<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 3, 1994
----------------
SANTA FE PACIFIC CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION)
1-8627 36-3258709
(COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NO.)
----------------
1700 EAST GOLF ROAD, SCHAUMBURG, 60173-5860
ILLINOIS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
(708) 995-6000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(NOT APPLICABLE)
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits: Included as Exhibit 99 is financial information restated to
reflect Santa Fe Pacific Corporation's gold operations as discontinued
operations. See Exhibit Index included herewith at E-1.
1
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED HEREUNTO DULY AUTHORIZED.
Santa Fe Pacific Corporation
(Registrant)
/s/ Thomas N. Hund
By: _________________________________
Thomas N. Hund
Vice President and Controller
Date: October 5, 1994
2
<PAGE>
SANTA FE PACIFIC CORPORATION
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
------- -------------------- ----------
<C> <S> <C>
23 Consent of Independent Accountants.
99 Santa Fe Pacific Corporation financial information
restated for discontinued operations. The following
financial information is included:
2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 1
3. Consolidated Financial Statements:
Report of Independent Accountants 11
Consolidated Statement of Operations for the three years
ended December 31, 1993 12
Consolidated Balance Sheet at December 31, 1993 and 1992 13
Consolidated Statement of Cash Flows for the three years
ended December 31, 1993 14
Consolidated Statement of Shareholders' Equity for the
three years ended December 31, 1993 15
Notes to Consolidated Financial Statements 16
</TABLE>
E-1
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in (i) the Registration
Statements on Form S-8 (Nos. 33-12072; 33-26814; 33-33413; 33-41409; 33-60628;
and 33-63208), (ii) the Prospectus constituting part of the Registration
Statement on Form S-3 (No. 33-51435) and (iii) the Prospectus constituting part
of the Post-Effective Amendment 1-D on Form S-8 to the Registration Statement
on Form S-14 (No. 2-87755) of Santa Fe Pacific Corporation of our report dated
February 4, 1994, except for the retroactive restatement described in Note 2 of
the notes to consolidated financial statements, as to which the date is June
29, 1994, appearing on page 11 of Exhibit 99 of this Form 8-K/A.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Kansas City, Missouri
October 5, 1994
<PAGE>
EXHIBIT 99
CONSOLIDATED FINANCIAL REVIEW
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
REVENUE INFORMATION (In millions)
SANTA FE RAILWAY--OPERATING REVENUES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Freight Revenues
Intermodal Business Unit
Direct Marketing................................ $ 404.1 $ 345.7 $ 290.5
Intermodal Marketing Companies.................. 376.6 398.4 402.2
International................................... 196.1 168.2 150.1
-------- -------- --------
Total Intermodal Business Unit................ 976.8 912.3 842.8
-------- -------- --------
Carload Business Unit
Chemicals and Petroleum......................... 281.3 282.7 258.6
Coal............................................ 220.1 193.8 190.5
Vehicles and Parts.............................. 191.2 136.7 144.1
Whole Grain..................................... 160.6 143.4 145.8
Minerals and Ores............................... 143.1 157.0 166.0
Forest Products................................. 121.6 115.9 102.7
Consumer Products............................... 113.9 117.1 116.2
Grain Products.................................. 82.3 80.4 71.1
Primary Metals.................................. 77.6 70.3 69.8
-------- -------- --------
Total Carload Business Unit................... 1,391.7 1,297.3 1,264.8
-------- -------- --------
Total Revenue Before Adjustments.................... 2,368.5 2,209.6 2,107.6
Miscellaneous Adjustments........................... -- 3.3 5.5
-------- -------- --------
Total Freight Revenue......................... 2,368.5 2,212.9 2,113.1
Other Revenues...................................... 40.7 38.8 40.4
-------- -------- --------
Total Operating Revenues...................... $2,409.2 $2,251.7 $2,153.5
======== ======== ========
</TABLE>
RESULTS OF OPERATIONS
1993 Compared with 1992
Santa Fe Pacific Corporation ("SFP" or "Company") reported 1993 net income of
$338.8 million or $1.81 per share compared to a net loss of $104.5 million or
$0.57 per share last year. Income from continuing operations was $177.4 million
or $0.95 per share compared to $21.1 million or $0.11 in the prior year. The
increase in net income primarily relates to: (1) higher operating income of
$340.5 million at The Atchison, Topeka and Santa Fe Railway Company (Santa Fe
Railway) principally due to a $320.4 million special charge recorded in 1992 as
well as increased business levels in 1993, partially offset by the negative
impact of midwest floods in 1993; (2) lower interest expense of $31.1 million;
(3) higher income from discontinued operations partially due to an after-tax
gain of $108.3 million on the exchange of mineral assets in 1993; and (4) a
$163.0 million charge in 1992 for an accounting change. The above are partially
offset by: (1) a $59.5 million decline in pre-tax gains on the sale of rail
lines in California; and (2) the increase in the federal income tax rate from
34% to 35% during 1993.
1
<PAGE>
On June 29, 1994, SFP's Board of Directors approved the distribution of SFP's
interest in Santa Fe Pacific Gold Corporation ("SFP Gold") to SFP shareholders
(see Other Matters--Distribution of SFP Gold Subsidiary to Shareholders). As a
result, SFP Gold is reflected as a discontinued operation in the consolidated
financial statements. Income from discontinued operations, net of income taxes
was $161.4 million in 1993 compared to $42.4 million in 1992. The higher income
from discontinued operations in 1993 principally reflects an after-tax gain of
$108.3 million or $0.58 per share on an exchange of mineral assets.
Special items in 1993 include pre-tax gains of $145.4 million from the sale
of rail lines in southern California (see Other Matters--Sale of California
Lines) and $21.6 million related to the favorable outcome of arbitration and
litigation settlements. In addition, 1993 includes $12.2 million of pre-tax
expense for SFP's portion of environmental and litigation charges at Santa Fe
Pacific Pipeline Partners, L.P. ("Pipeline Partnership"), and an increase in
income tax expense of $27.7 million for the retroactive effect from the date of
enactment of the increase in the federal income tax rate from 34% to 35%.
Special items in 1992 include a pre-tax gain of $204.9 million from the sale
of rail lines in southern California (see Other Matters--Sale of California
Lines). Additionally, 1992 included pre-tax special charges of $320.4 million
at Santa Fe Railway principally related to a new labor agreement, operations
centralization and increased environmental accruals (See Other Matters--
Contingencies and Other Matters--Rail Restructuring) and $4.5 million for SFP's
portion of environmental charges at the Pipeline Partnership. Also, a charge of
$163.0 million after taxes was recorded for the adoption of Statement of
Financial Accounting Standards ("SFAS") No.'s 106 and 112, on accounting for
postretirement and postemployment benefits other than pensions. This charge
represented the cumulative effect of the new principle on years prior to 1992.
Finally, an extraordinary charge of $5.0 million after taxes was recorded on
early extinguishment of debt.
Excluding discontinued operations and special items in both years, SFP's 1993
net income was approximately $114.5 million or $0.61 per share compared to
$96.4 million or $0.52 per share in 1992. The improved results are due to
higher operating income at Santa Fe Railway, higher equity income from SFP's
investment in the Pipeline Partnership and lower interest expense, partially
offset by reduced other income (expense)--net.
Santa Fe Railway
Operating income was $317.7 million and represents an increase of $340.5
million over the $22.8 million operating loss reported in 1992. The increase is
the result of the $320.4 million special charge in 1992 discussed above, as
well as continued growth in revenues despite an estimated $40 million in lost
revenues due to midwest flooding, and increased efficiencies related to
operations, partially offset by increased expenses from higher traffic volumes
and from flooding in the midwest. Operating income in 1993 increased 7%
compared to 1992 excluding the special charge, while the operating ratio of
86.8% was even with adjusted 1992.
Operating revenues increased by $157.5 million or 7% in 1993 reflecting a 7%
increase in carloadings while average revenue per car remained constant. The
volume increase occurred despite the midwest flooding.
Intermodal Business Unit ("IBU") revenues increased by 7% to $976.8 million
primarily due to a 6% increase in carloadings. Continued growth of Santa Fe
Railway's alliance with J.B. Hunt was the principal factor for the 17% increase
in direct marketing revenues. International revenues improved by 17% reflecting
both continued growth in shipments from existing customers and new contracts.
Intermodal Marketing Companies' revenue declined 5% due to lower volumes. The
average IBU revenue per car increased 1% principally reflecting a shift in mix
to higher rated direct marketing traffic.
Carload Business Unit ("CBU") revenues increased by 7% to $1,391.7 million as
carloadings increased 8% while average revenue per car declined slightly.
Vehicles and parts revenues increased by $54.5 million to $191.2 million due
principally to new business related to a long-term automotive contract with
General Motors in the Arizona and southern California corridors which began in
December 1992. Coal revenues increased 14% to $220.1 million and include
traffic related to Wisconsin Electric Power's long-term purchase
2
<PAGE>
agreement with the Pittsburg & Midway Coal Mine located near Raton, New Mexico
which began in the third quarter of 1992. Whole grain revenues increased 12% to
$160.6 million reflecting both higher volumes due to a rise in export shipments
and higher average revenue per car due to longer haul shipments and rate
increases. Primary metals revenues of $77.6 million were $7.3 million higher
principally due to an increase in steel shipments along the west coast. Forest
products revenues rose 5% to $121.6 million due to favorable average revenue
per car reflecting a shift in mix to higher rated lumber products shipments.
Minerals and ores revenues declined 9% to $143.1 million due to sluggish
international markets and foreign competition in the sulphur and potash
industries.
Operating expenses of $2,091.5 million decreased by $183.0 million from 1992,
which included the $320.4 million special charge discussed above. Compensation
and benefits expense rose slightly as higher traffic levels and cost
escalations were offset by increased efficiencies, which include the effect of
a crew consist agreement reached in September 1992 with the United
Transportation Union reducing crew sizes on the eastern half of the railroad.
Revenue ton miles per average employee improved by 8% reflecting efficiencies
and volume growth. Fuel expense of $239.1 million rose $33.6 million reflecting
a 9% increase in consumption and a 7% higher price. The increase in consumption
reflects the higher traffic volumes as well as additional consumption
associated with flood-related train detours. The higher fuel price includes a
4.3 cent increase in federal tax on fuel which became effective October 1,
1993. Equipment rents expense increased by $43.4 million to $229.4 million due
to the higher traffic volume, the lease of equipment for new business and
additional expenses associated with flood-related train detours. Other expenses
rose by $51.6 million to $507.1 million due to the higher volume levels
including ramping/deramping and drayage costs for IBU shipments, and various
other contract service costs. Operating expenses increased by $137.4 million
excluding the 1992 special charge.
Equity in Earnings of Pipeline Partnership
SFP's investment in the Pipeline Partnership produced equity income of $18.6
million including the $12.2 million special litigation and environmental
charge, a decrease of $5.5 million compared to 1992 which included a $4.5
million special environmental charge. The Pipeline Partnership's revenues
increased 7% principally reflecting a 3% volume increase and 4% increase in
average revenue per barrel. Operating expenses at the Pipeline Partnership
increased by $27.6 million due to a $17.0 million increase in special charges
and higher major maintenance and administrative expenses. Excluding special
items in both years, SFP's equity investment in the Pipeline Partnership
produced income of $30.8 million in 1993 compared to $28.6 million in 1992.
Interest Expense/Other Income (Expense)--Net
Interest expense declined by $31.1 million or 19% due principally to lower
outstanding debt as well as favorable variable interest rates. Other income
(expense)--net increased by $6.1 million to $5.8 million reflecting $21.6
million related to favorable outcome of arbitration and litigation settlements,
partially offset by lower interest income and reduced income from real estate
activities.
Income Taxes
Income tax expense in 1993 includes an increase of approximately $27.7
million which reflects the retroactive impact of the increase in the federal
tax rate from 34% to 35% from the date of enactment of the Omnibus Budget
Reconciliation Act of 1993, signed into law on August 10, 1993. A majority of
this increase relates to additional tax expense related to temporary
differences at January 1, 1993. SFAS No. 109--"Accounting for Income Taxes"
requires deferred taxes to be provided using enacted tax rates in effect during
the years in which the differences are expected to reverse.
Discontinued Operations
Income from discontinued operations, net of income taxes increased $119.0
million due to an after-tax gain of $108.3 million related to the exchange of
assets with Hanson Natural Resources Company ("Hanson") and higher operating
income from gold. Ounces sold doubled to 591,000 in 1993, which reflects
increased
3
<PAGE>
sales from existing mines as well as production in the second half of the year
from mines received in the exchange of assets with Hanson. Operating income
from coal and aggregate operations declined by approximately $14 million as
1993 included only six months of operations due to the exchange of these assets
with Hanson.
1992 Compared with 1991
SFP had a 1992 net loss of $104.5 million or $0.57 per share compared to 1991
net income of $96.4 million or $0.54 per share. Income from continuing
operations was $21.1 million or $0.11 per share compared to $62.4 million or
$0.35 in 1991. The decrease in net income primarily relates to: (1) lower
operating income of $278.2 million which includes a $320.4 million special
charge recorded in 1992, partially offset by higher business levels; (2) lower
other income-net of $25.8 million; and (3) a $163.0 million charge for an
accounting change in 1992. The above are partially offset by: (1) a $204.9
million pre-tax gain on the sale of rail lines in California in 1992; (2) lower
interest expense of $44.4 million; and (3) higher income from discontinued
operations.
Excluding the special items in 1992 discussed previously, net income from
continuing operations for 1992 was $96.4 million or $0.52 per share compared to
net income from continuing operations of $62.4 million or $0.35 per share in
1991. This improvement in adjusted 1992 income from continuing operations is
due to higher operating income at Santa Fe Railway and lower interest expense,
partially offset by lower other income (expense)--net.
Santa Fe Railway
Operating loss was $22.8 million and represents a decrease of $278.2 million
compared to operating income of $255.4 million reported in 1991. This decrease
was principally due to the 1992 special charge, partially offset by higher
business levels and increased operating efficiencies. Excluding the special
charge, operating income in 1992 increased 17% compared to 1991 while the
operating ratio as adjusted, improved from 88.1% in 1991 to 86.8% in 1992.
Operating revenues increased by $98.2 million or 5% in 1992 due to a 6%
increase in carloadings partially offset by a 1% decrease in the average
revenue per car.
IBU revenues increased by 8% to $912.3 million as carloadings were up 11%
while average revenue per car declined by 3%. Growth of J.B. Hunt shipments was
the principal factor for the 19% increase in direct marketing revenues.
International revenues improved by 12% principally reflecting continued growth
in shipments from existing customers. The average revenue per car declined due
to a shift in traffic mix, reflecting growth in international container
shipments which move at lower average rates, as well as competitive pressures
within all IBU segments.
CBU revenues increased by 3% to $1,297.3 million as carloadings increased 3%
while average revenue per car remained relatively constant. Chemicals and
petroleum revenues increased by 9% to $282.7 million due largely to increased
shipments of plastics and agricultural and industrial chemicals. Forest
products revenues increased by 13% to $115.9 million due to both favorable
volume and average revenue per car including a rebound in the housing market
which resulted in increased shipments of lumber and other forest products.
Grain products revenues of $80.4 million increased by $9.3 million reflecting
increased shipments of corn syrup, soybean meal and tapioca. The average
revenue per car within grain products was higher reflecting in part increases
in rates on export flour traffic. Minerals and ores revenues declined 5% to
$157.0 million as competitive pressures depressed sulphur and potash rates.
Vehicles and parts revenues decreased by $7.4 million to $136.7 million
principally reflecting declines in long haul traffic which caused the average
revenue per car to decline by 7%.
Operating expenses increased by $376.4 million to $2,274.5 million, and
includes the $320.4 million special charge. Compensation and benefits expense
increased 2% reflecting increased levels of traffic and cost escalations.
Average employees for the year declined 4% to 14,218 partially due to a new
labor agreement
4
<PAGE>
with train crew personnel, and revenue ton miles per average employee increased
by 11% reflecting improved efficiency and volume growth. Fuel expense of $205.5
million declined by $1.2 million principally reflecting a 3% decline in price.
Fuel consumption increased only 2% despite the 6% increase in traffic volume,
due to the lease of 90 new, fuel efficient locomotives in 1992 as well as other
conservation efforts. Equipment rents expense increased by $23.8 million to
$186.0 million due to the higher traffic volume as well as the lease of
locomotives. Materials and supplies expense declined by 6% to $127.5 million
principally reflecting reduced equipment maintenance. Other expenses increased
by $27.6 million to $455.5 million largely reflecting volume related increases
including ramping/deramping and drayage costs for IBU shipments. Operating
expenses increased by $56.0 million excluding the special charge.
Equity in Earnings of Pipeline Partnership
SFP's investment in the Pipeline Partnership produced equity income of $24.1
million including the $4.5 million special environmental charge. This was a
decrease of $3.0 million compared to 1991. The Pipeline Partnership's revenues
increased 6% principally reflecting an increase in average revenue per barrel.
Operating expenses at the Pipeline Partnership increased by $16.0 million due
to a $10.0 million special environmental charge and higher depreciation and
facility costs. Excluding the special item in 1992, SFP's equity investment in
the Pipeline Partnership produced operating income of $28.6 million in 1992
compared to $27.1 million in 1991.
Interest Expense/Other Income (Expense)--Net
Interest expense declined by $44.4 million or 21% due to both lower
outstanding debt and favorable variable interest rates. Other income
(expense)--net declined by $25.8 million reflecting reduced income from real
estate activities at Santa Fe Railway and lower interest income.
Discontinued Operations
Income from discontinued operations, net of income taxes increased by 25% to
$42.4 million. Higher operating income from gold was partially offset by lower
operating income from coal and increased exploration and development costs.
Operating income from gold increased by approximately $19 million principally
reflecting an 80% increase in sales to 295,000 ounces. Operating income from
coal declined by $2.9 million due to a 19% decline in sales partially offset by
a 12% increase in price. Both are principally the result of reduced spot market
sales.
FINANCIAL CONDITION
Liquidity and Capital Resources
Cash provided by operating activities from continuing operations is generally
SFP's primary source of liquidity and for the year ended December 31, 1993 was
$296.1 million. It primarily consists of net earnings before depreciation and
deferred taxes, reduced by restructuring payments, which include employee
severance, relocation costs and other labor related payments. During 1993,
additional cash of $247.6 million was provided by the sale of assets at Santa
Fe Railway, including $226.9 million from the sale of lines in southern
California (see Other Matters--Sale of California Lines). In addition, $72.5
million was received as principal payments on a note receivable. Capital
expenditures during 1993, including non-cash capital expenditures of $157.6
million primarily for directly financed equipment acquisitions and reimbursed
projects at Santa Fe Railway, totaled $539.1 million. Capital expenditures in
1993 were significantly higher than in 1992 due to increased spending on rail
expansion projects and facilities which include the Alliance, Texas intermodal
and carload transportation center and the Willow Springs, Illinois intermodal
facility, and improvements to track structure. Additionally, 1993 capital
expenditures reflect the purchase of 85 new locomotives valued at approximately
$100 million, while in 1992, 90 new locomotives with a fair market value in
excess of $100 million were acquired through an operating lease. Cash
expenditures were primarily funded through cash generated from continuing
operations. Principal payments on long term borrowings during 1993 were $242.6
million.
5
<PAGE>
For the year ended December 31, 1992, cash provided by operating activities
from continuing operations was $250.6 million. Additionally, cash of $319.0
million was provided by the sale of assets at Santa Fe Railway, including
$255.0 million from the sale of lines in southern California. In addition,
$72.5 million was received as principal payments on a note receivable. Capital
expenditures during 1992, including non-cash capital expenditures of $9.5
million, totaled $265.5 million and were used for equipment and improvements to
track structure and facilities at Santa Fe Railway. The expenditures were
primarily funded through cash generated from continuing operations. Principal
payments on long term borrowings during 1992 were $407.5 million, including
$201.0 million of proceeds from the sale of lines in southern California used
to retire debt.
During the year ended December 31, 1991, cash provided by operating
activities from continuing operations was $196.8 million. Additional cash of
$90.5 million was provided through the sale of assets, principally branch lines
and real estate at Santa Fe Railway. Also, $36.3 million was received as a
principal payment on a note receivable and proceeds of $36.2 million were
received from the sale of SFP stock. Capital expenditures in 1991, including
non-cash capital expenditures of $35.2 million primarily related to directly
financed equipment acquisitions at Santa Fe Railway, totaled $243.2 million and
were primarily used for equipment and improvements to track structure at Santa
Fe Railway. The expenditures were primarily funded through the cash generated
from continuing operations, equipment financings and other sources. Principal
payments on long-term borrowings during 1991 were $132.2 million.
Management anticipates that it will fund payment of current obligations from
continuing operations in 1994 through internally generated funds. Current
obligations include principal payments on long term debt as well as commitments
related to operating leases, maintenance agreements for locomotives and minimum
payments under haulage agreements with other railroads (see Note 13: Leases and
Other Commitments). Capital expenditures in 1994 are anticipated to approximate
$650 million, including non-cash capital expenditures of approximately $200
million primarily for directly financed equipment acquisitions and reimbursed
projects. The remaining expenditures will be funded through the use of
internally generated funds as well as various financings. In addition, Santa Fe
Railway's agreement to sell accounts receivable expires in December 1994 (see
Note 8: Sales of Accounts Receivable). At December 31, 1993, $225 million was
outstanding under the agreement. It is the Company's intention to replace or
extend this agreement with a similar facility prior to the December 1994
expiration. In addition, in December 1993, the Company filed a shelf
registration statement with the Securities and Exchange Commission ("SEC"), for
the issuance of up to $250 million in debt securities, none of which had been
issued as of December 31, 1993.
At present, the payment of external and intercompany dividends are limited in
amount by certain debt covenants of the Company. At December 31, 1993 no
payment of external dividends was allowed.
Inflation
Because of the capital intensive nature of SFP's businesses and because
depreciation is based on historical cost, the full effect of inflation is not
reflected in operating expenses. An assumption that all operating assets were
replaced at current price levels would result in depreciation charges
substantially greater than historically reported amounts.
OTHER MATTERS
Distribution of SFP Gold Subsidiary to Shareholders
On June 15, 1994, SFP Gold's, SFP's gold subsidiary, registration statement
for the initial public offering of 14.6% of its common stock became effective.
Approximately 19 million shares were sold at a price of $14 per share. On June
29, 1994, SFP's Board of Directors approved the distribution to SFP
shareholders of its remaining 85.4% interest in SFP Gold. As a result, SFP Gold
will become a separate, independent entity effective September 30, 1994.
Holders of record of SFP common stock as of September 12, 1994, will receive
6
<PAGE>
a distribution of one share of common stock of SFP Gold for every approximately
1.7 shares of SFP common stock held. Under a ruling obtained from the Internal
Revenue Service, the distributions are tax-free to SFP shareholders. The
consolidated financial statements and notes have been retroactively restated to
present SFP Gold as a discontinued operation.
Sale of California Lines
In November 1992, Santa Fe Railway announced that it and eight southern
California transportation agencies had reached definitive agreements for the
sale to the agencies of certain interests in approximately 340 miles of rail
lines and additional property, for cash and relief of obligations to reimburse
certain state and county agencies for capital improvements previously paid for
by the agencies and the State of California. Santa Fe Railway retained all
rights necessary for its freight operations in southern California. The
transportation agencies anticipate using these facilities for commuter lines.
The sale encompassed three separate closings which occurred in December 1992
and March and June of 1993. Cash proceeds of $226.9 million in 1993 and $255.0
million in 1992 were received resulting in pre-tax gains of $145.4 million and
$204.9 million in 1993 and 1992, respectively (see Note 3: Gain on Sale of
California Lines). A substantial portion of the net proceeds in both years were
used to reduce outstanding debt, including $126.0 million of debt related to
discontinued operations. Both of the gains recognized are net of the cost of
the properties, and other expenses of sale. Additionally, the 1993 gain is net
of an obligation retained by Santa Fe Railway which under certain conditions,
requires Santa Fe Railway to repurchase a portion of the properties sold for
$50 million.
Contingencies
The Company is subject to extensive regulation under federal, state, and
local environmental laws concerning, among other things, discharges to waters,
air emissions, toxic substances, and the generation, handling, storage,
transportation, and disposal of waste and hazardous materials. These laws and
regulations have the effect of increasing the cost and liabilities associated
with the conduct of operations. Environmental risks are also inherent in
railroad operations which frequently involve the transportation of chemicals
and other hazardous materials.
Santa Fe Railway expects it will become subject to new requirements
regulating air emissions from diesel locomotives that may increase its
operating costs in the future. By 1995, the United States Environmental
Protection Agency must issue regulations applicable to new locomotive engines.
Locomotive engines (other than new locomotive engines) may be regulated by
states based on standards and procedures which the State of California
ultimately adopts. The California standards are currently in the process of
being developed.
In addition, because many of SFP's land holdings are and have been used for
industrial or transportation related purposes or leased to commercial or
industrial companies whose activities may have resulted in discharges onto the
property, the Company is now subject and will from time to time continue to be
subject to environmental clean-up and enforcement actions. In particular, the
federal Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), also known as the "Superfund" law, generally imposes joint and
several liability for clean-up and enforcement costs, without regard to fault
or the legality of the original conduct, on current and predecessor owners and
operators of a site. Accordingly, SFP may be responsible under CERCLA and other
federal and state statutes for all or part of the costs to clean up sites at
which certain substances may have been released by the Company, its current
lessees, predecessor owners or lessees of properties, or other third parties.
At December 31, 1993, SFP had been named a potentially responsible party
(PRP) at 6 sites on the Environmental Protection Agency's (EPA) National
Priorities List (NPL). Additionally, SFP is potentially liable for the cost of
clean-up at other sites identified by the EPA and other agencies. Finally, SFP
has
7
<PAGE>
identified sites where costs exist for environmental clean-up and monitoring
(including where no claim has been asserted), and no agency is currently
involved. There are approximately 125 known environmental sites at December 31,
1993 which include, among other things; closed facilities including diesel
locomotive repair shops, tie treating plants, fueling facilities and
underground storage tanks; property leased or sold to others and current
operating sites.
Estimates of the Company's ultimate liabilities associated with Superfund and
other environmental sites are difficult to predict with certainty due to, among
other factors, the number of parties involved, possible remediation
alternatives, lengthy time frames, evolving environmental laws and regulations,
and potential recoveries from third parties. Environmental costs include
initial site surveys and environmental studies of potentially contaminated
sites, costs for remediation and restoration of sites determined to be
contaminated, as well as post-closure and ongoing monitoring costs. The Company
has not included any reduction in costs for anticipated recovery from
insurance. Estimated costs at sites where SFP is a PRP are generally based on
cost sharing agreements which vary from site to site, after consideration of
the financial condition of other PRP's. These costs are typically allocated
based on volume of material contributed, the portion of the total site owned or
operated by each PRP, and/or the amount of time the site was owned or operated.
During 1992, management completed an internal assessment of Santa Fe
Railway's environmental liabilities, including a site-by-site analysis of
properties with potentially significant environmental exposure. As a result of
this review and analysis it was determined that an additional accrual of $67
million was appropriate to provide for future costs of this nature which was
recorded in the third quarter of 1992 as part of a rail special charge. In
addition, the Company monitors, on a regular basis, accruals for environmental
sites which have been identified, based on additional information developed in
subsequent periods. The additional information is based on a combination of
factors including independent consulting reports, site visits, legal reviews
and historical trend analysis.
Payments recorded against environmental liabilities totaled $13.5 million,
$6.3 million and $7.1 million for the years ended December 31, 1993, 1992 and
1991, respectively. The majority of these payments related to mandatory clean-
up efforts. Capital expenditures related to environmental sites were
insignificant during this three year period. At December 31, 1993 and December
31, 1992 the Company had accrued liabilities for environmental costs of
approximately $125 million and $121 million, respectively. The Company
anticipates that approximately 75% of the accrued costs at December 31, 1993
will be paid over the next five years, with approximately $25 million of
payments occurring in 1994. It is the opinion of SFP management that none of
the above items, when finally resolved, will have a material adverse effect on
the annual results of operations, financial position or liquidity of SFP,
although an adverse resolution of a number of these items in a single year
could have a material adverse effect on the results of operations for that
year.
SFP is also a party to a number of other legal actions and claims, including
employee injury claims, various governmental proceedings and private civil
suits, arising in the ordinary course of business. While the final outcome of
these other legal actions cannot be predicted with certainty, considering among
other things, the meritorious legal defenses available, it is the opinion of
SFP management that none of these claims, when finally resolved, will have a
material adverse effect on the annual results of operations, financial position
or liquidity of SFP, although an adverse resolution of a number of these items
in a single year could have a material adverse effect on the results of
operations for that year.
Rail Restructuring
During the third quarter of 1992, Santa Fe Railway recorded a $253 million
pre-tax charge primarily for costs of a crew consist agreement on the eastern
half of the railroad and for centralization of certain transportation
functions.
The eastern lines crew consist agreement comprised $149 million of the
charge. The 1992 agreement is an update to a 1990 crew consist agreement. The
1992 agreement provides for further reductions in average crew sizes on through
freight trains and elimination of productivity payments which were required
when reduced crews were used. The 1992 eastern lines agreement, when combined
with a similar agreement reached earlier with trainmen on the other half of the
system, provides for through trains generally to operate with two person crews.
8
<PAGE>
Estimated operating expense savings resulting from the eastern lines
agreement was approximately $25 million annually beginning in 1993. The
agreement covers approximately 2,000 employees. Costs of the agreement which
are provided for in the charge relate to a signing bonus of $10,000 per
employee, the present value of a $65,000 deferred benefit per employee payable
upon separation or retirement and the present value of reserve board costs.
Reserve board costs represent wages paid to employees rendered excess due to
reduced crews. When on reserve board status, employees are removed from active
service and receive a percentage of their normal wages. Eastern line reserve
boards initially contained approximately 500 members and will decline over time
through attrition and other factors.
The charge also included $73 million related to centralization. In 1992,
Santa Fe Railway decided to centralize many operating support functions.
Centralization activities began in late 1992 and by the fall of 1993, Railway
had centralized train dispatching, crew planning and fleet management in
Schaumburg, Illinois; crew management, customer service and mechanical
(equipment) administration in Topeka, Kansas; and other administrative and
operating support functions in Kansas City, Kansas. Annual savings resulting
from centralized functions are expected to be approximately $20 million, most
of which will be reflected annually beginning in 1994. Cost of centralization
included in the $73 million charge relates to approximately 700 relocations,
reductions of 600 administrative and clerical positions, and abandonment of
facilities. Most of the costs of centralization had been paid by December 31,
1993.
Additionally, the charge includes approximately $31 million for other cost
saving initiatives including an adjustment of accruals established for other
operating craft labor agreements reached in prior periods.
At December 31, 1993, the balance of the restructuring liability was $315.6
million. The majority of the balance represents future deferred benefit and
reserve board payments related to the 1992 eastern lines agreement and similar
agreements reached in and accrued for in prior years. Restructuring costs paid
were $80.9 million in 1993, $118.9 million in 1992 and $104.5 million in 1991.
In 1994, the Company expects payments of approximately $60 million. Future
payments will decline over time; however, certain separation benefits will not
be paid until employee retirement. Santa Fe Railway has obtained letters of
credit of approximately $18 million supporting certain of its obligations under
labor agreement.
Hedging Activities
The Company enters into various commodity swap and collar transactions to
manage exposure against fluctuations in diesel fuel prices. The Company's fuel
hedging transactions are based upon commodities that are established in the
futures markets. The prices of these commodities have historically shown a high
degree of correlation with the Company's diesel fuel prices. Cash settlements
on contracts to hedge fuel prices are made at the end of a quarter and the
related gain or loss is included in fuel expense for that quarter. To the
extent the Company hedges portions of its fuel purchases, it may not fully
participate in decreases in fuel prices. At December 31, 1993, the Company had
entered into various agreements with several counterparties covering
approximately 260 million gallons which is anticipated to cover approximately
two-thirds of 1994 fuel purchases. Through swap arrangements the Company has
hedged approximately 205 million gallons at an average price of 48 cents.
Additionally, approximately 55 million gallons have been hedged through collar
arrangements which allow the price to float between average floor and ceiling
prices of 46 cents and 51 cents, respectively. These prices do not include
taxes, fuel handling costs and any differences which may occur from time to time
between the prices of commodities hedged and the purchase price of the Company's
diesel fuel. The effects of the Company's fuel hedges was to increase operating
expense by $12.4 million in 1993 and to reduce operating expense by $0.9 million
and $5.6 million in 1992 and 1991, respectively.
From time to time, the Company enters into various interest rate hedging
transactions for various purposes, including managing exposure to fluctuations
in interest rates or establishing rates in anticipation of future debt
issuance. At December 31, 1993, the Company had entered into four related
interest rate swap transactions for a total notional principal amount of $100
million, for the purpose of establishing rates in anticipation of an expected
future debt offering. These swap transactions call for the payment of a fixed
interest rate of 6.2%, which was based upon ten year treasury notes, and the
receipt of a variable interest
9
<PAGE>
rate which was 3.5% at December 31, 1993. At the time of the borrowing, which
is also expected to have a term of ten years, the swap will be closed out and
any gain or loss relating to the terminated interest rate swap will be
amortized as an adjustment to interest expense over the term of the borrowing.
The Company monitors its positions and the credit ratings of its
counterparties and does not currently anticipate losses due to counterparty
non-performance. The fair market value of the Company's fuel hedging
transactions at December 31, 1993 were unrealized losses of $9.2 million for
swap arrangements and $2.4 million for collar arrangements. The fair market
value of the Company's interest hedging transactions at December 31, 1993 was
not significant.
COMMON STOCK MARKET PRICES AND DIVIDENDS
Santa Fe Pacific Corporation common stock is traded on the New York, Chicago
and Pacific Stock Exchanges. The quarterly price range per share for the years
1993 and 1992 is as follows:
<TABLE>
<CAPTION>
1993 1992
--------------- ---------------
HIGH LOW HIGH LOW
------- ------- ------- -------
<S> <C> <C> <C> <C>
First Quarter............................. $15 5/8 $12 3/4 $14 1/8 $11 1/8
Second Quarter............................ $18 3/8 $14 1/2 $13 3/8 $11
Third Quarter............................. $19 1/8 $16 3/4 $12 7/8 $10 7/8
Fourth Quarter............................ $22 1/2 $18 $13 7/8 $10 5/8
</TABLE>
SFP paid a cash dividend of $0.10 per share in both 1993 and 1992.
As of January 31, 1994, there were approximately 75,000 holders of record of
SFP common stock.
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders, Chairman and Board of Directors
of Santa Fe Pacific Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of cash flows and of shareholders'
equity present fairly, in all material respects, the financial position of
Santa Fe Pacific Corporation and subsidiary companies at December 31, 1993 and
1992, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
Note 17 to the consolidated financial statements includes a description of a
change in the method of accounting for postretirement and postemployment
benefits other than pensions effective January 1, 1992.
As discussed in Note 2 to the consolidated financial statements, on June 29,
1994 Santa Fe Pacific Corporation's Board of Directors declared a special
dividend to holders of its common stock consisting of interests in its
subsidiary Santa Fe Pacific Gold Corporation. The consolidated financial
statements have been retroactively restated to present the subsidiary as a
discontinued operation.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Kansas City, Missouri February 4, 1994, except for the retroactive restatement
described in Note 2 of the notes to consolidated financial statements, as to
which the date is June 29, 1994.
11
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1992 1991
-------- -------- --------
(IN MILLIONS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
Operating Revenues................................. $2,409.2 $2,251.7 $2,153.5
-------- -------- --------
Operating Expenses
Compensation and benefits........................ 799.8 798.8 781.8
Fuel............................................. 239.1 205.5 206.7
Equipment rents.................................. 229.4 186.0 162.2
Depreciation and amortization.................... 188.4 180.8 184.3
Materials and supplies........................... 127.7 127.5 135.2
Other............................................ 507.1 455.5 427.9
Rail special charge.............................. -- 320.4 --
-------- -------- --------
Total Operating Expenses....................... 2,091.5 2,274.5 1,898.1
-------- -------- --------
Operating Income (Loss)............................ 317.7 (22.8) 255.4
Equity in Earnings of Pipeline Partnership......... 18.6 24.1 27.1
Interest Expense................................... 133.4 164.5 208.9
Gain on Sale of California Lines................... 145.4 204.9 --
Other Income (Expense)--Net........................ 5.8 (0.3) 25.5
-------- -------- --------
Income From Continuing Operations Before Income
Taxes............................................. 354.1 41.4 99.1
Income Taxes....................................... 176.7 20.3 36.7
-------- -------- --------
Income from Continuing Operations.................. 177.4 21.1 62.4
Income from Discontinued Operations, Net of Income
Taxes............................................. 161.4 42.4 34.0
Extraordinary Charge on Early Retirement of Debt,
Net of Income Taxes............................... -- (5.0) --
Cumulative Effect of a Change in Accounting for
Postretirement and Postemployment Benefits, Net of
Income Taxes...................................... -- (163.0) --
-------- -------- --------
Net Income (Loss).............................. $ 338.8 $ (104.5) $ 96.4
======== ======== ========
Income (Loss) Per Share of Common Stock
Continuing Operations............................ $ 0.95 $ 0.11 $ 0.35
Discontinued Operations.......................... 0.86 0.23 0.19
Extraordinary Charge............................. -- (0.03) --
Cumulative Effect of a Change in Accounting...... -- (0.88) --
-------- -------- --------
Net Income (Loss).............................. $ 1.81 $ (0.57) $ 0.54
======== ======== ========
Average Number of Common and Common Equivalent
Shares............................................ 187.2 184.8 178.0
======== ======== ========
</TABLE>
(See notes to consolidated financial statements)
12
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1993 1992
-------- --------
(IN MILLIONS)
ASSETS
------
<S> <C> <C>
Current Assets
Cash and cash equivalents, at cost which approximates
market.................................................. $ 70.3 $ 62.1
Accounts receivable, less allowances..................... 96.1 83.9
Materials and supplies................................... 92.3 87.7
Note receivable--current................................. 72.5 72.5
Current portion of deferred income taxes................. 99.3 103.9
Other.................................................... 27.2 19.4
-------- --------
Total current assets................................... 457.7 429.5
-------- --------
Note Receivable............................................ 36.2 108.7
Other Long-Term Assets..................................... 323.3 342.8
-------- --------
Properties, Plant and Equipment............................ 5,886.1 5,524.0
Less-accumulated depreciation and amortization............. 1,577.7 1,535.3
-------- --------
Net properties............................................. 4,308.4 3,988.7
-------- --------
Net Assets of Discontinued Operations...................... 248.4 76.7
-------- --------
Total Assets........................................... $5,374.0 $4,946.4
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
<S> <C> <C>
Current Liabilities
Accounts payable and accrued liabilities................. $ 669.8 $ 696.3
Long-term debt due within one year....................... 184.7 187.1
-------- --------
Total current liabilities.............................. 854.5 883.4
-------- --------
Long-Term Debt Due After One Year.......................... 991.1 1,119.6
Postretirement Benefits Liability.......................... 284.7 279.1
Rail Restructuring Liability............................... 257.8 254.6
Other Long-Term Liabilities................................ 601.7 553.6
Deferred Income Taxes...................................... 1,115.9 927.6
-------- --------
Total Liabilities...................................... 4,105.7 4,017.9
-------- --------
Commitments and Contingencies (See Note 13 and Note 14)
Shareholders' Equity
Common stock, $1 par value, shares authorized, 600.0
million; 1993 shares issued
and outstanding, 190.0 million and 185.6 million; 1992
shares issued and outstanding, 190.0 million and 181.8
million................................................. 190.0 190.0
Paid-in capital.......................................... 869.7 966.7
Retained income.......................................... 340.3 19.9
Treasury stock, at cost.................................. (131.7) (248.1)
-------- --------
Total shareholders' equity............................. 1,268.3 928.5
-------- --------
Total Liabilities and Shareholders' Equity............. $5,374.0 $4,946.4
======== ========
</TABLE>
(See notes to consolidated financial statements)
13
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1992 1991
------- -------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Operating Activities
Net income (loss)................................ $ 338.8 $ (104.5) $ 96.4
Adjustments to reconcile net income (loss) to
operating cash flows:
Income from discontinued operations, net of
income taxes.................................. (161.4) (42.4) (34.0)
Depreciation and amortization.................. 188.4 180.8 184.3
Deferred income taxes.......................... 139.0 53.0 16.1
Cumulative effect of a change in accounting for
postretirement and postemployment benefits,
net of income taxes........................... -- 163.0 --
Rail special charge............................ -- 320.4 --
Rail restructuring costs paid.................. (80.9) (118.9) (104.5)
Imputed interest expense....................... 26.6 23.3 23.8
Gain on sales of property, plant and equipment. (156.0) (218.7) (36.9)
Other--net..................................... (22.4) (20.0) 17.6
Changes in Working Capital:
Accounts receivable.......................... (25.3) (7.5) (0.4)
Materials and supplies....................... (3.6) (11.2) 0.5
Accounts payable and accrued liabilities..... 51.6 40.0 60.5
Short term investments and other current
assets...................................... 1.3 (6.7) (26.6)
------- -------- -------
Net Cash Provided By Operating Activities--
Continuing Operations......................... 296.1 250.6 196.8
Discontinued Operations--Net................... 67.7 79.0 19.7
------- -------- -------
Net Cash Provided By Operating Activities...... 363.8 329.6 216.5
------- -------- -------
Investing Activities
Cash used for capital expenditures............... (381.5) (256.0) (208.0)
Proceeds from the sale of property, plant and
equipment....................................... 247.6 319.0 90.5
Other--net....................................... 70.3 43.8 58.0
Discontinued Operations--Net..................... (99.8) (68.2) (87.8)
------- -------- -------
Net Cash Provided By (Used For) Investing
Activities.................................... (163.4) 38.6 (147.3)
------- -------- -------
Financing Activities
Proceeds from long-term borrowings............... 6.5 -- 9.0
Principal payments on long-term borrowings....... (242.6) (407.5) (132.2)
Proceeds from sale of stock...................... -- -- 36.2
Cash dividends paid.............................. (18.5) (18.2) (17.9)
Other--net....................................... 20.7 16.0 11.8
Discontinued Operations--Net..................... 41.7 (4.6) 73.3
------- -------- -------
Net Cash Used For Financing Activities......... (192.2) (414.3) (19.8)
------- -------- -------
Increase (Decrease) In Cash and Cash Equivalents... 8.2 (46.1) 49.4
Cash and Cash Equivalents:
Beginning of year.................................. 62.1 108.2 58.8
------- -------- -------
End of year........................................ $ 70.3 $ 62.1 $ 108.2
======= ======== =======
</TABLE>
(See notes to consolidated financial statements)
14
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SHARES
OF SHARES OF
COMMON TREASURY COMMON TREASURY PAID-IN RETAINED
STOCK STOCK STOCK STOCK CAPITAL INCOME
------- --------- ------ -------- -------- --------
(SHARES IN THOUSANDS) (DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1990. 190,021 17,051 $190.0 $(516.9) $1,166.1 $ 72.5
1991 net income........... -- -- -- -- -- 96.4
Dividends declared........ -- -- -- -- -- (17.9)
Sale of common stock...... -- (4,043) -- 122.4 (86.2) --
Exercise of stock options. -- (1,511) -- 45.8 (35.9) --
Stockholder rights
redemption............... -- (1,311) -- 39.8 (31.2) (8.4)
Other..................... -- 23 -- (0.3) 0.7 --
------- ------ ------ ------- -------- -------
Balance December 31, 1991. 190,021 10,209 $190.0 $(309.2) $1,013.5 $ 142.6
1992 net loss............. -- -- -- -- -- (104.5)
Dividends declared........ -- -- -- -- -- (18.2)
Exercise of stock options. -- (1,995) -- 60.5 (46.4) --
Other..................... -- (20) -- 0.6 (0.4) --
------- ------ ------ ------- -------- -------
Balance December 31, 1992. 190,021 8,194 $190.0 $(248.1) $ 966.7 $ 19.9
1993 net income........... -- -- -- -- -- 338.8
Dividends declared........ -- -- -- -- -- (18.5)
Exercise of stock options. -- (3,231) -- 97.1 (73.8) --
Issuance of restricted
stock.................... -- (777) -- 23.2 (23.2) --
Other..................... -- 224 -- (3.9) -- 0.1
------- ------ ------ ------- -------- -------
Balance December 31, 1993. 190,021 4,410 $190.0 $(131.7) $ 869.7 $ 340.3
======= ====== ====== ======= ======== =======
</TABLE>
- --------
Note: SFP has authorized common stock of 600 million shares with a par value of
$1.00. Also authorized are 200 million shares of preferred stock with a
par value of $1.00, none of which was outstanding at December 31, 1993.
(See notes to consolidated financial statements)
15
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Santa Fe Pacific Corporation and subsidiary companies ("SFP or Company") which
are majority owned and controlled, directly or indirectly, by SFP. The equity
method is used to account for investments in 20% to 50% owned entities. All
significant intercompany transactions have been eliminated.
Reclassifications
Certain comparative prior year amounts in the consolidated financial
statements and notes have been reclassified to conform with the current year
presentation.
Statement of Cash Flows
SFP considers all highly liquid investments with a maturity of three months
or less when purchased to be cash equivalents. In addition to amounts reported
as "Cash Used for Capital Expenditures", SFP had non-cash capital expenditures
totaling $157.6 million, $9.5 million, and $35.2 million in 1993, 1992, and
1991, respectively. Non-cash capital expenditures consist principally of
directly financed equipment acquisitions and reimbursed projects at The
Atchison, Topeka and Santa Fe Railway Company ("Santa Fe Railway").
Accounts Receivable
SFP maintains an allowance for doubtful accounts based upon the estimated
collectibility of all trade accounts receivable. Allowances for doubtful
accounts of $16.4 million and $11.2 million have been applied as a reduction of
accounts receivable at December 31, 1993 and 1992, respectively.
Materials and Supplies
Material and supply inventories are valued at the lower of cost (average or
first-in, first-out) or market.
Note Receivable
The note receivable included in the consolidated balance sheet relates to the
sale of a subsidiary in 1986. Principal payments of $72.5 million were received
in both 1993 and 1992. Remaining proceeds to be received from the note are
$72.5 million in 1994 and $36.2 million in 1995.
Properties
Properties are stated at cost and include capitalized interest incurred
during construction of $8.2 million in 1993, $3.7 million in 1992, and $3.9
million in 1991. Additions and replacements are capitalized. Expenditures for
maintenance and repairs are charged to income. Upon normal sale or retirement
of depreciable railroad property, cost less salvage, net of cost of removal, is
charged to accumulated depreciation and no gain or loss is recognized. With
respect to all other property sold or retired, gain or loss is recognized.
Depreciation is computed under the straight-line method.
Revenue Recognition
Rail revenue is recognized when freight is received from the shipper with a
corresponding accrual of the direct costs to complete delivery of the freight-
in-transit.
16
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2: DISCONTINUED OPERATIONS
On June 15, 1994, Santa Pacific Gold Corporation's ("SFP Gold"), SFP's gold
subsidiary, registration statement for the initial public offering of 14.6% of
its common stock became effective. Approximately 19 million shares were sold at
a price of $14 per share. On June 29, 1994, SFP's Board of Directors approved
the distribution to SFP shareholders of its remaining 85.4% interest in SFP
Gold. As a result, SFP Gold will become a separate, independent entity
effective September 30, 1994. Holders of record of SFP common stock as of
September 12, 1994, will receive a distribution of one share of common stock of
SFP Gold for every approximately 1.7 shares of SFP common stock held. Under a
ruling obtained from the Internal Revenue Service, the distributions are tax-
free to SFP shareholders. The consolidated financial statements and notes have
been retroactively restated to present SFP Gold as a discontinued operation.
Income from discontinued operations in 1993, 1992 and 1991 was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------
1993 1992 1991
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues.......................................... $298.6 $220.6 $179.4
Income before income taxes........................ 296.1 63.1 48.3
Income taxes...................................... 134.7 20.7 14.3
------ ------ ------
Income from discontinued operations............... $161.4 $ 42.4 $ 34.0
====== ====== ======
</TABLE>
In June 1993, SFP Gold closed an asset exchange with Hanson Natural Resources
Company ("Hanson"). SFP Gold received certain gold assets of Hanson, and Hanson
acquired essentially all coal and aggregate assets of SFP Gold. The exchange
was recorded as a purchase of assets and accordingly, the results from the gold
assets have been reflected in income prospectively from the date of closing.
Income from discontinued operations for 1993 includes an after-tax gain on the
exchange of $108.3 million.
NOTE 3: GAIN ON SALE OF CALIFORNIA LINES
In November 1992, Santa Fe Railway announced that it and eight southern
California transportation agencies had reached definitive agreements for the
sale to the agencies of certain interests in approximately 340 miles of rail
lines and additional property, for cash and relief of obligations to reimburse
certain state and county agencies for capital improvements previously paid for
by the agencies and the State of California. Santa Fe Railway retained all
rights necessary for its freight operations in southern California. The
transportation agencies anticipate using these facilities for commuter lines.
The sale encompassed three separate closings which occurred in December 1992
and March and June of 1993. Cash proceeds of $226.9 million in 1993 and $255.0
million in 1992 were received resulting in pre-tax gains of $145.4 million and
$204.9 million in 1993 and 1992, respectively. Both of the gains recognized are
net of the cost of the properties and other expenses of the sale. Additionally,
the 1993 gain is net of an obligation retained by Santa Fe Railway which under
certain conditions, requires the repurchase of a portion of the properties sold
for $50 million. Proceeds of $126.0 million were used to retire debt related to
discontinued operations in 1993; and proceeds of $201.0 million were used to
retire debt in 1992 (see Note 11: Long-Term Debt).
NOTE 4: RAIL SPECIAL CHARGE
During 1992, Santa Fe Railway recorded a $320.4 million pre-tax special
charge which included provisions for restructuring and environmental.
17
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Rail Restructuring
During the third quarter of 1992, Santa Fe Railway recorded a $253 million
pre-tax charge primarily for costs of a crew consist agreement on the eastern
half of the railroad and for centralization of certain transportation
functions.
The eastern lines crew consist agreement comprised $149 million of the
charge. The 1992 agreement is an update to a 1990 crew consist agreement. The
1992 agreement provides for further reductions in average crew size on through
freight trains and elimination of productivity payments which were required
when reduced crews were used. The 1992 eastern lines agreement, when combined
with a similar agreement reached earlier with trainmen on the other half of the
system, provides for through trains generally to operate with two person crews.
The agreement covers approximately 2,000 employees. Costs of the agreement
which are provided for in the charge, relate to a signing bonus of $10,000 per
employee, the present value of a $65,000 deferred benefit per employee payable
upon separation or retirement and the present value of reserve board costs.
Reserve board costs represent wages paid to employees rendered excess due to
reduced crews. When on reserve board status, employees are removed from active
service and receive a percentage of their normal wages. Eastern line reserve
boards initially contained approximately 500 members and will decline over time
through attrition and other factors.
The charge also included $73 million related to centralization. In 1992,
Santa Fe Railway decided to centralize many operating support functions.
Centralization activities began in late 1992 and by the fall of 1993, Railway
had centralized train dispatching, crew planning and fleet management in
Schaumburg, Illinois; crew management, customer service and mechanical
(equipment) administration in Topeka, Kansas; and other administrative and
operating support functions in Kansas City, Kansas. Cost of centralization
included in the $73 million charge relates to approximately 700 relocations,
reductions of 600 administrative and clerical positions, and abandonment of
facilities. Most of the costs of centralization had been paid by December 31,
1993.
Additionally, the charge includes approximately $31 million for other cost
saving initiatives including an adjustment of accruals established for other
operating craft labor agreements reached in prior periods.
At December 31, 1993, the balance of the restructuring liability was $315.6
million. The majority of the balance represents future deferred benefit and
reserve board payments related to the 1992 eastern lines agreement and similar
agreements reached in and accrued for in prior years. Restructuring costs paid
were $80.9 million in 1993, $118.9 million in 1992 and $104.5 million in 1991.
In 1994, the Company expects payments of approximately $60 million. Future
payments will decline over time; however, certain separation benefits will not
be paid until employee retirement. Santa Fe Railway has obtained letters of
credit of approximately $18 million supporting certain of its obligations under
labor agreement.
Environmental
Approximately $67 million of the special charge was to increase accruals for
environmental clean-up and remediation, primarily on abandoned properties (see
Note 14: Contingencies). During 1993, payments charged to the environmental
reserve were approximately $13 million, with the majority of remaining
expenditures expected to be incurred over the next five years.
NOTE 5: PIPELINE PARTNERSHIP
A wholly owned subsidiary of SFP, SFP Pipeline Holdings, Inc. ("Pipeline
Holdings"), through its wholly owned subsidiary, holds an aggregate 44% common
unit ownership in Santa Fe Pacific Pipeline Partners, L.P. ("Pipeline
Partnership"), a Delaware limited partnership. This interest is held through a
2%
18
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
general partner interest and a 42% limited partner interest. The Company
accounts for its interest in the partnership under the equity method. Other
long-term assets include $61.5 million and $67.6 million at December 31, 1993
and 1992, respectively, for SFP's investment in the Pipeline Partnership.
Pipeline Holdings also issued the Pipeline Exchangeable Debentures ("Pipeline
Debentures") (see Note 11: Long-Term Debt) which are traded on the New York
Stock Exchange and under certain circumstances are exchangeable for common
units that represent SFP's 42% limited partnership interest in the Pipeline
Partnership. Interest on the Pipeline Debentures is payable quarterly and is
equal to the greater of (a) distributions of cash from operations declared by
the Pipeline Partnership for such quarter on the number of common units for
which the Pipeline Debentures are then exchangeable or (b) 2% of the unpaid
Pipeline Debentures principal balance.
During 1993, 1992 and 1991, SFP, through its wholly owned subsidiaries,
received cash distributions of $25.1 million, $25.1 million, and $23.8 million,
respectively, from the Pipeline Partnership. Of these distributions $22.8
million, $22.8 million, and $22.0 million, respectively, were used to pay
interest costs on the Pipeline Debentures.
The following table sets forth selected financial data for the Pipeline
Partnership:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1992 1991
------ ------ ------
(IN MILLIONS, EXCEPT PER
UNIT DATA)
<S> <C> <C> <C>
Income Statement Data
Total revenues............................. $219.5 $205.0 $193.4
Operating income........................... 78.3(1) 91.4 (1) 95.8
Interest expense........................... 37.1 36.9 36.9
Income before cumulative effect of
accounting change......................... 41.6 54.1 60.6
Cumulative effect of accounting change..... -- (16.4)(2) --
Net income................................. 41.6 37.7 60.6
Per Unit Data
Income before accounting change............ $ 2.13 $ 2.77 $ 3.10
Cumulative effect of accounting change..... -- (.84)(2) --
Net income................................. 2.13 1.93 3.10
Cash distributions per unit................ 2.80 2.80 2.75
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1993 1992
------ ------
<S> <C> <C>
Balance Sheet Data
Total current assets..................................... $ 67.7 $ 58.4
Net properties, plant and equipment...................... 616.6 618.1
Total assets............................................. 697.0 684.9
Total current liabilities................................ 35.6 21.6
Long-term debt........................................... 355.0 355.0
Total partners' capital.................................. 265.9 279.0
</TABLE>
- --------
(1) 1993 includes a $15 million special environmental charge and a $12 million
special litigation charge. 1992 includes a $10 million special
environmental charge.
(2) Reflects a change in accounting for postretirement and postemployment
benefits.
19
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6: OTHER INCOME (EXPENSE)--NET
Other income (expense)--net consisted of the following:
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Real estate activities............................ $ 19.4 $ 23.9 $ 45.6
Interest income................................... 11.7 17.8 27.4
Corporate administrative expenses................. (24.2) (22.3) (20.0)
Accounts receivable fees.......................... (8.3) (9.4) (14.5)
Arbitration/litigation settlements................ 21.6 -- --
Other-net......................................... (14.4) (10.3) (13.0)
------ ------ ------
Total......................................... $ 5.8 $ (0.3) $ 25.5
====== ====== ======
</TABLE>
NOTE 7: INCOME TAXES
The provision for income taxes applicable to continuing operations consisted
of the following:
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ -----
(IN MILLIONS)
<S> <C> <C> <C>
Current:
Federal............................................ $ 33.5 $(32.0) $17.5
State.............................................. 4.2 (0.7) 3.1
------ ------ -----
Total Current.................................... 37.7 (32.7) 20.6
------ ------ -----
Deferred:
Federal............................................ 124.6 40.7 13.9
State.............................................. 14.4 12.3 2.2
------ ------ -----
Total Deferred................................... 139.0 53.0 16.1
------ ------ -----
Total............................................ $176.7 $ 20.3 $36.7
====== ====== =====
</TABLE>
Income taxes from continuing operations as reflected in the consolidated
statement of operations differ from the amounts computed by applying the
statutory federal corporate tax rate to income from continuing operations as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
------ ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Federal income tax at statutory rate (35% in 1993,
34% in 1992-1991)................................. $123.9 $14.1 $33.7
Increase(decrease) in taxes resulting from:
State income taxes, net of federal benefit....... 12.1 7.7 3.5
1% increase in federal tax rate.................. 23.5 -- --
Other............................................ 17.2 (1.5) (0.5)
------ ----- -----
Total.......................................... $176.7 $20.3 $36.7
====== ===== =====
</TABLE>
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes," as of January 1,
1992 having previously accounted for income taxes under SFAS No. 96. The
adoption of SFAS No. 109 had no impact on 1992 net income. Both SFAS No. 96 and
No. 109 required that deferred income taxes be determined based on temporary
differences between the financial reporting and tax basis of the Company's
assets and liabilities using enacted tax rates in effect during the years in
which the differences are expected to reverse.
20
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Omnibus Budget Reconciliation Act of 1993 resulted in an increase in the
maximum corporate federal income tax rate from 34% to 35% retroactive to
January 1, 1993. In accordance with SFAS No. 109, SFP recorded additional
income tax expense of $23.5 million, representing the impact of the 1% rate
increase on SFP's net beginning of year deferred income tax liability. The
impact of the tax increase as of August 10, 1993, the date of enactment, was
approximately $27.7 million. The difference between the $23.5 million impact as
of the beginning of the year and the $27.7 million impact as of August 10, 1993
is due to taxable income and temporary differences generated during the period
January 1, 1993 through August 10, 1993.
Principal temporary differences that gave rise to the net deferred tax
liability at December 31, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1993 1992
--------- ---------
(IN MILLIONS)
<S> <C> <C>
Deferred tax debits:
Accrued liabilities not deductible until paid:
Restructuring.................................. $ 119.5 $ 144.6
Postretirement benefits........................ 110.8 106.7
Casualty and environmental..................... 114.8 112.8
Other.......................................... 124.2 133.9
Non-expiring AMT credit carryforwards............ 93.7 73.9
Other............................................ 13.5 36.5
--------- ---------
Subtotal..................................... $ 576.5 $ 608.4
========= =========
Deferred tax credits:
Depreciation..................................... $(1,267.4) $(1,195.2)
Condemnation sales............................... (211.8) (123.1)
Other............................................ (113.9) (113.8)
--------- ---------
Subtotal..................................... $(1,593.1) $(1,432.1)
========= =========
Net deferred tax liability................... $(1,016.6) $ (823.7)
========= =========
</TABLE>
During 1993 and 1992, SFP made income tax payments, net of refunds, of $23.9
million and $8.2 million, respectively. During 1991, SFP received net refunds
of $8.5 million.
The federal income tax returns of SFP have been examined through 1988. All
years prior to 1981 are closed. Issues relating to the years 1981-1988 are
being contested through various stages of administrative appeal. In addition,
SFP and its subsidiaries have various state income tax returns in the process
of examination, administrative appeal or litigation. Management believes that
adequate provision has been made for any adjustment which might be assessed for
open years through 1993.
NOTE 8: SALES OF ACCOUNTS RECEIVABLE
Santa Fe Railway has an agreement to sell, on a revolving basis, an undivided
percentage interest in certain accounts receivable, with limited recourse, to a
financial institution. The agreement, which expires in December 1994, allows
for sales of accounts receivable up to a maximum of $225.0 million. Santa Fe
Railway acts as collection agent under the agreement. The amount of accounts
receivable sold under the agreement was $225.0 million at both December 31,
1993 and 1992. The financial institution purchases an interest in a pool of
receivables that has generally ranged from $250-$325 million during 1993 and
1992. Santa Fe Railway is exposed to credit loss related to collection of
accounts receivable to the extent that the purchased interest exceeds the
amount of accounts receivable sold. Costs related to the agreement vary on a
monthly basis and are generally related to certain interest rates. These costs,
which are included in Other Income (Expense)--Net, were $8.3 million, $9.4
million and $14.5 million in 1993, 1992 and 1991, respectively.
21
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9: PROPERTIES, PLANT AND EQUIPMENT
The major classes of properties, plant and equipment are as follows:
<TABLE>
<CAPTION>
1993 1992
-------- --------
(IN MILLIONS)
<S> <C> <C>
Track structure........................................ $2,326.8 $2,199.8
Equipment.............................................. 1,952.6 1,864.0
Other road properties.................................. 1,478.9 1,337.5
Real estate and other.................................. 127.8 122.7
-------- --------
Total.............................................. 5,886.1 5,524.0
Accumulated depreciation and amortization.............. 1,577.7 1,535.3
-------- --------
Net properties....................................... $4,308.4 $3,988.7
======== ========
</TABLE>
NOTE 10: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at December 31, 1993 and 1992
consisted of the following:
<TABLE>
<CAPTION>
1993 1992
------ ------
(IN MILLIONS)
<S> <C> <C>
Accounts and wages payable................................. $141.8 $154.5
Accrued claims............................................. 90.3 88.3
Rail restructuring......................................... 57.8 122.6
Vacations.................................................. 49.8 48.8
Taxes other than income taxes.............................. 34.3 34.3
Interest................................................... 28.1 28.3
Other...................................................... 267.7 219.5
------ ------
Total.................................................. $669.8 $696.3
====== ======
</TABLE>
NOTE 11: LONG-TERM DEBT
Long-term debt at December 31, 1993 and 1992 consisted of the following:
<TABLE>
<CAPTION>
1993 1992
-------- --------
(IN MILLIONS)
<S> <C> <C>
Equipment Obligations, weighted average rate of 8.9%,
maturing from 1994 to 2008............................. $ 478.9 $ 453.1
Pipeline Exchangeable Debentures, 10.4%
(variable), maturing 2010.............................. 219.0 219.0
Senior Notes, 12.65%,
maturing from 1998 to 2000............................. 200.0 200.0
Term Loan, 4.0%
(variable), maturing from 1994 to 1995................. 108.7 181.2
Mortgage Bonds, 4%, maturing 1995....................... 95.8 95.8
Bank Term Loan, 4.1%
(variable), maturing from 1994 to 1997................. 50.0 130.8
Other Obligations, 9.4% to 10.3%, maturing from 1994-
2014................................................... 40.2 43.8
Debt discount........................................... (16.8) (17.0)
-------- --------
Total long-term debt................................ 1,175.8 1,306.7
Due within one year..................................... (184.7) (187.1)
-------- --------
Due after one year...................................... $ 991.1 $1,119.6
======== ========
</TABLE>
22
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Under the Bank Term Loan, SFP has a $173.6 million revolving credit facility
for general corporate purposes. SFP pays commitment fees of 3/8% per annum on
the unused portion of the Bank Term Loan and revolving credit facility, payable
quarterly. As of December 31, 1993, no borrowings were outstanding under the
revolving credit facility.
In December 1992, SFP accelerated the repayment of borrowings related to a
1990 litigation settlement. The early extinguishment of debt resulted in an
extraordinary charge of $5.0 million, net of applicable tax benefits of $3.0
million, reflecting the write off of unamortized debt discount. The repayment
was made using a portion of the 1992 proceeds from Santa Fe Railway's sale of
California Lines (see Note 3: Gain on Sale of California Lines).
In December 1993, SFP filed a shelf registration statement with the SEC, for
the issuance of up to $250 million in debt securities, none of which had been
issued at December 31, 1993.
As of December 31, 1993, projected principal repayments of long term debt
during the five years 1994 through 1998, excluding capital leases, are $182.9
million, $206.5 million, $50.1 million, $46.5 million and $100.7 million,
respectively. Total interest paid was $111.3 million in 1993, $142.2 million in
1992 and $160.5 million in 1991.
Substantially all railroad property is subject to liens securing Mortgage
Bonds or Equipment Obligations. The payment of cash dividends by SFP is
restricted by various debt covenants. Such restrictions vary with levels of
income and other factors. At December 31, 1993, no payment of dividends was
allowed. Certain other debt agreements of the Company and its subsidiaries
include covenants which place limitations on indebtedness and intercompany
dividends, require the maintenance of various financial ratios, and restrict
the disposition of assets. Pipeline Holdings is contingently liable for $355.0
million of Pipeline Partnership debt.
NOTE 12: FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments at December
31, 1993 and 1992, and the methods and assumptions used to estimate such fair
values, are as follows:
Cash and short-term investments
The fair value of cash and short-term investments approximates the carrying
amount because of the short maturity of those instruments.
Note Receivable
The fair value of the Note Receivable approximates the carrying amount as the
variable interest rate on the note approximates current interest rates.
Other Investments
SFP maintained an investment in common stock which became publicly traded
during 1993. The carrying value of the investment at December 31, 1993 was
$10.6 million. In January 1994, the investment was sold resulting in a pre-tax
gain of approximately $25 million. Additionally, SFP maintains various other
investments in common stock with a carrying value at December 31, 1993 and 1992
of approximately $17 million and $27 million, respectively, which are accounted
for under a cost basis. These investments are in non-publicly traded companies
which have no quoted market prices; therefore, a reasonable estimate of fair
value could not be made.
23
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Long-Term Debt
The fair value of the Company's long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
which would be offered to the Company for debt of the same remaining
maturities. The carrying value of debt at December 31, 1993 and 1992 was
$1,175.8 million and $1,306.7 million compared with estimated fair values of
approximately $1,395 million and $1,475 million, respectively.
NOTE 13: LEASES AND OTHER COMMITMENTS
SFP leases certain locomotives, freight cars, trailers, data processing
equipment and other property. Future minimum lease payments for operating
leases applicable to continuing operations (which reflect operating leases
having non-cancelable lease terms in excess of one year) as of December 31,
1993 are summarized as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
1994........................................................ $ 60.2
1995........................................................ 55.1
1996........................................................ 46.1
1997........................................................ 36.0
1998........................................................ 30.1
Later years................................................. 174.5
------
Total minimum payments.................................. $402.0
======
</TABLE>
Rental expense for all operating leases applicable to continuing operations
was $94.9 million in 1993, $72.8 million in 1992 and $65.9 million in 1991.
Contingent rentals and sublease rentals were not significant.
Santa Fe Railway has entered into agreements with certain locomotive
suppliers which provide for maintenance on a portion of its locomotive fleet.
As of December 31, 1993, these agreements obligate Santa Fe Railway to make
minimum annual payments over periods ranging from two to eighteen years. Santa
Fe Railway has also entered into haulage agreements with other rail carriers
under which it is required to make minimum payments if specified traffic levels
are not met. In the aggregate, these agreements require minimum annual payments
of approximately $63 million in 1994, $52 million in 1995, $50 million in 1996,
$51 million in 1997, $52 million in 1998, and $327 million in total thereafter
through 2012. Payments under the agreements totaled approximately $68 million,
$62 million and $49 million in 1993, 1992 and 1991, respectively.
In connection with the closing of the sale of California lines, Santa Fe
Railway has entered into various shared use agreements with the agencies which
require Santa Fe Railway to pay the agencies approximately $6.0 million
annually for the maintenance of track structure and facilities. In addition,
Santa Fe Railway is committed to acquire locomotives valued at approximately
$62 million in 1994.
The Company enters into various commodity swap and collar transactions to
manage exposure against fluctuations in diesel fuel prices. The Company's fuel
hedging transactions are based upon commodities that are established in the
futures markets. The prices of these commodities have historically shown a high
degree of correlation with the Company's diesel fuel prices. Cash settlements
on contracts to hedge fuel prices are made at the end of a quarter and the
related gain or loss is included in fuel expense for that quarter. To the
extent the Company hedges portions of its fuel purchases, it may not fully
participate in decreases in fuel prices. At December 31, 1993, the Company had
entered into various agreements with several counterparties covering
approximately 260 million gallons which is anticipated to cover approximately
two-thirds of 1994 fuel purchases. Through swap arrangements the Company has
hedged approximately 205 million gallons at an average price of 48 cents.
Additionally, approximately 55 million gallons have been hedged through collar
24
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
arrangements which allow the price to float between average floor and ceiling
prices of 46 cents and 51 cents, respectively. These prices do not include
taxes, fuel handling costs and any differences which may occur from time to time
between the prices of commodities hedged and the purchase price of the Company's
diesel fuel. The effects of the Company's fuel hedges was to increase operating
expense by $12.4 million in 1993 and to reduce operating expense by $0.9 million
and $5.6 million in 1992 and 1991, respectively.
From time to time, the Company enters into various interest rate hedging
transactions for various purposes, including managing exposure to fluctuations
in interest rates or establishing rates in anticipation of future debt
issuance. At December 31, 1993, the Company had entered into four related
interest rate swap transactions for a total notional principal amount of $100
million, for the purpose of establishing rates in anticipation of an expected
future debt offering. These swap transactions call for the payment of a fixed
interest rate of 6.2%, which was based upon ten year treasury notes, and the
receipt of a variable interest rate which was 3.5% at December 31, 1993. At the
time of the borrowing, which is also expected to have a term of ten years, the
swap will be closed out and any gain or loss relating to the terminated
interest rate swap will be amortized as an adjustment to interest expense over
the term of the borrowing.
The Company monitors its positions and the credit ratings of its
counterparties and does not currently anticipate losses due to counterparty
non-performance. The fair market value of the Company's fuel hedging
transactions at December 31, 1993 were unrealized losses of $9.2 million for
swap arrangements and $2.4 million for collar arrangements. The fair market
value of the Company's interest hedging transactions at December 31, 1993 was
not significant.
NOTE 14: CONTINGENCIES
Environmental
The Company is subject to extensive regulation under federal, state and local
environmental laws concerning, among other things, discharges to waters, air
emissions, toxic substances, and the generation, handling, storage,
transportation, and disposal of waste and hazardous materials. These laws and
regulations have the effect of increasing the cost and liabilities associated
with the conduct of operations. Environmental risks are also inherent in
railroad operations which frequently involve the transportation of chemicals
and other hazardous materials.
Santa Fe Railway expects it will become subject to new requirements
regulating air emissions from diesel locomotives that may increase its
operating costs in the future. By 1995, the United States Environmental
Protection Agency must issue regulations applicable to new locomotive engines.
Locomotive engines (other than new locomotive engines) may be regulated by
states based on standards and procedures which the State of California
ultimately adopts. The California standards are currently in the process of
being developed.
In addition, because many of SFP's land holdings are and have been used for
industrial or transportation related purposes or leased to commercial or
industrial companies whose activities may have resulted in discharges onto the
property, the Company is now subject and will from time to time continue to be
subject to environmental clean-up and enforcement actions. In particular, the
federal Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), also known as the "Superfund" law, generally imposes joint and
several liability for clean-up and enforcement costs, without regard to fault
or the legality of the original conduct, on current and predecessor owners and
operators of a site. Accordingly, SFP may be responsible under CERCLA and other
federal and state statutes for all or part of the costs to clean up sites at
which certain substances may have been released by the Company, its current
lessees, predecessor owners or lessees of properties, or other third parties.
At December 31, 1993, SFP had been named a potentially responsible party
(PRP) at 6 sites on the Environmental Protection Agency's (EPA) National
Priorities List (NPL). Additionally, SFP is potentially liable for the cost of
clean-up at other sites identified by the EPA and other agencies. Finally, SFP
has identified sites where costs exist for environmental clean-up and
monitoring, (including where no claim has
25
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
been asserted) and no agency is currently involved. There are approximately 125
known environmental sites at December 31, 1993 which include, among other
things; closed facilities including diesel locomotive repair shops, tie
treating plants, fueling facilities and underground storage tanks; property
leased or sold to others and current operating sites.
Estimates of the Company's ultimate liabilities associated with Superfund and
other environmental sites are difficult to predict with certainty due to, among
other factors, the number of parties involved, possible remediation
alternatives, lengthy time frames, evolving environmental laws and regulations,
and potential recoveries from third parties. Environmental costs include
initial site surveys and environmental studies of potentially contaminated
sites, costs for remediation and restoration of sites determined to be
contaminated, as well as post-closure and ongoing monitoring costs. The Company
has not included any reduction in costs for anticipated recovery from
insurance. Estimated costs at sites where SFP is a PRP are generally based on
cost sharing agreements which vary from site to site, after consideration of
the financial condition of other PRP's. These costs are typically allocated
based on volume of material contributed, the portion of the total site owned or
operated by each PRP, and/or the amount of time the site was owned or operated.
During 1992, management completed an internal assessment of Santa Fe
Railway's environmental liabilities, including a site-by-site analysis of
properties with potentially significant environmental exposure. As a result of
this review and analysis it was determined that an additional accrual of $67
million was appropriate to provide for future costs of this nature which was
recorded in the third quarter of 1992 as part of the rail special charge (see
Note 4: Rail Special Charge). In addition, the Company monitors, on a regular
basis, accruals for environmental sites which have been identified, based on
additional information developed in subsequent periods. The additional
information is based on a combination of factors including independent
consulting reports, site visits, legal reviews and historical trend analysis.
Payments recorded against environmental liabilities totaled $13.5 million,
$6.3 million and $7.1 million for the years ended December 31, 1993, 1992 and
1991, respectively. The majority of these payments related to mandatory clean-
up efforts. Capital expenditures related to environmental sites were
insignificant during this three year period. At December 31, 1993 and December
31, 1992 the Company had accrued liabilities for environmental costs of
approximately $125 million and $121 million, respectively. The Company
anticipates that approximately 75% of the accrued costs at December 31, 1993
will be paid over the next five years, with approximately $25 million of
payments occurring in 1994. It is the opinion of SFP management that none of
the above items, when finally resolved, will have a material adverse effect on
the annual results of operations, financial position or liquidity of SFP,
although an adverse resolution of a number of these items in a single year
could have a material adverse effect on the results of operations for that
year.
Other Claims and Litigation
SFP is also a party to a number of other legal actions and claims, including
employee injury claims, various governmental proceedings and private civil
suits, arising in the ordinary course of business. While the final outcome of
these other legal actions cannot be predicted with certainty, considering among
other things, the meritorious legal defenses available, it is the opinion of
SFP management that none of these claims, when finally resolved, will have a
material adverse effect on the annual results of operations, financial position
or liquidity of SFP, although an adverse resolution of a number of these items
in a single year could have a material adverse effect on the results of
operations for that year.
NOTE 15: PENSION PLANS
SFP and its subsidiaries have two significant defined benefit pension plans,
the trusteed noncontributory Santa Fe Pacific Corporation Retirement Plan
("Retirement Plan") and the Santa Fe Pacific Corporation Supplemental
Retirement Plan ("Supplemental Plan").
The Retirement Plan complies with Employee Retirement Income Security Act of
1974 ("ERISA") requirements and covers substantially all officers and employees
of SFP and its subsidiaries not covered by collective bargaining agreements.
Benefits payable under the Retirement Plan are based on compensation
26
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
during the 60 highest paid consecutive months of service during the ten years
immediately preceding retirement and years of service. SFP's funding policy is
to contribute annually not less than the ERISA minimum, and not more than the
maximum amount deductible for income tax purposes.
The Supplemental Plan is an unfunded plan that provides supplementary
retirement benefits primarily to certain executives.
Components of pension income and expense applicable to continuing operations
relating to the Retirement and Supplemental Plans for 1993, 1992 and 1991 were
as follows:
<TABLE>
<CAPTION>
RETIREMENT PLAN
-----------------------
1993 1992 1991
------- ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Components of pension (income) expense
Service cost................................... $ 6.0 $ 7.1 $ 8.2
Interest cost.................................. 41.9 39.1 40.0
Actual return on plan assets................... (110.4) (58.5) (99.0)
Net amortization and deferral.................. 46.6 (5.3) 37.4
------- ------ ------
Total........................................ $ (15.9) $(17.6) $(13.4)
======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL
PLAN
--------------
1993 1992 1991
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Components of pension expense
Service cost............................................ $0.1 $0.1 $0.1
Interest cost........................................... 0.6 0.7 0.7
Net amortization and deferral........................... 0.5 0.6 0.6
---- ---- ----
Total................................................. $1.2 $1.4 $1.4
==== ==== ====
</TABLE>
Plan assets and liabilities are measured at September 30. A reconciliation of
the funded status of the plans with amounts recorded is shown as follows:
<TABLE>
<CAPTION>
RETIREMENT PLAN
----------------
1993 1992
------- -------
(IN MILLIONS)
<S> <C> <C>
Plan assets at fair value, primarily invested in
common stock, and U.S. and corporate bonds........... $ 657.3 $ 590.9
Actuarial present value of projected benefit
obligation
Accumulated benefit obligation
Vested............................................ (535.1) (422.4)
Nonvested......................................... (30.5) (29.1)
Provision for future salary increases............... (40.4) (45.4)
------- -------
Excess of plan assets over projected benefit
obligation........................................... 51.3 94.0
Unrecognized net (gain) loss.......................... 33.5 (27.5)
Unrecognized prior service cost....................... 13.4 17.8
Unrecognized net assets being recognized ratably
through 2002......................................... (16.1) (18.1)
------- -------
Prepaid pension asset................................. $ 82.1 $ 66.2
======= =======
</TABLE>
27
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
SUPPLEMENTAL PLAN
------------------
1993 1992
-------- --------
(IN MILLIONS)
<S> <C> <C>
Actuarial present value of projected benefit
obligation
Accumulated vested benefit obligation.............. $ (8.3) $ (7.2)
Provision for future salary increases.............. (0.6) (1.2)
-------- --------
Projected benefit obligation......................... (8.9) (8.4)
Unrecognized net gain................................ (0.8) (1.4)
Unrecognized net transition obligation being
recognized ratably through 2003..................... 5.6 6.2
Adjustment required to recognize minimum liability... (4.2) (3.6)
-------- --------
Accrued pension liability............................ $ (8.3) $ (7.2)
-------- --------
Major assumptions
(Retirement and Supplemental Plans):
Discount rate........................................ 7.0% 8.5%
Rate of increase in compensation levels.............. 4.0% 5.5%
Expected return on market value of plan assets....... 9.75% 11.0%
</TABLE>
NOTE 16: OTHER POSTRETIREMENT BENEFITS
In addition to the Company's defined benefit pension plans, salaried
employees who have attained age 55 and who have rendered ten years of service
are eligible for both medical benefits and life insurance coverage during
retirement. The retiree medical plan is contributory and provides benefits to
retirees, their covered dependents and beneficiaries. Retiree contributions are
adjusted annually. The plan also contains fixed deductibles, coinsurance and
out-of-pocket limitations. The life insurance plan is noncontributory and
covers retirees only.
The Company adopted SFAS No. 106 effective January 1, 1992 (see Note 17:
Change in Method of Accounting for Postretirement and Postemployment Benefits).
Components of net periodic postretirement benefit cost applicable to continuing
operations relating to the medical plan and the life insurance plan were as
follows:
<TABLE>
<CAPTION>
MEDICAL PLAN
--------------
1993 1992
------ ------
(IN MILLIONS)
<S> <C> <C>
Components of net periodic postretirement benefit cost
Service cost........................................... $ 3.3 $ 4.8
Interest cost.......................................... 15.1 18.2
Net amortization and deferral.......................... (3.4) --
------ ------
Total................................................ $ 15.0 $ 23.0
====== ======
<CAPTION>
LIFE
INSURANCE
PLAN
--------------
1993 1992
------ ------
(IN MILLIONS)
<S> <C> <C>
Components of net periodic postretirement benefit cost
Service cost........................................... $ 0.2 $ 0.2
Interest cost.......................................... 3.9 3.8
------ ------
Total................................................ $ 4.1 $ 4.0
====== ======
</TABLE>
28
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Prior to 1992, the costs of these benefits were generally recognized when
paid and for 1991 were $13.6 million.
SFP's policy is to fund benefits payable under the medical and life insurance
plans as due. The following table shows the reconciliation of the plans'
obligations to amounts accrued at December 31, 1993 and 1992. The Company uses
a September 30 measurement date.
<TABLE>
<CAPTION>
MEDICAL PLAN
--------------
1993 1992
------ ------
(IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees................................................ $138.6 $114.1
Fully eligible active plan participants................. 16.1 9.5
Other active plan participants.......................... 76.1 54.7
------ ------
Accumulated postretirement benefit obligation............. 230.8 178.3
------ ------
Unrecognized prior service credit......................... 41.3 44.7
Unrecognized net gain (loss).............................. (40.3) 3.0
------ ------
Accrued postretirement liability.......................... $231.8 $226.0
====== ======
<CAPTION>
LIFE
INSURANCE
PLAN
--------------
1993 1992
------ ------
(IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees................................................ $ 45.8 $ 43.5
Fully eligible active plan participants................. 0.2 --
Other active plan participants.......................... 4.9 4.1
------ ------
Accumulated postretirement benefit obligation............. 50.9 47.6
------ ------
Unrecognized net gain (loss).............................. (5.5) (1.3)
------ ------
Accrued postretirement liability.......................... $ 45.4 $ 46.3
====== ======
</TABLE>
The unrecognized prior service credit will be amortized straight line over
the average future service to full eligibility of the active population.
For 1994, the assumed health care cost trend rate for managed care medical
costs is 11.5% and is assumed to decrease gradually to 5% by 2006 and remain
constant thereafter. For medical costs not in managed care, the assumed health
care cost trend rate is 14% and is assumed to decrease gradually to 5% by 2006
and remain constant thereafter. The health care cost trend rate assumption has
a significant effect on the amounts reported. For example, increasing the
assumed health care cost trend rates by one percentage point in each year would
increase the accumulated postretirement benefit obligation for the medical plan
by $36.5 million and the aggregate of the service and interest components of
net periodic postretirement benefit cost recognized in 1993 by $3.2 million. In
1993, the assumed health care cost trend rate for managed care medical costs
was 12% and was assumed to decrease gradually to 5.5% by 2006 and remain
constant thereafter. For medical costs not in managed care, the assumed health
care cost trend rate was 15% in 1993 and was assumed to decrease gradually to
6.5% by 2006 and remain constant thereafter.
The weighted-average discount rate assumed in determining the accumulated
postretirement benefit obligation was 7% and 8.5% in 1993 and 1992,
respectively. The assumed weighted-average salary increase was 4.0% and 5.5% in
1993 and 1992, respectively.
29
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Other Plans
Under collective bargaining agreements, Santa Fe Railway participates in
multiemployer benefit plans which provide certain postretirement health care
and life insurance benefits for eligible union employees. Insurance premiums
paid attributable to retirees, which are generally expensed as incurred, were
$3.3 million, $3.5 million and $3.7 million in 1993, 1992 and 1991,
respectively.
NOTE 17: CHANGE IN METHOD OF ACCOUNTING FOR POSTRETIREMENT AND POSTEMPLOYMENT
BENEFITS
Effective January 1, 1992, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and SFAS No. 112,
"Employers' Accounting for Postemployment Benefits". SFAS No. 106 requires that
an actuarial method be used to accrue the expected cost of postretirement
health care and other benefits over employees' years of service. SFAS No. 112
relates to benefits provided to former or inactive employees after employment
but before retirement and requires recognition of these benefits if they are
vested and payment is probable and reasonably estimable. Prior to 1992, the
cost of most postretirement and certain postemployment benefits were expensed
when paid. The cumulative effect of this change in accounting attributable to
years prior to 1992 was to decrease 1992 net income by $163.0 million, net of
the related income tax benefit of $97.0 million. The impact of SFAS No. 106
comprises approximately $158 million of the change. Additionally, pre-tax
expenses in 1992 were $14 million higher than in 1991 as a result of the change
in accounting for these costs.
NOTE 18: STOCK OPTION AND GROWTH PLANS
Under various plans, the most significant of which are the Santa Fe Pacific
Long Term Incentive Stock Plan ("Long Term Plan") and the Santa Fe Pacific
Incentive Stock Compensation Plan ("Incentive Compensation Plan"), options have
been granted to employees to purchase common stock of SFP at a price not less
than the fair market value at the date of grant. Options are generally
exercisable no earlier than one year after the date of grant and expire ten
years after the date of grant. Under these plans, approximately 0.8 million
shares of restricted stock have been granted with the restrictions on such
shares lapsing no earlier than one year from the date of grant and upon the
attainment of certain corporate performance objectives or the completion of a
required vesting period.
A total of 10 million shares, excluding 2 million additional shares that may
be granted in exchange for shares tendered to the Company to pay for an option
exercise, and a total of 18.4 million shares may be used under the Long Term
Plan and Incentive Compensation Plan, respectively. The Long Term Plan replaced
the Incentive Compensation Plan and no new grants will be made under the
Incentive Compensation Plan. Under these plans, awards may be granted in the
form of (1) options to purchase SFP common stock; (2) shares of restricted
stock, which may be issued in combination with performance units; (3)
Performance Units; and (4) stock appreciation rights. Awards of 6.6 million
shares under the Long Term Plan and 14.6 million shares under the Incentive
Compensation Plan, of SFP common stock, net of options surrendered or
terminated, have been made in the form of options, stock appreciation rights,
and restricted stock.
As a result of the approval by SFP's Board of Directors to distribute the
common stock of SFP Gold to SFP shareholders, it will be necessary to adjust
the outstanding options to maintain their economic value. The option price and
number of shares will be adjusted in accordance with Internal Revenue Code
Section 424.
30
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Approximately 4.9 million and 6.2 million of outstanding options at December
31, 1993 and 1992, respectively, were exercisable within the next year. Option
activity in all plans during 1993, 1992 and 1991 is summarized below:
<TABLE>
<CAPTION>
SFP AVERAGE
SHARES PRICE
---------- -------
<S> <C> <C>
Options outstanding at December 31, 1990............... 15,610,892 $ 7.46
Granted................................................ 343,700 7.22
Exercised.............................................. 2,022,221 6.21
Surrendered or terminated.............................. 2,887,071 9.20
----------
Options outstanding at December 31, 1991............... 11,045,300 $ 7.23
Granted................................................ 70,000 12.31
Exercised.............................................. 2,114,257 6.93
Surrendered or terminated.............................. 750,475 8.43
----------
Options outstanding at December 31, 1992............... 8,250,568 $ 7.24
Granted................................................ 5,814,770 17.17
Exercised.............................................. 3,284,947 7.21
Surrendered or terminated.............................. 176,544 9.91
----------
Options outstanding at December 31, 1993............... 10,603,847 $12.65
========== ======
</TABLE>
NOTE 19: STOCKHOLDER RIGHTS PLAN AND SALE OF STOCK
In January 1991, the SFP Board of Directors voted to redeem by means of a
share distribution the rights to purchase Series A Junior Participating
Preferred Stock of SFP issued under a rights agreement. Holders of record of
the rights as of the close of business on February 15, 1991, received an amount
of SFP common stock, with a current market price equal to $0.05 per right in
March 1991. The redemption resulted in an issuance of approximately 1.3 million
shares of common stock.
In October 1991, SFP sold 4,043,039 shares of stock, and received net
proceeds of approximately $36.2 million. These shares were purchased as a
result of options which had been granted to underwriters to cover over-
allotments in conjunction with the sale of SFP stock by a significant
shareholder through a secondary offering. The shares were issued through use of
treasury stock held by the Company.
31
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
NOTE 20: SUMMARIZED QUARTERLY OPERATING RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
1993 1992
----------------------------- -------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
------ ------ ------- ------ ------- ------ ------- ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues...... $583.2 $609.1 $585.8 $631.1 $ 545.2 $550.0 $ 577.8 $578.7
------ ------ ------- ------ ------- ------ ------- ------
Operating Income (Loss). $ 71.2 $ 82.2 $ 49.6 $114.7 $ 57.8 $ 65.5 $(238.0) $ 91.9
------ ------ ------- ------ ------- ------ ------- ------
Income (Loss)
Continuing Operations.. $106.4 $ 28.2 $ (10.3) $ 53.1 $ 9.4 $ 19.2 $(176.8) $169.3
Discontinued
Operations, Net of
Income Taxes.......... 20.7 119.3 7.5 13.9 18.8 7.3 11.7 4.6
Extraordinary Charge
on Early Retirement
of Debt, Net of
Income Taxes.......... -- -- -- -- -- -- -- (5.0)
Cumulative Effect of a
Change in Accounting
for Postretirement
and Postemployment
Benefits, Net of
Income Taxes.......... -- -- -- -- (163.0) -- -- --
------ ------ ------- ------ ------- ------ ------- ------
Net Income (Loss).... $127.1 $147.5 $ (2.8) $ 67.0 $(134.8) $ 26.5 $(165.1) $168.9
====== ====== ======= ====== ======= ====== ======= ======
Income (Loss) Per Common
Share
Continuing Operations.. $ 0.57 $ 0.15 $ (0.05) $ 0.28 $ 0.05 $ 0.10 $ (0.95) $ 0.91
Discontinued
Operations............ 0.11 0.64 0.04 0.08 0.10 0.04 0.06 0.03
Extraordinary Charge... -- -- -- -- -- -- -- (0.03)
Cumulative Effect of a
Change in Accounting.. -- -- -- -- (0.88) -- -- --
------ ------ ------- ------ ------- ------ ------- ------
Net Income (Loss) Per
Common Share........ $ 0.68 $ 0.79 $ (0.01) $ 0.36 $ (0.73) $ 0.14 $ (0.89) $ 0.91
====== ====== ======= ====== ======= ====== ======= ======
</TABLE>
- --------
(1) Quarterly results of operations have been reclassified to present SFP's
gold subsidiary as discontinued operations.
(2) The sum of income per share from discontinued operations and net income
(loss) per share for the four quarters of 1993 does not equal the related
net income (loss) per share for the full year due to incremental shares
resulting from stock options.
(3) 1993 income (loss) includes a first quarter $145.4 million pre-tax gain on
sale of California lines, and a third quarter increase in income tax
expense of approximately $27.7 million reflecting the retroactive impact of
the increase in the federal income tax rate to 35%.
(4) 1992 income (loss) includes a third quarter $320.4 million pre-tax rail
special charge and a fourth quarter $204.9 million pre-tax gain on sale of
California lines.
32
