and ad valorem .............. $ 28,765 $ 29,414 $ 25,375
Other state and local taxes .......... 4,977 6,264 9,826
-------- -------- --------
Total ............................. $ 33,742 $ 35,678 $ 35,201
======== ======== ========
</TABLE>
<PAGE> F-17
MISSOURI PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY COMPANIES
MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS
1993 COMPARED TO 1992
In the first quarter of 1993, the Registrant recorded a $125.2 million
after-tax charge to reflect the adoption of new Financial Accounting Standards
Board ("FASB") pronouncements as described in Note 1 to the Financial
Statements. In the third quarter, the Registrant recorded a $23.1 million
charge reflecting a deferred tax adjustment that resulted from the 1993 Tax Act
(see Note 5 to the Financial Statements). As a result of these accounting
adjustments and the effects of weather-related traffic interruptions, the
Registrant's net income declined to $73.8 million compared to $191.2 million in
1992. Excluding the accounting adjustments, the Registrant would have earned
$222.1 million in 1993.
OPERATING REVENUES
Operating revenues increased $19 million to $2.1 billion (despite being
adversely affected by the severe winter and the record 1993 flooding in the
Midwest), reflecting a 2% increase in carloadings offset by a 2% decline in
average revenue per car. Carloadings increased in intermodal (11%), automotive
(5%) and chemicals (2%), while decreases occurred in grain and grain products
(2%), food/ consumer/government (1%) and metals/minerals/forest (1%). Energy
traffic remained flat compared to the prior year.
OPERATING EXPENSES
Operating expenses totaled $1.7 billion, $33 million (2%) lower than a year
ago, as weather-related cost increases were more than offset by increased
charges to other carriers and efficiency-driven expense containment. Other
costs declined $26 million due to flood-related increases in repair work on
joint facility lines billed to other roads, additional third-party billings,
higher overhead credits for work performed on capital projects, and trackage
rights settlements. Salary and wages decreased $5 million as productivity
improvements and train crew reductions offset both volume and weather-related
increases and wage and benefit inflation. Material and supplies expense
declined $3 million as improved materials management offset weather-related
usage increases. Fuel and utility expense also decreased $3 million as lower
fuel prices and an improved fuel consumption rate offset volUme growth. These
lower costs were partially offset by higher depreciation charges, which resulted
from the implementation of SFAS No. 109 and continuing capital spending, and a
$1 million increase in rent expense caused by higher volumes.
OPERATING INCOME
Operating income rose $52 million to $410 million as a result of continued
cost containment and volume growth.
OTHER CHANGES
Interest expense decreased $16 million, mainly the result of lower interest
rates, the repayment of maturing equipment trust obligations, the exchange of
the 7.5% Exchangeable Guaranteed Notes and the repurchase of certain Missouri-
Kansas-Texas Railroad Company 5-1/2% Subordinated Income Debentures (the
"Debentures") (see Notes 2 and 6 to the Financial Statements). Other income
decreased $14 million, primarily the result of lower real estate sales,
partially offset by a $3.5 million pretax gain on repurchases of Debentures.
Income taxes increased $46 million as a result of the 1% increase in the Federal
income tax rate, higher pretax earnings and the adoption of SFAS No. 109.
<PAGE> F-18
OTHER MATTERS
The FASB has issued Statements No. 112, "Employers' Accounting for
Postemployment Benefits", and No. 115, "Accounting for Certain Investments in
Debt and Equity Securities", both effective by January 1994. Statement No. 112
requires employers to recognize the obligation to provide benefits to former or
inactive employees after employment but prior to retirement. Statement No. 115
creates new reporting classifications for investments in debt and certain equity
securities. Management has evaluated these Statements and has determined that
they will not have a significant effect on the Registrant.
<PAGE>
EXHIBIT INDEX
Exhibit
Number
- -------
(3)(a) Registrant's Certificate of Incorporation, amended effective as of
August 12, 1988, is incorporated herein by reference to Exhibit 3(i)
to the Registrant's Report on Form 10-Q for the quarter ended June
30, 1988.
(3)(b) Registrant's By-laws, amended effective as of September 1, 1992, are
incorporated herein by reference to Exhibit 3 to the Registrant's
Report on Form 10-Q for the quarter ended September 30, 1992.
(4) Pursuant to various indentures and other agreements, the Registrant
has issued long-term debt, but no such agreement has securities or
obligations covered thereby which exceed 10% of consolidated assets.
The Registrant agrees to furnish a copy of any such indenture or
agreement to the Securities and Exchange Commission upon request.
(24) Powers of attorney executed by the directors of the Registrant.
EXHIBIT 24
MISSOURI PACIFIC RAILROAD COMPANY
POWER OF ATTORNEY
The undersigned, a director of Missouri Pacific Railroad Company,
a Delaware corporation (the "Company"), hereby appoints each of Drew Lewis, L.
White Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact
and agent, to sign on his behalf the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, and any and all amendments thereto, and to
file the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Robert P. Bauman
ROBERT P. BAUMAN
MISSOURI PACIFIC RAILROAD COMPANY
POWER OF ATTORNEY
The undersigned, a director of Missouri Pacific Railroad Company,
a Delaware corporation (the "Company"), hereby appoints each of Drew Lewis, L.
White Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact
and agent, to sign on his behalf the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, and any and all amendments thereto, and to
file the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Richard B. Cheney
RICHARD B. CHENEY
MISSOURI PACIFIC RAILROAD COMPANY
POWER OF ATTORNEY
The undersigned, a director of Missouri Pacific Railroad Company,
a Delaware corporation (the "Company"), hereby appoints each of Drew Lewis, L.
White Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact
and agent, to sign on his behalf the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, and any and all amendments thereto, and to
file the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/E. Virgil Conway
E. VIRGIL CONWAY
MISSOURI PACIFIC RAILROAD COMPANY
POWER OF ATTORNEY
The undersigned, a director of Missouri Pacific Railroad Company,
a Delaware corporation (the "Company"), hereby appoints each of Drew Lewis, L.
White Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact
and agent, to sign on his behalf the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, and any and all amendments thereto, and to
file the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Spencer F. Eccles
SPENCER F. ECCLES
MISSOURI PACIFIC RAILROAD COMPANY
POWER OF ATTORNEY
The undersigned, a director of Missouri Pacific Railroad Company,
a Delaware corporation (the "Company"), hereby appoints each of Drew Lewis, L.
White Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact
and agent, to sign on his behalf the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, and any and all amendments thereto, and to
file the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Elbridge T. Gerry, Jr.
ELBRIDGE T. GERRY, JR.
MISSOURI PACIFIC RAILROAD COMPANY
POWER OF ATTORNEY
The undersigned, a director of Missouri Pacific Railroad Company,
a Delaware corporation (the "Company"), hereby appoints each of Drew Lewis, L.
White Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact
and agent, to sign on his behalf the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, and any and all amendments thereto, and to
file the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/William H. Gray, III
WILLIAM H. GRAY, III
MISSOURI PACIFIC RAILROAD COMPANY
POWER OF ATTORNEY
The undersigned, a director of Missouri Pacific Railroad Company,
a Delaware corporation (the "Company"), hereby appoints each of Drew Lewis, L.
White Matthews, III and Judy L. Swantak her true and lawful attorney-in-fact
and agent, to sign on her behalf the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, and any and all amendments thereto, and to
file the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Judith Richards Hope
JUDITH RICHARDS HOPE
MISSOURI PACIFIC RAILROAD COMPANY
POWER OF ATTORNEY
The undersigned, a director of Missouri Pacific Railroad Company,
a Delaware corporation (the "Company"), hereby appoints each of Drew Lewis, L.
White Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact
and agent, to sign on his behalf the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, and any and all amendments thereto, and to
file the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Lawrence M. Jones
LAWRENCE M. JONES
MISSOURI PACIFIC RAILROAD COMPANY
POWER OF ATTORNEY
The undersigned, a director of Missouri Pacific Railroad Company,
a Delaware corporation (the "Company"), hereby appoints each of Drew Lewis, L.
White Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact
and agent, to sign on his behalf the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, and any and all amendments thereto, and to
file the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Richard J. Mahoney
RICHARD J. MAHONEY
MISSOURI PACIFIC RAILROAD COMPANY
POWER OF ATTORNEY
The undersigned, a director of Missouri Pacific Railroad Company,
a Delaware corporation (the "Company"), hereby appoints each of Drew Lewis, L.
White Matthews, III and Judy L. Swantak her true and lawful attorney-in-fact
and agent, to sign on her behalf the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, and any and all amendments thereto, and to
file the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Claudine B. Malone
CLAUDINE B. MALONE
MISSOURI PACIFIC RAILROAD COMPANY
POWER OF ATTORNEY
The undersigned, a director of Missouri Pacific Railroad Company,
a Delaware corporation (the "Company"), hereby appoints each of Drew Lewis, L.
White Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact
and agent, to sign on his behalf the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, and any and all amendments thereto, and to
file the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/John R. Meyer
JOHN R. MEYER
MISSOURI PACIFIC RAILROAD COMPANY
POWER OF ATTORNEY
The undersigned, a director of Missouri Pacific Railroad Company,
a Delaware corporation (the "Company"), hereby appoints each of Drew Lewis, L.
White Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact
and agent, to sign on his behalf the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, and any and all amendments thereto, and to
file the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Thomas A. Reynolds, Jr.
THOMAS A. REYNOLDS, JR.
MISSOURI PACIFIC RAILROAD COMPANY
POWER OF ATTORNEY
The undersigned, a director of Missouri Pacific Railroad Company,
a Delaware corporation (the "Company"), hereby appoints each of Drew Lewis, L.
White Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact
and agent, to sign on his behalf the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, and any and all amendments thereto, and to
file the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/James D. Robinson, III
JAMES D. ROBINSON, III
MISSOURI PACIFIC RAILROAD COMPANY
POWER OF ATTORNEY
The undersigned, a director of Missouri Pacific Railroad Company,
a Delaware corporation (the "Company"), hereby appoints each of Drew Lewis, L.
White Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact
and agent, to sign on his behalf the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, and any and all amendments thereto, and to
file the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Robert W. Roth
ROBERT W. ROTH
MISSOURI PACIFIC RAILROAD COMPANY
POWER OF ATTORNEY
The undersigned, a director of Missouri Pacific Railroad Company,
a Delaware corporation (the "Company"), hereby appoints each of Drew Lewis, L.
White Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact
and agent, to sign on his behalf the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, and any and all amendments thereto, and to
file the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Richard D. Simmons
RICHARD D. SIMMONS
MISSOURI PACIFIC RAILROAD COMPANY
POWER OF ATTORNEY
The undersigned, a director of Missouri Pacific Railroad Company,
a Delaware corporation (the "Company"), hereby appoints each of L. White
Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact and
agent, to sign on his behalf the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, and any and all amendments thereto, and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Drew Lewis
DREW LEWIS
