SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to
Commission file number 1-10720
ILLINOIS CENTRAL RAILROAD COMPANY
(Exact name of registrant as specified in its charter)
Illinois 36-2728842
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
455 North Cityfront Plaza Drive, Chicago, Illinois 60611-5504
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 755-7500
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
As of June 30, 1997, 100 common shares were outstanding.
THE REGISTRANT IS A WHOLLY-OWNED SUBSIDIARY OF ILLINOIS CENTRAL CORPORATION AND
MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1)(a) AND (b) OF THE
FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
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ILLINOIS CENTRAL RAILROAD COMPANY
AND SUBSIDIARIES
FORM 10-Q
Three and Six Months Ended June 30, 1997
CONTENTS
Part I - Financial Information: Page
Item 1. Financial Statements:
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II - Other Information:
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
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ILLINOIS CENTRAL RAILROAD COMPANY AND SUBSIDIARIES
Consolidated Statements
(Unaudited)
Three Months Six Months
Ended June 30, Ended June
1997 1996 1997 1996
Revenues $ 147.9 $ 149.4 $ 302.1 $ 312.0
Operating expenses:
Labor and fringe benefits 43.3 44.3 86.8 91.5
Leases and car hire 11.8 14.2 26.3 27.9
Diesel fuel 7.7 8.4 17.1 17.2
Materials and supplies 6.3 7.6 15.5 15.9
Depreciation and amortization 8.2 7.6 16.4 15.6
Casualty, insurance and losses 3.1 0.9 7.3 5.1
Other taxes 5.2 3.4 10.5 8.5
Other 6.2 10.7 8.4 20.2
Operating expenses 91.8 97.1 188.3 201.9
Operating income 56.1 52.3 113.8 110.1
Other income, net 1.7 1.1 2.2 1.6
Interest expense, net (7.3) (6.2) (14.5) (13.0)
Income before income taxes 50.5 47.2 101.5 98.7
Provision for income taxes 17.6 17.7 36.7 39.0
Net income $ 32.9 $ 29.5 $ 64.8 $ 59.7
The following notes are an integral part of the consolidated financial
statements.
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ILLINOIS CENTRAL RAILROAD COMPANY AND STATEMTNS
Consolidated Balance Sheets
($ in millions)
ASSETS June 30, 1997 December 30, 1996
Current assets:
Cash and temporary cash investment $ 49.1 $ 46.3
Receivables, net of allowance for
doubtful accounts of $.9 in 1997
and $1.3 in 1996 84.9 84.4
Loans to affiliates 28.2 14.9
Materials and supplies, at average cost 18.2 17.3
Deferred income taxes - current 18.1 18.1
Other current assets 7.9 7.8
Total current assets 206.4 188.8
Investments 11.7 11.7
Loans to affiliates 109.7 138.2
Properties:
Transportation:
Road and structures, including land 1,143.9 1,118.0
Equipment 166.7 165.2
Other, principally land 41.2 41.5
Total properties 1,351.8 1,324.7
Accumulated depreciation (33.4) (38.4)
Net properties 1,318.4 1,286.3
Other assets 22.5 20.9
Total assets $1,668.7 $ 1,645.9
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt $ 2.8 $ 2.8
Accounts payable 47.1 56.3
Dividends payable - -
Income taxes payable 5.4 1.2
Casualty and freight claims 20.9 20.9
Employee compensation and vacations 17.0 18.4
Taxes other than income taxes 13.1 15.4
Accrued redundancy reserves 4.3 4.3
Other accrued expenses 82.4 72.6
Total current liabilities 193.0 191.9
Long-term debt 572.8 590.3
Deferred income taxes 278.6 263.5
Other liabilities and reserves 109.9 117.5
Contingencies and commitments
Stockholder's equity:
Common stock authorized, issued and outstanding
100 shares, $1 par value - -
Additional paid-in capital 129.7 129.6
Retained income 384.7 353.1
Total stockholder's equity 514.4 482.7
Total liabilities and
stockholders equity $ 1,668.7 $ 1,645.9
The following notes are an integral part of the consolidated financial
statements.
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ILLINOIS CENTRAL RAILROAD COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
($ in millions)
(Unaudited)
Months Ended June 30,
1997 1996
Cash flows from operating activities :
Net income $ 64.8 $ 59.7
Reconciliation of net income to net cash
provided by (used for) operating activities :
Depreciation and amortization 16.4 15.6
Deferred income taxes 15.1 14.2
Equity in undistributed earnings of affiliates,
net of dividends received (0.4) (0.1)
Net gains on sales of real estate (0.9) (1.4)
Cash changes in working capital (0.1) (11.3)
Changes in other assets (1.8) (0.1)
Changes in other liabilities and reserves (7.2) (11.9)
Net cash provided by operating activities 85.9 64.7
Cash flows from investing activities :
Additions to properties (43.7) (53.5)
Proceeds from real estate sales 1.7 2.4
Proceeds from equipment sales 3.1 2.0
Loans to affiliated companies 14.9 (57.2)
Proceeds from sales of investments 0.4 0.2
Other (4.3) (3.8)
Net cash (used for) investing activities (27.9) (109.9)
Cash flows from financing activities :
Proceeds from issuance of debt - -
Principal payments on debt (1.9) (5.0)
Net proceeds (payments) in commercial paper (20.0) 131.0
Dividends paid (33.3) (74.2)
Purchase of subsidiary's common stock - -
Net cash provided by (used for) financing
activities (55.2) 51.8
Changes in cash and temporary cash investments 2.8 6.6
Cash and temporary cash investments at beginning of
period 46.3 3.0
Cash and temporary cash investments at end of
period $ 49.1 $ 9.6
Supplemental disclosure of cash flow information :
Cash paid during the year for:
Interest (net of amount capitalized) $ 18.3 $ 14.3
Income taxes $ 17.3 $ 27.6
The following notes are an integral part of the consolidated financial
statements.
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ILLINOIS CENTRAL RAILROAD COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
Except as described below, the accompanying unaudited consolidated
financial statements have been prepared in accordance with accounting
policies described in the 1996 Annual Report on Form 10-K and should be
read in conjunction with the disclosures therein.
In the opinion of management, these interim financial statements reflect
all adjustments, consisting of normal recurring accruals, necessary to
present fairly the financial position, results of operations and cash
flows for the periods presented. Interim results are not necessarily
indicative of results for the full year. Certain 1996 amounts have been
reclassified to conform with the presentation used in the 1997 financial
statements.
Income Per Share
Income per common share has been omitted as ICRR is a wholly-owned
subsidiary of Illinois Central Corporation ("IC").
2. Equity and Restrictions on Dividends
For the six month period ended June 30, 1997, ICRR has paid cash
dividends of $33.3 million to IC. Covenants of the ICRR Revolver require
specified levels of tangible net worth. At June 30, 1997, ICRR exceeded
its tangible net worth covenant by $26.0 million.
In June 1996, ICRR paid a dividend of $50.0 million to IC for the
acquisition of CCP Holdings, Inc. ("CCPH"). In March 1996, ICRR
transferred its ownership in the Chicago Intermodal Company ("CIC") via a
dividend of CIC stock to IC. The book value of the CIC investment was
$5.7 million.
3. Receivable Sales Agreement
On January 1, 1997, the ICRR adopted SFAS 125. The accounting and
reporting of sales relating to ICRR's accounts receivable agreement was
not changed.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996
Total revenues for 1997 decreased from the prior year quarter by $1.5
million or 1.0% to $147.9 million.
Total freight carloads of 222,558 were down 2.5%, primarily reflecting weak
coal and export grain which had a negative impact on the revenue mix.
Grain and grain mill accounted for 13% of ICRR's carloads and 20% of
ton-miles in the second quarter of 1997. While 1997's rail rates were higher on
average versus last year and demand for grain domestically was strong as
processors returned to more normal production levels, the negative impact of
weak export grain traffic was only partially offset. Export grain movements are
not expected to improve until the fourth quarter of 1997.
Coal accounted for 21% of ICRR's carloads and 25% of ton-miles in the
second quarter of 1997. Against 1996, carloads and revenues were down 4% and 14%
respectively, with ton-miles down 5%. Increased one-time moves and new business
offset production difficulties at several shippers' operations.
Chemicals accounted for 17% of ICRR's carloads and 21% of ton-miles in
1997. Against 1996, carloads, ton-miles and revenues were up 12%, 12% and 3%,
respectively, reflecting the new haulage agreement with BNSF entered into in
late 1996.
Paper and Forest Products were 15% of 1997 carloads and 16% of ton-miles.
Carloads were down 8%, ton-miles were down 1% and revenues were down 11% versus
1996.
Bulk Commodities contributed 6% of carloads and 6% of ton-miles in 1997.
Bulk commodities are primarily stone and other construction materials and are
closely tied to state highway projects. This smaller commodity group fluctuates
with the timing of projects as well as the availability of freight cars for this
lower-margin business.
Finally, Intermodal accounted for 22% of loads and 7% of ton-miles. Versus
1996, carloads were up 2%, with ton-miles and revenues up 6%.
Operating expenses decreased $5.3 million or 5.5% in 1997. Labor and fringe
costs were down modestly reflecting cost efficiencies experienced at ICRR.
Leases and car hire returned to more normal operating levels. Fuel expense
reflects the decrease in cost per gallon (4.0%) offset by increased usage
(12.0%). The expense category Casualty, Insurance and Losses reflects normal
operating levels. Other taxes increased $1.8 million reflecting normal operating
levels.
Operating income for 1997 increased by $3.8 million or 7.3% to $56.1
million for the reasons cited above.
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Net interest expense of $7.3 million for 1997 increased 17.7% compared to
$6.2 million in 1996. The 1997 expense includes borrowings to support the $109.9
million transferred from ICRR in mid- June 1996 in connection with the
acquisition of CCPH.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Revenues for 1997 decreased from the prior year period by $9.9 million or
3.2% to $302.1 million.
Total freight carloads of 455,817 were down .6%, primarily reflecting weak
export grain which had a negative impact on the revenue mix.
Grain and grain mill accounted for 16% of ICRR's carloads and 27% of
ton-miles in 1997. While 1997's rail rates were higher on average versus last
year and demand for grain domestically was strong as processors returned to more
normal production levels , the negative impact of weak export grain traffic was
only partially offset. Export grain movements are not expected to improve until
the fourth quarter of 1997.
Coal accounted for 21% of ICRR's carloads and 23% of ton-miles in 1997.
Against 1996, carloads and ton-miles were up 3% and 2%, respectively, revenues
were down 7% versus 1996. Increased one time moves and new business offset
production difficulties at several shippers' operations.
Chemicals accounted for 16% of ICRR's carloads and 18% of ton-miles in
1997. Against 1996, carloads, ton-miles and revenues were up 10%, 10% and 3%,
respectively, reflecting the new haulage agreement with BNSF entered into in
late 1996.
Paper and Forest Products were 15% of 1997 carloads and 15% of ton-miles.
Carloads were down 7%, revenues were down 8% and ton miles were flat versus
1996.
Bulk Commodities contributed 5% of carloads and ton-miles in 1997. Bulk
commodities are primarily stone and other construction materials and are closely
tied to state highway projects. This smaller commodity group fluctuates with the
timing of projects as well as the availability of freight cars for this
lower-margin business.
Finally, Intermodal accounted for 21% of loads and 7% of ton-miles. Versus
1996, carloads were up 3%, ton-miles were up 4% and revenues up 7%.
Operating expenses decreased $13.6 million or 6.7% in 1997. Labor and
fringe costs were down modestly reflecting cost efficiencies experienced at
ICRR. Leases and car hire returned to more normal operating levels. Fuel expense
reflects the increase in cost per gallon (4.4%) coupled with increased usage
(12.9%). The expense category Casualty, Insurance and Losses reflects normal
operating levels. Other expenses reflect recovery of prior period expenses in
relation to a derailment.
Operating income for 1997 increased by $3.7 million or 3.4% to $113.8
million for the reasons cited above.
Net interest expense of $14.5 million for 1997 increased 11.5% compared to
$13.0 million in 1996. The 1997 expense includes borrowings to support the
$109.9 million transferred from ICRR in mid-June 1996 in connection with the
acquisition of CCPH.
Liquidity and Capital Resources
Operating Data ($ in millions): Six Months Ended June 30,
-------------------------
1997 1996
---- ----
Cash flows provided by (used for):
Operating activities.......... $85.9 $64.7
Investing activities............... (27.9) (109.9)
Financing activities................ (55.2) 51.8
------- ------
Net change in cash and
temporary cash investments $ 2.8 $ 6.6
====== ======
Cash from operating activities in 1997 and 1996 was primarily net income
before depreciation and deferred taxes.
Investing Data ($ in millions):
Additions to property were as follows:
Six Months Ended June 30,
1997 1996
---- ----
Communications and signals............ $ 7.6 $ 5.7
Equipment/rolling stock............ 1.9 17.5
Track and bridges..................... 30.2 24.0
Other................................ 4.0 6.3
------- -------
Total..................... $43.7 $53.5
===== =====
Property retirements and removals generated proceeds of $4.8 million and
$4.4 million in 1997 and 1996, respectively.
ICRR still anticipates that total capital expenditures for 1997 will be
approximately $93 million.
Financing Activities
In July 1997 and 1996, ICRR paid $15.1 million and $14.5 million,
respectively, in cash dividends to IC. Through July, ICRR paid dividends of
$48.5 million and $94.4 million in 1997 and 1996, respectively, to IC, which
included $50.0 million for the purchase of CCPH in 1996. Also included in the
1996 dividends to IC is the March 1996 transfer by ICRR of its ownership in the
Chicago Intermodal Company ("CIC") via a dividend of CIC stock. The book value
of the CIC investment was $5.7 million.
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ICRR has a $250 million Revolver with its bank lending group, which expires
in 2001. Fees and borrowings spreads are predicated on ICRR's long-term credit
ratings. The Revolver is used primarily for backup for ICRR's commercial paper
program but can be used for general corporate purposes. The available amount is
reduced by the outstanding amount of commercial paper borrowings and any letters
of credit issued on behalf of ICRR under the facility. At June 30, 1997, the
full $250 million was available but undrawn.
In 1994, ICRR entered into a revolving agreement to sell undivided
percentage interests in certain of its accounts receivable, with recourse, to a
financial institution. The agreement, which expires in June 1998, allows for
sales of accounts receivable up to a maximum of $50 million at any one time.
ICRR services the accounts receivable sold under the agreement and retains the
same exposure to credit loss as existed prior to the sale. At June 30, 1997, $50
million had been sold pursuant to the agreement. Costs related to the agreement
fluctuate with changes in prevailing interest rates. These costs, which are
included in Other Income (Expense), Net, were $1.5 million each for the six
month periods ended June 30, 1997 and 1996. ICRR's accounting and reporting for
the sale of accounts receivable was not changed by the implementation of SFAS
No. 125.
Certain covenants of ICRR's debt agreements require among others specific
levels of tangible net worth but not a specific dividend restriction. At June
30, 1997, ICRR exceeded its tangible net worth covenants by $26.0 million. ICRR
was in compliance with all covenants at June 30, 1997, and does not contemplate
any difficulty maintaining such compliance.
A shelf registration from 1996 can be used to issue an additional $70
million in MTN's or other debt until 2000. Currently, there are no plans to
issue additional debt but capital investments in the terminal facilities and
other ventures could necessitate use.
ICRR believes that its available cash, cash generated by its operations and
cash available from the facilities described above will be sufficient to meet
foreseeable liquidity requirements. Additionally, ICRR believes it has access to
the public debt market if needed.
Year 2000 Conversion
ICRR is accumulating and evaluating the costs associated with modifying
existing software programs for the year 2000. Current estimates are
approximately $2 million. ICRR is also evaluating the feasibility of complete
replacement of its "non-2000" compliant programs. Replacement may be more
economical and provides additional enhancements. A final determination is
expected in the fourth quarter of 1997.
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Miscellaneous
ICRR has entered into various diesel fuel collar agreements designed to
mitigate significant changes in fuel prices. As a result, approximately 60% of
ICRR's short-term diesel fuel requirements through July 1998 are protected
against significant price changes.
In January 1997, the United Transportation Union ("UTU") ratified a new
agreement which settles wage and work rule issues through 2000. The UTU
agreement is similar to the nationally negotiated agreement in effect with other
Class I carriers. The main distinction is timing of the various lump sum payouts
and scheduled wage increases. In May 1997, the Brotherhood of Locomotive
Engineers ("BLE") ratified a local agreement which settles wage and work rule
issues through 2000. The BLE agreement increased wage rates approximately 4.9%
upon ratification.
Environmental Liabilities
ICRR's operations are subject to comprehensive environmental regulation by
federal, state and local authorities. Compliance with such regulation requires
ICRR to modify its operations and expend substantial manpower and financial
resources.
Under the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("Superfund"), and similar state and federal laws, ICRR is
potentially liable for the cost of clean-up of various contaminated sites. ICRR
generally participates in the clean-up at sites where other substantial parties
share responsibility through cost-sharing arrangements, but under Superfund and
other similar laws ICRR can be held jointly and severally liable for all
environmental costs associated with such sites.
ICRR is aware of approximately 25 contaminated sites at which it is
probably liable for some portion of any required clean-up. Of these, 17 involve
contamination primarily by diesel fuel which can be remediated without material
cost. Five other sites are expected to require more than $1 million in clean-up
costs. At four of these sites other parties are expected to contribute the
majority of the costs incurred. ICRR anticipates expenditures of approximately
$2.8 million annually for the investigation and remediation at all sites.
For all known sites of environmental contamination where ICRR's loss or
liability is probable, ICRR has recorded an estimated liability at the time when
a reasonable estimate of remediation cost and ICRR liability can first be
determined. Adjustments to initial estimates are recorded as necessary based
upon additional information developed in subsequent periods. Estimates of the
ICRR`s potential financial exposure for environmental claims or incidents are
necessarily imprecise because of the difficulty of determining in advance the
nature and extent of contamination, the varying costs of alternative methods of
remediation, the regulatory clean-up standards which will be applied, and the
appropriate allocation of liability among multiple responsible parties. At June
30, 1997, ICRR estimated the probable range of its liability to be $10 million
to $50 million, and in accordance with the provisions of SFAS No. 5 had a
reserve of $10 million for environmental
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contingencies. This amount is not reduced for potential insurance
recoveries or third-party contributions.
The risk of incurring environmental liability in connection with both past
and current activities is inherent in railroad operations. Decades-old railroad
housekeeping practices were not always consistent with contemporary standards.
Historically ICRR has leased substantial amounts of property to industrial
tenants, and ICRR continues to haul hazardous materials which are subject to
occasional accidental release. Because the ultimate cost of known contaminated
sites cannot be definitively established and because additional contaminated
sites yet unknown may be discovered or future operations may result in
accidental releases, no assurance can be given that ICRR will not incur material
environmental liabilities in the future. However, based on its assessments of
the facts and circumstances now known, management believes that it has recorded
adequate reserves for known liabilities and does not expect future environmental
charges or expenditures, based on these known facts and circumstances, to have a
material adverse effect on ICRR`s financial position, results of operations,
cash flow or liquidity.
Recent Accounting Pronouncements
The FASB has also released Statement of Financial Accounting Standard No.
129 "Disclosure of Information about Capital Structure" ("SFAS No. 129"). ICRR
complies with all the requirements of the standard which is effective for
periods ending after December 15, 1997.
In June 1997, the FASB issued two new standards which will be effective for
periods ending after December 15, 1997.
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130") establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general-purpose financial statements. SFAS No. 130
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the some prominence as other financial
statements. ICRR does not expect to adopt this standard early.
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS No. 131") establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. This Statement supersedes FASB Statement No. 14, "Financial Reporting
for Segments of a Business Enterprise," but retains the requirement to report
information about major customers. SFAS No. 131 will not apply to interim
periods until the second year of application. ICRR will not adopt this standard
early.
ICRR is currently assessing the impact, if any, these standards will have
on its consolidated financial statements.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
See Exhibit Index on page E-1
ILLINOIS CENTRAL RAILROAD COMPANY
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, ICRR
has duly caused this report to be signed on its behalf by the undersigned
hereto duly authorized.
ILINOIS CENTRAL RAILROAD COMPANY
/s/ Dale W. Phillips
Dale W. Phillips
Vice President & Chief Financial Officer
/s/ John V. Mulvaney
John V. Mulvaney
Controller
Date: August 12, 1997
13
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ILLINOIS CENTRAL RAILROAD COMPANY AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential
No. Description Page No.
3 By-Laws of Illinois Central Railroad Company, as
amended.
27 Financial Data Schedule (This exhibit is required
to be submitted electronically pursuant to the rules
and regulations of the Securities and Exchange
Commission and shall not be deemed filed for the
purposes of Section 11 of the Securities Act of
1933 or Section 18 of the Securities Exchange Act
of 1934).
E-1
<PAGE>
By-Laws
of
ILLINOIS CENTRAL RAILROAD COMPANY
ARTICLE I
Offices
SECTION 1. Registered Office and Agent. The corporation shall maintain
in the State of Illinois a registered office and a registered agent whose
business office is identical with such registered office.
SECTION 2. Other Offices. The corporation shall have its principal
business office at such location within or without the State of Illinois as the
Board of Directors may from time to time determine. The corporation may have
other offices within or without the State of Illinois.
ARTICLE II
Meetings of Shareholders; Shareholders'
Consent in Lieu of Meeting
SECTION 1. Annual Meeting. The annual meeting of shareholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held at such place within or without
the State of Illinois, and at such date and hour, as shall be designated by the
Board of Directors.
SECTION 2. Special Meetings. Special meetings of the shareholders may
be called by the president, by the board of directors or by the holders of not
less than one-fifth of all the outstanding shares of the corporation entitled to
vote on the matter for which the meeting is called.
SECTION 3. Notice of Meetings. Unless waived in writing by the
shareholder of record or unless such shareholder is represented thereat in
person or by proxy, each shareholder of record shall be given written notice of
each meeting of shareholders, which notice shall state the place, date and hour
of the meeting, and, in the case of a special meeting, the purpose or purposes
for which the meeting is called. Such notice shall be given at least ten days
but not more than 60 days before the date fixed for such meeting, or, in the
case of a meeting for the purpose of acting upon a merger, consolidation, share
exchange, dissolution or sale, lease or exchange of assets, at least twenty but
not more than 60 days before the date fixed for such meeting.
1
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SECTION 4. Quorum. At each meeting of shareholders, the holders of
record of a majority of the issued and outstanding share of the Corporation
entitled to vote at such meeting, present in person or by proxy, shall
constitute a quorum for the transaction of business, except where otherwise
provided by law, the Articles of Incorporation or these By-Laws. In the absence
of a quorum, any officer entitled to preside at, or act as secretary of, such
meeting shall have the power to adjourn the meeting from time to time until a
quorum shall be constituted. At any such adjourned meeting at which a quorum
shall be present any business may be transacted which might have been transacted
at the meeting as originally called, but only those shareholders entitled to
vote at the meeting as originally noticed shall be entitled to vote at any
adjournment or adjournments thereof.
SECTION 5. Voting. Except as otherwise provided in the Articles of
Incorporation, at every meeting of shareholders each holder of record of the
issued and outstanding shares of the Corporation entitled to vote thereat shall
be entitled to one vote, in person or by proxy, for each share held by such
shareholder. Shares of the Corporation belonging to the Corporation directly or
indirectly shall not be voted directly or indirectly. At all meetings of
shareholders, a quorum being present, all matters shall be decided by majority
vote of the shares entitled to vote thereat, except as otherwise required by the
laws of the State of Illinois. Unless demanded by a shareholder of the
Corporation present in person or by proxy at any meeting of shareholders and
entitled to vote thereat or so directed by the chairman of the meeting or
required by the laws of the State of Illinois, the vote thereat on any question
need not be by ballot. On a vote by ballot, each ballot shall be signed by the
shareholder voting, or in his name by his proxy, if there be such proxy, and
shall state the number of shares voted by him and the number of votes to which
each share is entitled.
SECTION 6. Shareholders' Consent in Lieu of Meeting. Any corporate
action requiring a vote of shareholders may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Such writing or writings shall be filed with the minutes of
shareholders' meetings and if such consent is signed by less than all of the
shareholders entitled to vote, then such consent shall become effective only if
at least 5 days prior to the execution of the consent a notice in writing is
delivered to all the shareholders entitled to vote with respect to the subject
matter thereof and, after the effective date of the consent prompt notice of the
taking of any such action without a meeting by less than unanimous written
consent shall be given to those shareholders who have not so consented in
writing.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The property, business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors.
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SECTION 2. Number and Term of Holding Office. The number of directors
which shall constitute the whole Board of Directors shall be such number not
fewer than one nor more than ten as shall from time to time be fixed by the
Board of Directors or the shareholders. Each of the directors of the Corporation
shall hold office until the annual meeting next after his election and until his
successor shall be elected and shall qualify or until his earlier death or
resignation or removal in the manner hereinafter provided.
SECTION 3. Organization and Order of Business. At each meeting of the
Board of Directors, any director chosen by a majority of the directors present
thereat shall act as chairman of the meeting and preside thereat. The Secretary
of the Corporation or, in the case of his absence, any person whom the chairman
shall appoint, shall act as secretary of such meeting and keep the minutes
thereof.
SECTION 4. Resignations. Any director may resign at any time by giving
written notice of his resignation to the President or the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not be specified
therein, then it shall take effect when accepted by action of the Board of
Directors. Except as aforesaid, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 5. Removal of Directors. Except as provided by law, any
director may be removed, either with or without cause, at any time by vote of a
majority of the shareholders of the Corporation entitled to vote in the election
of directors.
SECTION 6. Vacancies. Any vacancy in the Board of Directors, arising
from death, resignation, removal, an increase in the number of directors or any
other cause, may be filled either by a majority vote of the remaining directors,
although less than a quorum, or by the shareholders of the Corporation at the
next annual meeting or any special meeting called for the purpose.
SECTION 7. Place of Meeting. The Board of Directors may hold its
meetings at such place or places within or without the State of Illinois as the
Board may from time to time by resolution determine or as shall be designated in
the respective notices or waivers of notice thereof.
SECTION 8. Meetings.
(A) Annual Meetings. As soon as practicable after each annual
election of directors, the Board of Directors shall meet for the purpose of
organization and the transaction of other business.
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(B) Other Meetings. Other meetings of the Board of Directors
shall be held at such times and places as the Board shall from time to time
determine or upon call by the President of the Corporation.
SECTION 9. Notice of Meetings. The Secretary of the Corporation shall
give notice to each director of each meeting, including the time and place of
such meeting. Notice of each such meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, at least three
days before the day on which such meeting is to be held, or shall be sent to him
by telegraph, cable, wireless or other form of recorded communication or be
delivered personally or by telephone not later than the day before the day on
which such meeting is to be held. Attendance of a director at any meeting shall
constitute a waiver of notice of such meeting except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
SECTION 10. Quorum and Manner of Acting. Except as provided by law,
the Articles of Incorporation or these By-Laws, a majority of the directors then
in office shall be necessary at any meeting of the Board of Directors in order
to constitute a quorum for the transaction of business at such meeting, and the
vote of a majority of those directors present at any such meeting at which a
quorum is present shall be necessary for the passage of any resolution or act of
the Board. In the absence of a quorum for any such meeting, a majority of the
directors present thereat may adjourn such meeting from time to time until a
quorum shall be present thereat. Notice of any adjourned meeting need not be
given.
SECTION 11. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if a written consent thereto is signed by all members
of the Board or of such committee, as the case may be, and such written consent
is filed with the minutes of the proceedings of the Board or such committee.
SECTION 12. Meetings by Telephone, etc. Members of the Board of
Directors, or of any committee thereof, may participate in a meeting of the
Board, or of such committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting.
SECTION 13. Compensation. Each director, in consideration of his
serving as such, shall be entitled to receive from the Corporation such amount
per annum or such fees for attendance at meetings of the Board of Directors or
of any committee thereof, or both, as the Board shall from time to time
determine. The Board may likewise provide that the Corporation shall reimburse
each director or member of a committee for any expenses incurred by him on
account of his attendance at any such meeting. Nothing contained in this Section
shall be construed to preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
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SECTION 14. Committees. The Board of Directors, by resolution passed
by a majority of the whole Board, may designate members of the Board to
constitute one or more committees, which shall in each case consist of such
number of directors, not fewer than two, and shall have and may exercise such
powers as the Board may by resolution determine and specify in the respective
resolutions appointing them. A majority of all the members of any such committee
may fix its rules of procedure, determine its action and fix the time and place,
whether within or without the State of Illinois, of its meetings and specify
what notice thereof, if any, shall be given, unless the Board shall otherwise by
resolution provide. The Board shall have power to change the members of any such
committee at any time, to fill vacancies therein and to discharge any such
committee, either with or without cause, at any time.
ARTICLE IV
Officers
SECTION 1. Number. The officers of the Corporation shall be a
President, one or more Vice Presidents, a Controller, a Treasurer and a
Secretary. Any two or more offices may be held by the same person. Each such
officer shall be elected by the Board of Directors at its initial organization
meeting and thereafter at its annual meeting and shall hold office until the
next succeeding annual meeting of the Board and until his successor is elected
or until his earlier death or resignation or removal in the manner hereinafter
provided.
The Board may elect or appoint such other officers of the Corporation
(including one or more Assistant Treasurers, one or more Assistant Controllers,
and one or more Assistant Secretaries) as it deems necessary who shall have such
authority and shall perform such duties as the Board may prescribe. If
additional officers are elected or appointed during the year, each of them shall
hold office until the next annual meeting of the Board at which officers are
regularly elected or appointed and until his successor is elected or appointed
or until his earlier death or resignation or removal in the manner hereinafter
provided. Election of an officer shall not of itself create contract rights.
A vacancy in any office may be filled for the unexpired portion of the
term in the same manner as provided for election or appointment to such office.
All officers and agents elected or appointed by the Board shall be
subject to removal at any time by the Board with or without cause, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.
Any officer may resign at any time by giving written notice to the
President or the Secretary of the Corporation, and such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, it shall take effect when accepted by
action of the Board. Except as aforesaid, the acceptance of such resignation
shall not be necessary to make it effective.
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SECTION 2. The President. The President of the Corporation, subject to
the direction of the Board of Directors, shall be the chief executive officer of
the Corporation, shall have general charge of the business and affairs of the
Corporation, shall have the direction of all other officers, agents and
employees and may assign such duties to the other officers of the Corporation as
he deems appropriate. Also, the President may vote all securities which the
corporation is entitled to vote except as and to the extent such authority shall
be vested in a different officer or agent of the corporation by the Board of
Directors.
SECTION 3. Vice Presidents. Each Vice President shall have such powers
and perform such duties as the President or the Board may from time to time
prescribe and shall perform such other duties as may be prescribed by these
By-Laws. At the request of the President, or in case of his absence or inability
to act, any of the Vice Presidents shall perform the duties of the President
and, when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the President.
SECTION 4. Treasurer. The Treasurer of the Corporation shall have
charge and custody of and be responsible for all funds and securities of the
Corporation and its books of account, and be responsible therefor and for the
receipt and disbursement thereof.
SECTION 5. Secretary. The Secretary of the Corporation shall keep the
records of all meetings of the shareholders and the Board of Directors. The
Secretary shall affix the seal of the Corporation to all deeds, contracts, bonds
or other instruments requiring the corporate seal when the same shall have been
signed on behalf of the Corporation by a duly authorized officer and shall be
the custodian of all contracts, deeds, documents and all other indicia of title
to properties owned by the Corporation and of its other corporate records. Also,
the Secretary may vote all securities which the corporation is entitled to vote
except as and to the extent such authority shall be vested in a different
officer or agent of the corporation by the Board of Directors.
SECTION 6. Controller. The Controller shall be the chief accounting
officer of the corporation and shall maintain adequate records of all assets,
liabilities and transactions of the corporation; he shall establish and maintain
internal accounting control in cooperation with the independent public
accountants selected by the Board. He shall have such further powers and duties
as may be conferred upon him from time to time by the President.
ARTICLE V
Documents and Deposits
SECTION 1. Execution of Documents. The President, any Vice President,
the Treasurer, the Controller or the Secretary of the Corporation may execute
for the corporation certificates for its shares (the issue of which shall have
been authorized by the board of directors), and any contracts, deeds, mortgages,
bonds or other instruments which the board of directors has authorized, and he
or she may (without previous authorization by the board of
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directors) execute such contracts and other instruments and vote shares owned or
held by the Corporation as the conduct of the corporation's business in its
ordinary course requires, and he or she may accomplish such execution in each
case either individually or with the secretary, any assistant secretary, or any
other officer thereunto authorized by the board of directors, according to the
requirements of the form of the instrument. The President, any Vice President,
the Treasurer, the Controller or the Secretary of the Corporation may delegate
the authority to execute any contracts, deeds, mortgages, bonds or other
instruments to be made or executed for or on behalf of the Corporation to others
under his or her supervision, subject to any restrictions imposed by the Board
of Directors or the President. Any such delegation of power shall not relieve
the aforementioned officers of responsibility with respect to the exercise of
such delegated power.
SECTION 2. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
or otherwise as the Board of Directors or the President or any other officer of
the Corporation to whom power in that respect shall have been delegated by the
Board.
ARTICLE VI
Books and Records
The books and records of the Corporation may be kept at such places
within or without the State of Illinois as the Board of Directors may from time
to time determine.
ARTICLE VII
Seal
The Board shall provide a corporate seal, which shall be in the form
of a circle and shall bear the full name of the Corporation and the word
"Illinois" and figures representing the year of its incorporation.
ARTICLE VIII
Indemnification
SECTION 1. Indemnification of Directors and Officers. The corporation
shall, to the fullest extent to which it is empowered to do so by the Illinois
Business Corporation Act of 1983 or any other applicable laws as may from time
to time be in effect, indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of
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the fact that he or she is or was a director or officer of the corporation, or
that he or she is or was serving at the request of the corporation as a director
or officer of another corporation, partnership, joint venture, trust or other
enterprise, against all expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding.
SECTION 2. Contract with the Corporation. The provisions of this
Article 8 shall be deemed to be a contract between the corporation and each
director or officer who serves in any such capacity at any time while this
Article is in effect, and any repeal or modification of this Article 8 shall not
affect any rights or obligations hereunder with respect to any state of facts
then or theretofore existing or any action, suit or proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such state
of facts.
SECTION 3. Indemnification of Employees and Agents. Persons who are
not covered by the foregoing provisions of this Article 8 and who are or were
employees or agents of the corporation, or who are or were serving at the
request of the corporation as employees or agents of another corporation,
partnership, joint venture, trust or other enterprise, may be indemnified to the
extent authorized at any time or from time to time by the board of directors;
provided, however, that to the extent that such employee or agent has been
successful, on the merits or otherwise, in the defense of any action, suit or
proceeding to which he or she was made a party by reason of the fact that he or
she is or was an employee or agent acting in the above-described capacity, or in
defense of any claim, issue or matter therein, the corporation shall indemnify
such employee or agent against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
SECTION 4. Other Rights of Indemnification. The indemnification
provided or permitted by this Article 8 shall not be deemed exclusive of any
other rights to which those indemnified may be entitled by law or otherwise, and
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such person.
ARTICLE IX
Shares and Their Transfer
SECTION 1. Certificates of Shares. Every owner of shares of the
Corporation shall be entitled to have a certificate certifying the number of
shares owned by him or it in the Corporation and designating the class to which
such shares belong, which shall otherwise be in such form as the Board of
Directors shall prescribe. Each such certificate shall be signed by the
President or a Vice President and the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Corporation. In case any officer or
officers who shall have signed any such certificate or certificates shall cease
to be such officer or officers of the Corporation, whether because of death,
resignation, removal or otherwise, before such certificate or
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certificates shall have been delivered by the Corporation, such certificate or
certificates may nevertheless be adopted by the Corporation and be issued and
delivered as though the person or persons who signed such certificate had not
ceased to be such officer or officers of the Corporation.
SECTION 2. Record. A record shall be kept of the name of the person,
firm or corporation owning the shares represented by each certificate for shares
of the Corporation issued, the number of shares represented by each such
certificate, and the date thereof, and, in the case of cancellation, the date of
cancellation. The person in whose name shares stand on the books of the
Corporation shall be deemed the owner thereof for all purposes as regards the
Corporation.
SECTION 3. Transfer of Shares. Transfers of shares of the Corporation
shall be made only on the books of the Corporation by the registered holder
thereof, or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the Corporation, and on the surrender
of the certificate or certificates for such shares properly endorsed.
SECTION 4. Lost, Destroyed or Mutilated Certificate. In case of the
alleged loss or destruction or the mutilation of a certificate representing
shares of the Corporation, a new certificate may be issued in place thereof, in
the manner and upon such terms as the Board of Directors may prescribe.
ARTICLE X
Amendments
These By-Laws, or any of them, may be altered, amended or repealed, or
new By-Laws may be made, by the shareholders entitled to vote thereon at any
annual or special meeting thereof or by the board of directors.
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