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, 1999
[ ] 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 30,1999, 100 common shares were outstanding.
THE REGISTRANT THROUGH ITS PARENT, ILLINOIS CENTRAL CORPORATION (FORMER SEC
FILE NO. 1-10720), IS AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF CANADIAN NATIONAL
RAILWAY COMPANY (SEC FILE NO. 1-2413) AND MEETS THE CONDITIONS SET FORTH IN
GENERAL INSTRUCTIONS I(1)(a) AND (b) OF THE FORM 10-Q AND IS THEREFORE FILING
THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY
AND SUBSIDIARIES
FORM 10-Q
Quarter and Six Months Ended June 30, 1999
CONTENTS
Part I - Financial Information:
Item 1. Financial Statements: Page
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 9
Part II - Other Information:
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
($ in millions)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
Revenues $ 160.4 $ 162.4 $ 320.5 $ 325.4
Operating expenses:
Labor and fringe benefits 48.4 48.8 96.7 95.3
Leases and car hire 13.4 13.4 27.3 26.7
Diesel fuel 6.1 6.9 11.7 14.6
Materials and supplies 8.1 8.2 16.6 17.3
Depreciation and amortization 9.6 8.9 18.9 17.5
Casualty, insurance and losses 3.5 3.4 7.1 6.2
Other taxes 5.5 5.2 11.1 10.5
Other 13.8 8.2 27.7 16.4
Special charge 6.1 - 6.1 16.4
Operating expenses 114.5 103.0 223.2 220.9
Operating income 45.9 59.4 97.3 104.5
Other income, net 1.5 4.1 2.9 6.3
Interest expense, net (7.0) (7.1) (14.3) (14.0)
Income before income taxes 40.4 56.4 85.9 96.8
Provision for income taxes 15.6 21.1 32.7 32.5
Net income $ 24.8 $ 35.3 $ 53.2 $ 64.3
The following notes are an integral part of the consolidated financial
statements.
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
($ in millions)
(Unaudited)
ASSETS June 30, 1999 December 31, 1998
Current assets:
Cash and temporary cash investment $ 8.9 $ 28.8
Receivables, net of allowance for
doubtful accounts
of $0.7 in 1999 and $0.7 in 1998 150.1 147.6
Materials and supplies, at average cost 20.1 14.9
Assets held for disposition 1.1 1.1
Deferred income taxes - current 18.6 18.6
Other current assets 19.4 6.5
Total current assets 218.2 217.5
Investments 13.1 12.9
Loans to affiliates 208.9 193.2
Properties:
Transportation:
Road and structures, including land 1,280.9 1,255.4
Equipment 219.4 189.4
Other, principally land 41.0 41.0
Total properties 1,541.3 1,485.8
Accumulated depreciation (67.0) (57.5)
Net properties 1,474.3 1,428.3
Other assets 42.6 33.2
Total assets $1,957.1 $1,885.1
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt $ 63.0 $ 52.7
Accounts payable 45.5 54.5
Income taxes payable 42.6 25.8
Casualty and freight claims 12.3 12.7
Employee compensation 38.0 29.1
Taxes other than income taxes 12.1 15.4
Accrued redundancy reserves - 3.7
Other accrued expenses 81.5 76.7
Total current liabilities 295.0 270.6
Long-term debt 527.6 544.8
Deferred income taxes 350.1 334.2
Other liabilities and reserves 104.7 109.0
Contingencies and commitments
Stockholder's equity:
Common stock authorized, issued and outstanding
100 shares, $1 par value - -
Additional paid-in capital 129.6 129.6
Retained income 550.1 496.9
Total stockholder's equity 679.7 626.5
Total liabilities and stockholder's
equity $1,957.1 $1,885.1
The following notes are an integral part of the consolidated financial
statements.
ILLINOIS CENTRAL RAILROAD COMPANY AND SUBSIDIARIES
Consolidated Statements of
Cash Flows ($ in millions)
(Unaudited)
Six Months Ended
June 30,
1999 1998
Cash flows from operating activities :
Net income $ 53.2 $ 64.3
Reconciliation of net income to net cash
provided by (used for) operating activities :
Depreciation and amortization 18.9 17.5
Deferred income taxes 15.9 13.9
Equity in undistributed earnings of affiliates,
net of dividends received (0.2) (0.6)
Net gains on sales of real estate (0.1) (1.3)
Cash changes in working capital (6.5) (47.8)
Changes in other assets (9.4) (1.8)
Changes in other liabilities and reserves (4.3) (3.9)
Net cash provided by operating activities 67.5 40.3
Cash flows from investing activities :
Additions to properties (63.3) (43.9)
Proceeds from real estate sales 0.2 1.5
Proceeds from equipment sales 1.6 1.0
Loans to affiliated companies (15.7) (31.7)
Other (3.3) (3.9)
Net cash used for investing activities (80.5) (77.0)
Cash flows from financing activities :
Proceeds from issuance of debt - 20.0
Principal payments on debt (21.5) (21.3)
Net proceeds in commercial paper 14.6 57.8
Dividends paid - (34.6)
Net cash provided by (used for) financing (6.9) 21.9
Changes in cash and temporary cash investments (19.9) (14.8)
Cash and temporary cash investments at beginning
of period 28.8 28.2
Cash and temporary cash investments at end of period $ 8.9 $ 13.4
Supplemental disclosure of cash flow information :
Cash paid during the year for:
Interest (net of amount capitalized) $ 20.9 $ 22.5
Income taxes $ 1.0 $ 15.9
The following notes are an integral part of the consolidated financial
statements.
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
1. Merger Agreement and Special Charges
On February 10, 1998, ICR's parent, Illinois Central Corporation (the
"Corporation") and Canadian National Railway Company ("CN") entered into an
Agreement and Plan of Merger (as subsequently amended, the "Merger Agreement"),
pursuant to which Blackhawk Merger Sub, Inc. (the "Purchaser"), a wholly-owned
subsidiary of CN, acquired on March 13, 1998, 46,051,761 of the outstanding
shares of the Corporation's Common Stock (the "Shares") at a price of $39.00 per
share through a cash tender offer (the "Offer"). The Corporation's Board of
Directors unanimously approved the Merger Agreement and the transaction
contemplated. On June 4, 1998, the Purchaser was merged with and into the
Corporation (the "Merger") and the remaining outstanding Corporation common
shares not purchased pursuant to the Offer were converted into a right to
receive 0.633 share of CN common stock for each share of Corporation common
stock. The Corporation's Employee Stock Purchase Plan and Management Employee
Discounted Stock Purchase Plan were terminated following completion of the
Offer. Pursuant to the Merger, each share of the Corporation's Common Stock,
including treasury stock held by the Corporation, was cancelled, and the
Corporation became an indirect, wholly-owned subsidiary of CN with 100 shares of
no-par Common Stock issued and outstanding. CN deposited the shares in an
independent, irrevocable voting trust while CN and the Corporation awaited
review of the transaction by the Surface Transportation Board ("STB").
On May 25, 1999, the merger of CN and the Corporation received final
written approval of the STB; consistent with the STB's March 25, 1999 voting
conference. On July 1, 1999, the voting trust was terminated releasing the
Corporation shares to CN enabling it to control ICR's operations and assets.
Upon acquisition of control, CN began the process of integrating the
Corporation's operations and evaluating its assets, liabilities, systems,
accounting policies and personnel. No impact of this integration process has yet
been reflected in the financial statements.
The Corporation and ICR recorded special charges (the "Special
Charges") during 1999 and 1998 for costs associated with the CN Merger
Agreement. The Special Charges totaled $6.1 million and $28.4 million at ICR in
1999 and 1998, respectively, for costs relating primarily to payments under
various compensation plans payable following the change in control. Included in
the $28.4 million is approximately $9.1 million for payments under the Incentive
2000 Plan. Additionally, approximately thirty executive officers of ICR are
covered by Employment Security Agreements and are entitled to receive either two
or three years of severance benefits if within two years after March 13, 1998,
their employment is terminated by ICR without cause or they resign with good
reason. The Special Charges include approximately $6.1 million and $12.0 million
in 1999 and 1998, respectively, in connection with these agreements for amounts
payable through June 30, 1999. If all Employment Security Agreements were to be
activated, ICR would incur an additional liability of approximately $10.0
million.
2. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared on the historical cost basis for ICR.
Except as described below, the accompanying unaudited consolidated
financial statements have been prepared in accordance with accounting policies
described in the 1998 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.
Income Per Share
Income per common share has been omitted, as ICR is a wholly-owned
subsidiary of the Corporation.
Reclassification
Certain items relating to prior years have been reclassified to conform
to the presentation in the current year.
3. Equity and Restrictions on Dividends
For the six-month period ended June 30, 1999, ICR did not pay or
declare any dividends to the Corporation. Covenants of the ICR Revolver require
specified levels of tangible net worth. At June 30, 1999, ICR exceeded its
tangible net worth covenant by approximately $68.7 million.
4. Litigation
ICR is one of several defendants in a New Orleans class action in which
a jury has returned a verdict against the ICR for $125 million in punitive
damages as a result of a tank car fire. The Louisiana Supreme Court has vacated
the judgment for technical reasons and remanded the case to the trial court for
further proceedings. On April 8, 1999, the trial court entered judgment
concerning the punitive verdict but because the verdict addressed only the first
20 plaintiffs, the trial court allocated punitive damages against ICR of
approximately $300,000 to those 20 plaintiffs. The judgment and finding will be
appealable upon the trial court's ruling on other post-trial motions. In ICR's
judgment, it has made adequate provision for the ultimate disposition of the
matter.
5. Uncertainty due to Year 2000 issue
The Year 2000 issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may recognize
the Year 2000 as 1900 or some other date, resulting in errors when information
using Year 2000 dates is processed. In addition, similar problems may arise in
some systems that use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure that could
affect the ICR's ability to conduct normal business operations. There can be no
assurance that all aspects of the Year 2000 issue affecting the ICR, including
those related to the efforts of customers, suppliers or other third parties,
will be fully resolved.
6. Subsequent Events
On July 6, 1999, ICR terminated the Revolver, and paid off all
outstanding commercial paper obligations. After July 6, 1999, ICR's short-term
cash requirements will be funded through borrowings from an affiliated company.
On July 1, 1999, ICR signed a Joinder Agreement with CN's bank lending group
whereby ICR became a borrower and a guarantor under the CN credit
agreement. Indentures covering $555.0 million public debt issuance by ICR were
supplemented in early July 1999, to provide guarantee by CN. As part of this
debt restructuring, ICR paid a $613.7 million dividend to Corporation.
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
Total revenues for 1999 decreased from the prior year quarter
by $2.0 million or 1.2% to $160.4 million.
Revenue declines have occurred in metals primarily as a result of high
levels of imported lower-priced steel and fewer domestic pipeline projects, and
in grain products as a result of reduced soybean meal demand and lower demand
for export soybean oil and vegetable oils. Increased revenues from grain
resulted primarily from export shipments of corn, coupled with continued strong
shipments of feed grain to domestic poultry markets.
Intermodal, coal, and bulk all showed increased revenues versus year-ago levels.
Operating expenses increased $11.5 million or 11.2% to $114.5 million.
Decrease in fuel expense reflects the decrease in usage (3.1%) as well as lower
costs (10.3%). The $6.1 million Special Charge in 1999 is discussed in Note 1.
Other expenses increased $5.6 million primarily from credits that were not
received in 1999 compared to 1998 following the termination of joint facility
agreements with other railroads.
Other income, net of $1.5 million for 1999 decreased compared to $4.1
million in 1998, primarily from a non-recurring gain on sale of woodchip hopper
cars in 1998.
Net interest expense of $7.0 million for 1999 decreased 1.4% compared
to $7.1 million in 1998.
Provision for income taxes in 1998 benefited from additional tax
deductions.
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Total revenues for 1999 decreased from the prior year period by $4.9
million or 1.5% to $320.5 million.
Weakness in metals resulted from continued import of steel and fewer
domestic pipeline projects. Grain products continued to fall behind year-ago
levels due primarily to reduced demand for soybean products. These losses were
offset by increased export and domestic grain activity, growth in bulk and
intermodal trailer volumes, and increased coal volumes primarily to rebuild
stockpiles.
Operating expenses increased $2.3 million to $223.2 million. Increases
in labor and fringe benefits reflect contract and merit increases. Decrease in
fuel expense reflects the decrease in usage (5.5%) as well as lower costs
(16.3%). The $6.1 million and $28.4 million Special Charge in 1999 and 1998,
respectively, is discussed in Note 1. Other expenses were higher contrasted to
last year which benefited from the recovery of prior period expenses relating to
a derailment and from credits that were not received in 1999 compared to 1998
following termination of joint facility agreements with other railroads.
Other income, net of $2.9 million for 1999 decreased compared to
$6.3 million in 1998 primarily from a gain on sale of woodchip hopper cars in
1998.
Net interest expense of $14.3 million for 1999 increased 2.1% compared
to $14.0 million in 1998.
Provision for income taxes in 1998 benefited from additional tax
deductions.
Liquidity and Capital Resources
Operating Data ($ in millions): Six Months Ended June 30
------------------------
1999 1998
---- ----
Cash flows provided by (used for):
Operating activities $ 67.5 $ 40.3
Investing activities (80.5) (77.0)
Financing activities (6.9) 21.9
------- ------
Net change in cash and
temporary cash investments $(19.9) $ (4.8)
======= =======
Cash from operating activities in 1999 and 1998 was primarily net
income before depreciation and deferred taxes and 1998 was also affected by the
termination of the ICR's receivables sales program.
Investing Data ($ in millions):
Additions to property were as follows:
Six Months Ended June 30,
1999 1998
Communications and signals $ 4.6 $ 5.1
Equipment/rolling stock 32.7 9.0
Track and bridges 22.3 24.4
Other 3.7 5.4
----- -----
Total $63.3 $43.9
===== =====
Property retirements and removals generated proceeds of $1.8 million
and $2.5 million in 1999 and 1998, respectively.
ICR anticipates that capital expenditures for 1999 will be
approximately $91.0 million. Replacement expenditures of $78.9 million will
concentrate on track maintenance, bridges and freight car upgrades. Productivity
and expansion expenditures will total $12.4 million. ICR expects to fund these
expenditures from current operations or other available sources.
Financing Activities
No dividends were declared or paid during the first and second quarters
of 1999. Through June 1998, ICR paid $34.6 million in cash dividends to the
Corporation.
ICR has a commercial paper program whereby a total of $200 million can
be issued and outstanding at any one time. The program is supported by a $250
million ICR Revolver (see below). At June 30, 1999, $14.6 million was
outstanding. The average interest rate on commercial paper for the quarter ended
June 30, 1999, was 5.1% with a range of 5.07% to 5.34%. Moody's Investors
Service and Standard & Poor's rate ICR's public debt Baa2 and BBB, respectively.
ICR has a $250 million Revolver with its bank lending group, which
expires in 2001. Fees and borrowing spreads are predicated on ICR's long-term
credit ratings. The annual facility fee is 15 basis points and borrowings under
this agreement are at Eurodollar offered rate plus 22.5 basis points. The
Revolver is used primarily for backup for ICR's commercial paper program but can
be used for general corporate purposes. Outstanding commercial paper borrowings
and any letters of credit issued on behalf of ICR under the facility reduce the
available amount. At June 30, 1999, $235.4 million was available.
Certain covenants of ICR's debt agreements require among others
specific levels of tangible net worth but not a specific dividend restriction.
At June 30, 1999, ICR exceeded its tangible net worth covenants by approximately
$68.7 million. ICR was in compliance with all covenants at June 30, 1999, and
does not contemplate any difficulty maintaining such compliance.
On July 6, 1999, ICR terminated the Revolver, and paid off all
outstanding commercial paper obligations. After July 6, 1999, ICR's short-term
cash requirements will be funded through borrowings from an affiliated company.
On July 1,1999, ICR signed a Joinder Agreement with CN's bank lending group
whereby ICR became a borrower and a guarantor under the CN credit
agreement. Indentures covering $555.0 million public debt issuance by ICR were
supplemented in early July 1999, to provide guarantee by CN. As part of this
debt restructuring, ICR paid a $613.7 million dividend to the Corporation.
ICR has a shelf registration from 1996 which can be used to issue an
additional $50 million in MTN's or other debt until 2000. Currently, there are
no plans to issue additional debt but replacing maturing MTN's, capital
investments in the terminal facilities and other ventures could necessitate use.
ICR 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.
Year 2000 Issues
Overview
ICR has long viewed the Year 2000 issue as a serious challenge because
the safety of its employees, customers, and the public is a top priority. ICR
began to address the Year 2000 issue in 1997. As a result of those efforts,
mission- and safety-critical hardware, software, and embedded systems controlled
by ICR are substantially Year 2000 ready.
The Year 2000 Readiness Project includes ICR and the Corporation. The
Year 2000 Program Office, established by ICR in 1997 to manage and oversee Year
2000 activities, will continue monitoring, testing and contingency planning
throughout 1999. The Year 2000 initiative is fully supported by senior
management. The Year 2000 initiative includes information technology department
supported systems; user department supported systems; personal computers and
LAN; customers and electronic partners; suppliers; public utilities;
subsidiaries; and process control.
ICR expects to spend approximately $6.5 million to modify and replace
its computer systems. Of the total project cost, approximately $4.1 million is
attributable to the purchase of new software. The total cost of the project is
being funded through operating cash flows. Maintenance or modification costs
will be expensed as incurred, while the costs of new software will be
capitalized and amortized over the useful life of the software. Accordingly, ICR
does not expect the amounts required to be expensed to have a material effect on
its financial position or results of operations. The amount of spending to date
is approximately $6.1 million.
Process Control
This is the most significant category within ICR based on analysis of
core business processes and the potential impacts of Year 2000 failures. It
includes, but is not limited to, locomotives, the dispatching system, signal and
switch controllers, highway-rail grade crossing protection, telecommunications
systems, locomotive event recorders, and crew management systems. ICR's policy
is to test mission- and safety-critical hardware, software and embedded systems
regardless of whether they have been certified Year 2000 ready by the vendor.
ICR tests indicate that signals and highway grade crossing devices do not employ
date calculations. This finding is consistent with research and testing
experience by other railroads and rail suppliers.
ICR is dependent on third party vendors for Year 2000 readiness of key
systems and equipment. The vendor of the dispatching system provided ICR with a
written Year 2000 readiness statement. ICR completed its own Year 2000 tests of
the hardware and software in May 1998. ICR will continue to test this system
during 1999 to confirm that vendor maintenance and software upgrades have not
affected Year 2000 readiness. Another third-party vendor supports the
transportation control system. The vendor completed remediation and integration
testing of the transportation control system during 1998. ICR completed
acceptance testing on this system in June 1999. Information Technology
Department Supported Systems
Upon completion of an inventory in July 1997, ICR identified
approximately 1.6 million lines of COBOL code in various programs as candidates
for remediation. Remediation of approximately 1.4 million lines of code in more
than 2,100 programs is complete and the programs have been unit tested and
returned to the production environment. In addition, ICR migrated the programs
to a Year 2000 ready COBOL compiler. An independent validation and verification
of code changes was completed in March 1999. Integration and user acceptance
testing of mainframe applications was completed during April 1999.
ICR completed installation of two modules of an enterprise software
solution during January 1999. This software replaced the remaining lines of
non-Year 2000 ready code.
ICR installed a Year 2000 ready version of the mainframe computer
operating system in April 1998. Subsequently, the vendor developed and ICR
applied more than 800 patches to the operating system software. We also
installed more than 60 system software tools during 1998.
ICR will implement a moratorium on any new applications effective
October 1, 1999 that will extend at least two months into the year 2000. This
will reduce the risk of introducing non-Year 2000 ready elements into our
systems and allow information technology specialists to promptly identify and
resolve any Year 2000 issues that might emerge.
User Department Supported Systems
This category includes mainframe, mid-range, and personal computer
applications. Mainframe systems are comprised primarily of data extraction and
analysis programs and databases. An inventory of these systems is complete. Many
of these systems are not critical or do not employ date comparisons. Remediation
was completed in 1998.
The mid-range computer and its operating system are Year 2000 ready.
Remediation of the application programs was completed during the fourth quarter
1998.
The inventory and risk assessment process determined that most user
department supported personal computer applications are not mission- or
safety-critical. Repair of the programs was completed during the first quarter
of 1999.
ICR completed testing of systems in this category during the first
quarter of 1999.
Personal Computers and LAN
All LAN-connected personal computers have been inventoried and found to
be Year 2000 ready. About 90 percent of freestanding personal computers are Year
2000 ready. None of the remaining personal computers support any mission- or
safety-critical processes.
Generally, client-server hardware and software have been designed to be
Year 2000 ready. However, a client-server application with data feeds from older
mainframe systems using two-digit years may require building bridges or
conversion programs to use data from those mainframe systems. These bridges were
built as part of the installation of enterprise software described above. Year
2000 testing of the data bridges has been completed.
Customers and Suppliers
ICR contacted 180 shippers and approximately 1,500 rail and private car
interchange partners to request confirmation of their internal processes in
place to prevent Year 2000 failures. About 90 percent of the shippers have
responded that they have Year 2000 programs. ICR is monitoring shippers and
essential interchange partners to determine whether Year 2000 readiness was
attained.
ICR uses electronic data interchange ("EDI") to exchange data with
customers and other railroads. ICR has implemented new industry standards for
EDI requiring a four-digit year. Since some companies will continue to use
two-digit years, ICR will support older versions of EDI transaction sets and
interpret two-digit years within the appropriate century.
ICR is also taking steps to increase the likelihood that the flow of
goods and services provided by suppliers will not be interrupted by Year 2000
failures. ICR asked 1,100 suppliers to confirm that their products are Year 2000
ready and that their internal systems will work properly beyond 1999. More than
700 have responded and indicated that they have a Year 2000 project in place. In
addition, ICR identified about 60 critical vendors. ICR is monitoring these
suppliers to determine whether Year 2000 readiness was attained. ICR relies on a
value-added network ("VAN") for EDI with vendors. The VAN provider has verified
that hardware and software is Year 2000 ready via information on its' Internet
site. In addition, a forward date test was successfully executed in April 1999.
ICR asked 265 private and municipal public utility companies to confirm
that their services will not be interrupted by Year 2000 failures and that their
internal business processes and systems will work properly beyond 1999.
Approximately fifty percent have responded and reported they have a Year 2000
plan. ICR also monitors the Internet sites and Securities and Exchange
Commission filings of individual utility companies as well as electric utility
and telecommunications industry forums.
Business Continuity and Contingency Planning
We have planned for normal operations on January 1, 2000. Despite our
best efforts, we recognize that it is not possible to represent that we have
achieved complete Year 2000 compliance. In addition, Year 2000 readiness depends
in part upon the readiness of other entities and systems that comprise an
organization's business chain. In the event IC resolves all internal Year 2000
issues, we could still face potential business disruption if our suppliers fail
to deliver goods or provide services or our customers are unable to use our
services. Therefore, business continuity and contingency planning to address
Year 2000-related failure scenarios and ICR's response is an integral part of
ICR's Year 2000 program. Our objective is to mitigate the effects of significant
risks ICR would face in the event certain aspects of its Year 2000 remediation
plan fail. ICR completed risk assessment and developed event response strategies
during the first quarter of 1999. At the foundation of Year 2000 contingency
plans are previously developed disaster recovery plans, a communications and
signals help desk currently staffed 24 hours a day, 7 days a week, and other
emergency and safety reporting processes. Plans and procedures already exist to
address unanticipated outages of electricity, telecommunications, and other
services. The Year 2000 contingency plan addresses, among other things, critical
hardware and software, critical vendors, and key people. We will adjust business
continuity and contingency plans throughout 1999.
Forward-Looking Information
Information concerning costs, remediation, testing and the dates on
which ICR plans to complete Year 2000 efforts are based on management's best
estimates. The estimates were derived utilizing numerous assumptions of future
events. There can be no guarantee that these estimates will be achieved and
actual results could differ materially from those plans. Specific factors that
might cause material differences include, but are not limited to, the continued
availability of internal and external resources, the timetables for internal and
third party testing, the types of Year 2000 failures ICR might face, and similar
uncertainties.
Quantitative and Qualitative Disclosure about Market Risk
In the ordinary course of business, ICR utilizes various financial
instruments, primarily debt obligations, that inherently have some degree of
market risk. Since December 31, 1998 there have been no material changes to the
Company's financial instruments positions.
Miscellaneous
ICR has entered into various diesel fuel collar agreements designed to
mitigate significant changes in fuel prices. ICR has hedged approximately 61% of
the estimated 1999 diesel fuel purchases. In June 1998, the Financial Accounting
Standards Board issued SFAS 133, Accounting for Derivative Instruments and
Hedging Activities. Effective for fiscal periods beginning after June 15, 1999,
SFAS 133 establishes accounting and reporting standards requiring that
derivative financial instruments (including those embedded in other contracts)
be recorded on the balance sheet as either an asset or liability measured at its
fair value. Changes in the derivative's fair value are to be recognized
currently in earnings, unless certain specified criteria are met which allow the
derivative to be treated as a hedge. Special accounting for qualifying hedges
allows a derivative's gains or losses to offset related results of the hedged
item in the income statement. With respect to ICR's current hedging program, the
effect of adopting SFAS 133 on ICR's net income or financial position is not
expected to be significant.
Environmental Liabilities
ICR's operations are subject to comprehensive environmental regulation
by federal, state and local authorities. Compliance with such regulation
requires the Corporation 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, ICR
is potentially liable for the cost of clean up of various contaminated sites.
ICR 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 ICR can be held jointly and severally liable
for all environmental costs associated with such sites.
ICR is aware of approximately ten contaminated sites at which it is
probably liable for some portion of any required clean up. Of these, three
involve contamination primarily by diesel fuel that can be remediated without
material cost. Six other sites are expected to require more than $1 million each
in clean-up costs. At four of these sites other parties are expected to
contribute the majority of the costs incurred.
For all known sites of environmental contamination where ICR loss or
liability is probable, ICR has recorded an estimated liability at the time when
a reasonable estimate of remediation cost and ICR liability can first be
determined. Adjustments to initial estimates are recorded as necessary based
upon additional information developed in subsequent periods. Estimates of ICR`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, 1999, ICR had a reserve of $18.7 million for environmental 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 ICR leased substantial amounts of property to industrial
tenants, and ICR continues to haul hazardous materials that 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 ICR 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 ICR`s financial position, results of operations, cash
flow or liquidity.
Litigation
ICR is one of several defendants in a New Orleans class action in which
a jury has returned a verdict against the ICR for $125 million in punitive
damages as a result of a tank car fire. The Louisiana Supreme Court has vacated
the judgment for technical reasons and remanded the case to the trial court for
further proceedings. On April 8, 1999, the trial court entered judgment
concerning the punitive verdict but because the verdict addressed only the first
20 plaintiffs, the trial court allocated punitive damages against ICR of
approximately $300,000 to those 20 plaintiffs. The judgment and finding will be
appealable upon the trial court's ruling on other post-trial motions. In ICR's
judgment, it has made adequate provision for the ultimate disposition of the
matter.
Management's Discussion and Analysis of Financial Condition and Results
of Operations includes various forward-looking statements about ICR that are
subject to risks and uncertainties. Forward-looking statements include
information concerning future results of operations of ICR. Also, statements
including the words "believes," "expects," "anticipates," "intends," "estimates"
or similar expressions are forward-looking statements. Readers should note that
many factors could materially affect the future financial results of ICR and
could cause actual results to differ materially from those expressed in
forward-looking statements contained in this document. Accordingly, ICR
identifies the following important factors that could cause ICR's actual
financial results to be materially effected. The costs of the project and the
date on which ICR plans to complete the Year 2000 modifications are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events including the continued availability of certain resources,
third party modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those plans. The variability of fuel prices can be offset
through hedging, but hedging activities may fail to achieve that purpose or may
result in expense that might not have been otherwise incurred, in the event that
ICR fails to anticipate adequately its fuel requirements or the timing,
magnitude and direction of changes in fuel prices. 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 ICR will not
incur material environmental liabilities in the future. These forward-looking
statements speak only to the date of this filing. ICR disclaims any obligation
or undertaking to disseminate any updates or revisions to any such statement to
reflect changes in ICR's expectations or any change in events, conditions or
circumstances on which any such statements are based.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
See Exhibit Index on page E-1
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY
AND SUBSIDIARIES
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, ICR
has duly caused this report to be signed on its behalf by the undersigned
hereto duly authorized.
ILLINOIS CENTRAL RAILROAD COMPANY
/s/Michael J. Sabia
Michael J. Sabia
Executive Vice President & Chief Financial Officer
/s/Serge Pharand
Serge Pharand
Vice President and Corporate Comptroller
Date: August 16, 1999
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY
AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential
No. Description Page No.
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).
4.35 Form of Second Supplemental Indenture (Included at E-2)
between the Illinois Central Railroad
Company and The Chase Manhattan Bank dated
as of July 1, 1999, supplementing
Indenture dated July 25, 1996.
4.36 Form of First Supplemental Indenture (Included at E-4)
between the Illinois Central Railroad
Company and Allfirst Bank (formerly known
as First National Bank of Maryland)
dated as of July 1, 1999, supplementing
Indenture dated April 1, 1999, supplementing
Indenture dated April 1, 1995.
4.37 Form of First Supplemental Indenture (Included at E-6)
between the Illinois Central Railroad
Company and Allfirst Bank (formerly known
as First National Bank of Maryland)
dated as of July 1, 1999, supplementing
Indenture dated May 1, 1993.
<PAGE>
Exhibit 4
CANADIAN NATIONAL RAILWAY COMPANY,
ILLINOIS CENTRAL RAILROAD COMPANY,
and
THE CHASE MANHATTAN BANK, as
Trustee
SECOND SUPPLEMENTAL INDENTURE
This SECOND SUPPLEMENTAL INDENTURE, dated as of July 1, 1999, between
ILLINOIS CENTRAL RAILROAD COMPANY, an Illinois corporation ("ICR"), CANADIAN
NATIONAL RAILWAY COMPANY, a company incorporated in Canada ("CN") and THE CHASE
MANHATTAN BANK, a New York banking corporation, as trustee (the "Trustee").
W I T N E S S E T H :
WHEREAS, ICR entered into an Indenture dated as of July 25, 1996 (as
supplemented by the First Supplemental Indenture, dated as of December 17, 1996,
the "Indenture"), with the Trustee, pursuant to which have been issued ICR's
6.85% Medium Term Notes, Series B, due August 2, 1999, its 7.12% Medium Term
Notes, Series B, due August 2, 2001, its 6.72% Medium Term Notes, Series B, due
August 14, 2001, its 6.63% Medium Term Notes, Series B, due June 9, 2008, and
its 7.70% Debentures, due September 15, 2096 (collectively, the "Notes");
WHEREAS, Section 9.1 of the Indenture provides that ICR and the Trustee
may supplement the Indenture without notice to or the consent of any Holder (as
defined in the Indenture) to make any change that does not materially and
adversely affect the rights of any Holder;
WHEREAS, the parties hereto desire by this Second Supplemental
Indenture to provide for the full and unconditional guarantee by CN of the due
and punctual payment of the principal of, and premium, if any, and interest on,
all of the Notes outstanding, when and as the same shall become due and payable,
whether at the stated maturity, by acceleration, or call for redemption, or
otherwise, all according to the terms thereof and the terms of the Indenture;
and
<PAGE>
WHEREAS, all things necessary to make this Second Supplemental
Indenture a valid, binding and legal agreement in accordance with its terms have
been done and performed and the execution and delivery of this Second
Supplemental Indenture have in all respects been duly authorized;
NOW, THEREFORE:
ARTICLE 1
GUARANTEE
SECTION 1.1. Guarantee; Waiver. CN hereby fully and unconditionally
guarantees (the "Guarantee") to the holders of the Notes the due and punctual
payment of the principal of, premium, if any, and interest on, the Notes
outstanding when and as the same shall become due and payable, whether at the
stated maturity, by acceleration, or call for redemption, or otherwise, all
according to the terms thereof and of the Indenture. CN agrees that, in the
event of a default in payment of principal, premium, if any, or interest on, any
of the Notes outstanding, whether at its stated maturity, by acceleration or
call for redemption, legal proceedings may be instituted by the holder of such
Note directly against CN to enforce the Guarantee without first proceeding
against ICR. CN hereby waives the benefits of diligence, presentment, demand of
payment, any requirement that any of the holders of the Notes protect, secure,
perfect or insure any security interest in or other lien on any property subject
thereto or exhaust any right or take any action against ICR or any other person
or entity or any collateral, filing of claims with a court in the event of
insolvency or bankruptcy of ICR, any right to require a proceeding first against
ICR or any other entity, demand, protest or notice (except as expressly required
by the Indenture) with respect to such Note or the indebtedness evidenced
thereby.
SECTION 1.2. Reports to Trustee. CN covenants to provide the Trustee,
at its address at 450 West 33rd Street, New York, New York 10001-2697,
Attention: Capital Markets Fiduciary Services, or any other address that the
Trustee may designate in accordance with Section 10.1 of the Indenture, with
copies of all reports and other documents that CN may be required to file with
the Commission (as defined in the Indenture) under Section 13 or 15(d) of the
Exchange Act (as defined in the Indenture).
ARTICLE 2
TRUSTEE
SECTION 2.1. Obligations of Trustee. The recitals of fact and covenants
and agreements in this Second Supplemental Indenture shall be taken as made by
CN and shall not be construed as made by or imposing any obligations upon the
Trustee other than those imposed by the Indenture.
<PAGE>
ARTICLE 3
MISCELLANEOUS
SECTION 3.1. Counterparts. This Second Supplemental Indenture may be
executed in any number of counterparts, each of which shall be deemed to be an
original, and all of which shall together constitute but one and the same
instrument.
SECTION 3.2. Governing Law. THIS SECOND SUPPLEMENTAL INDENTURE SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
[THE REMAINDER OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed and their respective corporate seals
to be hereunto fixed and attested as of the day and year first written above.
CANADIAN NATIONAL RAILWAY COMPANY
By: /s/ JEAN PIERRE OUELLET
Name: Jean Pierre Ouellet
Title: Senior Vice-President, Chief Legal Officer and Corporate
Secretary
Attest:
By:/s/ CRISTINA CIRCELLI
Name: Cristina Circelli
Title: Attorney
<PAGE>
PROVINCE OF QUEBEC )
) ss:
CITY OF MONTREAL )
On this 21st day of July, 1999, before me personally came JEAN PIERRE
OUELLET, to me personally known, who, being by me duly sworn, did depose and say
that he resides in Montreal, Quebec, Canada; that he is an officer of CANADIAN
NATIONAL RAILWAY COMPANY, one of the corporations described in and which
executed the above instrument; and that he signed his name thereto by authority
of the Board of Directors of said corporation.
IN WITNESS HEREOF, I have hereunto set my hand the day and year in this
certificate first above written.
/S/ DIANE LONGTIN
Name: Diane Longtin, no. 69,116
Comissioner for Oaths
Commissaire a l'Assermentation
Tous les districts judiciares du Quebec
My commission expires: July 29, 1999
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY
By: /s/ MYLES L. TOBIN
Name: Myles L. Tobin
Title: Vice President and Secretary
Attest:
By: /s/ NATALIE L. SHOW
Name: Natalie L. Show
Title: Assistant Secretary
<PAGE>
STATE OF ILLINOIS )
) ss.:
COUNTY OF COOK )
On this 21st day of July, 1999, before me personally came MYLES L.
TOBIN, to me personally known, who, being by me duly sworn, did depose and say
that he is a resident of Cook County, Illinois; that he is an authorized officer
of ILLINOIS CENTRAL RAILROAD COMPANY, one of the corporations described in and
which executed the above instrument; that he knows the corporate seal of said
corporation; that the seal affixed to said instruments is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed her name thereto by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand the day and year in
this certificate first above written.
/s/ PATRICIA A. ZIEMINSKI
Notary Public
My commission expires: 1/6/2003
[Notarial Seal]
<PAGE>
THE CHASE MANHATTAN BANK
By: /s/ R. J. HALLERAN
Name: R. J. Halleran
Title: Second Vice President
Attest:
By:/s/ ERIC BUTLER
Name: Eric Butler
Title: Trust Officer
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 21st day of July, 1999, before me personally came R. J.
HALLERAN, to me personally known, who, being by me duly sworn, did depose and
say that he is a resident of Richmond County, New York; that he is an authorized
officer of THE CHASE MANHATTAN BANK, one of the corporations described in and
which executed the above instrument; that he knows the corporate seal of said
corporation; that the seal affixed to said instruments is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed her name thereto by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand the day and year in
this certificate first above written.
/s/ EMILY FAYAN
Notary Public
My commission expires: December 31, 1999
[Notarial Seal]
<PAGE>
Exhibit 4
CANADIAN NATIONAL RAILWAY COMPANY,
ILLINOIS CENTRAL RAILROAD COMPANY,
and
ALLFIRST BANK, as
Trustee
FIRST SUPPLEMENTAL INDENTURE
This FIRST SUPPLEMENTAL INDENTURE, dated as of July 1, 1999, between
ILLINOIS CENTRAL RAILROAD COMPANY, an Illinois corporation ("ICR"), CANADIAN
NATIONAL RAILWAY COMPANY, a company incorporated in Canada ("CN") and ALLFIRST
BANK, a Maryland state chartered commercial bank, as trustee (as successor
trustee to The First National Bank of Boston, the "Trustee").
W I T N E S S E T H :
WHEREAS, ICR entered into an Indenture dated as of April 1, 1995 (the
"Indenture"), with The First National Bank of Boston, pursuant to which have
been issued ICR's 6.83% Medium Term Notes, Series A, due May 17, 2000, its 7.75%
Notes due May 1, 2005, and its 6.98% Medium Term Notes, Series A, due July 12,
2007 (collectively, the "Notes");
WHEREAS, Allfirst Bank (formerly known as The First National Bank of
Maryland) has been appointed successor trustee with respect to the Indenture;
WHEREAS, Section 9.1 of the Indenture provides that ICR and the Trustee
may supplement the Indenture without notice to or the consent of any Holder (as
defined in the Indenture) to make any change that does not materially and
adversely affect the rights of any Holder;
WHEREAS, the parties hereto desire by this First Supplemental Indenture
to provide for the full and unconditional guarantee by CN of the due and
punctual payment of the principal of, and premium, if any, and interest on, all
of the Notes outstanding, when and as the same shall become due and payable,
whether at the stated maturity, by acceleration, or call for redemption, or
otherwise, all according to the terms thereof and the terms of the Indenture;
and
<PAGE>
WHEREAS, all things necessary to make this First Supplemental Indenture
a valid, binding and legal agreement in accordance with its terms have been done
and performed and the execution and delivery of this First Supplemental
Indenture have in all respects been duly authorized;
NOW, THEREFORE:
ARTICLE 1
GUARANTEE
SECTION 1.1. Guarantee; Waiver. CN hereby fully and unconditionally
guarantees (the "Guarantee") to the holders of the Notes the due and punctual
payment of the principal of, premium, if any, and interest on, the Notes
outstanding when and as the same shall become due and payable, whether at the
stated maturity, by acceleration, or call for redemption, or otherwise, all
according to the terms thereof and of the Indenture. CN agrees that, in the
event of a default in payment of principal, premium, if any, or interest on, any
of the Notes outstanding, whether at its stated maturity, by acceleration or
call for redemption, legal proceedings may be instituted by the holder of such
Note directly against CN to enforce the Guarantee without first proceeding
against ICR. CN hereby waives the benefits of diligence, presentment, demand of
payment, any requirement that any of the holders of the Notes protect, secure,
perfect or insure any security interest in or other lien on any property subject
thereto or exhaust any right or take any action against ICR or any other person
or entity or any collateral, filing of claims with a court in the event of
insolvency or bankruptcy of ICR, any right to require a proceeding first against
ICR or any other entity, demand, protest or notice (except as expressly required
by the Indenture) with respect to such Note or the indebtedness evidenced
thereby.
SECTION 1.2. Reports to Trustee. CN covenants to provide the Trustee,
at its address at Allfirst Trust, Mail Code: 101-591, 25 South Charles Street,
Baltimore, MD 21201, Attention: Corporate Trust Services, or any other address
that the Trustee may designate in accordance with Section 9.1 of the Indenture,
with copies of all reports and other documents that CN may be required to file
with the United States Securities and Exchange Commission under Section 13 or
15(d) of the Exchange Act (as defined in the Indenture).
<PAGE>
ARTICLE 2
TRUSTEE
SECTION 2.1. Obligations of Trustee. The recitals of fact and covenants
and agreements in this First Supplemental Indenture shall be taken as made by CN
and shall not be construed as made by or imposing any obligations upon the
Trustee other than those imposed by the Indenture.
ARTICLE 3
MISCELLANEOUS
SECTION 3.1. Counterparts. This First Supplemental Indenture may be
executed in any number of counterparts, each of which shall be deemed to be an
original, and all of which shall together constitute but one and the same
instrument.
SECTION 3.2. Governing Law. THIS FIRST SUPPLEMENTAL INDENTURE SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
[THE REMAINDER OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed and their respective corporate seals
to be hereunto fixed and attested as of the day and year first written above.
CANADIAN NATIONAL RAILWAY COMPANY
By: /s/ JEAN PIERRE OUELLET
Name: Jean Pierre Ouellet
Title: Senior Vice-President, Chief Legal Officer
and Corporate Secretary
Attest:
By:/s/ CRISTINA CIRCELLI
Name: Cristina Circelli
Title: Attorney
<PAGE>
PROVINCE OF QUEBEC )
) ss:
CITY OF MONTREAL )
On this 23rd day of July, 1999, before me personally came JEAN PIERRE
OUELLET, to me personally known, who, being by me duly sworn, did depose and say
that he resides in Outremont, Quebec, Canada; that he is an officer of CANADIAN
NATIONAL RAILWAY COMPANY, one of the corporations described in and which
executed the above instrument; and that he signed his name thereto by authority
of the Board of Directors of said corporation.
IN WITNESS HEREOF, I have hereunto set my hand the day and year in this
certificate first above written.
/s/ DIANE LONGTIN
Name: Diane Longtin, no. 69,116
Comissioner for Oaths
Commissaire a l'Assermentation
District - Montreal
My commission expires: July 29, 1999
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY
By: /s/ MYLES L. TOBIN
Name: Myles L. Tobin
Title: Vice President and Secretary
Attest:
By:/s/ NATALIE L. SHOW
Name: Natalie L. Show
Title: Assistant Secretary
<PAGE>
STATE OF ILLINOIS )
) ss.:
COUNTY OF COOK )
On this 21st day of July, 1999, before me personally came MYLES L.
TOBIN, to me personally known, who, being by me duly sworn, did depose and say
that he is a resident of Cook County, Illinois; that he is an authorized officer
of ILLINOIS CENTRAL RAILROAD COMPANY, one of the corporations described in and
which executed the above instrument; that he knows the corporate seal of said
corporation; that the seal affixed to said instruments is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand the day and year in
this certificate first above written.
/s/ PATRICIA A. ZIEMINSKI
Notary Public
My commission expires: 1/6/2003
[Notarial Seal]
<PAGE>
ALLFIRST BANK
By: /s/ ROBERT D. BROWN
Name:Robert D. Brown
Title: Vice President
<PAGE>
STATE OF MARYLAND )
) ss.:
CITY OF BALTIMORE )
On this 21st day of July, 1999, before me personally came ROBERT D.
BROWN, to me personally known, who, being by me duly sworn, did depose and say
that he is a resident of Harford County, Maryland; that he is an authorized
officer of ALLFIRST BANK, one of the corporations described in and which
executed the above instrument; that he knows the corporate seal of said
corporation; that the seal affixed to said instruments is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand the day and year in
this certificate first above written.
/s/ DEBORAH K. BAILEY
Notary Public
My commission expires: 4/13/02
[Notarial Seal]
<PAGE>
Exhibit 4
CANADIAN NATIONAL RAILWAY COMPANY,
ILLINOIS CENTRAL RAILROAD COMPANY,
and
ALLFIRST BANK, as
Trustee
FIRST SUPPLEMENTAL INDENTURE
This FIRST SUPPLEMENTAL INDENTURE, dated as of July 1, 1999, between
ILLINOIS CENTRAL RAILROAD COMPANY, an Illinois corporation ("ICR"), CANADIAN
NATIONAL RAILWAY COMPANY, a company incorporated in Canada ("CN") and ALLFIRST
BANK, a Maryland state chartered commercial bank, as trustee (as successor
trustee to The First National Bank of Boston, the "Trustee").
W I T N E S S E T H :
WHEREAS, ICR entered into an Indenture dated as of May 1, 1993 (the
"Indenture"), with The First National Bank of Boston, pursuant to which have
been issued ICR's 6.75% Notes due May 15, 2003 (the "Notes");
WHEREAS, Allfirst Bank (formerly known as The First National Bank of
Maryland) has been appointed successor trustee with respect to the Indenture;
WHEREAS, Section 8.1 of the Indenture provides that ICR and the Trustee
may supplement the Indenture without the consent of any Securityholder (as
defined in the Indenture) to add to the covenants and agreements of ICR for the
benefit of the Holders (as defined in the Indenture) or to make any change that
does not materially adversely affect the legal rights under the Indenture of any
Holder;
WHEREAS, the parties hereto desire by this First Supplemental Indenture
to provide for the full and unconditional guarantee by CN of the due and
punctual payment of the principal of, and premium, if any, and interest on, all
of the Notes outstanding, when and as the same shall become due and payable,
whether at the stated maturity, by acceleration, or call for redemption, or
otherwise, all according to the terms thereof and the terms of the Indenture;
and
<PAGE>
WHEREAS, all things necessary to make this First Supplemental Indenture
a valid, binding and legal agreement in accordance with its terms have been done
and performed and the execution and delivery of this First Supplemental
Indenture have in all respects been duly authorized;
NOW, THEREFORE:
ARTICLE 1
GUARANTEE
SECTION 1.1. Guarantee; Waiver. CN hereby fully and unconditionally
guarantees (the "Guarantee") to the holders of the Notes the due and punctual
payment of the principal of, premium, if any, and interest on, the Notes
outstanding when and as the same shall become due and payable, whether at the
stated maturity, by acceleration, or call for redemption, or otherwise, all
according to the terms thereof and of the Indenture. CN agrees that, in the
event of a default in payment of principal, premium, if any, or interest on, any
of the Notes outstanding, whether at its stated maturity, by acceleration or
call for redemption, legal proceedings may be instituted by the holder of such
Note directly against CN to enforce the Guarantee without first proceeding
against ICR. CN hereby waives the benefits of diligence, presentment, demand of
payment, any requirement that any of the holders of the Notes protect, secure,
perfect or insure any security interest in or other lien on any property subject
thereto or exhaust any right or take any action against ICR or any other person
or entity or any collateral, filing of claims with a court in the event of
insolvency or bankruptcy of ICR, any right to require a proceeding first against
ICR or any other entity, demand, protest or notice (except as expressly required
by the Indenture) with respect to such Note or the indebtedness evidenced
thereby.
SECTION 1.2. Reports to Trustee. CN covenants to provide the Trustee,
at its address at Allfirst Trust, Mail Code: 101-591, 25 South Charles Street,
Baltimore, MD 21201, Attention: Corporate Trust Services, or any other address
that the Trustee may designate in accordance with Section 9.1 of the Indenture,
with copies of all reports and other documents that CN may be required to file
with the Commission (as defined in the Indenture) under Section 13 or 15(d) of
the Exchange Act (as defined in the Indenture).
<PAGE>
ARTICLE 2
TRUSTEE
SECTION 2.1. Obligations of Trustee. The recitals of fact and covenants
and agreements in this First Supplemental Indenture shall be taken as made by CN
and shall not be construed as made by or imposing any obligations upon the
Trustee other than those imposed by the Indenture.
ARTICLE 3
MISCELLANEOUS
SECTION 3.1. Counterparts. This First Supplemental Indenture may be
executed in any number of counterparts, each of which shall be deemed to be
an original, and all of which shall together constitute but one and the same
instrument.
SECTION 3.2. Governing Law. THIS FIRST SUPPLEMENTAL INDENTURE SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
[THE REMAINDER OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed and their respective corporate seals
to be hereunto fixed and attested as of the day and year first written above.
CANADIAN NATIONAL RAILWAY COMPANY
By: /s/ JEAN PIERRE OUELLET
Name: Jean Pierre Ouellet
Title: Senior Vice-President, Chief
Legal Officer and Corporate
Secretary
Attest:
By:/s/ CRISTINA CIRCELLI
Name: Cristina Circelli
Title: Attorney
<PAGE>
PROVINCE OF QUEBEC )
) ss:
CITY OF MONTREAL )
On this 23rd day of July, 1999, before me personally came JEAN PIERRE
OUELLET, to me personally known, who, being by me duly sworn, did depose and say
that he resides in Outremont, Quebec, Canada; that he is an officer of CANADIAN
NATIONAL RAILWAY COMPANY, one of the corporations described in and which
executed the above instrument; and that he signed his name thereto by authority
of the Board of Directors of said corporation.
IN WITNESS HEREOF, I have hereunto set my hand the day and year in this
certificate first above written.
/s/ DIANE LONGTIN
Name: Diane Longtin, no. 69,116
Comissioner for Oaths
Commissaire a l'Assermentation
District - Montreal
My commission expires: July 29, 1999
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY
By: /s/ MYLES L. TOBIN
Name: Myles L. Tobin
Title: Vice President and Secretary
Attest:
By:/s/ NATALIE L. SHOW
Name: Natalie L. Show
Title: Assistant Secretary
<PAGE>
STATE OF ILLINOIS )
) ss.:
COUNTY OF COOK )
On this 21st day of July, 1999, before me personally came MYLES L.
TOBIN, to me personally known, who, being by me duly sworn, did depose and say
that he is a resident of Cook County, Illinois; that he is an authorized officer
of ILLINOIS CENTRAL RAILROAD COMPANY, one of the corporations described in and
which executed the above instrument; that he knows the corporate seal of said
corporation; that the seal affixed to said instruments is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand the day and year in
this certificate first above written.
/s/ PATRICIA A. ZIEMINSKI
Notary Public
My commission expires: 1/6/2003
[Notarial Seal]
<PAGE>
ALLFIRST BANK
By: /s/ ROBERT D. BROWN
Name: Robert D. Brown
Title: Vice President
<PAGE>
STATE OF MARYLAND )
) ss.:
CITY OF BALTIMORE )
On this 21st day of July, 1999, before me personally came ROBERT D.
BROWN, to me personally known, who, being by me duly sworn, did depose and say
that he is a resident of Harford County, Maryland; that he is an authorized
officer of ALLFIRST BANK, one of the corporations described in and which
executed the above instrument; that he knows the corporate seal of said
corporation; that the seal affixed to said instruments is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand the day and year in
this certificate first above written.
/s/ DEBORAH K. BAILEY
Notary Public
My commission expires: 4/13/02
[Notarial Seal]
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 8900
<SECURITIES> 0
<RECEIVABLES> 150100
<ALLOWANCES> 700
<INVENTORY> 20100
<CURRENT-ASSETS> 218200
<PP&E> 1541300
<DEPRECIATION> 67000
<TOTAL-ASSETS> 1957100
<CURRENT-LIABILITIES> 295000
<BONDS> 527600
<COMMON> 0
0
0
<OTHER-SE> 679700
<TOTAL-LIABILITY-AND-EQUITY> 1957100
<SALES> 320500
<TOTAL-REVENUES> 320500
<CGS> 223200
<TOTAL-COSTS> 223200
<OTHER-EXPENSES> (2900)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14300
<INCOME-PRETAX> 85900
<INCOME-TAX> 32700
<INCOME-CONTINUING> 53200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53200
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
