<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 1-8627
------------
SANTA FE PACIFIC CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3258709
(State of Incorporation) (I.R.S. Employer Identification No.)
1700 East Golf Road
Schaumburg, Illinois 60173-5860
(Address of principal executive offices, including zip code)
708/995-6000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Stock, $1.00 par value New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
</TABLE>
------------
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of RegulationS-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $3,614.7 million on March 1, 1994, excluding stock
beneficially owned by directors, officers, and beneficial owners of more than
10% of the outstanding common stock, without admission of affiliate status of
such persons for any other purpose.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date:
Common Stock, $1.00 par value 186,217,883 shares outstanding on March 1,
1994.
List hereunder the documents from which parts thereof have been incorporated
by reference and the part of the Form 10-K into which such information is
incorporated:
<TABLE>
<S> <C>
Annual Report to Shareholders for the fiscal year ended
December 31, 1993...................................... PARTS I, II, AND IV
Proxy Statement dated March 9, 1994.................... PART III
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I
ITEMS 1 and 2. Business and Properties.................................... 1
Rail...................................................................... 1
Gold...................................................................... 11
Pipeline.................................................................. 20
ITEM 3.Legal Proceedings.................................................. 22
ITEM 4.Submission of Matters to a Vote of Security Holders................ 24
EXECUTIVE OFFICERS OF THE REGISTRANT...................................... 24
PART II
ITEM 5.Market for Registrant's Common Equity and Related Stockholder
Matters........................................................ 25
ITEM 6.Selected Financial Data............................................ 26
ITEM 7.Management's Discussion and Analysis of Results of Operations and
Financial Condition............................................ 26
ITEM 8.Financial Statements and Supplementary Data........................ 26
ITEM 9.Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................... 26
PART III
ITEM 10.Directors and Executive Officers of the Registrant................ 26
ITEM 11.Executive Compensation............................................ 26
ITEM 12.Security Ownership of Certain Beneficial Owners and Management.... 27
ITEM 13.Certain Relationships and Related Transactions.................... 27
PART IV
ITEM 14.Exhibits, Financial Statement Schedules, and Reports on Form 8-K.. 27
SIGNATURES................................................................ S-1
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES................................ F-1
INDEX OF EXHIBITS......................................................... E-1
</TABLE>
i
<PAGE>
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
Santa Fe Pacific Corporation ("SFP") was incorporated in the State of
Delaware in 1983. A holding company, SFP owns subsidiaries engaged in three
segments of business: Rail, consisting principally of The Atchison, Topeka and
Santa Fe Railway Company ("Santa Fe Railway"), a major Class I railroad
operating in 12 midwestern, western, and southwestern states; Gold, including
Santa Fe Pacific Gold Corporation and its subsidiaries, which are engaged in
the exploration for and development of gold properties and the mining and
processing of gold ores; and Pipeline, reflecting SFP's interest in a refined
petroleum products pipeline system operating in six western and southwestern
states. Santa Fe Railway, an indirect, wholly owned subsidiary of SFP, Santa Fe
Pacific Pipeline Partners, L.P., the general partner of which is an indirect,
wholly owned subsidiary of SFP, and SFP Pipeline Holdings, Inc., an indirect,
wholly owned subsidiary of SFP, are also subject to the filing requirements of
Section 13 of the Securities Exchange Act of 1934, as amended. At December 31,
1993, SFP and its subsidiaries had approximately 16,700 employees.
Below is a table showing revenues and operating income for each of SFP's
businesses for the years ended December 31, 1993, 1992, and 1991. Reference is
made to Note 21 to the consolidated financial statements on page 31 of SFP's
Annual Report to Shareholders for additional financial information including
identifiable assets attributable to SFP's businesses.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1992 1991
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES BY BUSINESS:
Rail........................................... $2,409.2 $2,251.7 $2,153.5
Gold........................................... 298.6 220.6 179.4
Pipeline....................................... 18.6 24.1 27.1
-------- -------- --------
TOTAL REVENUES.................................. $2,726.4 $2,496.4 $2,360.0
======== ======== ========
OPERATING INCOME BY BUSINESS:
Rail........................................... $ 317.7 $ 297.6 $ 255.4
Rail Special Charge........................... -- (320.4) --
-------- -------- --------
Total Rail.................................... 317.7 (22.8) 255.4
Gold........................................... 86.5 76.3 59.5
Pipeline....................................... 18.6 24.1 27.1
-------- -------- --------
TOTAL OPERATING INCOME.......................... $ 422.8 $ 77.6 $ 342.0
======== ======== ========
</TABLE>
RAIL
One of the nation's major freight railroads, Santa Fe Railway operated as of
December 31, 1993, approximately 8,536 route miles of track (approximately
7,620 of which are owned route miles including easements) extending from
Chicago to the Gulf of Mexico and the West Coast and operated related
facilities in twelve midwestern, western, and southwestern states.
TRACK CONFIGURATION
Santa Fe Railway has worked since 1988 to develop an efficient, high-speed,
core railroad system, to consist of approximately 7,500 owned route miles,
through sizable reductions in miles of track. Since December 31, 1988, Santa Fe
Railway has sold over 3,800 owned route miles, reducing its owned core route
mileage by one-third.
1
<PAGE>
In 1993, Santa Fe Railway and eight southern California transportation
agencies completed the sale to the agencies of certain interests in
approximately 340 miles of rail lines and additional property, for cash as well
as 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 plan on using
the facilities acquired for commuter service. In that connection, Santa Fe
Railway began a multi-year program with certain government agencies in 1993 to
upgrade signalling and construct new double and triple tracks on a 60-mile
segment between Fullerton and San Bernardino, California, to facilitate freight
and planned commuter service over the segment. In cooperation with another
government agency, Santa Fe Railway is making improvements between Richmond and
Bakersfield, California, to enhance the corridor's capacity for passenger
service.
As of December 31, 1993, Santa Fe Railway's total system consisted of
approximately 15,300 operated miles of track, all of which were owned by or
held under easement by Santa Fe Railway except for 1,221 miles operated under
trackage rights agreements with other parties. Excluding passing, yard, and
switching tracks, approximately 6,485 miles or 87 percent of the main lines
have been laid with 131-pound or heavier rail. Substantially all rail laid
under Santa Fe Railway's rail renewal programs is continuous welded rail. At
December 31, 1993, Santa Fe Railway had approximately 9,000 owned track miles
of welded rail in its system.
EQUIPMENT CONFIGURATION
Santa Fe Railway owned or had under non-cancelable leases exceeding one year
the following units of rolling stock for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Diesel Locomotives...................................... 1,745 1,696 1,716
====== ====== ======
Freight Cars:
Box.................................................... 3,746 3,784 3,920
Open Hopper............................................ 3,529 3,665 4,162
Covered Hopper......................................... 12,854 13,147 13,298
Gondola................................................ 3,065 2,911 3,005
Refrigerator........................................... 3,331 3,365 3,554
Autorack............................................... 819 819 853
Flat................................................... 1,790 1,792 1,746
Tank................................................... 428 464 465
------ ------ ------
TOTAL................................................ 29,562 29,947 31,003
====== ====== ======
Containers.............................................. 8,503 4,570 3,514
====== ====== ======
Trailers................................................ 5,067 5,096 4,729
====== ====== ======
Chassis................................................. 8,180 5,358 3,519
====== ====== ======
Company Service Cars.................................... 1,959 1,991 2,176
====== ====== ======
</TABLE>
The autoracks shown above are installed on Santa Fe Railway-owned flatcars.
In addition, autoracks (owned by Santa Fe Railway or under non-cancelable
leases exceeding one year) which are installed on flatcars under short-term
lease from others totaled 2,759, 1,715, and 1,608 at December 31, 1993, 1992,
and 1991, respectively.
At December 31, 1993, 96 serviceable locomotives and approximately 1,130
serviceable freight cars reflected in the above table were in storage. The
average ages from date of manufacture or
2
<PAGE>
remanufacture of the locomotive and freight car fleets at December 31, 1993,
were 8.1 years and 19.0 years, respectively. These averages are not weighted to
reflect the greater capacities of the newer equipment.
A summary of Santa Fe Railway's recent ratios of locomotives and freight cars
on line awaiting or undergoing repairs to the total number of locomotives or
freight cars in the fleet is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Locomotives................................................... 7.6% 7.7% 7.4%
Freight Cars.................................................. 7.8% 7.4% 6.2%
</TABLE>
CAPITAL EXPENDITURES AND MAINTENANCE
Capital expenditures of Santa Fe Railway for the periods indicated were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1993 1992 1991
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Ties................................................... $ 58.4 $ 44.5 $ 39.2
Rail................................................... 78.8 60.2 53.5
Ballast................................................ 48.2 37.6 37.7
Facilities............................................. 107.3 24.9 13.6
Other Roadway.......................................... 88.6 57.8 48.2
Locomotives............................................ 125.0 18.3 40.6
Freight Cars........................................... 19.7 13.0 4.3
Other.................................................. 13.1 9.2 4.8
------ ------ ------
Total Capital Expenditures......................... 539.1 265.5 241.9
Less Non-Cash Capital Expenditures(1).............. 157.6 9.5 35.2
------ ------ ------
Net Capital Expenditures.......................... $381.5 $256.0 $206.7
====== ====== ======
</TABLE>
- --------
(1) Primarily consists of directly financed equipment acquisitions and
projects reimbursed by governmental agencies and other parties.
Santa Fe Railway's 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 Hodgkins/Willow Springs, Illinois, intermodal
facility. 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. Santa Fe Railway expects capital expenditures to
exceed $550 million in 1994, including amounts expected to be reimbursed by
governmental agencies. Of the $550 million, approximately $200 million is
allocated for expansion projects (approximately $65 million of which are
expected to be reimbursed by governmental agencies and other parties),
approximately $60 million for the acquisition of 50 new locomotives, and the
remainder for capital maintenance. Expansion projects include continued work on
the combined intermodal facility and carload transportation center at Alliance,
Texas, adjacent to the Fort Worth Alliance Airport. Completion of the new
facility, which will consolidate existing local yards and terminal operations
in north Texas, is scheduled for the first half of 1994. Work is also scheduled
to be completed in the fall of 1994 on a 90-acre intermodal facility at
Hodgkins/Willow Springs, Illinois, located adjacent to a United Parcel Service
hub being constructed. Additional expansion projects include work at San
Bernardino, California, on a new intermodal facility and the completion of a
new automotive facility. Various line and terminal capacity improvements at
other locations are also expected.
3
<PAGE>
In addition to the capital expenditures discussed above, amounts expensed for
the costs, including labor, for repairs and maintenance of roadway and track
structures and equipment, exclusive of depreciation, were as follows for the
periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1993 1992 1991
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Repairs and maintenance of roadway and track
structures........................................... $234.0 $228.0 $221.5
Repairs and maintenance of equipment.................. $287.0 $260.5 $251.0
</TABLE>
General Electric Company ("GE") has been maintaining locomotives for Santa Fe
Railway under various maintenance agreements since September 1989 and
maintained a total of 428 locomotives as of December 31, 1993. The Electro-
Motive Division of General Motors Corporation ("EMD") began performing
maintenance under a similar agreement in October 1990 and maintained 179
locomotives as of December 31, 1993. Additionally, Santa Fe Railway entered
into a similar agreement with Morrison Knudsen Corporation ("MK") in March 1994
for the overhaul and maintenance of 278 locomotives over the next 12 years. The
agreements with GE, EMD, and MK call for the work to be done at Santa Fe
Railway facilities with Santa Fe Railway employees. The 50 new locomotives to
be acquired in 1994 also will be maintained under agreement with GE.
The majority of capital and maintenance of way expenditures for track have
been for rail and tie refurbishment and surfacing. The extent of Santa Fe
Railway's track maintenance program is depicted in the following chart:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Track miles of rail laid................................... 324 304 251
Ties inserted (in thousands)............................... 1,547 1,216 1,164
Track miles surfaced....................................... 2,672 2,400 2,521
</TABLE>
Santa Fe Railway anticipates that its 1994 track maintenance of way program,
together with expansion projects, will result in the installation of
approximately 380 miles of welded rail, the replacement of about 1.5 million
crossties, and the surfacing of approximately 2,450 miles of track.
OPERATING CONFIGURATION
Santa Fe Railway operates modern facilities and equipment for maintenance of
track, locomotives, and freight cars. It also owns or leases other equipment to
support rail operations, such as highway trailers and vehicles. Support
facilities for rail operations include yards and terminals, a centralized
system operations center for dispatching, computers, telecommunications, signal
systems, a locomotive management system, and transfer facilities for rail-to-
rail as well as intermodal transfer of containers, trailers, and other freight
traffic.
In 1993, Santa Fe Railway consolidated train dispatching, crew planning, and
fleet management at Schaumburg, Illinois, to provide the basis for operations
planning at one central point. Crew management, customer service functions, and
mechanical administrative functions were consolidated at Topeka, Kansas, and
other transportation and maintenance of way functions were relocated to Kansas
City. These consolidations, which were completed in the fall of 1993, are
expected to lead to operational efficiencies, including improved utilization of
assets and improved service, as well as a reduction in annual operating
expenses.
EMPLOYEES AND LABOR RELATIONS
Productivity as measured by revenue ton miles per employee has risen steadily
in the last three years, and compensation and benefits expense per revenue ton
mile has declined, as shown in the table below.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Revenue ton miles/average number of employees (thousands). 6,477 6,023 5,450
Compensation and benefits expense/revenue ton miles
(cents).................................................. .86 .93 .97
</TABLE>
4
<PAGE>
Labor unions represent over 80 percent of Santa Fe Railway's employees. Major
issues concerning wages, health and welfare benefits, work rules, and other
matters were resolved in 1991 for substantially all of Santa Fe Railway's
crafts. Following a brief industry-wide strike ended by Congressional
resolution in April 1991, a Special Board created by President Bush made a
binding determination to accept the recommendations of a Presidential Emergency
Board which prescribed terms for settlement of the disputes.
Key economic terms under the national settlement included wage increases
totaling ten percent over the five-year life of the arrangement and a series of
lump sum payments which approximate 17 percent over the life of the agreement.
Rail workers agreed to pay a share of their health care costs. The settlement
also increased the "basic day" miles which each conductor, brakeman, and
fireman must travel to earn a day's pay by 20 percent over the five-year
period. The basic day change and other provisions of the settlement partially
offset the cash impact of the wage increases and lump-sum payments granted all
employees covered by the settlement. The national settlement governs the
parties through at least December 31, 1994.
In 1992, a national labor dispute with the machinists union over the
recommendations of Presidential Emergency Board ("PEB") No. 220 was resolved
following a strike against CSX Transportation, Inc. and the subsequent shutdown
of freight operations by the remaining national freight railroads. The
arbitrator's decision under strike-ending Congressional legislation imposed a
final and binding settlement closely following the recommendations of PEB No.
220. The settlement was in all key respects identical to the 1991 national
settlements with other unions discussed above and will govern the parties
through at least December 31, 1994.
Santa Fe Railway began a major effort to improve the productivity of its
train crews in September 1989 through crew consist agreements and expanded crew
districts. In January 1992, members of the UTU on the Texas lines and Coast
lines, the western half of Santa Fe Railway's system, ratified new agreements
that further reduced the size of crews on freight trains and simplified certain
work rules, while establishing additional security and benefits for employees.
In September 1992, negotiations with the UTU produced another agreement
updating a 1990 crew consist agreement for the remaining half of the system.
Now all through freight trains on the Santa Fe Railway system not making an
unusual number of stops between terminals operate with two-person crews and all
other trains have only three crew members. Santa Fe Railway's average crew size
has been reduced from 3.7 in 1989 to about 2.5 as of December 31, 1993.
Locomotive engineers are not involved in the UTU agreements; Santa Fe Railway
previously reached a five-year agreement with the Brotherhood of Locomotive
Engineers effective January 1, 1990, settling wage and work rule issues, which
agreement will govern the parties through at least December 31, 1994.
Railroad industry personnel are covered by the Railroad Retirement System
instead of Social Security. Santa Fe Railway's contributions under the Railroad
Retirement System are approximately triple those in industries covered by
Social Security.
Railroad industry personnel are also covered by the Federal Employers'
Liability Act ("FELA") rather than by state workers' compensation systems. FELA
is a fault-based system, with compensation for injuries settled by negotiation
and litigation, not subject to specific statutory limitations on the amount of
recovery. By contrast, most other industries are covered under state
administered no-fault plans with standard compensation schedules. Santa Fe
Railway believes it has adequate reserves for its FELA claims; however, the
future costs of FELA claims are uncertain and such costs could be significantly
higher in the future.
5
<PAGE>
BUSINESS MIX
In serving the midwestern, western, and southwestern regions of the country,
Santa Fe Railway transports a broad range of commodities derived from
manufacturing, agricultural, and natural resource industries. Accordingly,
Santa Fe Railway's financial performance is influenced by the economic
conditions of these industries, both at the national and regional levels, as
well as by the overall condition of the national and world economy. Santa Fe
Railway's traffic volumes are subject to some seasonal variations and in recent
years have tended to peak in March, August, and October.
Santa Fe Railway markets both carload and intermodal service. Major markets
served directly by Santa Fe Railway include Albuquerque, Chicago, Dallas,
Denver, Houston, Kansas City, Los Angeles, Phoenix, the San Francisco Bay area,
and the United States/Mexico crossings of El Paso and San Diego. Other major
cities are served through Santa Fe Railway's Intermodal Market Extension
("IMX") terminals located at various off-line points.
In addition to market segments where Santa Fe Railway provides direct single
line service, extension of Santa Fe Railway's marketing influence beyond the
end of the system is undertaken by interline rail carrier pricing and service
relationships and through voluntary coordination agreements, haulage
agreements, and cooperative service agreements. Santa Fe Railway currently has
such agreements with Burlington Northern, Union Pacific, Conrail, Grand Trunk,
Norfolk Southern, Kansas City Southern, Toledo, Peoria & Western, and Gateway
Western for traffic where there is a joint marketing interest. Santa Fe Railway
has thereby extended its service into the Northeast, Southeast, and Pacific
Northwest, and has access to the St. Louis gateway. Santa Fe Railway's
intermodal Quality Stack Service reaches the northeastern markets of Boston and
Springfield, Massachusetts; Harrisburg and Morrisville, Pennsylvania; Kearney,
New Jersey; and Syracuse, New York. In June 1993, Santa Fe Railway and
Burlington Northern entered into a haulage agreement which gives Santa Fe
Railway direct access to southeastern markets from Oklahoma to Memphis,
Tennessee and Birmingham, Alabama, over Burlington Northern lines. Service is
provided to both intermodal and carload customers under the agreement, with
Burlington Northern crews operating Santa Fe Railway's trains, and Santa Fe
Railway responsible for marketing, equipment, and billing. In 1993, Santa Fe
Railway also joined with the National Railways of Mexico to provide once-a-week
doublestack service for steamship customers between Los Angeles, California,
and Mexico City, Mexico, via El Paso, Texas.
Intermodal. Santa Fe Railway was one of the first railroads to enter the
intermodal freight business, which consists of hauling freight containers or
truck trailers by a combination of water, rail, and motor carriers. The
intermodal business has become highly service-driven, and in some cases motor
carriers and railroads have begun to jointly market intermodal service. Through
a joint intermodal arrangement known as Quantum, Santa Fe Railway and J. B.
Hunt Transport provide customers full service, customized door-to-door
transportation (truck and rail), with a common communication system and
integrated billing at a single rate. Both the volume of traffic and the
geographic areas served have expanded significantly since the service was
inaugurated in 1990. In 1993, Santa Fe Railway and J. B. Hunt Transport began
container service and began moving shipments to the Southeast under Santa Fe
Railway's new haulage agreement with Burlington Northern. Santa Fe Railway
continues to handle intermodal shipments of intermodal cargo for KLLM, a
nationwide motor carrier specializing in temperature controlled transportation.
Santa Fe Railway also carries international intermodal traffic through a
contract with The Rail-Bridge Corp., the doublestack operating subsidiary of
"K" Line, and through contracts with Maersk, Hyundai, and OOCL. Santa Fe
Railway is also one of the underlying carriers for APL Land Transport Services,
providing doublestack service between Los Angeles and the Midwest.
Santa Fe Railway's Intermodal Business Unit ("IBU") combines both marketing
and operating functions relating to its intermodal business. Intermodal
business accounts for over 40 percent of rail revenue. Traffic volume of
intermodal units (trailer or container) increased in 1993 to over 1.22 million
units, up 6.3 percent from 1992.
6
<PAGE>
Santa Fe Railway's IBU focuses on three types of intermodal business:
. DIRECT MARKETING. Santa Fe Railway's direct marketing efforts result in
approximately 41 percent of total intermodal revenue and center around Quantum,
traffic contracted from United Parcel Service and the United States Postal
Service, just-in-time parts service for the automotive industry, and service
for nationwide LTL (less than trailer load) carriers and truckload carriers.
. INTERMODAL MARKETING COMPANIES. Approximately 39 percent of total
intermodal revenue is generated through intermodal marketing companies,
primarily shipper agents and consolidators.
. INTERNATIONAL. The IBU's international business consists primarily of
traffic from steamship companies and accounts for approximately 20 percent of
intermodal revenues.
Carload. In 1992, Santa Fe Railway created a Carload Business Unit ("CBU") to
complement its IBU. Besides being responsible for carload marketing, sales, and
customer service functions, the CBU coordinated transportation services and
equipment distribution with operating management in 1993.
Effective January 1, 1994, Santa Fe Railway implemented organizational
changes designed to meet customer expectations by more effectively coordinating
its marketing and operations. The new organization is centered around four
market-oriented business units: the IBU, and new automotive, bulk products, and
carload commodities business units in place of the CBU. Besides marketing
functions, these four units are responsible for equipment distribution and
utilization, and service design, and they will operate those facilities related
to their product line. The automotive unit is responsible for all automotive
services and facility operations. The bulk products unit is responsible for
grain, coal, and minerals. In addition to Santa Fe Railway's Quality
Distribution Center ("QDC") program, the carload commodities unit is
responsible for chemicals, lumber, primary metals, consumer products and
related commodities.
Santa Fe Railway's 1993 carload business included transportation of the
following commodities:
. CHEMICALS AND PETROLEUM. Chemicals for industrial and agricultural use are
the two major chemical groups transported by Santa Fe Railway. Industrial
chemicals are used by the automotive and housing industries, as well as by the
chemical industry as feedstock for other chemical products. Major industrial
chemical markets are in the East and California. Agricultural chemicals are
transported over Santa Fe Railway's system primarily to the South and the
Midwest, and to Texas Gulf ports for export. Santa Fe Railway also handles
liquified petroleum gas (LPG) shipments from California to Arizona and from
Kansas to Mexico, as well as refined petroleum products.
. COAL. Coal shipments transported on Santa Fe Railway's lines originate
principally in Wyoming, Colorado, and New Mexico on the lines of Santa Fe
Railway and other rail carriers. These shipments are moved to electrical
generating stations and industrial plants in the Midwest and Southwest.
. VEHICLES AND PARTS. Santa Fe Railway handles both assembled motor vehicles
and shipments of vehicle parts to numerous destinations throughout the Midwest,
Southwest, and West.
. WHOLE GRAIN. Santa Fe Railway serves a large portion of the grain-producing
regions of the nation. Santa Fe Railway transports wheat and feed grains to
points in California, Kansas, Oklahoma, and Texas to be stored, milled, or fed
to livestock. Santa Fe Railway also moves export wheat to Texas ports for
shipment to foreign consumers.
. MINERALS AND ORES. Sulphur generally moves via Santa Fe Railway to the Gulf
Coast and thence via vessels to Florida and overseas markets for use in making
phosphatic fertilizers. Potash is transported to domestic markets and to export
points for markets in Canada, Mexico, and
7
<PAGE>
overseas. Cement and aggregates (sand and stone) generally move from Texas,
Kansas, and California origins to domestic markets for use in general
construction and public work projects, such as highway projects.
. FOREST PRODUCTS. Santa Fe Railway hauls lumber, paper and paper products,
and building supplies. Lumber and lumber products move between East Texas and
Chicago and points east, and from the Southeast and the Northwest coast into
California.
. CONSUMER PRODUCTS. Beverages, canned goods, and grocery products are the
principal food commodities moved over Santa Fe Railway's system, the greatest
volume of which is eastbound traffic from California.
. GRAIN PRODUCTS. Principal grain products hauled include corn syrup, flour,
soybean meal, and vegetable oils. Flour moves from Kansas and other producing
states to export points. Oils and meals generally move from the Midwest into
California.
. PRIMARY METALS. Santa Fe Railway hauls scrap metal, sheet metal, steel
ingots, rods, and angle bars among other primary metals.
Under its QDC program, Santa Fe Railway currently operates 45 warehouses, 13
steel centers, and 17 bulk transfer sites. These facilities handle a variety of
manufactured, semi-manufactured, and bulk commodities and provide door-to-door
delivery on an as-needed or just-in-time basis using a combination of rail cars
and highway trailers. QDC operations handled approximately 24,000 carloads in
1993.
Freight Statistics. The following tables set forth certain freight statistics
relating to the rail operations of Santa Fe Railway for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Revenue ton miles (billions)............................... 93.1 85.6 80.8
Revenue per ton-mile (cents)............................... 2.54 2.58 2.61
Average haul per ton (miles)............................... 794 779 774
</TABLE>
REVENUES BY BUSINESS GROUP
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1992 1991
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
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
-------- -------- --------
Miscellaneous Adjustments....................... -- 3.3 5.5
-------- -------- --------
Total Freight Revenue........................... $2,368.5 $2,212.9 $2,113.1
======== ======== ========
</TABLE>
8
<PAGE>
CARLOADINGS*
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1993 1992 1991
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Intermodal Business Unit:
Direct Marketing.................................... 206.3 171.9 143.5
Intermodal Marketing Companies...................... 221.0 242.8 239.4
International....................................... 184.0 160.4 132.6
------- ------- -------
Total Intermodal Business Unit....................... 611.3 575.1 515.5
------- ------- -------
Carload Business Unit:
Chemicals and Petroleum............................. 164.6 164.1 153.0
Coal................................................ 351.1 316.9 305.9
Vehicles and Parts.................................. 119.1 85.5 83.4
Whole Grain......................................... 145.7 139.5 136.0
Minerals and Ores................................... 118.1 119.7 120.8
Forest Products..................................... 87.6 87.8 82.3
Consumer Products................................... 75.4 74.4 82.3
Grain Products...................................... 54.0 54.0 51.3
Primary Metals...................................... 63.8 53.1 51.7
------- ------- -------
Total Carload Business Unit.......................... 1,179.4 1,095.0 1,066.7
------- ------- -------
Total Carloadings.................................... 1,790.7 1,670.1 1,582.2
======= ======= =======
</TABLE>
- --------
* Each intermodal carload is equal to two intermodal units (trailers or
containers).
AVERAGE REVENUE PER CAR
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Intermodal Business Unit:
Direct Marketing...................................... $1,959 $2,011 $2,024
Intermodal Marketing Companies........................ 1,704 1,641 1,681
International......................................... 1,066 1,049 1,132
------ ------ ------
Total Intermodal Business Unit......................... 1,598 1,586 1,635
------ ------ ------
Carload Business Unit:
Chemicals and Petroleum............................... 1,709 1,722 1,690
Coal.................................................. 627 611 623
Vehicles and Parts.................................... 1,605 1,599 1,728
Whole Grain........................................... 1,102 1,028 1,072
Minerals and Ores..................................... 1,212 1,312 1,374
Forest Products....................................... 1,389 1,321 1,247
Consumer Products..................................... 1,510 1,574 1,412
Grain Products........................................ 1,523 1,489 1,386
Primary Metals........................................ 1,216 1,323 1,349
------ ------ ------
Total Carload Business Unit............................ 1,180 1,185 1,186
------ ------ ------
Average Revenue Per Car................................ $1,323 $1,323 $1,332
====== ====== ======
</TABLE>
Passenger Operations. Since May 1, 1971, the National Railroad Passenger
Corporation ("Amtrak") has assumed from participating railroads, including
Santa Fe Railway, the responsibility for providing intercity rail passenger
service. Amtrak operates numerous passenger trains daily
9
<PAGE>
between major points on Santa Fe Railway's system. Amtrak compensates Santa Fe
Railway under an amended agreement entered into in 1989 which provides for cost
reimbursements and performance incentives.
REAL ESTATE ACTIVITIES; ENCUMBRANCES
Income net of related expenses attributable to real estate activities of
Santa Fe Railway, principally sales of non-operating properties and leasing
revenues, was $19.4 million for the year ended December 31, 1993, as compared
to $23.9 million in 1992 and $45.6 million in 1991. Santa Fe Railway's non-
operating properties, which include over 1.4 million acres of mountain and
desert lands with possible mineral potential in California, Nevada, and Utah
(which lands are subject to an exploration agreement or mineral leases with
Santa Fe Pacific Gold Corporation) and over 23,000 acres of other property, are
managed by Catellus Development Corporation, a former affiliate, under a
management agreement.
Substantially all railroad property, real or personal, is subject to liens
securing mortgage bonds, and certain locomotives and rolling stock are subject
to equipment obligations, as referred to in Note 11 to the consolidated
financial statements on page 27 of SFP's 1993 Annual Report to Shareholders.
GOVERNMENT REGULATION AND LEGISLATION
Rail operations are subject to the regulatory jurisdiction of the Interstate
Commerce Commission ("ICC"), the Occupational Safety and Health Administration
("OSHA"), the United States Department of Transportation ("DOT"), and state
regulatory agencies. The ICC has jurisdiction over certain rates, routes,
services, issuance or guarantee of Santa Fe Railway securities, extension, sale
or abandonment of rail lines, and consolidation or merger with or acquisition
of control of rail common carriers. State agencies regulate some aspects of
rail operations with respect to health and safety and in some instances
intrastate freight rates. DOT and OSHA have jurisdiction under several federal
statutes over a number of safety and health aspects of rail operations.
Santa Fe Railway 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 ("EPA") must issue regulations applicable to new locomotive
engines. Emissions from 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 February 1994, EPA announced a federal implementation plan designed to
bring California ambient air quality in line with standards under the federal
Clean Air Act for the four-county Los Angeles region by 2010 and Ventura County
and the Sacramento area by 2005. Final regulations are planned to be adopted
within one year following public hearings. The shipping business--including
airline, truck, rail, and maritime industries--are included within the reach of
the proposed rules which include pollution fees and emissions standards.
Nitrogen oxide locomotive emission standards eventually promulgated as
regulations under EPA's plan will likely increase Santa Fe Railway's operating
costs and could possibly require the use of alternative fuels to meet
10
<PAGE>
the standards. Also, ships docking at the Ports of Long Beach and Los Angeles
could be faced with fees beginning in 2001 based on their engine emissions.
This could have the effect of diverting some maritime intermodal traffic to
other ports that are not served by Santa Fe Railway.
Many of Santa Fe Railway's land holdings are and have been used for
industrial and transportation-related purposes or leased to commercial and
industrial companies whose activities may have resulted in discharges onto the
property. As a result, Santa Fe Railway is now subject and will continue from
time to time to be subject to environmental cleanup 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 cleanup 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, Santa Fe Railway may be
responsible under CERCLA and other applicable federal and state statutes for
all or part of the costs to clean up sites at which wastes have been released
by Santa Fe Railway, its current lessees, predecessor owners or lessees of
properties, or other third parties. Estimates of Santa Fe Railway'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, and
potential recoveries from third parties.
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, SFP monitors, on a regular basis, accruals for environmental sites
which have been identified. Payments of these accrued costs are expected to be
made over the next five years. It is the opinion of SFP management that any
costs in excess of recorded liabilities will not have a material adverse effect
on the consolidated financial position of SFP.
COMPETITION
Rail operations are subject to intense competition from various modes of
transportation, primarily from other railroads, motor carriers, and both inland
and intercoastal water carriers. Competition is based upon price and quality
and reliability of service. Other major rail systems and smaller rail carriers
compete with Santa Fe Railway in various transport markets for the movement of
most commodities. Motor carrier competition, especially in the intermodal area,
is pervasive throughout all major markets with the exception of the long-haul
electric utility coal markets. In those cases, competition exists from the coal
producing regions of the central and northern Rocky Mountain districts as well
as the eastern United States. Water competition is present between the Texas
Gulf Coast and Mississippi and Illinois River systems as well as between the
West and Gulf Coasts and along the West Coast.
GOLD
Santa Fe Pacific Gold Corporation and its subsidiaries ("SFP Gold") are
engaged in the exploration for and development of gold properties and the
mining and processing of gold ores. SFP Gold's three gold mines consist of the
Twin Creeks Mine, which was formed from the consolidation of the Rabbit Creek
Mine and the Chimney Creek Mine, and the Lone Tree Mine, both in northern
Nevada, and the Mesquite Mine in southern California. SFP Gold acquired the
Mesquite Mine and the Chimney Creek Mine in an exchange of assets with Hanson
Natural Resources Company ("HNRC") on June 25, 1993 (the "Exchange"). The
Mesquite Mine and the Chimney Creek Mine had previously been operated by Gold
Fields Mining Corporation ("Gold
11
<PAGE>
Fields"), a partner in HNRC. In the Exchange, SFP Gold acquired HNRC's gold
assets, including the Chimney Creek and Mesquite mines, two advanced
exploration projects in Nevada and Montana, and other gold prospects in North
America and Chile. In return, HNRC received essentially all of SFP Gold's coal
assets, including the Lee Ranch Mine, a large surface coal mine in New Mexico,
undeveloped coal reserves in northwest New Mexico, and six aggregates quarries
in Oklahoma, Texas, New Mexico, Arizona, and California.
Formerly named Santa Fe Pacific Minerals Corporation, SFP Gold changed its
name to its current one following the Exchange to reflect its focus on gold
operations. Reference is made to Note 3 to the consolidated financial
statements on page 24 of SFP's 1993 Annual Report to Shareholders for further
information concerning the Exchange. Reference is also made to Note 23 on page
32 of SFP's 1993 Annual Report to Shareholders for information concerning gold
reserves. In connection with the following description of SFP Gold's mines,
reference is made to the following map of areas of mineral rights controlled by
SFP Gold and the location of individual mines.
SFP is continuing to review the possibility of establishing SFP Gold as a
separate public company. As part of this process, SFP Gold is considering an
initial public offering of up to 20 percent of SFP Gold stock, and in that
event, SFP is considering a distribution of the remaining interest in SFP Gold
to SFP shareholders following SFP Gold's initial public offering. This
evaluation and the timing of any distribution by SFP involve a number of
economic, business, legal, tax, and other considerations, including prior
approval from the SFP Board of Directors. SFP is pursuing a ruling from the
Internal Revenue Service that a distribution of SFP Gold shares to existing SFP
shareholders would be tax free.
12
<PAGE>
13
<PAGE>
OPERATING PROPERTIES
Twin Creeks Mine. The Twin Creeks Mine is believed by SFP Gold to be North
America's third-largest primary gold mine. It is located approximately 45 miles
northeast of Winnemucca, Nevada, and is accessed by a paved public road, an
improved public road, and two improved roads owned by SFP Gold. Mining at the
Twin Creeks Mine is conducted in three open pits utilizing conventional open-
pit mining methods. During 1994, the Company expects to mine 70.0 million tons
of overburden, 17.0 million tons of run-of-mine heap-leach ore, and 2.0 million
tons of oxide mill ore at the mine. The current equipment fleet consists of
large electric and hydraulic shovels coupled with 150-, 170-, and 190-ton haul
trucks working on 40-foot benches, and a smaller-sized fleet for mining 20-foot
ore benches consisting of hydraulic shovels, front-end loaders, and 85- and
150-ton haul trucks. The mining fleet is supported with a full set of ancillary
equipment. The equipment fleet is generally in good condition.
Gold mineralization at the Twin Creeks Mine occurs at the north end of the
Rabbit Trend, a nearly 60-mile long, north-south zone containing numerous
sediment-hosted Carlin-type deposits and other occurrences of gold
mineralization. The deposits at the Twin Creeks Mine lie in the Getchell mining
district which occupies the eastern flank of the Osgood Mountains. The deposits
occur in a complexly folded and faulted sequence of sedimentary rocks with
minor amounts of interlayered basalt. The deposits are overlain by zero to 600
feet of alluvium. Gold mineralization is controlled by both stratigraphy and
structure.
At the Twin Creeks Mine, gold occurs in both refractory and oxide ores.
Refractory ores contain variable amounts of pyrite, realgar, orpiment,
stibnite, and organic carbon. In oxide ores, the refractory minerals and
carbonaceous matter are absent, and gold is associated with antimony-rich
limonite.
Ore is processed at the Twin Creeks Mine through either oxide milling or heap
leaching depending upon the grade of ore. High-grade (approximately 0.05 ounces
per ton and greater) oxide ore is processed through one of two separate oxide
milling facilities. The south mill has a nominal 3,000 tons per day capacity
and historically has had a recovery rate of approximately 91 percent of the
gold contained in the ore processed. Gold is recovered through conventional
carbon adsorption, pressure-stripping, and electro-winning. The north mill has
a nominal capacity of 2,500 tons per day and historically has had a recovery
rate of approximately 94 percent of the gold contained in the ore processed.
Run-of-mine heap leaching is used to recover gold from low-grade ores
(generally, less than 0.05 ounces per ton). Leach cycles at the Twin Creeks
Mine are typically 180 days and achieve approximately 65 percent gold recovery.
Approximately 50 percent of the future oxide gold production from the Twin
Creeks Mine is expected to come from run-of-mine heap leaching. For the last
half of 1993, the Twin Creeks Mine processed an average of 5,354 tons of mill
ore per day. Over a full year, the Twin Creeks Mine has the capacity to produce
approximately 500,000 ounces of gold.
Water for operations at the Twin Creeks Mine is obtained from area wells, in-
pit wells, and pit-dewatering operations. Water pumped from the pit sumps and
wells currently totals approximately 2,000 gallons per minute, and is either
consumed in processing and mining or is required by permit terms to be treated
and released at drinking water standards prescribed under the Clean Water Act.
Electric power sufficient for existing operations is either purchased from
Sierra Pacific Power Company or provided by an on-site, natural gas-fired power
plant owned by SFP Gold which is capable of providing approximately 40 percent
to 50 percent of the mine's existing electric power needs.
SFP Gold is evaluating a sulfide expansion, estimated to require a $125
million to $150 million capital investment over a two to three year period,
which would, if successfully implemented, enable SFP Gold to process refractory
ores at the Twin Creeks Mine. If SFP Gold determines not
14
<PAGE>
to proceed with the sulfide expansion, it may not be able to recover up to 57
percent of the reserves at the mine. The sulfide expansion will require
approval of an operating permit from the federal Bureau of Land Management
("BLM"), and an approval by the Nevada State Engineer of an increase in the
mine's dewatering rate by 18,000 gallons per minute which would bring the total
appropriation to the level estimated to be required to extract all of the
mine's reserves.
Lone Tree Mine. The Lone Tree Mine is located 34 miles southeast of
Winnemucca, Nevada, one-half mile south of Interstate 80, to which it is
connected by an improved road owned by SFP Gold. Mining at the Lone Tree Mine
is conducted in one open pit utilizing conventional open-pit mining methods.
During 1994, SFP Gold expects to mine 31.2 million tons of overburden, 2.2
million tons of run-of-mine heap leach ore, 1.3 million tons of conventional
heap-leach ore, 71,000 tons of oxide mill ore, and 323,000 tons of refractory
ore at the mine. The current equipment fleet consists of large hydraulic
shovels and backhoes coupled with 150-ton haul trucks, working on 40-foot
benches in overburden and 20-foot benches in ore. The mining fleet is supported
with a full set of ancillary equipment. The equipment fleet is generally in
good condition.
The deposit at the Lone Tree Mine is a sediment-hosted gold deposit which
occurs in silicified and brecciated siltstone, sandstone, and argillite within
a steeply-dipping structure known as the Wayne Zone. This zone consists of
several parallel to sub-parallel shear zones. Gold mineralization is controlled
primarily by structures with gold occupying fractures. Some stratigraphic
control exists, especially where the rock units are brittle and easily
fractured.
Gold occurs in both refractory and oxide ores. In the refractory ore, the
gold is dominantly associated with pyrite, and to a lesser extent, with
arsenopyrite. In the oxide ore, the arsenopyrite and pyrite are absent, and
gold is associated with limonite.
Oxide milling at the Lone Tree Mine consists of a standard SAG mill and ball
mill grinding circuit, followed by a CIL cyanide leaching circuit with a
nominal 2,500 tons per day capacity. Gold is recovered from the loaded carbon
through a conventional pressure-stripping and electro-winning process. Heap
leaching at the Lone Tree Mine is conducted both as run-of-mine and
conventional heap leaching. Conventional heap leaching cycles are typically 13
months and achieve approximately 70 percent recovery of the contained gold
value. Run-of-mine leaching cycles are also typically 13 months and achieve an
overall recovery rate of approximately 40 percent of the contained gold. Heap
leaching produced all of the gold at the Lone Tree Mine through mid-October
1993, totaling over 255,000 ounces, and will continue to contribute a
significant portion of the gold produced at the Lone Tree Mine throughout its
life.
In mid 1992, SFP Gold initiated a sulfide expansion at the mine. In February
1994, SFP Gold completed the expansion, which included the addition of a
refractory mill, that is currently processing refractory ores at the rate of
2,500 tons per day. SFP Gold also completed construction of an oxygen plant, an
extension to the maintenance shop and warehouse, additions to the pit
dewatering system, expansion of the leach pad capacity and addition of two
carbon circuits in the heap-leach processing facility. When the pressure-
oxidation circuit of the refractory mill is not operating, high-grade oxide
ores will be processed through the oxide circuit of the refractory mill. The
oxide circuit of the mill began operation in October of 1993. The sulfide
expansion will increase annual production from the Lone Tree Mine to
approximately 200,000 ounces of gold.
SFP Gold estimates that the cost of processing refractory ore will be between
$18 and $20 per ton, depending on the mineralogical characteristics of the
material. It also estimates that its ability to process refractory ores at the
Lone Tree Mine as a result of the sulfide expansion has increased the estimated
life of the mine by approximately 9 years to a remaining life of 16 years.
SFP Gold is pursuing a mining permit for Section 14 of the Lone Tree Mine
from the BLM. Because of its geological setting, the Lone Tree Mine will
require the removal of increasingly large
15
<PAGE>
volumes of water to maintain a relatively dry, minable pit as the pit deepens.
The Nevada State Engineer requires mines to obtain permits to appropriate mine-
dewatering rights. SFP Gold has permits from the Nevada State Engineer to pump
approximately 33,460 gallons of water per minute from the wells on the mine
site and to discharge this water into the Humboldt River. Appropriations for
pumping an additional 42,000 gallons per minute have been requested to ensure
that mining operations can continue as higher volumes of water must be removed.
Although SFP Gold anticipates it will be successful in obtaining the necessary
water appropriations and other permits, there is no assurance that such permits
will be obtained. Failure to obtain any necessary permits could result in a
curtailment of gold production, reduction of reserves, or both. SFP Gold's
ability to recover up to 50 percent of its reserves at the Lone Tree Mine could
be adversely affected by its failure to obtain the requested dewatering
permits.
Mesquite Mine. The Mesquite Mine is located in Imperial County in southern
California and is accessed by a paved road owned by SFP Gold which connects to
a paved state highway. Mining at the Mesquite Mine is conducted in three open
pits utilizing conventional open-pit mining methods. During 1994, SFP Gold
expects to mine 21.7 million tons of overburden, 2.8 million tons of run-of-
mine heap-leach ore, and 8.0 million tons of conventional heap-leach ore. The
current equipment fleet consists of large hydraulic shovels and front-end
loaders coupled with 85- and 150-ton haul trucks, working on 40-foot benches in
overburden and 20-foot benches in ore. The mining fleet is supported with a
full set of ancillary equipment. The equipment fleet is generally in good
condition; however, since the Mesquite Mine only has about six years remaining
in its economic life, SFP Gold is rebuilding, rather than replacing the older
equipment.
The deposits at the Mesquite Mine lie on the southwestern flank of the
Chocolate Mountains, in highly metamorphosed rocks which have an extremely
complex structural history. Faulting had a strong control on the
mineralization. Gold mineralization occurs in structurally-prepared
metamorphosed rock in the Mine Area. Gold in the oxide-ore zones occurs in
association with disseminated pyrite which has oxidized to limonite and as
microscopic fracture coatings.
Conventional heap-leaching cycles at the Mesquite Mine are typically 75 to
100 days long and achieve gold recoveries which have historically approximated
78 percent. Run-of-mine heap-leaching cycles at the mine are typically longer
and recoveries are approximately 50 percent. Gold is recovered from the
pregnant solution from both heap-leaching processes by means of carbon
adsorption, pressure stripping, and electro-winning.
SFP Gold's current plans are to increase conventional heap-leaching rates to
8.0 million tons per year, and run-of-mine heap leaching to over 2.0 million
tons per year. Facilities are in place to accomplish these goals with the
exception of additional leach pads, which are being designed and permitted at
this time. Production at the Mesquite Mine is estimated to average
approximately 200,000 ounces of gold per year for the period 1994 through 1998,
declining to approximately 40 percent of that amount in 1999, the last year of
the mine's anticipated operating life, reflecting a partial year's production.
The Mesquite Mine is currently running nearly at capacity.
Operations at the Mesquite mine draw water from three wells located on land
owned by SFP Gold within the mine, approximately four miles south of the
processing facility. Water usage is permitted for up to 2,493 gallons per
minute, with current water usage in the order of 680 gallons per minute.
Potable water is provided by an on-site, reverse-osmosis plant owned and
operated by SFP Gold. Electrical power is supplied by the Imperial Irrigation
District via a seven-mile-long, 92-kilovolt line feeding into a substation at
the mine.
Portions of the Mesquite mine, including a significant portion of the area
currently under exploration by SFP Gold within the areas surrounding the mine
area, are located within the proposed Chuckwalla Critical Habitat area for the
desert tortoise, as designated by the United States
16
<PAGE>
Fish and Wildlife Service ("USFWS"). SFP Gold believes it has complied with all
desert tortoise mitigation requirements imposed by the BLM and the USFWS.
However, recent proposals with regard to critical tortoise habitat may place
additional burdens on the mine which could materially affect the operations.
OPERATING DATA
Operating data for the Twin Creeks Mine represent production and cost
information for the Rabbit Creek Mine through December 31, 1993, and for the
Chimney Creek Mine received in the Exchange for the period June 26 through
December 31, 1993. The Lone Tree Mine commenced production in August 1991.
Operating data for the Mesquite Mine, which was also received in the Exchange,
cover the period June 26 through December 31, 1993. In March 1992, SFP Gold
exchanged its 30 percent interest in a joint venture gold mine (the "Marigold
Joint Venture") for the mineral rights and reserves that now make up the
southern extension of the Lone Tree Mine and additional exploration mineral
rights.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Ounces Sold (thousands)............................. 591 295 164
Average Sales Price (per ounce)..................... $ 387 $ 394 $ 410
Production (thousands of ounces of gold)
Twin Creeks Mine................................... 346.2 160.9 122.6
Lone Tree Mine..................................... 158.6 129.0 36.4
Mesquite Mine...................................... 106.1 -- --
Marigold Joint Venture(1).......................... -- 6.0 19.6
------- ------- -------
Total Production................................. 610.9 295.9 178.6
======= ======= =======
Cash Costs Per Ounce(2)
Twin Creeks Mine................................... $ 177 $ 182 $ 168
Lone Tree Mine..................................... 149 130 103
Mesquite Mine...................................... 165 -- --
Marigold Joint Venture............................. -- 306 296
Weighted Average Cash Costs Per Ounce............ $ 167 $ 162 $ 169
Total Costs Per Ounce(2)
Twin Creeks Mine................................... $ 259 $ 254 $ 212
Lone Tree Mine..................................... 201 173 160
Mesquite Mine...................................... 255 -- --
Marigold Joint Venture............................. -- 387 389
Weighted Average Total Costs Per Ounce........... $ 243 $ 222 $ 221
</TABLE>
- --------
(1) Data for the Marigold Joint Venture include only SFP Gold's 30 percent
share.
(2) Cash costs per ounce refer to cash costs of production which include cash
costs of milling, general and administrative expenses at the mine site
(including overhead, taxes other than on income, royalties, and credits for
silver by-products) and the applicable portion of mining and overburden-
removal cash costs that benefit current production. Total costs include
cash costs of production plus depreciation, depletion, and amortization
charged to current production. Cash and total costs of production include
certain costs which are calculated on a units-of- production basis and are,
therefore, directly affected by the level of reserves and expected
remaining life of each mine.
RESERVES
SFP Gold calculates its proven and probable gold reserves by methods
generally applied in the mining industry using a multi-disciplinary team of SFP
Gold geologists, engineers, and
17
<PAGE>
geostatisticians. Reserves reported by SFP Gold are regularly audited and
verified by Pincock, Allen & Holt, a division of Hart Crowser, Inc. ("PAH")
which reviews the methods used to estimate the reserves. PAH's audit of SFP
Gold's reserves as of December 31, 1993, verified that SFP Gold's reserves
models are prepared according to accepted engineering practice and the minable
reserves satisfy the requirements for classification as proven and probable
gold reserves.
The following table lists SFP Gold's reserves as of December 31 for the years
from 1991 through 1993 as well as the tons of ore identified by SFP Gold and
average gold grade of such ore as of December 31, 1993.
RESERVES(1)
(IN THOUSANDS, EXCEPT AVERAGE GOLD GRADE)
<TABLE>
<CAPTION>
AS OF DECEMBER 31 OF EACH YEAR
-------------------------------------------
1993 1992 1991
------------------------------- ----- -----
AVERAGE
TONS GOLD GRADE CONTAINED CONTAINED
OF ORE (OZ. PER TON) OUNCES OUNCES
------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C>
Operating Properties:
Twin Creeks Mine(2)................ 137,154 0.062 8,523 3,255 3,457
Lone Tree Mine..................... 65,167 0.062 4,028 3,136 2,118
Mesquite Mine(3)................... 54,408 0.029 1,570 -- --
Marigold Joint Venture(4).......... -- -- -- -- 206
------- ----- ------ ----- -----
Total............................ 256,729 0.055 14,121 6,391 5,781
======= ===== ====== ===== =====
</TABLE>
- --------
(1) The term "reserves" means that part of a mineral deposit which can be
reasonably assumed to be economically and legally extracted or produced at
the time of the reserves determination. The term "economically," as used in
the definition of reserves, implies that profitable extraction or
production under defined investment assumptions has been established or
analytically demonstrated. The assumptions made must be reasonable,
including assumptions concerning the prices and costs that will prevail
during the life of the project. The term "legally," as used in the
definition of reserves, does not imply that all permits needed for mining
and processing have been obtained or that other legal issues have been
completely resolved. However, for reserves to exist, there should not be
any significant uncertainty concerning issuance of these permits or
resolution of legal issues. The term "proven reserves" means reserves for
which (a) quantity is computed from dimensions revealed in outcrops,
trenches, workings or drill holes; grade and/or quality are computed from
the results of detailed sampling; and (b) the sites for inspection,
sampling, and measurement are spaced so closely and the geologic character
is so well defined that size, shape, depth, and mineral content of reserves
are well established. The term "probable reserves" means reserves for which
quantity and grade and/or quality are computed from information similar to
that used for proven reserves, but the sites for inspection, sampling, and
measurement are farther apart or are otherwise less adequately spaced. The
degree of assurance, although lower than that for proven reserves, is high
enough to assume continuity between points of observation. The term
"contained ounces" means that the reserves are estimated to encompass a
stated number of ounces of gold in place. The number of ounces ultimately
recovered and available for sale depends upon mining efficiency and
processing efficiency. SFP Gold currently estimates overall recovery of
11.2 million ounces from the 14.1 million contained ounces.
(2) For all dates prior to December 31, 1993, reserves for the Twin Creeks Mine
include only reserves at the Rabbit Creek Mine. The information listed for
the period ended December 31, 1993, includes reserves located at both the
Rabbit Creek Mine and the Chimney Creek Mine. If SFP Gold determines not to
proceed with the sulfide expansion at the Twin Creeks Mine (discussed
earlier), it may not be able to recover up to 57 percent of the reserves at
the mine.
18
<PAGE>
(3) No reserves information is shown for the Mesquite Mine for dates prior to
December 31, 1993, since the mine was not acquired by SFP Gold until June
1993 as part of the Exchange.
(4) In March 1992, SFP Gold exchanged its 30 percent interest in the Marigold
Joint Venture for the mineral rights and reserves that now make up the
southern extension of the Lone Tree Mine and additional exploration mineral
rights. Data for the Marigold Joint Venture include only SFP Gold's 30
percent share.
The reserves listed as of December 31, 1993, have been calculated assuming a
realizable price for gold of $400 per ounce. The price of $400 per ounce was
selected because it is within the recent trading range of the gold spot market
and is available in the current gold forward market within the life of SFP
Gold's reserves. However, there can be no assurance that this price will be
realized. In 1993, SFP Gold realized an average price of approximately $387 per
ounce of gold sold.
SFP Gold believes that, for a substantial portion of its reserves, the costs
of recovery are significantly below the gold prices used to estimate the
reserves. Even at much lower gold prices, SFP Gold's operating margin would be
positive for most of the reserves. SFP Gold believes that if its reserves
estimates were to be based on a gold price of $350 per ounce, with current
operating costs, reserves as of December 31, 1993, would decrease by
approximately 13 percent. If reserves estimates were based on a gold price of
$450 per ounce, with current operating costs, reserves as of December 31, 1993,
would increase by approximately 10 percent.
EXPLORATION
SFP Gold spent approximately $17 million on exploration during 1992 in the
United States, and approximately $22 million in 1993, including approximately
$3 million spent on foreign projects. In 1994, expenditures of between $25
million and $30 million are planned with approximately 75 percent to be spent
in the United States and 25 percent on foreign projects. SFP Gold maintains an
inventory of active exploration projects in the United States and at foreign
locations. In an average year, about one-third of the projects are discontinued
with a similar number of new projects added to maintain a full spectrum of
exploration activity.
SFP Gold's exploration team presently consists of approximately 140
individuals, including over 60 geologists. Varying numbers of consulting
geologists are employed as needed to assist during peak work periods. About 90
staff members cover exploration in the United States and Canada from offices in
Albuquerque, New Mexico; Reno, Winnemucca, and Elko, Nevada; and Helena,
Montana. The foreign staff members are at offices in Copiapo and Santiago,
Chile; Trinidad, Uruguay; San Luis Potosi, Mexico; and Timmins, Canada.
MINERAL RIGHTS HOLDINGS
SFP Gold is one of the largest holders of mineral rights in the western
United States, controlling over 6.8 million acres of private mineral rights,
including over 1.8 million acres in northern Nevada, where the majority of the
gold production in the United States is located. SFP Gold also controls over
200,000 acres of mineral rights through unpatented mining claims on federal
land.
GOVERNMENT REGULATION AND LEGISLATION
SFP Gold's mining operations and exploration activities are subject to
extensive federal, state, and local laws and regulations governing exploration,
development, production, exports, taxes, labor standards, occupational health,
waste disposal, protection and remediation of the environment, reclamation,
mine safety, toxic substances, and other matters. Compliance with such laws and
regulations has increased the costs of planning, designing, drilling,
developing, constructing, operating, and closing SFP Gold's mines and other
facilities. It is possible that the costs and delays associated with compliance
with such laws and regulations could become such that SFP Gold would not
proceed with the development or operation of a mine.
19
<PAGE>
Both the United States House of Representatives and Senate have passed bills
that seek to reform the General Mining Law of 1872 (the "Mining Law"), which
governs exploration and mining activities on unpatented mining claims and
related activities on federal lands. The bills have been tentatively scheduled
to be considered by a House-Senate conference committee; however, the House
conferees have not been selected. The pending legislation contains strict new
environmental protection standards and conditions, additional reclamation
requirements and extensive new procedural steps which would likely result in
delays in permitting and could have a material adverse effect on SFP Gold's
ability to develop minerals on federal lands. The pending bills would also
impose royalties on gold production from currently unpatented mining claims.
Imposition of a significant royalty could have a material adverse effect on SFP
Gold's future profitability from the production of minerals from federal lands.
SFP Gold cannot predict the extent to which any such changes will actually
occur or the likely effect the proposed reforms will have on SFP Gold or its
level of reserves. Such bills, if enacted, could reduce the profitability of
portions of SFP Gold's operations. Approximately 52 percent of SFP Gold's
reserves are located on private mineral rights, approximately 39 percent on
federal land controlled by SFP Gold through unpatented mining claims with
first-half final certificates, and approximately 9 percent on unpatented mining
claims without first-half final certificates. Issuance of first-half final
certificates generally confirms equitable title is vested in the applicant and
segregates the land from all further entry under the public land and minerals
laws. It is possible that the amendments to the Mining Law that are ultimately
adopted will exempt the unpatented mining claims for which SFP Gold has
received first-half final certificates from the royalty and the limitations on
patenting contemplated by the legislation.
COMPETITION
SFP Gold competes with other mining companies and private individuals in
connection with the acquisition of unpatented mining claims and mineral leases
on gold and other precious metals prospects and in connection with the
recruitment and retention of qualified employees.
PIPELINE
Santa Fe Pacific Pipelines, Inc. ("SFP Pipelines"), an indirect, wholly owned
subsidiary of SFP, serves as the general partner of Santa Fe Pacific Pipeline
Partners, L.P. (the "Partnership"), a publicly traded Delaware master limited
partnership formed in 1988 to acquire and operate the refined petroleum
products pipeline business of SFP. SFP Pipelines owns a two percent interest as
the Partnership's general partner and an approximate 42 percent interest as
limited partner (the "Common Units"). The Common Units were subject to certain
priorities in favor of the publicly held Preference Units representing
approximately 56 percent of all interests in the Partnership for the initial
five years of the Partnership's operation. Effective January 1, 1994, all
distinctions between units outstanding, including the Common Units, were
eliminated. The units are traded on the New York Stock Exchange under the
symbol "SFL." As general partner, SFP Pipelines is entitled to receive two
percent of all amounts available for distribution by the Partnership and also
an additional incentive depending upon the level of cash distributions paid to
unitholders. SFP accounts for its interests in the Partnership on the equity
basis.
In June 1990, SFP organized SFP Pipeline Holdings, Inc. ("SFP Pipeline
Holdings"), and contributed to SFP Pipeline Holdings all of the outstanding
capital stock of SFP Pipelines. In September 1990, SFP Pipeline Holdings issued
$219 million principal amount of Variable Rate Exchangeable Debentures due 2010
(the "Holdings Debentures") at an 8 percent discount. The Holdings Debentures
are exchangeable under certain circumstances at the option of the holders upon
the first to occur of certain specified events or final maturity for
substantially all of the Common Units that are owned by SFP Pipelines. The
interest payable with respect to the Holdings Debentures for a particular
quarter is equal to the greater of (i) the distributions of cash from
20
<PAGE>
operations declared by the Partnership on the Common Units for which such
Holdings Debentures are exchangeable and (ii) two percent of the weighted
average unpaid balance of such Holdings Debentures outstanding during such
quarter, provided that in no event shall the amount of interest paid on the
Holdings Debentures exceed an average annual rate of 16 percent since their
date of issuance. The Holdings Debentures are listed on the New York Stock
Exchange under the symbol "SFLH."
The Partnership is one of the largest independent pipeline common carriers of
refined petroleum products in the United States, and the largest in the western
United States, in terms of product deliveries, barrel miles, and pipeline
mileage, with approximately 3,300 miles of pipeline and 14 truck loading
terminals serving six states. The Partnership transports refined petroleum
products via underground pipeline in liquid form, including gasoline, diesel
fuel, and commercial and military jet fuel, primarily for integrated petroleum
companies, independent refiners, the United States military, and marketers and
distributors of such products. The Partnership also operates loading terminals
through which refined petroleum products are loaded into tank trucks for
further distribution, and provides pipeline service to 44 customer-owned
terminals, three commercial airports, and 12 military bases.
The Partnership's Pipeline System consists of: (1) the South Line, which
comprises two segments, the West Line, which transports products from Los
Angeles to Phoenix and Tucson, Arizona, and various intermediate points, and
the East Line, which transports products from El Paso, Texas to Tucson and
Phoenix, Arizona, and various intermediate points; (2) the North Line, which
transports products primarily from the San Francisco Bay area to various cities
in northern California and western Nevada; (3) the Oregon Line, which
transports products between Portland and Eugene, Oregon and one intermediate
point; and (4) the San Diego Line, which transports products from Los Angeles
basin refineries to San Diego, California, and various intermediate points.
The Pipeline System shipped 332.7 million barrels in 1993, up from 323.4
million barrels in 1992. Approximately 66 percent of the 1993 volumes were
gasoline, with the balance divided approximately equally between jet fuels and
diesel fuels. The volume of refined petroleum products transported in the
Pipeline System is directly affected by the demand for refined petroleum
products in the geographic regions served, which can vary seasonally and is
based upon the different end uses to which the refined petroleum products
delivered may be applied. Although the mix of refined petroleum products
transported varies among the pipeline segments constituting the Pipeline
System, such variation is not substantial. Tariff rates charged shippers for
transportation do not vary for different product types.
During 1993, the Partnership spent $21.1 million for capital improvements.
The Partnership's planned 1994 capital expenditures approximate $22 million.
GOVERNMENT REGULATION AND LEGISLATION
Substantially all of the Partnership's pipeline operations are common carrier
operations that are subject to federal or state rate regulation. The Federal
Energy Regulatory Commission (FERC) exercises economic regulatory jurisdiction
over interstate shipments through the Pipeline System. Intrastate shipments are
subject to economic regulation by the California Public Utilities Commission.
The Pipeline System is also subject to operating and safety regulation by the
DOT, OSHA, and by various state agencies.
The Partnership's operations are subject to federal, state, and local laws
and regulations relating to the protection of the environment, including laws
and regulations applicable to water, air, solid waste, and hazardous
substances. The discharge of hazardous materials or contamination of property
by hazardous materials may arise from the transportation and storage of such
materials in
21
<PAGE>
the Pipeline System. The normal operations of the Pipeline System may result in
hazards and expose SFP Pipelines to claims and potential liability for injuries
to employees, other persons, property, and the environment. During the quarter
ended September 30, 1993, the Partnership completed a comprehensive re-
evaluation of its potential liabilities associated with environmental
remediation activities and, as a result, recorded a $15 million provision to
increase its existing reserve for environmental remediation costs.
ITEM 3. LEGAL PROCEEDINGS
Set forth below is a description of certain legal proceedings involving SFP
and its subsidiaries.
On January 30, 1987, New TC Holding Corporation ("New TC") and Ticor, Inc.
("Ticor") filed suit in the Superior Court of the State of California for the
County of Los Angeles against SFP Properties, Inc. (formerly known as Southern
Pacific Company), a wholly owned subsidiary of SFP (the "New TC Lawsuit"). In
the complaint, New TC, which purchased all of the outstanding common stock of
Ticor from SFP Properties, Inc. pursuant to a Share Purchase Agreement dated
September 30, 1983, sought an order declaring that SFP Properties, Inc. is
obligated by the terms of the Share Purchase Agreement to defend and hold
harmless New TC and certain of its subsidiaries from losses which may exceed
$100 million. On February 24, 1993, this case was dismissed by the court for
lack of prosecution. SFP Properties, Inc. has reached an agreement in principle
to pay New TC and Ticor $1.2 million in settlement of all claims made in the
New TC Lawsuit and the third-party action filed in the Great American Lawsuit
(described below).
In another lawsuit, Great American Insurance Company ("Great American") seeks
indemnity from Ticor for various claims and losses pursuant to the indemnity
provisions of the 1977 Share Purchase Agreement in which Ticor purchased
Constellation Reinsurance Company ("Con Re") from Great American (the "Great
American Lawsuit"). Great American alleges that Con Re breached certain
agreements with Great American, and that Ticor is required to indemnify and
hold Great American harmless with respect to all losses incurred in connection
therewith. In turn, Ticor seeks indemnity from SFP Properties, Inc. under the
1983 Share Purchase Agreement between New TC and SFP Properties, Inc. referred
to above.
Ticor's third-party complaint against SFP Properties, Inc., filed on December
22, 1989, alleges not only that SFP Properties, Inc. is responsible to
indemnify Ticor under the 1983 Share Purchase Agreement between New TC and SFP
Properties, Inc., but that SFP Properties, Inc.'s failure to infuse funds into
Con Re and to implement less onerous tax allocation arrangements prior to Con
Re's liquidation was the proximate cause of Con Re's failure to satisfy the
claims now made against Great American. Ticor alleges that SFP Properties, Inc.
had an implied contractual duty to Ticor to refrain from such conduct.
On or about December 14, 1990, Ticor filed a petition for reorganization
pursuant to Chapter 11 of the Bankruptcy Code, and both Great American's action
against Ticor and Ticor's third-party action against against SFP Properties,
Inc. were stayed. The Bankruptcy Court thereafter entered an order disallowing
Great American's claim in its entirety, and the action brought by Great
American against Ticor was dismissed, with prejudice. Subsequently, as
described above, SFP Properties, Inc. reached an agreement in principle to pay
New TC and Ticor $1.2 million in settlement of all claims made in the third-
party action filed in the Great American Lawsuit and the New TC Lawsuit.
On December 17, 1992, an amended complaint was filed in an action entitled
David Rodriguez, derivatively on behalf of Santa Fe Pacific Corporation v. John
S. Reed, Robert D. Krebs, W. John Swartz, John J. Schmidt, Joseph F. Alibrandi,
Richard J. Flamson III, George B. Munroe, Jack S. Parker, Jean Head Sisco,
Arthur W. Woelfle, Robert E. Gilmore, Michael A. Morphy, Edward F. Swift,
Kathryn D. Wriston, John S. Runnells, II, Robert H. West, Alan C. Furth, Arjay
Miller, and
22
<PAGE>
Benjamin F. Biaggini, Defendants, and Santa Fe Pacific Corporation, a Delaware
corporation, Nominal Defendant, in the Circuit Court of Cook County, Illinois,
County Department, Chancery Division, No. 92 CH 06618. The amended complaint
asserts purported derivative claims on behalf of SFP against present and former
directors of SFP and alleges that the defendant directors caused SFP to incur
liability in connection with the action brought against SFP in 1985 by Energy
Transportation Systems, Inc. and ETSI Pipeline Project (the "ETSI Litigation").
The four counts of the amended complaint allege breach of fiduciary duty and
waste of corporate assets for intentional antitrust violations, negligent
failure to stop antitrust violations, failure to timely settle the ETSI
Litigation, and failure to take appropriate action against persons who
committed antitrust violations. The amended complaint seeks damages from the
individual defendants in an amount "not less than $342 million." On December 7,
1993, the Board appointed a Litigation Committee consisting of Directors Lindig
and Roberts to consider and determine whether or not prosecution of such claims
and action is in the best interest of SFP and its stockholders.
In August 1991, the EPA issued an order to SFP Pipelines and nine additional
parties regarding investigation and cleanup of contamination in the vicinity of
the Partnership's storage facilities and truck loading terminal at Sparks,
Nevada. The investigation and remediation at the Sparks terminal is also the
subject of a lawsuit filed January 1, 1991, entitled Nevada Division of
Environmental Protection v. Santa Fe Pacific Pipelines, Inc., Southern Pacific
Transportation Company, Shell Oil Company, Time Oil Company, Berry-Hinkley
Terminal, Inc., Chevron U.S.A., Inc., Texaco Refining and Marketing, Inc., Air
BP, a division of BP Oil, Unocal Corporation, and Golden Gate Petroleum
Company, Case No. CV91-546, in the Second Judicial District Court of the State
of Nevada in and for the County of Washoe, seeking remediation of contamination
allegedly due to operations of SFP Pipelines and other defendants and which
involves potential monetary sanctions that could exceed $100,000. This lawsuit
was subsequently joined by the County of Washoe Health District and the City of
Sparks. Several lawsuits also have been brought against the ten respondents for
alleged property value diminishment. Pursuant to the EPA order, a report on a
detailed site investigation, along with a proposed remediation plan, was
submitted to the EPA on March 6, 1992. In September 1992, the EPA approved the
respondents' remediation plan and an estimate of remediation costs was made in
accordance with that plan. During the quarter ended September 30, 1992, the
Partnership recorded a $10 million provision for environmental remediation
costs at Sparks, Nevada, and two sites in California.
Effective December 10, 1993, Santa Fe Railway entered into an agreement with
the South Coast Air Quality Management District ("District"), a political
subdivision of the State of California, with respect to alleged violations of
air emission regulations dating from January 1991. The agreement covers 48
Notices of Violation concerning smoke emissions from 71 locomotives operating
in California's South Coast Air Basin. Under the agreement, Santa Fe Railway
contributed $173,500 to the District to support its Locomotive Propulsion
Systems Task Force Account or other locomotive emissions research or
demonstration projects mutually agreed upon by the District and Santa Fe
Railway, and contributed $4,000 to be used for certain audit expenses. In
addition, Santa Fe Railway has agreed to purchase and install measuring meters
and to implement a compliance reporting program to monitor locomotive emissions
for an approximate total cost of $300,000.
During the quarter ended June 30, 1993, the EPA issued a Notice of Violations
to the Partnership associated with an oxygenate blending equipment malfunction
at the Partnership's Phoenix terminal. It is possible that the Partnership will
be required to pay in excess of $100,000 in fines arising from this Notice of
Violations.
SFP and its subsidiaries also are parties to a number of other legal actions
arising in the ordinary course of business, including various governmental
proceedings and private civil suits concerning environmental matters. While the
final outcome of these and other legal actions cannot be predicted with
certainty, considering the meritorious legal defenses available, it is the
opinion of
23
<PAGE>
SFP management that none of these legal actions, when finally resolved, will
have a material adverse effect on the consolidated financial position of SFP.
Reference is made to Note 8 to the consolidated financial statements on page
26 of SFP's 1993 Annual Report to Shareholders for information concerning
certain pending administrative appeals between SFP and the Internal Revenue
Service.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted by SFP to a vote of its securities holders during
the fourth quarter of 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
Listed below are the names, ages, and positions of all executive officers of
SFP (excluding executive officers who are also directors of SFP) and their
business experience during the past five years. Unless otherwise indicated,
each executive officer listed below has served in his or her present occupation
for at least five years. Executive officers hold office until their successors
are elected or appointed, or until their earlier death, resignation, or
removal.
CAROL R. BEERBAUM, 50
Vice President--Human Resources since June 1992. Formerly, Senior Vice
President, Human Resources, PHH Homequity, Inc. (relocation and real estate
management services) from May 1990, and Vice President, Human Resources of PHH
Homequity, Inc. from January 1987.
JEROME F. DONOHOE, 55
Vice President--Law since July 1984. Also, partner with Mayer, Brown & Platt
(law firm) since September 1990.
RUSSELL E. HAGBERG, 43
Senior Vice President and Chief of Staff of Santa Fe Railway since January
1994. Prior to that, Vice President--Transportation of Santa Fe Railway from
June 1991, Vice President--Human Resources of SFP from June 1990, and Vice
President--Human Resources and Administration of Santa Fe Railway from March
1989.
THOMAS N. HUND, 40
Vice President and Controller since July 1990. Formerly, Assistant Vice
President and Controller of Santa Fe Railway from August 1989. Prior to that,
Assistant Controller of SFP.
STEVEN F. MARLIER, 48
Senior Vice President and Chief Marketing Officer of Santa Fe Railway since
January 1994. Prior to that, Senior Vice President--Carload Business Unit of
Santa Fe Railway since January 1992. Formerly, Regional Manager/General
Manager, IBM Corporation (computers and data processing).
DONALD G. MCINNES, 53
Senior Vice President and Chief Operating Officer of Santa Fe Railway since
January 1994. Prior to that, Senior Vice President--Intermodal Business Unit of
Santa Fe Railway since January 1992, Vice President--Intermodal of Santa Fe
Railway from July 1989, Vice President--Administration of Santa Fe Railway from
January 1989, and General Manager of Eastern Region of Santa Fe Railway from
July 1987.
24
<PAGE>
JEFFREY R. MORELAND, 49
Vice President--Law and General Counsel of Santa Fe Railway since June 1989.
Prior to that, General Counsel of SFP from April 1988.
MARSHA K. MORGAN, 46
Corporate Secretary since December 1990. Prior to that, Treasurer from March
1988, and Assistant Treasurer from 1983.
PATRICK J. OTTENSMEYER, 38
Vice President--Finance of SFP since September 1993. Previously, held a
senior credit position with First Empire State Corporation (banking) from
September 1992, was Senior Vice President of Security Pacific National Bank
(banking) from October 1989 (which merged with Bank of America National Trust
and Savings Association (banking) in April 1992), and held other positions with
Security Pacific National Bank from 1984.
DENIS E. SPRINGER, 48
Senior Vice President and Chief Financial Officer since October 1993. Prior
to that, Senior Vice President, Treasurer and Chief Financial Officer from
January 1992, Vice President, Treasurer and Chief Financial Officer from
January 1991, Vice President--Finance from April 1988, and Assistant Vice
President--Finance from October 1984.
IRVIN TOOLE, JR., 52
Chairman, President and Chief Executive Officer, SFP Pipelines and SFP
Pipeline Holdings, Inc. since September 1991. Formerly, Senior Vice President,
Treasurer and Chief Financial Officer, SFP Pipelines from December 1988, and
Vice President--Administration and Treasurer, SFP Pipelines from February 1986.
DANIEL J. WESTERBECK, 50
Vice President and Tax Counsel since April 1988. Formerly, Assistant Vice
President and Tax Counsel from October 1984.
CATHERINE A. WESTPHAL, 45
Vice President--Corporate Communications since January 1994. Prior to that,
Assistant Vice President--Public Relations from January 1992, Director--Public
Relations from January 1991, and Manager--Public Affairs at Santa Fe Railway
from January 1989.
RICHARD T. ZITTING, 64
Chairman and Chief Executive Officer, SFP Gold, a subsidiary of SFP, since
January 1994. Prior to that, President, SFP Gold or its predecessors from
November 1978.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information as to the principal markets on which the Common Stock of SFP is
traded, the high and low sales prices of such stock for the two years ending
December 31, 1993, the frequency and
25
<PAGE>
amount of dividends declared on such stock during such period and the
approximate number of record holders of the Common Stock is set forth below the
heading "Common Stock Market Prices and Dividends" on page 18 of SFP's 1993
Annual Report to Shareholders and is hereby incorporated by reference. A
statement regarding a limitation of dividends on SFP Common Stock is set forth
in Note 11 to the consolidated financial statements on page 27 of SFP's 1993
Annual Report to Shareholders and is hereby incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
There is disclosed on page 1 of SFP's 1993 Annual Report to Shareholders
selected financial data of SFP for each of the last five fiscal years. Such
data with respect to the following topics are incorporated by reference:
Revenues; Income (Loss) from Continuing Operations; Income (Loss) from
Continuing Operations Per Common Share; Total Assets; Total Debt; and Cash
Dividends Per Common Share.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITIONS
Management's Discussion and Analysis of Results of Operations and Financial
Condition appearing on pages 14 through 18 of SFP's 1993 Annual Report to
Shareholders is hereby incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of SFP and subsidiary companies,
together with the report thereon of Price Waterhouse dated February 4, 1994,
appearing on pages 19 through 32 of SFP's 1993 Annual Report to Shareholders,
are hereby incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the directors of SFP is provided on pages 2 through 4
and on pages 5 and 6 ("Legal Proceedings") of SFP's proxy statement dated March
9, 1994, and is hereby incorporated by reference. Pursuant to the retirement
policy of the Board, one current director, Mr. George B. Munroe, age 72, will
not stand for re-election at the 1994 Annual Meeting. Mr. Munroe, a director
since 1972, retired in February 1987, from his position as Chairman of the
Board and Chief Executive Officer of Phelps Dodge Corporation (copper mining,
manufacturing, and specialty chemicals). He is a director of New York Life
Insurance Company, The New York Times Company, and Phelps Dodge Corporation.
Information concerning the executive officers of SFP (excluding one executive
officer who is also a director of SFP) is included in Part I of this Report.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning the compensation of directors and executive officers
of SFP is provided on pages 4 through 5 ("Directors' Compensation") and pages 8
through 13 (excluding the portion
26
<PAGE>
of page 13 containing the "Compensation and Benefits Committee Report on
Executive Compensation") of SFP's proxy statement dated March 9, 1994, and is
hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning the ownership of SFP equity securities by certain
beneficial owners and management is provided on pages 2 through 4, and 6
through 7 of SFP's proxy statement dated March 9, 1994, and is hereby
incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is
provided on page 4 ("Certain Relationships and Related Transactions") of SFP's
proxy statement dated March 9, 1994, and is hereby incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) The following documents are filed as a part of this report:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
1. Consolidated Financial Statements:
Report of Independent Accountants dated February 4, 1994.................. [19*]
Consolidated Statement of Operations for the three years ended
December 31, 1993........................................................ [20*]
Consolidated Balance Sheet at December 31, 1993 and 1992.................. [21*]
Consolidated Statement of Cash Flows for the three years ended
December 31, 1993........................................................ [22*]
Consolidated Statement of Shareholders' Equity for the three years
ended December 31, 1993.................................................. [23*]
Notes to Consolidated Financial Statements................................ [24*]
2. Consolidated Financial Statement Schedules:
Report of Independent Accountants on Consolidated Financial
Statement Schedules for the three years ended December 31, 1993 F-1...... F-1
Schedule V--Property, Plant and Equipment for the three years ended
December 31, 1993........................................................ F-2
Schedule VI--Accumulated Depreciation, Depletion, and Amortization
of Properties for the three years ended December 31, 1993................ F-4
Schedule VII--Guarantees of Securities of Other Issuers as of
December 31, 1993........................................................ F-5
Schedule VIII--Valuation and Qualifying Accounts for the three years
ended December 31, 1993, 1992, and 1991.................................. F-6
Schedule X--Supplementary Income Statement Information for the
three years ended December 31, 1993...................................... F-7
</TABLE>
All other schedules have been omitted because they are not applicable or the
required information is presented in the financial statements or the notes to
the consolidated financial statements.
27
<PAGE>
3. Exhibits:
See Index to Exhibits on pages E-1-E-4 for a description of the exhibits
filed as a part of this Report.
(B) Reports on Form 8-K
SFP filed no Reports on Form 8-K during the quarter ended December 31, 1993.
- --------
* Incorporated by reference from the indicated pages of SFP's Annual Report
to Shareholders for the fiscal year ended December 31, 1993.
28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
To the Shareholders, Chairman and Board of Directors of Santa Fe Pacific
Corporation
Our audits of the consolidated financial statements referred to in our report
dated February 4, 1994 appearing on page 19 of the 1993 Annual Report to
Shareholders of Santa Fe Pacific Corporation and subsidiary companies (which
report and consolidated financial statements are incorporated by reference in
this Annual Report on Form 10-K) also included an audit of the Consolidated
Financial Statement Schedules listed in Item 14(a)(2) of this Form 10-K. In our
opinion, these Consolidated Financial Statement Schedules present fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PRICE WATERHOUSE
Kansas City, Missouri
February 4, 1994
F-1
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
FOR YEARS 1993, 1992 AND 1991
(IN MILLIONS)
<TABLE>
<CAPTION>
BALANCE
AT BALANCE
BEGINNING ADDITIONS OTHER AT END
DESCRIPTION OF YEAR AT COST RETIREMENTS CHANGES OF YEAR
----------- --------- --------- ----------- ------- --------
<S> <C> <C> <C> <C> <C>
1993
- ----
Rail
Track structure............. $2,199.8 $185.4 $ 58.4 $ -- $2,326.8
Equipment................... 1,864.0 149.5 60.9 -- 1,952.6
Other road properties....... 1,337.5 192.8 51.4 -- 1,478.9
Real estate and other....... 122.7 11.4 6.3 -- 127.8
-------- ------ ------ ------ --------
Total Rail................ 5,524.0 539.1 177.0 -- 5,886.1
Gold......................... 445.5 107.1 2.2 227.9(1) 778.3
-------- ------ ------ ------ --------
Total..................... $5,969.5 $646.2 $179.2 $227.9 $6,664.4
======== ====== ====== ====== ========
1992
- ----
Rail
Track structure............. $2,202.9 $142.3 $145.4 $ -- $2,199.8
Equipment................... 1,910.2 36.6 82.8 -- 1,864.0
Other road properties....... 1,264.6 83.3 10.4 -- 1,337.5
Real estate and other....... 116.6 3.3 (2.8) -- 122.7
-------- ------ ------ ------ --------
Total Rail................ 5,494.3 265.5 235.8 -- 5,524.0
Gold......................... 381.2 66.5 2.2 -- 445.5
Corporate.................... 1.2 -- 1.2 -- --
-------- ------ ------ ------ --------
Total..................... $5,876.7 $332.0 $239.2 $ -- $5,969.5
======== ====== ====== ====== ========
1991
- ----
Rail
Track structure............. $2,185.1 $130.4 $112.6 $ -- $2,202.9
Equipment................... 1,981.4 47.0 117.5 (0.7) 1,910.2
Other road properties....... 1,280.0 62.9 78.3 -- 1,264.6
Real estate and other....... 117.2 1.6 2.2 -- 116.6
-------- ------ ------ ------ --------
Total Rail................ 5,563.7 241.9 310.6 (0.7) 5,494.3
Gold......................... 299.2 87.5 5.5 -- 381.2
Corporate.................... 19.5 1.3 19.6 -- 1.2
-------- ------ ------ ------ --------
Total..................... $5,882.4 $330.7 $335.7 $ (0.7) $5,876.7
======== ====== ====== ====== ========
</TABLE>
- --------
(1) Represents excess of fair value of gold assets received over coal and
aggregate assets given up in exchange with Hanson Natural Resources Company
("HNRC"). See Note 3 to Financial Statements on page 24 in the 1993 Santa
Fe Pacific Corporation Annual Report to Shareholders (Gain on Exchange of
Mineral Assets).
F-2
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
(CONTINUED)
Rates used for computing annual depreciation and amortization provisions for
properties are as follows (in percent):
<TABLE>
<S> <C>
Railroad properties
Locomotives................................................. 5.59 to 6.04
Freight cars................................................ 2.52 to 6.13
Track structure............................................. 1.25 to 3.18
Other road properties....................................... .67 to 8.82
Other railroad equipment.................................... 3.13 to 14.07
Gold properties
Productive properties....................................... (1)
Machinery and equipment..................................... 6.70 to 33.00
Buildings................................................... 6.70 to 16.00
</TABLE>
- --------
(1) See Note 1 to Financial Statements on page 24 in the 1993 Santa Fe Pacific
Corporation Annual Report to Shareholders (Summary of Significant
Accounting Policies: Properties, and Exploration and Development Costs).
F-3
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION OF PROPERTIES
FOR YEARS 1993, 1992 AND 1991
(IN MILLIONS)
<TABLE>
<CAPTION>
BALANCE
AT BALANCE
BEGINNING OTHER AT END
DESCRIPTION OF YEAR ADDITIONS RETIREMENTS CHANGES OF YEAR
----------- --------- --------- ----------- ------- --------
<S> <C> <C> <C> <C> <C>
1993
- ----
Rail
Track structure............ $ 420.0 $ 62.1 $ 42.3 $118.2(1) $ 558.0
Equipment.................. 828.9 92.1 48.4 -- 872.6
Other road properties...... 279.6 28.3 49.6 (118.2)(1) 140.1
Real estate and other...... 6.8 -- -- 0.2 7.0
-------- ------ ------ ------ --------
Total Rail............... 1,535.3 182.5 140.3 0.2 1,577.7
Gold........................ 94.9 59.0 1.2 (62.2)(2) 90.5
-------- ------ ------ ------ --------
Total.................... $1,630.2 $241.5 $141.5 $(62.0) $1,668.2
======== ====== ====== ====== ========
1992
- ----
Rail
Track structure............ $ 465.5 $ 60.8 $106.3 $ -- $ 420.0
Equipment.................. 790.6 89.4 51.1 -- 828.9
Other road properties...... 278.3 29.2 27.9 -- 279.6
Real estate and other...... 7.0 -- 0.2 -- 6.8
-------- ------ ------ ------ --------
Total Rail............... 1,541.4 179.4 185.5 -- 1,535.3
Gold........................ 66.3 34.8 6.2 -- 94.9
-------- ------ ------ ------ --------
Total.................... $1,607.7 $214.2 $191.7 $ -- $1,630.2
======== ====== ====== ====== ========
1991
- ----
Rail
Track structure............ $ 514.9 $ 54.9 $104.3 $ -- $ 465.5
Equipment.................. 818.7 93.1 121.2 -- 790.6
Other road properties...... 340.9 36.1 98.7 -- 278.3
Real estate and other...... 7.1 -- 0.1 -- 7.0
-------- ------ ------ ------ --------
Total Rail............... 1,681.6 184.1 324.3 -- 1,541.4
Gold........................ 46.3 23.9 3.9 -- 66.3
Corporate................... 10.1 -- 10.1 -- --
-------- ------ ------ ------ --------
Total.................... $1,738.0 $208.0 $338.3 $ -- $1,607.7
======== ====== ====== ====== ========
</TABLE>
- --------
(1) Transfer of excess reserves from Other Road Properties to Track Structure
as a result of depreciation studies filed with the Interstate Commerce
Commission.
(2) Represents accumulated depreciation on coal and aggregate assets acquired
by HNRC in the asset exchange. See Note 3 to Financial Statements on page
24 in the 1993 Santa Fe Pacific Corporation Annual Report to Shareholders
(Gain on Exchange of Mineral Assets).
F-4
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE VII--GUARANTEES OF SECURITIES OF OTHER ISSUERS
DECEMBER 31, 1993
<TABLE>
<CAPTION>
TOTAL
NAME OF ISSUER OF TITLE OF ISSUE AMOUNT
SECURITIES GUARANTEED OF EACH CLASS OF GUARANTEED AND NATURE OF
BY REGISTRANT SECURITIES GUARANTEED OUTSTANDING(A) GUARANTEE
- --------------------- --------------------- -------------- ---------
(MILLIONS)
<S> <C> <C> <C>
SFPP, L.P.(b) First Mortgage Notes due $356.7 Principal and
1994 to 2004 interest
</TABLE>
- --------
(a) None of the securities were owned by the Registrant, none were held in the
treasury of the issuer, and none were in default.
(b) SFPP, L.P. is the operating partnership of Santa Fe Pacific Pipeline
Partners, L.P. ("Pipeline Partnership"). A subsidiary of Santa Fe Pacific
Corporation, the general partner of the Pipeline Partnership, is
contingently liable for this amount.
F-5
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS 1993, 1992 AND 1991
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED TO AT END
DESCRIPTION OF PERIOD EXPENSE DEDUCTIONS OF PERIOD
----------- ---------- ---------- ---------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts
- -------------------------------
Year Ended December 31, 1993........ $11.2 $7.8 $2.6 $16.4
Year Ended December 31, 1992........ $11.6 $5.7 $6.1 $11.2
Year Ended December 31, 1991........ $11.1 $6.3 $5.8 $11.6
</TABLE>
F-6
<PAGE>
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR YEARS 1993, 1992 AND 1991
The following amounts have been charged to operating expenses:
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Maintenance and repairs............................... $560.2 $515.9 $494.2
====== ====== ======
Taxes, other than payroll and income
Real estate and personal property.................... $ 23.1 $ 22.3 $ 23.6
Other................................................ $ 14.8 $ 16.3 $ 16.3
------ ------ ------
Total............................................... $ 37.9 $ 38.6 $ 39.9
====== ====== ======
</TABLE>
Other supplementary income statement items have been omitted from this schedule
either because the required information is disclosed elsewhere in the
consolidated financial statements or the notes to consolidated financial
statements or the amounts charged to operating expenses do not exceed one
percent of total consolidated revenues.
F-7
<PAGE>
SIGNATURES
SANTA FE PACIFIC CORPORATION, PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, HAS DULY CAUSED THIS REPORT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
SANTA FE PACIFIC CORPORATION
/s/ Robert D. Krebs
By: _________________________________
Robert D. Krebs
Chairman, President and
Chief Executive Officer
Dated: March 30, 1994
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF SANTA FE
PACIFIC CORPORATION AND IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Robert D. Krebs
- -------------------------------------------
Robert D. Krebs Chairman, President and Chief Executive
Officer (Principal Executive Officer), and
Director
/s/ Denis E. Springer
- -------------------------------------------
Denis E. Springer Senior Vice President and Chief Financial
Officer (Principal Financial Officer)
/s/ Thomas N. Hund
- -------------------------------------------
Thomas N. Hund Vice President and Controller (Principal
Accounting Officer)
Joseph F. Alibrandi*
- -------------------------------------------
Joseph F. Alibrandi* Director
George Deukmejian*
- -------------------------------------------
George Deukmejian* Director
Bill M. Lindig*
- -------------------------------------------
Bill M. Lindig Director
Michael A. Morphy*
- -------------------------------------------
Michael A. Morphy Director
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
George B. Munroe*
- -------------------------------------------
George B. Munroe Director
Roy S. Roberts*
- -------------------------------------------
Roy S. Roberts Director
John S. Runnells II*
- -------------------------------------------
John S. Runnells II Director
Jean Head Sisco*
- -------------------------------------------
Jean Head Sisco Director
Edward F. Swift*
- -------------------------------------------
Edward F. Swift Director
Robert H. West*
- -------------------------------------------
Robert H. West Director
</TABLE>
/s/ Jeffrey R. Moreland
*By__________________________________
Vice President--Law and General
Counsel, The Atchison, Topeka and
Santa Fe Railway Company
Attorney in Fact
Dated: March 30, 1994
S-2
<PAGE>
SANTA FE PACIFIC CORPORATION
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3(a) Restated Certificate of Incorporation of SFP (as amended April 26,
1989). Incorporated by reference to Exhibit 3(a) to SFP's Report on
Form 10-K for the fiscal year ended December 31, 1989.
(b) By-Laws of SFP (as amended April 27, 1993). Incorporated by reference
to Exhibit 3 to SFP's Report on Form 10-Q for the quarter ended March
31, 1993.
4(a) SFP is not filing any instruments evidencing indebtedness because the
total amount of securities authorized under any single such instrument
does not exceed 10% of SFP's total assets. SFP will furnish copies of
any material instruments upon request of the Securities and Exchange
Commission.
10(a)* SFP 1983 Incentive Stock Option Plan. Incorporated by reference to
Exhibit 10(b) to SFP's Report on Form 10-K for the fiscal year ended
December 31, 1984. Amendments to SFP 1983 Incentive Stock Option Plan
dated May 28, 1987 and October 29, 1987 are incorporated by reference
to Exhibit 10(b) to SFP's Report on Form 10-K for the fiscal year
ended December 31, 1987. Amendments to SFP 1983 Incentive Stock Option
Plan dated February 27, 1990 are incorporated by reference to Exhibit
10(b) to SFP's Report on Form 10-K for the fiscal year ended December
31, 1989. Amendment to SFP 1983 Incentive Stock Option Plan dated
December 4, 1990 is incorporated by reference to Exhibit 10(b) to
SFP's Report on Form 10-K for the fiscal year ended December 31, 1990.
(b)* Santa Fe Pacific Corporation Supplemental Retirement Plan
("Supplemental Plan"). Incorporated by reference to Exhibit 10(d) to
SFP's Report on Form 10-K for the fiscal year ended December 31, 1984.
Supplemental Plan as amended October 1, 1989, and Amendment to
Supplemental Plan dated February 27, 1990, are incorporated by
reference to Exhibit 10(d) to SFP's Report on Form 10-K for the fiscal
year ended December 31, 1989. Amendment to Supplemental Plan dated
March 22, 1994, and effective January 1, 1994.
(c)* SFP Incentive Stock Compensation Plan. Incorporated by reference to
Exhibit 10(e) to SFP's Report on Form 10-K for the fiscal year ended
December 31, 1985. Amendments to SFP Incentive Stock Compensation Plan
dated May 28, 1987 and October 29, 1987 are incorporated by reference
to Exhibit 10(e) to SFP's Report on Form 10-K for the fiscal year
ended December 31, 1987. Amendments to SFP Incentive Stock
Compensation Plan dated March 8, 1989, June 8, 1989, and February 27,
1990 are incorporated by reference to Exhibit 10(e) to SFP's Report on
Form 10-K for the fiscal year ended December 31, 1989. Amendment to
SFP Incentive Stock Compensation Plan effective as of July 24, 1990 is
incorporated by reference to SFP's Report on Form 10-Q for the Quarter
ended June 30, 1990. Amendment to SFP Incentive Stock Compensation
Plan dated December 4, 1990 is incorporated by reference to SFP's
Report on Form 10-K for the fiscal year ended December 31, 1990.
(d)* Indemnity Agreements dated September 23, 1986 by and between SFP and
each of its directors and officers. Incorporated by reference to
Exhibit A to SFP's Annual Meeting of Stockholders-Notice and Proxy
Statement-dated March 18, 1987.
</TABLE>
- --------
* Management contract or compensatory plan or arrangement.
E-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
(e)* SFP Form of Severance Agreement dated November 2, 1987 (applicable to
29 persons as of March 22, 1994), as adopted in May 1987 and amended
in October 1987. Incorporated by reference to Exhibit 10(j) to SFP's
Report on Form 10-K for the fiscal year ended December 31, 1987.
Amendment to Form of Severance Agreement dated July 24, 1990 is
incorporated by reference to SFP's Report on Form 10-Q for the Quarter
ended June 30, 1990. Amendment to Form of Severance Agreement adopted
January 25, 1994.
(f)* Trust Agreement dated July 6, 1987 between SFP and Harris Trust and
Savings Bank as Trustee, as amended on October 28, 1987 and November
2, 1987. Incorporated by reference to Exhibit 10(k) to SFP's Report on
Form 10-K for the fiscal year ended December 31, 1987. Amendment to
Trust Agreement dated September 1, 1988. Incorporated by reference to
Exhibit 10(i) to SFP's Report on Form 10-K for the fiscal year ended
December 31, 1988.
(g)* SFP Supplemental Deferred Compensation Plan. Incorporated by reference
to Exhibit 10(l) to SFP's Report on Form 10-K for the fiscal year
ended December 31, 1987.
(h)* Retirement Policy for Directors of Santa Fe Pacific Corporation,
adopted July 26, 1988, and effective January 1, 1988. Incorporated by
reference to Exhibit 10(l) to SFP's Report on Form 10-K for the fiscal
year ended December 31, 1988.
(i)* SFP Supplemental Executive Retirement Plan adopted as of October 1,
1989 and Amendment to SFP Supplemental Executive Retirement Plan dated
as of February 27, 1990. Incorporated by reference to Exhibit 10(n) to
SFP's Report on Form 10-K for the fiscal year ended December 31, 1989.
(j)* MLP Incentive Plan. Incorporated by reference to Exhibit 10.9 to
Amendment No. 1 to Registration Statement on Form S-1 of SFP Pipeline
Holdings, Inc. (Commission File No. 33-35638) dated August 8, 1990.
(k)* Employment Agreement effective as of June 1, 1990 between Santa Fe
Pacific Pipelines, Inc. and I. Toole, Jr. Incorporated by reference to
Exhibit 10.16 to Amendment No. 1 to Registration Statement on Form S-1
of SFP Pipeline Holdings, Inc. (Commission File No. 33-35638) dated
August 8, 1990.
(l)* Retirement Benefit Agreement dated February 26, 1992 between SFP and
R. D. Krebs. Incorporated by reference to SFP's Report on Form 10-K
for the fiscal year ended December 31, 1991.
(m)* Severance Agreement effective June 3, 1991 between R. T. Zitting and
Santa Fe Pacific Gold Corporation. Incorporated by reference to
Exhibit 10(a) to SFP's Report on Form 10-Q for the quarter ended
September 30, 1991.
(n)* The Atchison, Topeka and Santa Fe Railway Company Incentive
Compensation Plan. Incorporated by reference to Exhibit 10(n) to SFP's
Report on Form 10-K for the fiscal year ended December 31, 1991.
(o)* Santa Fe Pacific Gold Corporation Incentive Compensation Plan.
Incorporated by reference to Exhibit 10(o) to SFP's Report on Form 10-
K for the fiscal year ended December 31, 1991.
</TABLE>
- --------
* Management contract or compensatory plan or arrangement.
E-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
(p)* The Santa Fe Pacific Pipelines, Inc. Incentive Compensation Plan.
Incorporated by reference to Exhibit 10.8 to Amendment No. 1 to
Registration Statement on Form S-1 of SFP Pipeline Holdings, Inc.
(Commission File No. 33-35638) dated August 8, 1990. Amendment to the
Santa Fe Pacific Pipelines, Inc. Incentive Compensation Plan dated
January 12, 1994.
(q)* Executive Employment Agreement of June 29, 1992 between C. R. Beerbaum
and SFP. Incorporated by reference to Exhibit 10(q) to SFP's Report on
Form 10-K for the fiscal year ended December 31, 1992.
(r)* Santa Fe Pacific Long Term Incentive Stock Plan. Incorporated by
reference to Exhibit 10(r) to SFP's Report on Form 10-K for the fiscal
year ended December 31, 1992. Amendment to Santa Fe Pacific
Corporation Long Term Incentive Stock Plan dated May 25, 1993,
incorporated by reference to SFP's Report on Form 10-Q for the quarter
ended June 30, 1993.
(s)* Santa Fe Pacific Corporation Supplemental Retirement and Savings Plan.
(t)* The MLP Phantom Unit Incentive Plan. Incorporated by reference to
Exhibit 10 to Form 10-Q of SFP Pipeline Holdings, Inc. for the quarter
ended June 30, 1993.
(u)* Santa Fe Pacific Gold Corporation Phantom Stock Option Plan.
(v) Asset Exchange Agreement, dated as of January 25, 1993, First
Amendment to Asset Exchange Agreement, dated June 1, 1993, and Second
Amendment to Asset Exchange Agreement, dated as of June 25, 1993.
Incorporated by reference to SFP's Current Report on Form 8-K dated
June 25, 1993.
13 1993 Annual Report to Shareholders of SFP (Consolidated Financial
Highlights on page 1, and pages 14-32, only.)
21 Subsidiaries of SFP.
23(a) Consent of Independent Accountants.
(b) Consent of Pincock, Allen & Holt
24 Powers of Attorney.
</TABLE>
- --------
* Management contract or compensatory plan or arrangement.
E-3
<PAGE>
GRAPHICS APPENDIX
Page 13 consists of a map depicting areas of minerals rights controlled by
Santa Fe Pacific Gold Corporation in the western United States as well as the
location of exploration offices, company mines, and company headquarters.
<PAGE>
Exhibit 10(b)
AMENDMENT OF THE SANTA FE PACIFIC
CORPORATION SUPPLEMENTAL RETIREMENT PLAN
The Santa Fe Pacific Corporation Supplemental Retirement Plan (the
"Supplemental Plan") was amended by the Board of Directors of the SFP so that,
effective as of January 1, 1994, the Supplemental Plan was amended:
1. By deleting Paragraph 1(b) and inserting the following in its stead:
(b) . . . those benefits thereunder would be limited as a result of
Section 2.09 of the Plan.
2. By deleting Paragraph 2(a) and inserting the following in its stead:
(a) by calculating the amount of the monthly benefit to which the
participant, surviving spouse, or contingent annuitant would be
entitled under the Plan without regard to the limitation set
forth in Section 14.01 of the Plan and without regard to the
limitation on Compensation set forth in Section 2.09 of the Plan.
3. By deleting the words ". . . combined with the benefit payable under
the SFP Corporation Supplemental Executive Retirement Plan" where it appears in
Paragraph 5.
<PAGE>
Exhibit 10(e)
AMENDMENT TO SANTA FE PACIFIC
CORPORATION SEVERANCE AGREEMENT
The Santa Fe Pacific Corporation Severance Agreements ("Severance
Agreements") as adopted effective May 27, 1987, and as amended from time to
time, is hereby further amended, effective as of the adoption hereof, as set
forth below.
ARTICLE FIRST
In the third paragraph of the Severance Agreement, the phrase "or its
Affiliates", should be inserted after the word "Corporation" where it first and
third appears therein.
ARTICLE SECOND
All references to "Santa Fe Southern Pacific" shall be deleted wherever
it appears therein and "Santa Fe Pacific" inserted in its stead.
ARTICLE THIRD
Paragraph number 1 of the Severance Agreement shall be amended by
substituting the following after the second semicolon therein:
"and provided further, that if a change in control of the
Corporation, as defined in Section 2, shall have occurred
during the original or extended term of this Agreement,
this Agreement shall continue in effect for a period of
not less than the later of (a) thirty-six (36) months
beyond the month in which such change in control of the
Corporation occurred, (b) in the event Interstate
Commerce Commission approval of such change in control
involving the Corporation or its Affiliate is required,
the effective date of the Interstate Commerce Commission
approval or, if later, the first anniversary of the
consummation of the transaction, provided, however that
if the Corporation determines that it will not consummate
the transaction, the date of such determination, or (c)
in the event that Interstate Commerce Commission approval
of such change in control involving the Corporation or
its Affiliate is required, and the Interstate Commerce
Commission determines that the proposed transaction will
not be approved, the date of such Interstate Commerce
Commission determination."
<PAGE>
ARTICLE FOURTH
Section 3(iv) shall be amended by substituting the following in its stead:
(iv) Good Reason. You shall be entitled to terminate your employment for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean,
without your express written consent, the occurence after a change in
control of the Corporation of any of the following circumstances unless,
in the case of paragraphs (a), (b), (c), and (d), such circumstances are
corrected in all material respects prior to the Date of Termination (as
defined in Section 3(vi)) specified in the Notice of Termination (as
defined in Section 3(v)) given is respect thereof:
(a) Position and Duties. The assignment to you of a position
with the Corporation or an Affiliate of the Corporation that
violates the following requirements of Section 3(iv)(a)(I) or
Section 3(iv)(a)(II):
(I) Management. You shall not be
assigned a position that is not a
senior management position. However,
this Section 3(iv)(a)(I) shall not
prevent your being assigned a senior
management position: (A) with an
Affiliate of the Corporation,
provided that such assignment does
not result in a significant
reduction of your responsibilities;
(B) with responsibilities that are
different from the responsibilities
assigned to you imemediately prior
to the time of the change in control
of the Corporation, provided that
such assignment does not result in
a significant reduction of your
responsibilities; or (C) with
reporting relationships that are
different from your reporting
relationships immediately prior to
the time of change in control of the
Corporation, provided that such
assignment does not result in a
significant reduction of your
responsibilities.
-2-
<PAGE>
(II) Significant Adverse
Change in Duties. You shall
not be assigned a position
that requires a significant
adverse alteration in the
nature or status of
responsibilities or conditions
from those in effect immediately
prior to a change in control
of the Corporation, provided
this will not preclude a
change in a reporting
relationship.
Assignment with Affiliate. This Section 3(iv)(a) shall not prevent your
being assigned to a position with an Affiliate of the Corporation, but
only to the extent that any such position satisfies the requirements of
Section 3(iv)(a)(I) and Section 3(iv)(a)(II).
(b) Compensation. The failure by the Corporation to
provide compensation to you which satisfies the
requirements of all of Section 3(iv)(b)(I), Section
3(iv)(b)(II), Section 3(iv)(b)(III) and
Section 3(iv)(b)(IV):
(I) Current Compensation.
The rate of your annual
salary and other current
cash compensation
(disregarding compensation
that is contingent on
satisfaction of performance
standards) shall not be
less than the rate of your
annual salary and other
current cash compensation
(disregarding compensation
that is contingent on
satisfaction on performance
standards) immediately
prior to the change in
control of the Corporation,
except that such compensation
may be reduced if there are
comparable reductions for all
senior management employees
of the Corporation (or all
senior management employees
of the Corporation or all
senior management employees
of an Affiliate of the
Corporation, if you are then
employed by the Affiliate)
and all management personnel
of any person in control of
the Corporation.
-3-
<PAGE>
(II) Fringe benefits. You and your
family shall be provided with fringe
benefit coverage while employed by
the Corporation or an Affiliate on
substantially the same basis, and to
substantially the same extent, as such
coverage is provided to other senior
management employees of the
Corporation or an Affiliate from
time to time. For purposes of this
Section 3(iv)(b)(II), the term "fringe
benefit coverage" shall include
coverage provided under any plan
that is a welfare benefit plan (as
defined in ERISA, which defines
welfare benefit plans to include such
things as life insurance, health
(medical), accident and disability
plans) or a pension plan (as defined
in ERISA).
(III) Material Compensation Plans.
The failure of the Corporation to
maintain compensation plans that are
material to your aggregate
compensation in effect prior to a
change in control of the Corporation,
unless an equitable substitute
arrangement is adopted, both in
respect to the amount of benefits and
level of participation relative to other
participants, and in respect to
benefits and level of participation
that existed at the time of the change
of control of the Corporation.
(IV) Vacation. You shall be provided
with the number of paid vacation
days to which you are entitled on the
basis of your years of service with
the Corporation in accordance with
the Corporation's normal vacation
policy in effect immediately prior to
the change in control of the Corporation.
-4-
<PAGE>
(c) Relocation. The relocation of the Corporation's
principal executive offices to a location outside the
Chicago Metropolitan Area (or, if different, the
metropolitan area in which such offices are located
immediately prior to the change in control of the
Corporation) or the Corporation's requiring you to be
based anywhere other than the Corporation's principal
executive offices except to the extent you were based
outside the principal executive offices prior to the
change in control of the Corporation or except to the
extent for required travel on the Corporation's business
to the extent substantially consistent with your
business travel obligations prior to the change in
control of the Corporation). Notwithstanding the
foregoing, if you retain or are offered a position in
another location that is equal to or better in status
and responsibilities than the position you held at the
time of the change in control of the Corporation, you
shall not be entitled to benefits under this Agreement
on an after-tax basis, as set forth in Section 4(iii)(g).
(d) Assumption by Successor. The failure of any successor
to the corporation to obtain a satisfactory agreement
from any successor to assume and agree to perform this
Agreement, as contemplated by Section 5 of this Agreement.
Your right to terminate your employment pursuant to this Section 3(iv)
shall not be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason under this Agreement. For
purposes of this Agreement, the term "Affiliate" means (I) any person during any
period in which the person directly or indirectly owns more than 50% of the
voting power of the Corporation and (II) any other person if more than 50% of
the combined voting power of the securities of such person is directly or
indirectly owned by the Corporation or by any person described in clause (I)
next above.
ARTICLE FIFTH
Section 4(iii)(b) shall be amended in respect to Severance Agreements held
by Senior Executives as follows:
(b) You shall be entitled to the following:
-5-
<PAGE>
(I) If your employment by the Corporation shall be terminated by the
Corporation other than for Cause or Disability, or if your
employment by the Corporation shall be terminated by you for
Good Reason described in Section 3(iv)(b)(I) or Section
3(iv)(b)(III) (relating to certain reductions in compensation),
then the Corporation shall pay to you a lump sum severance
payment equal to the sum of: (A) 200% of your Annual Salary (as
described below), which shall be in lieu of any further salary
payments to you for periods subsequent to your Date of
Termination, and (B) 200% of the Maximum Incentive Award (as
described below), which shall be in lieu of any further payments
to you under the Corporation's Annual Incentive Compensation Plan
for the year in which your Date of Termination occurs, and for
any subsequent years. Payments under this paragraph (I) shall be
made to you at the time specified in Section 4(iv).
(II) If your employment by the Corporation shall be terminated by you
for Good Reason, other than for Good Reason described in Section
3(iv)(b)(I) and Section 3(iv)(b)(III) (relating to certain
reductions in compensation), then the Corporation shall make
monthly installment payments to you, at an annual rate equal to
the sum of (A) your Annual Salary plus (B) the Maximum Incentive
Award, which payments shall be made for the period beginning on
your Date of Termination and ending on the earliest to occur of
1) the 24-month anniversary of your Date of Termination; 2) the
date of your death; or 3) the date you are in Competition (as
described below). If payments under this paragraph (II) terminate
by reason of your being in Competition, such payments shall not
recommence regardless of whether you subsequently refrain from
Competition. Amounts payable under this paragraph (II) shall be
in lieu of any further salary payments to you for periods
subsequent to your Date of Termination, and shall be in lieu of
any further payments to you under the Corporation's Annual
Incentive Compensation Plan for the year in which your Date of
Termination occurs, and for any subsequent years. Payment under
this paragraph (II) shall be made in installments notwithstanding
any provisions of Section 4(iv) to the contrary unless mutually
agreed by the parties.
For purposes of this Section 4:
1) Your "Severance Payments" shall be the payments provided under
paragraphs 4(iii)(b), (c) and (d) of this Agreement.
2) Your "Annual Salary" shall be your annual salary as in effect as
of your Date of Termination, the highest consecutive twelve (12)
months' salary over the twenty-four (24) month period preceding
your Date of Termination, or your annual salary in effect
immediately prior to the change in control of the Corporation,
whichever is greatest.
-6-
<PAGE>
3) Your "Maximum Incentive Award" shall be the maximum incentive
award payable to you under the Corporation's Annual Incentive
Compensation Plan for the year in which your Date of Termination
occurs, assuming for purposes hereof that all performance
objectives for such year had been met at the maximum levels and
that you are entitled to a full award thereunder.
4) You shall be considered to be in "Competition" during any period
in which you are employed by, perform any material services for,
or own any interest in (except for an interest of not more than
1% in any publicly traded business) any Class I railroad, or any
company or other enterprise that offers shipping services to the
public (including, without limitation, trucking services, rail
services, air-freight services, and water-going freight
services).
Notwithstanding the foregoing provisions of this Section 4(iii)(b), in no
event shall the amount payable under this Section 4(iii)(b) exceed the sum
of the amount of salary payments plus the amount of bonus payments
(determined on the basis used for determining the amount of your Maximum
Incentive Award, above), on an undiscounted basis, which you would have
received had you remained in the employ of the Corporation until the
earlier of 1) your "Normal Retirement Date" (as defined in the
Corporation's Retirement Plan) to the extent permitted by law or 2) the
date on which you are subject to mandatory retirement. You may elect, in
lieu of receipt of the salary replacement payments described in Section
4(iii)(b)(I)(A) or Section 4(iii)(b)(II)(A), whichever is applicable, the
benefits provided for under Section C.1.c. or Section C.1.d, Section D.3,
Section D.4, and Section D.5 of The Atchison, Topeka and Santa Fe Railway
Company Severance Program, as they may be amended from time to time (the
"Severance Program"), the terms and provisions of which are incorporated
herein by reference. This Severance Agreement is part of a formal severance
program and you will receive Vesting and Benefit Service for the period in
which severance payments are made.
ARTICLE SIXTH
Section 4(iii)(b) shall be amended with respect to Severance Agreements
held by Senior managers as set forth above, with the deletion of the phrase
"200% of" whenever it appears in Section 4(iii)(b)(I), and by the substitution
of the phrase "12-month anniversary" for the phrase "24-month anniversary" where
the latter phrase appears in Section 4(iii)(b)(II).
ARTICLE SEVENTH
Section 4(iii)(c) and 4(iii)(d) shall be amended by inserting the phrase
"Long Term Incentive Stock Plan" and before the phrase "Incentive Stock
Compensation Plan", where it appears therein.
-7-
<PAGE>
ARTICLE EIGHTH
Section 4(iii)(g) shall be amended by inserting the following at the beginning
thereof:
"(g) the Corporation shall pay you an additional amount necessary to
provide the benefits under subsection (b) on an after-tax basis, (except
that this benefit shall be limited to the extent set forth in Section
3(iv)(c) relating to termination for good reason; however, ..."
The Severance Agreements shall otherwise remain in full force and effect.
-8-
<PAGE>
Exhibit 10(p)
AMENDMENT OF THE SANTA FE PACIFIC PIPELINES
INCENTIVE COMPENSATION PLAN
WHEREAS, Santa Fe Pacific Pipelines, Inc. has adopted the Santa Fe Pacific
Pipelines, Inc. Incentive Compensation Plan ("ICP"); and
WHEREAS, pursuant to Article X, the Pipelines Incentive Committee
established under the ICP may amend the plan from time to time; and
WHEREAS, the Pipelines Incentive Committee wishes to amend the ICP at this
time.
RESOLVED, the ICP is hereby amended by deleting the first paragraph of
Section XII of the ICP and to insert the following in its stead.
In the event of a "Change in Control" or "SFP Change in Control"
of Santa Fe Pacific Pipelines as herein defined, the ICP shall remain
in effect through the end of the year in which such Change in Control
occurred, during which time, Santa Fe Pacific Pipelines is
contractually bound to maintain the ICP, and provided further that the
membership of the Pipelines Incentive Committee cannot be changed
during such period.
The Plan shall otherwise remain in full force and effect.
Approved this 12 day of January, 1994.
Pipelines Incentive Committee
By: /s/ Irwin Toole, Jr.
------------------------------------------
President and Chief Executive Officer -
Santa Fe Pacific Pipelines
By: /s/ R. L. Edwards
------------------------------------------
Senior Vice President and Chief
Financial Officer - Santa Fe Pacific
Pipelines
By: /s/ Lyle B. Boarts
------------------------------------------
Vice President - Human Resources -
Santa Fe Pacific Pipelines
<PAGE>
Exhibit 10 (s)
SANTA FE PACIFIC CORPORATION
SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
ARTICLE I
GENERAL
Section 1.1 Establishment of Plan and Purpose. Santa Fe Pacific
Corporation (hereinafter the "Company"), has established the Santa Fe Pacific
Supplemental Retirement and Savings Plan, (hereinafter the "Plan"), effective
May 1, 1994. The purpose of this Plan is to provide certain highly compensated
employees of the Company and certain of its subsidiaries (hereinafter the
"Employing Companies"), the opportunity to defer the receipt of compensation and
to receive additional retirement income from the Employing Companies. This plan
is not intended to qualify under Section 401(a) of the Internal Revenue Code of
1986, as amended (hereinafter the "Code"), or be subject to Part 2, 3, or 4 of
Title I of the Employee Retirement Income Security Act of 1974, as amended,
(hereinafter "ERISA").
Section 1.2 Affiliated Companies. The term "Affiliated Company"
shall mean every corporation (including the Company) which is a member of a
controlled group of corporations (within the meaning of Section 414(b) of the
Internal Revenue Code). The Company and each Affiliated Company which, with the
consent of the Company adopts the Plan are referred to herein collectively as
the "Employing Companies" and individually as an"Employing Company".
Section 1.3 Plan Administration. The authority to control and manage
the operation and administration of the Plan shall be vested in the Employee
Benefits Committee (hereinafter the "Committee"), appointed to act under The
Santa Fe Pacific Retirement and Savings Plan for Salaried Employees (hereinafter
the "Savings Plan"). Any interpretation of the Plan by the Committee or its
delegate and any decision made by the Committee or its delegate on any other
matter within its discretion are final and binding on all persons. The
Committee shall have discretionary authority to administer, construe and
interpret the Plan, to decide all questions including but not limited to
eligibility, payment of any benefits hereunder and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The Committee shall act with or without a meeting by the vote or
concurrence of a majority of its members; but no member of the Committee who is
a Participant shall take part in any Committee action or any matter that has
particular reference to his own interest hereunder. The Committee shall
administer this Plan and discharge its responsibilities hereunder in a uniform
and non-discriminatory manner as to all Participants.
Section 1.4 Non-Alienation. Benefits payable to any individual under
the Plan may not
<PAGE>
be voluntarily or involuntarily assigned, alienated, pledged or subject to
attachment, anticipation, garnishment, levy, execution or other legal or
equitable process.
Section 1.5 Source of Benefits. Subject to the terms and conditions
of the Plan, any amount payable to or on account of a Participant under this
Plan by any Employing Company shall be paid from the general assets of that
Employing Company or from one or more trusts, the assets of which are subject to
the claims of the Employing Companies' general creditors. None of the
individuals entitled to benefits under the Plan shall have any preferred claim
on, or any beneficial ownership interest in, any assets of any Employing Company
or of any such trust, and any rights of such individuals under the Plan or any
such trust shall constitute unsecured contractual rights only.
Section 1.6 Plan Not Contract of Employment. The Plan does not
constitute a contract of employment, and nothing in the Plan will give any
participant the right to be retained in the employ of any Employing Company, nor
any right or claim to any benefit under the Plan, except to the extent
specifically provided under the terms of the Plan.
Section 1.7 Notices. Any notice or document required to be given to
or filed with an Employing Company, the Company or the Committee shall be
considered to be given or filed:
(a) on the date delivered to the Vice President Human Resources of
the Company; or
(b) three days after the date sent by certified mail to the
Secretary of the Company.
Section 1.8 Applicable Law. The Plan shall be construed and
administered in accordance with the internal laws of the State of Illinois.
Section 1.9 Gender and Number. Where the context admits, words in
any gender shall include any other gender, words in the singular shall include
the plural and the plural shall include the singular.
Section 1.10 Plan Year. The Plan Year shall be the calendar year.
ARTICLE II
PARTICIPATION
Section 2.1 Participation. The Compensation and Benefits Committee
of the Company shall establish from time to time the Employing Companies which
may participate and the class
-2-
<PAGE>
of highly-compensated employees of each Employing Company who shall be eligible
for the benefits provided in Article IV below (hereinafter the "Participants");
provided, however, that the class of eligible employees of each Employing
Company shall be limited to employees who are members of a select group of
management or highly compensated employees within the meaning of Section
401(a)(1) of ERISA. If the Company determines that participation by one or more
Participants shall cause the Plan as applied to any Employing Company to be
subject to Part 2, 3, or 4 of Title I of ERISA, the entire interest of such
Participant or Participants under the Plan shall be immediately paid to such
Participant by the applicable Employing Company, notwithstanding any election of
the Participant, or shall otherwise be segregated from the Plan in the
discretion of the Company, and such Participant or Participants shall cease to
have any interest under the Plan.
ARTICLE III
VESTING
Section 3.1 Vesting. A Participant shall be fully vested in his
deferral amounts and earnings at all times and subject to investment gains and
losses. A Participant shall be vested in Employer Matching Contributions in
accordance with the vesting schedule set forth in Section 6.3 of the Savings
Plan.
ARTICLE IV
DEFERRALS
Section 4.1 Deferral Elections. To become a Participant, subject to
such additional terms, conditions and limitations as the Committee may from time
to time impose, a Participant may make an irrevocable election to defer receipt
of certain eligible compensation otherwise payable to him by his Employer for a
Plan Year by filing a Deferral Election Form indicating his or her desire to
have a portion of his or her eligible compensation deferred. Such deferral
elections shall be made as follows:
(a) With the approval of the Compensation and Benefits Committee of
the Board, a Participant may elect not to participate in the Savings Plan and
may elect to defer up to 12% of i) Compensation as defined in the Savings Plan,
ii) base salary that is not eligible compensation under the Savings Plan, and
iii) one-half of any cash incentive payments otherwise payable to him by his
Employing Company that Plan Year; or
-3-
<PAGE>
(b) Unless the Compensation and Benefits Committee of the Board
otherwise specifies, a Participant may elect to defer up to 12% of i) base
salary that is not eligible Compensation under the Savings Plan, ii) one-half of
any cash incentive payments, and iii) that to the extent that a Participant is
subject to a limitation on before-tax contributions under Section 402(g)(1) of
the Code to the Savings Plan, the amounts which could have been deferred into
the Savings Plan but for such limitation may be deferred under this Plan
("Deferred Compensation").
(c) Such elections shall be made annually and in writing, and filed
with the Committee at such time and in such manner as the Committee shall
provide. A Participant must specify the percentage, if any, which he chooses to
defer and authorize his Employing Company to make regular payroll deductions. A
separate notice will be required for deferrals in each Plan Year. Each such
notice shall specify the year in which the deferred compensation shall be paid,
which may not be sooner than two (2) years after the compensation is earned. A
Participant may make additional deferral elections for amounts payable on a
specified date, provided such elections are made at least one (1) year prior to
the specified date for payment. A Participant may further defer such payment
until his early retirement date under the Santa Fe Pacific Retirement Plan and
may thereafter make one further election to defer such amount to a subsequent
date. In the absence of a specified date for payment, such deferred
compensation shall be paid in accordance with Article VI. The Account (as
described below) of each Participant shall be credited with the amount deferred
by the Participant as of the date on which the amount of such Deferred
Compensation is communicated to the Plan recordkeeper which shall be as soon as
reasonably practicable after the date the compensation would otherwise have been
payable to Participant, or, if such date is not an Accounting Date, as of the
first Accounting Date occurring thereafter.
(d) A Participant may elect to suspend all future deferrals in a Plan
Year other than in respect to incentive payments, and will not be permitted to
resume participation until the next Plan Year.
Section 4.2 Employer Matching Contribution. Subject to such
limitations as the Committee may from time to time impose, for each Plan Year,
Participants shall be credited with an "Employer Matching Contribution" equal to
100% of the first 4% of the compensation deferred hereunder that would be
payable during that Plan Year other than amounts deferred under clause (iii) of
subsection 4.1(b).
ARTICLE V
PLAN ACCOUNTING
Section 5.1 Accounts. The Committee shall establish an Account for
each Participant who files a Deferral Election Form under subsection 4.1. Each
Account shall be adjusted in accordance with this Article V in a uniform, non-
discriminatory manner, as of such periodic "Accounting Dates" as may be
determined by the Committee from time to time (which Accounting Dates shall be
not less frequent than quarterly.) As of each Accounting Date, the
-4-
<PAGE>
balance of each Account shall be adjusted as follows:
(a) first, charge to the Account balance the amount of any
distributions under the Plan with respect to that Account that have not
previously been charged;
(b) then, credit to the Account balance the amount of the
compensation to be deferred by the Participant in accordance with the provisions
of subsection 4.1 and the amount of Employer Matching Contributions to be
credited in accordance with Section 4.2 that have not previously been credited;
(c) then, adjust the Account balance for the
applicable assumed rate of earnings in accordance with subsection 5.2.
Section 5.2 Adjustment of Accounts for Earnings. The amounts
credited to a Participant's Account in accordance with subsections 4.1 and 4.2
shall be adjusted as of each Accounting Date to reflect the value of an
investment equal to the Participant's Account balance in one or more assumed
investments that the Committee offers from time to time, and which the
Participant directs the Committee to use for purposes of adjusting his Account.
Such amount shall be determined without regard to taxes that would be payable
with respect to any such assumed investment. The Committee may eliminate any
assumed investment alternative at any time; provided, however, that the
Committee may not retroactively eliminate any assumed investment alternative.
To the extent permitted by the Committee, the Participant may elect to have
different portions of his Account balance for any period adjusted on the basis
of different assumed investments. Notwithstanding the election by Participants
of certain assumed investments and the adjustment of their Accounts based on
such investment decisions, the Plan does not require, and no trust or other
instrument maintained in connection with the Plan shall require that any assets
or amounts which are set aside in a trust or otherwise for the purpose of paying
Plan benefits shall actually be invested in the investment alternatives selected
by Participants.
Section 5.3 Participant Statements. At least quarterly, the
Committee shall cause to be furnished to each Participant a statement
indicating, on the basis of the latest available information, the status of the
Participants' Accounts.
ARTICLE VI
PAYMENT OF DEFERRED AMOUNTS
Section 6.1 Termination of Employment. Subject to the provisions of
subsection 1.5, upon a Participant's death or termination of active employment,
the Participant's entire Account
-5-
<PAGE>
balance, including the Employer's Matching Contribution on amounts deferred
prior to the Participant's death or termination date, shall be paid to or on
account of the Participant as follows:
(a) in a single lump sum payment as soon as practicable after his
date of death or termination of active employment, or if elected by the
Participant at least one year prior to termination, on January 31 of the year
following termination; or
(b) if elected by the Participant at least one year prior to the
distribution or such time period as may be established by the Committee, in
annual installments over a period of ten or fewer years, beginning as soon as
practicable after date of death or termination of active employment.
Section 6.2 Beneficiary Designation. Each Participant may, from time
to time by signing a form furnished by the Committee, designate any legal or
natural person or persons (who may be designated contingently or successively)
to whom his benefits under the Plan are to be paid if he dies before he receives
all of his benefits. A beneficiary designation form will be effective only when
the signed form is filed with the Committee while the Participant is alive and
will cancel all beneficiary designation forms filed earlier. If a deceased
Participant failed to designate a beneficiary as provided above, or if the
designated beneficiary of a deceased Participant died before him, his benefits
shall be paid in accordance with the following order of priority: (i) to his
surviving spouse, if any; (ii) to his surviving children in equal shares; or
(iii) the estate of the last to die of the Participant or his designated
beneficiary. The benefits under this plan shall be paid in a lump sum unless the
beneficiary has completed an election form in accordance with subsection 6.1(b).
Section 6.3 Withholding for Tax Liability. The Company may withhold
or cause to be withheld from any payment of benefits made pursuant to the Plan
any taxes required to be withheld with regard to such payment.
Section 6.4 Hardship Distributions. The Committee may, pursuant to
rules adopted by it and applied in a uniform manner, accelerate the date of
distribution of a Participant's Account because of hardship at any time.
"Hardship" shall mean an unforeseeable, severe financial condition resulting
from (a) a sudden and unexpected illness or accident of the Participant or his
dependent (as defined in section 152(a) of the Code); (b) loss of the
Participant's property due to casualty; or (c) other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant, but which may not be relieved through other available resources
of the Participant, as determined by the Committee in accordance with uniform
rules adopted by it.
-6-
<PAGE>
ARTICLE VII
CHANGE IN CONTROL
Section 7.1 Change in Control. In the event of a change in control
as defined in The Atchison, Topeka and Santa Fe Railway Company Severance
Program, all Accounts shall be fully vested and the Company shall be obligated
to transmit funds equal to the outstanding liabilities under this Plan to such
trust as may be established by the Company to provide for security of benefits
hereunder.
ARTICLE VIII
AMENDMENT OR TERMINATION
Section 8.1 Administrative Amendments. The Chief Executive Officer
of the Company may make minor or administrative amendments to the Plan.
Section 8.2 Amendments and Termination. The Board of Directors of
the Company may amend the Plan at any time and may terminate the Plan at any
time without the consent of the participants or beneficiaries, provided however,
that no amendment shall divest any Participant or beneficiary of the credits to
his Account, or any rights to which he would have been entitled if the Plan had
been terminated immediately prior to the effective date of such amendment. Any
Employing Company may terminate its participation in the Plan at any time,
provided that it has made adequate provision for any amount payable by it under
the terms of the Plan as in effect on the date it terminates its participation
in the Plan. Upon termination of the Plan as to any Employing Company, the
Company may, in its discretion applied in a uniform manner, provided that
amounts attributed to that Employing Company shall be distributed in accordance
with the provisions of 6.1. Upon termination of the Plan as to all Employing
Companies, the Company may, in its sole discretion applied in a uniform manner
to all Participants, cause a lump sum payment of all benefits for all
Participants to be made as soon as reasonably practicable or the date
established for payment under subsection 4.1(c).
-7-
<PAGE>
EXHIBIT 10(u)
SANTA FE PACIFIC GOLD CORPORATION
PHANTOM STOCK OPTION PLAN
-------------------------
SECTION 1
GENERAL
-------
1.1. Purpose. The Santa Fe Pacific Gold Corporation Phantom Stock Option
Plan (the "Plan") has been established by Santa Fe Pacific Gold Corporation (the
"Company") to:
(a) attract and retain executives and key managers providing services to
the Company;
(b) motivate participating employees by means of appropriate incentives, to
achieve long-range goals;
(c) provide incentive compensation opportunities which are competitive with
those of other corporations in the gold mining industry; and
(d) further the identity of interests of Participants and the Company;
and thereby promote the long-term financial interest of the Company.
1.2. Effective Date. The Plan shall be effective as of July 1, 1993 (the
"Effective Date"). The Plan shall be unlimited in duration and, in the event of
Plan termination, all Plan provisions shall remain in effect as to outstanding
awards until those awards expire or otherwise terminate.
1.3. Definitions. The following definitions are applicable to the Plan:
"Board" means the Board of Directors of the Company.
"Cause" means (a) the willful and continued failure by the Participant to
substantially perform the Participant's duties with the Company (other than
any such failure resulting from the Participant's incapacity due to physical
or mental illness), or (b) the willful engaging by the Participant in
conduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise. For purposes of this definition, no act, or failure
to act, shall be deemed "willful" unless done, or omitted to be done, by the
Participant not in good faith and without
<PAGE>
reasonable belief that the Participant's action or omission was in the best
interests of the Company.
"Change in Control" means the occurrence of one of the following events:
(a) any "person" (as such term is used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than a trustee or other fiduciary holding securities
under a benefit plan of Santa Fe Pacific Corporation ("SFP") or any
corporation owned, directly or indirectly, by the stockholders of
SFP in substantially the proportions as their ownership of stock of
SFP, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly of securities of
SFP representing 25% or more of the combined voting power of SFP's
then outstanding securities.
(b) during any period of two consecutive years (not including any
period ending prior to the Effective Date), individuals who at the
beginning of such period constitute the Board of Directors of SFP,
and any new director (other than a director designated by a person
who has entered into an agreement with SFP to effect a transaction
permitted under paragraphs (a), (c) or (d) of this definition)
whose election by the Board of Directors of SFP or nomination for
election by SFP's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved cease for any
reason to constitute at least a majority of the Board of Directors
of SFP;
(c) the stockholders of SFP approve a merger or consolidation of SFP
with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of SFP
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the merged or consolidated entity) more than 75% of
the combined voting power of the voting securities of SFP or such
merged or consolidated entity
2
<PAGE>
outstanding immediately after such merger or consolidation, or (B) a
merger or consolidation effected to implement a recapitalization of SFP
or similar transaction in which no "person" acquires more than 25% of
the combined voting power of SFP's then outstanding securities;
(d) the stockholders of SFP approve a plan of complete liquidation of SFP
or the sale or disposition of all or substantially all of SFP's assets.
The sale or disposition of all or substantially all of SFP's assets
shall mean a sale or other disposition transaction or series of related
transactions involving assets of SFP or of any direct or indirect
subsidiary of SFP (including the stock of any direct or indirect
subsidiary of SFP) in which the value of the assets or stock being sold
or otherwise disposed of (as measured by the purchase price being paid
therefor or by such other method as the Board of Directors of SFP
determines is appropriate in a case where there is no readily
ascertainable purchase price) constitutes more than two-thirds of the
fair market value of SFP. For purposes of the preceding sentence, the
"fair market value of SFP" shall be the aggregate fair market value of
SFP's outstanding common stock (on a fully diluted basis) plus the
aggregate market value of SFP's other outstanding equity securities.
The aggregate market value of SFP's common stock shall be determined by
multiplying the number of shares of SFP's common stock (on a fully
diluted basis) outstanding on the date of execution and delivery of a
definitive agreement ("Transaction Date") with respect to the sale or
disposition by SFP of all of substantially all of SFP's assets by the
average closing price for SFP's common stock for the ten trading days
immediately preceding the Transaction Date. The aggregate market value
of any other equity securities of SFP shall be determined in a manner
similar to that prescribed in the immediately preceding sentence for
determining the aggregate market value of SFP's common stock of by such
other method as the Board of Directors of SFP shall determine is
appropriate; or
(e) an event or series of events whereby more than 25% of the stock of the
Company or more than 25% of
3
<PAGE>
the assets of the Company are conveyed or transferred to the ownership
or control of any person other than an entity in which SFP owns more
than 80% of the voting securities or equity interests.
If SFP ceases to own 75% of the combined voting power of the Company's then
outstanding voting securities, the Company shall be substituted for SFP as
used in this definition of change in Control. Notwithstanding anything
herein to the contrary, a pro rata distribution by SFP to its stockholders
of SFP's interest in such voting securities of the Company shall not
constitute a Change in Control.
"Committee" means the Committee designated by the Board to administer the Plan
which shall consist of two or more disinterested persons within the meaning of
Rule 16b-3 ("Rule 16b-3") promulgated under the Exchange Act.
"Initial Public Offering" or "IPO" means an initial public offering of the
Company's common stock.
"Participant" means any employee of the Company or any subsidiary of the Company
who is selected for participation in the Plan in accordance with subsection 1.5.
"Phantom Stock Option" has the meaning ascribed to it in subsection 2.1.
"Retirement" means the Participant's voluntary termination of employment with
the Company on or after his early retirement date as defined in the pension plan
maintained by the Company under which the Participant is entitled to have the
Participant's benefits calculated.
"Share Value" of a share of Phantom Stock, as of any date, means the value of
such share determined in accordance with a formula established by the Committee.
Such formula may reflect the Company's performance in adding gold reserves,
adding gold production and increasing pre-tax cash flow and may be changed or
modified by the Committee at any time in its sole discretion; provided, however,
once the formula is established by the Committee it may not be changed or
modified in any manner that would impair the rights of Participants with respect
to awards previously granted under the Plan.
4
<PAGE>
"Valuation Date" means the date that the Share Value is determined. Prior
to an IPO the following rules shall apply:
(a) The Effective Date and the last day of each calendar quarter thereafter
shall be Valuation Dates; provided, however, the Committee shall
designate such other Valuation Dates as it may determine in its sole
discretion.
(b) The calculation of the Share Value shall be made within 60 days of the
applicable Valuation Date. Once calculated, Participants shall be
notified of the Share Value and such Share Value shall remain in effect
until Participants are notified that a new Share Value has been
determined as of a succeeding Valuation Date.
Notwithstanding the foregoing provisions of the Plan, in the event of an
IPO, the day of the IPO and each day thereafter shall be a Valuation Date
and the Share Value with respect to each such Valuation Date shall be the
fair market value of a share of Company stock on that date as determined
by the Committee.
1.4. Administration. The authority to manage and control the operation and
administration of the Plan shall be vested in the Committee. Subject to the
express provisions of the Plan, the Committee shall have the sole and complete
authority: (a) to select Participants in the Plan; (b) to make awards in such
forms and amounts as it shall determine; (c) to impose such limitations,
restrictions and conditions upon such awards as it shall deem appropriate; (d)
to interpret the Plan and to adopt, amend and rescind administrative guidelines
and other rules and regulations relating to the Plan; (e) to correct any defect
or omission or to reconcile any inconsistency in the Plan or in any award
granted hereunder; and (f) to make all other determinations and to take all
other actions necessary or advisable for the implementation and administration
of the Plan. The Committee's determinations on matters within its authority
shall be conclusive and binding upon the Company and all other persons. All
expenses associated with the Plan shall be borne by the Company. The Committee
may delegate any of its authority hereunder to such persons as it deems
appropriate; provided, however, such authority may not be delegated with respect
to the grant of such awards.
1.5. Participation. Subject to the terms and conditions of the Plan, the
Committee shall determine and designate, from time to time, the executives and
managers of the Company who will
5
<PAGE>
participate in the Plan. Participation in the Plan in any year does not assure
or entitle a person to participation in any subsequent year.
1.6. Governing Law. This Plan shall be governed by the internal laws of
the State of New Mexico without regard to any principles of conflict
of laws.
1.7. Successors. The obligations of the Company under the Plan shall be
binding upon any assignee or successor in interest to the Company.
SECTION 2
PHANTOM STOCK OPTION
2.1. Definition. A Phantom Stock Option is an award that entitles its
holder to receive from the Company upon the Option's exercise an amount equal
to:
(a) the number of shares of "Phantom Stock" as to which the Option is
being exercised;
Multiplied by
(b) the excess of the Share Value of a share of Phantom Stock on the date
of exercise over the Share Value of a share of Phantom Stock on the
date that the option was granted.
2.2. Option Awards. The Committee in its sole discretion shall determine
the number of shares of Phantom Stock, if any, to be awarded to an individual
Participant with respect to each Phantom Stock Option, and the Share Value of
each such share on the grant date. Unless determined otherwise by the Committee,
any such award shall vest as follows:
<TABLE>
<CAPTION>
Percentage
of
Interval Shares Vested
-------- -------------
<S> <C>
Date of grant up to
first anniversary 0%
First anniversary up
to second anniversary 33-1/3%
Second anniversary up
to third anniversary 66-2/3%
</TABLE>
6
<PAGE>
Third anniversary and
thereafter 100%
Notwithstanding the foregoing, unless determined otherwise by the Committee, all
Phantom Stock Options awarded to a Participant shall become vested in accordance
with the following rules:
(a) Death. All Phantom Stock Options awarded to a Participant shall become
fully vested upon the Participant's death.
(b) Retirement, Disability and Severance Program. If a Participant
terminates employment on account of Retirement, disability (as
determined by the Committee in its sole discretion) or under the
Company's Severance Program, the number of the Participant's vested
shares on such termination date shall be determined by multiplying the
number of shares subject to the Option by a fraction, the numerator of
which is the number of full months in the period beginning on the
Option's grant date and ending on the Participant's termination date,
and the denominator of which is the number of full months in the
period beginning on the Option's grant date and ending on the date
that the Option would have become fully vested if the Participant's
employment had not terminated.
(c) Change in Control. All Phantom Stock Options awarded to a Participant
shall become fully vested upon a Change in Control.
2.3. Exercise. A Participant may exercise his vested Phantom Stock Options
in whole or in part by written notice to the Company prior to the Option's
Expiration Date. The amount payable upon exercise of the Phantom Stock Option
shall be payable in cash as soon as practicable following receipt of such
notice.
2.4. Option Expiration Date. The "Expiration Date" with respect to a
Phantom Stock Option or any portion thereof means the date established by the
Committee at the time of grant.
2.5. Compliance With Applicable Laws and Withholding of Taxes. All awards
and payments under the Plan are subject to withholding of all applicable taxes.
SECTION 3
Miscellaneous
-------------
7
<PAGE>
3.1. Transferability. No award under the Plan, and no interest therein,
shall be transferable except as designated by the Participant by will or by the
laws of descent and distribution. All awards shall be redeemable during the
Participant's lifetime only by the Participant, and after the Participant's
death, the awards shall be redeemable by the Participant's legal representative
in accordance with the terms of the Plan and the award.
3.2. Termination of Employment. After a Participant's termination of
employment, the Participant's vested Phantom Stock Options may be exercised in
accordance with subsection 2.3, subject to the following rules:
(a) If a Participant voluntarily terminates his employment with the
Company for reasons other than death, disability or retirement, or
the Participant's employment is terminated by the Company for Cause,
any outstanding Phantom Stock Options shall expire, except to the
extent that the Committee permits exercise after such termination
date.
(b) If the Participant's employment terminates on account of the
Participant's Retirement or disability, or the Participant's
employment is terminated by the Company for reasons other than Cause,
the Participant's vested Phantom Stock Options may be exercised for a
period of three months after such termination, but no later than the
Option's Expiration Date; provided, however, if such Participant's
employment terminates prior to an IPO, the Participant's vested
Phantom Stock Options shall be exercisable for a period of six months
after such termination, but no later than the Option's Expiration
Date.
(c) If the Participant's employment terminates by reason of death, the
Participant's Phantom Stock Options may be exercised by the person or
persons to whom that right passes by will or by the laws of descent
and distribution for a period of twelve months after the date of
death, but no later than the Option's Expiration Date.
3.3. Employment and Stockholder Status. The Plan does not constitute a
contract of employment, and selection as a Participant will not give any
employee or Participant the right to be retained in the employ of the Company,
or any right or claim to any benefit under the Plan unless such right or claim
has specifically accrued under the terms of the Plan. No award
8
<PAGE>
under the Plan shall confer upon the holder thereof any right as a stockholder
of the Company.
3.4. Adjustments to Number of Options Awarded Under the Plan. In the event
of any change in the outstanding shares of common stock of the Company by reason
of any stock dividend, split, spinoff, recapitalization, merger, consolidation,
combination, exchange of shares or otherwise, the terms and the number of any
outstanding Phantom Stock Options will be equitably adjusted by the Board in its
sole discretion to preserve the benefit of the award for the Company and the
Participant.
3.5. Shares of Stock Subject to Plan. Subject to adjustment in accordance
with subsection 3.4, the number of shares of Phantom Stock with respect to which
awards may be granted under the Plan shall not exceed, in the aggregate,
4,000,000.
3.6. Agreement With Company. At the time of any awards under the Plan, the
Committee will require a Participant to enter into an agreement with the
Company in a form specified by the Committee, agreeing to the terms and
conditions of the Plan and to such additional terms and conditions, not
inconsistent with the Plan, as the Committee may, in its sole discretion,
prescribe.
SECTION 4
4.1. Amendment and Termination of Plan. The Board may at any time and in
any way amend, suspend or terminate the Plan; provided, however, no such
amendment, suspension or termination shall:
(a) impair the rights of Participants with respect to awards previously
granted under the Plan;
(b) be made without shareholder approval to the extent such approval is
required by law, agreement or the rules of any exchange or automated
quotation system upon which shares of the Company's common stock is
listed; or
(c) make any change that would disqualify the Plan, intended to be so
qualified, from the exemption provided by Rule 16b-3.
9
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------
Santa Fe Pacific Corporation and Subsidiary Companies
Year Ended December 31,
----------------------------------------------------
(In millions, except per share data) 1993 1992 1991 1990 1989
====================================================== ====================================================
<S> <C> <C> <C> <C> <C>
FOR THE YEAR
Revenues $2,726.4 $2,496.4 $2,360.0 $2,297.1 $2,352.7
Operating Income (Loss) (1) 422.8 77.6 342.0 291.1 (133.0)
Income (Loss) from Continuing Operations (2) 338.8 63.5 96.4 (101.2) (275.2)
Net Income (Loss) (3) 338.8 (104.5) 96.4 (111.8) 14.6
Total Capital Expenditures 646.2 332.0 330.7 473.9 340.0
Depreciation, Depletion and Amortization 247.9 216.1 208.4 196.3 195.1
- ------------------------------------------------------ ----------------------------------------------------
AT YEAR END
Total Assets $5,937.0 $5,345.4 $5,220.6 $5,066.2 $5,368.7
Working Capital Deficit (343.3) (404.4) (398.3) (345.8) (379.1)
Total Debt 1,375.8 1,451.5 1,844.4 1,945.3 2,222.1
Shareholders' Equity 1,268.3 928.5 1,036.9 911.7 851.6
- ------------------------------------------------------ ----------------------------------------------------
PER COMMON SHARE DATA
Income (Loss) from Continuing Operations (2) $ 1.81 $ 0.34 $ 0.54 $ (0.62) $ (1.73)
Net Income (Loss) (3) 1.81 (0.57) 0.54 (0.69) 0.09
Shareholders' Equity 6.83 5.11 5.77 5.27 5.39
Cash Dividends (4) 0.10 0.10 0.10 0.10 0.10
- ------------------------------------------------------ ----------------------------------------------------
</TABLE>
(1) 1992 and 1989 include pre-tax rail special charges of $320.4 million and
$441.8 million, respectively.
(2) Includes items in Note 1. In addition, 1993 includes a pre-tax gain on
sale of California lines of $145.4 million, a pre-tax gain on the
exchange of mineral assets of $217.5 million, 1992 includes a pre-tax
gain on sale of California lines of $204.9 million and 1990 includes a
net pre-tax charge of $187.1 million related to the settlement of
two lawsuits.
(3) Includes items in Notes 1 and 2. In addition, includes discontinued
operations, extraordinary charges and cumulative effect of accounting
changes.
(4) 1990 excludes the distributions of SFP's 80% interest in the stock of SFP's
former real estate and energy subsidiaries which occurred in December 1990.
1
<PAGE>
CONSOLIDATED FINANCIAL REVIEW
Santa Fe Pacific Corporation and Subsidiary Companyies
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION.
REVENUE INFORMATION (IN MILLIONS)
<TABLE>
<CAPTION>
SANTA FE RAILWAY OPERATING REVENUES
- -------------------------------------------------------------------------------
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 Revenues 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
===============================================================================
SANTA FE PACIFIC GOLD-OPERATING REVENUES
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Gold $ 228.7 $ 116.4 $ 67.2
Other 6.1 2.8 2.8
Coal and Aggregates 63.8 101.4 109.4
- -------------------------------------------------------------------------------
Total Operating Revenues $ 298.6 $ 220.6 $ 179.4
===============================================================================
</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. Excluding special items in both years, SFP's 1993 net income
was approximately $167.6 million or $0.90 per share compared to $138.8 million
or $0.75 per share in 1992. The improved results are due to higher operating
income at The Atchison, Topeka and Santa Fe Railway Company (Santa Fe Railway),
Santa Fe Pacific Gold Corporation (SFP Gold) and SFP's equity investment in
Santa Fe Pacific Pipeline Partners, L.P. (Pipeline Partnership) and lower
interest expense, partially offset by reduced other income--net.
Special items in 1993 include pre-tax gains of $217.5 million on the exchange
of mineral assets (see Other Matters--Exchange of Mineral Assets), $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
the Pipeline Partnership, and an increase in income tax expense of $32.0 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 charges of $320.4 million at Santa
Fe Railway principally related to a new labor agreement, operations
centralization, and increased environmental accruals (see Note 5: Rail Special
Charge) 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.
Santa Fe Railway
Operating income was $317.7 million and represents an increase of 7% compared to
adjusted 1992. The increase reflects continued growth in revenues despite an
estimated $40 million in lost revenue 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. The operating ratio of
86.8% was even with adjusted 1992.
Santa Fe Railway 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.
14
<PAGE>
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 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.
Santa Fe Railway operating expenses increased by $137.4 million to $2,091.5
million, excluding the $320.4 million special charge in the prior year.
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.
SFP Gold
SFP Gold operating income increased by 13% to $86.5 million due to higher
operating income from gold which reflects increased 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 Natural Resources Company (Hanson), an affiliate
of Hanson, PLC. (see Other Matters--Exchange of Mineral Assets). Ounces sold
doubled to 591,000 in 1993, as sales from the Twin Creeks Mine (which represents
a combination of SFP Gold's Rabbit Creek Mine and the Chimney Creek Mine
received in the exchange) increased by 113% to 336,000 ounces. In addition, Lone
Tree Mine sold 143,000 ounces, an increase of 11,000 ounces over 1992 and the
Mesquite Mine, obtained as part of the asset exchange, sold 112,000 ounces. The
average price of gold sold of $387 an ounce was 2% below 1992 but 8% above the
1993 average spot price due to effective hedging strategies. 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.
Pipeline
SFP's equity investment in the Pipeline Partnership produced operating income of
$30.8 million excluding the $12.2 million special litigation and environmental
charge, an increase of $2.2 million over the $28.6 million in 1992, excluding
the $4.5 million special environmental charge. The Pipeline Partnership's
revenues increased 7% principally reflecting a 3% volume increase and a 4%
increase in average revenue per barrel. Adjusted operating expenses at the
Pipeline Partnership increased by $10.5 million due to higher major maintenance
and administrative expenses.
Other Income--Net/Interest Expense
Other income--net increased by $4.7 million to $6.9 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. Interest expense declined by $37.8 million or 21% due principally to
lower outstanding debt as well as favorable variable interest rates.
Income Taxes
Income tax expense in 1993 includes an increase of approximately $32 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.
1992 COMPARED WITH 1991
SFP had a 1992 net loss of $104.5 million or $0.57 per share. Excluding special
items discussed previously, SFP's 1992 net income was approximately $138.8
million or $0.75 per share compared to 1991 net income of $96.4 million or $0.54
per share. This improvement in adjusted 1992 income is due to higher operating
income at Santa Fe Railway and SFP Gold and lower interest expense, partially
offset by lower other income--net.
Santa Fe Railway
Operating income was $297.6 million, excluding the special charge of $320.4
million, and represents an increase of 17% compared to 1991. The operating ratio
as adjusted, improved from 88.1% in 1991 to 86.8% in 1992, the result of higher
revenues and increased efficiencies related to operating expenses.
15
<PAGE>
CONSOLIDATED FINANCIAL REVIEW
- --------------------------------------------------------------------------------
Santa Fe Pacific Corporation and Subsidiary Companies
Santa Fe Railway 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%.
Santa Fe Railway operating expenses increased by $56.0 million to $1,954.1
million, excluding 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 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.
SFP Gold
SFP Gold operating income increased by 28% to $76.3 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. Lone
Tree Mine, which began production in August, 1991, sold 132,000
ounces, an increase of 104,000 ounces over 1991. Rabbit Creek sales
increased by 36% to 157,000 ounces reflecting increased mine production.
The average price of gold sold of $394 an ounce was 4% below 1991
but 15% above the 1992 average spot price due to effective hedging
strategies. 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.
Pipeline
SFP's equity investment in the Pipeline Partnership produced operating income of
$28.6 million excluding the $4.5 million special environmental charge. This was
an increase of $1.5 million over the $27.1 million in 1991. The Pipeline
Partnership's revenues increased 6% principally reflecting an increase in
average revenue per barrel. Adjusted operating expenses at the Pipeline
Partnership increased by $6.1 million due to higher depreciation and facility
costs.
Other Income-Net/Interest Expense
Other income-net declined by $29.6 million to $2.2 million reflecting reduced
income from real estate activities at Santa Fe Railway and lower interest
income. Interest expense declined by $46.2 million or 20% due to both lower
outstanding debt and favorable variable interest rates.
FINANCIAL CONDITION
Liquidity and Capital Resources
Cash provided by operations is generally SFP's primary source of liquidity and
for the year ended December 31, 1993 was $351.9 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 $247.9 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, long-term borrowings provided $188.8 million in cash while $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 $646.2 million. Capital expenditures in
1993 were significantly higher than in 1992 due to increased spending on rail
expansion projects and
16
<PAGE>
facilities which include the Alliance, Texas intermodal and carload
transportation center and the Willow Springs, Illinois intermodal facility, and
the Lone Tree Mine expansion project at SFP Gold. 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. Approximately
83% of capital expenditures were used for equipment and improvements to track
structure and rail facilities, and 17% for development of gold properties. Cash
expenditures were primarily funded through cash generated from operations and
project financings. Principal payments on long term borrowings and deferred gold
revenues during 1993 were $382.4 million, and include the use of $126.0 million
of proceeds from the sale of lines in southern California to retire debt.
For the year ended December 31, 1992, cash provided by operations was $312.2
million. Additionally, cash of $320.7 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 $332.0 million. Approximately 80% of
capital expenditures were used for equipment and improvements to track structure
and facilities at Santa Fe Railway, and 20% for development of mining
properties. The expenditures were primarily funded through cash generated from
operations and project financings. Principal payments on long term borrowings
and deferred gold revenues during 1992 were $444.2 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 operations was
$241.9 million. Additional cash of $91.0 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 $330.7 million. Approximately 73% of capital expenditures were
used for equipment and improvements to track structure at Santa Fe Railway and
27% for development of mining properties. The expenditures were primarily funded
through the cash generated from operations, project and equipment financings,
and other sources. Principal payments on long-term borrowings and deferred gold
revenues during 1991 were $157.4 million.
Management anticipates that it will fund payment of current obligations,
including principal payments on long term debt, in 1994 through internally
generated funds. SFP capital expenditures in 1994 are anticipated to exceed $600
million, including non-cash capital expenditures of approximately $150 million
primarily for directly financed equipment acquisitions and reimbursed projects
at Santa Fe Railway. 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 9: Sales of Accounts Receivable). Currently, $225 million is 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. The
Company also has funds available through a $173.6 million credit facility which
can be used for general corporate purposes. No borrowings were outstanding under
the facility at December 31, 1993. 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; however, the Company believes that it could
change the designation of SFP Gold under the restrictive debt agreement or
distribute SFP Gold to SFP shareholders to eliminate the dividend restriction.
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
Exchange of Mineral Assets
On June 25, 1993, SFP Gold completed an asset exchange with Hanson, in which SFP
Gold received certain gold assets of a subsidiary of Hanson including operating
gold mines in Nevada and California, two late stage development projects in
Nevada and Montana and other gold prospects. Hanson acquired essentially all
coal assets of SFP Gold including the Lee Ranch Mine and undeveloped coal
reserves and six crushed stone and aggregate quarries. The exchange was recorded
as a purchase business combination. The fair value of the gold assets for
financial reporting purposes was approximately $425 million. SFP recognized an
after tax, non-cash gain of $108.3 million on the exchange which represents the
excess of the fair value of the gold assets received over the sum of the
carrying value of the coal and aggregate assets and expenses of the exchange
(see Note 3: Gain on Exchange of Mineral Assets).
17
<PAGE>
CONSOLIDATED FINANCIAL REVIEW
- --------------------------------------------------------------------------------
Santa Fe Pacific Corporation and Subsidiary Companies
Potential SFP Gold Transactions
SFP is continuing to review the possibility of establishing the gold operation
as a separate public company. As part of this process SFP is considering an
initial public offering of up to 20% of SFP Gold stock, followed by a
distribution of the remaining interest in SFP Gold to SFP shareholders. This
evaluation and the timing of any distribution involve a number of economic,
business, legal, tax, and other considerations, including prior approval from
the SFP Board of Directors. The company is pursuing a ruling from the Internal
Revenue Service that a distribution of SFP Gold shares to existing SFP
shareholders would be tax free.
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.
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 2: Gain on Sale of California Lines). A
substantial portion of the net proceeds in both years were used to reduce
outstanding debt. 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.
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.
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, and potential recoveries from third parties.
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. Payment of these accrued costs are expected to be made over the next
five years. It is the opinion of SFP management that any costs in excess of
recorded liabilities will not have a material adverse effect on the consolidated
financial position of SFP.
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:
- ------------------------------------------------------
1993 1992
- ------------------------------------------------------
High Low High Low
- -------------- ------- ------- ------- -------
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
- -------------- ------- ------- ------- -------
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.
18
<PAGE>
REPORT OF MANAGEMENT
TO THE SHAREHOLDERS OF SANTA FE PACIFIC CORPORATION
The accompanying consolidated financial statements of Santa Fe Pacific
Corporation and subsidiary companies were prepared by management, who are
responsible for their integrity and objectivity. They were prepared in
accordance with generally accepted accounting principles and properly include
amounts that are based on management's best judgments and estimates. Other
financial information included in this annual report is consistent with that in
the consolidated financial statements.
The Company maintains a system of internal accounting controls, supported by
adequate documentation, to provide reasonable assurance that assets are
safeguarded and that the books and records reflect the authorized transactions
of the Company. Limitations exist in any system of internal accounting controls
based upon the recognition that the cost of the system should not exceed the
benefits derived. The Company believes its system of internal accounting
controls, augmented by its internal auditing function, appropriately balances
the cost/benefit relationship.
Independent accountants provide an objective assessment of the degree to
which management meets its responsibility for fairness of financial reporting.
They regularly evaluate the system of internal accounting controls and perform
such tests and other procedures as they deem necessary to express an opinion on
the fairness of the consolidated financial statements.
The Board of Directors pursues its responsibility for the Company's
financial statements through its Audit Committee which is composed solely of
directors who are not officers or employees of the Company. The Audit Committee
meets regularly with the independent accountants, management and the internal
auditors. The independent accountants and the Company's internal auditors have
direct access to the Audit Committee, with and without the presence of
management representatives, to discuss the scope and results of their audit work
and their comments on the adequacy of internal accounting controls and the
quality of financial reporting.
/s/ Robert D. Krebs
Robert D. Krebs
Chairman, President and Chief Executive Officer
/s/ Denis E. Springer
Denis E. Springer
Senior Vice President and Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC 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 18 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.
/s/ Price Waterhouse
Price Waterhouse
Kansas City, Missouri
February 4, 1994
19
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------
Santa Fe Pacific Corporation and Subsidiary Companies
Year Ended December 31,
-------------------------------
(In millions, except per share data) 1993 1992 1991
============================================================================ ===============================
<S> <C> <C> <C>
REVENUES
Rail $2,409.2 $2,251.7 $2,153.5
Gold 298.6 220.6 179.4
Pipeline 18.6 24.1 27.1
- ----------------------------------------------------------------------------- -------------------------------
Total revenues 2,726.4 2,496.4 2,360.0
- ----------------------------------------------------------------------------- -------------------------------
OPERATING EXPENSES
Rail 2,091.5 1,954.1 1,898.1
Rail Special Charge - 320.4 -
Gold 212.1 144.3 119.9
- ----------------------------------------------------------------------------- -------------------------------
Total operating expenses 2,303.6 2,418.8 2,018.0
- ----------------------------------------------------------------------------- -------------------------------
Operating Income 422.8 77.6 342.0
Other Income Net 6.9 2.2 31.8
Gain on Sale of California Lines 145.4 204.9 -
Gain on Exchange of Mineral Assets 217.5 - -
Interest Expense 142.4 180.2 226.4
- ----------------------------------------------------------------------------- -------------------------------
Income Before Income Taxes 650.2 104.5 147.4
Income Tax 311.4 41.0 51.0
- ----------------------------------------------------------------------------- -------------------------------
Income Before Extraordinary Charge and Cumulative Effect
of a Change in Accounting 338.8 63.5 96.4
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
Before Extraordinary Charge and Cumulative Effect of a Change
in Accounting $ 1.81 $ 0.34 $ 0.54
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
============================================================================ ===============================
(See notes to consolidated financial statements)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
Santa Fe Pacific Corporation and Subsidiary Companies
December 31,
--------------------
(In millions) 1993 1992
=============================================================================================== ====================
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents, at cost which approximates market $ 96.4 $ 100.1
Accounts receivable, less allowances 103.5 97.0
Inventories 120.4 107.4
Note receivable--current 72.5 72.5
Current portion of deferred income taxes 78.1 90.4
Other 107.6 70.2
- ----------------------------------------------------------------------------------------------- --------------------
Total current assets 578.5 537.6
- ----------------------------------------------------------------------------------------------- --------------------
Note Receivable 36.2 108.7
Other Long-Term Assets 326.1 359.8
- ----------------------------------------------------------------------------------------------- --------------------
Properties, Plant and Equipment 6,664.4 5,969.5
Less: Accumulated depreciation, depletion and amortization 1,668.2 1,630.2
- ----------------------------------------------------------------------------------------------- --------------------
Net properties 4,996.2 4,339.3
- ----------------------------------------------------------------------------------------------- --------------------
Total Assets $5,937.0 $5,345.4
=============================================================================================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 715.7 $ 723.3
Deferred gold revenues--current 15.4 12.9
Long-term debt due within one year 190.7 205.8
- ----------------------------------------------------------------------------------------------- --------------------
Total current liabilities 921.8 942.0
- ----------------------------------------------------------------------------------------------- --------------------
Long-Term Debt Due After One Year 1,185.1 1,245.7
Postretirement Benefits Liability 291.2 283.2
Rail Restructuring Liability 257.8 254.6
Deferred Gold Revenues 133.8 149.3
Other Long-Term Liabilities 644.4 557.7
Deferred Income Taxes 1,234.6 984.4
- ----------------------------------------------------------------------------------------------- --------------------
Total Liabilities 4,668.7 4,416.9
- ----------------------------------------------------------------------------------------------- --------------------
COMMITMENTS AND CONTINGENCIES (See Note 14 and Note 15)
- ----------------------------------------------------------------------------------------------- --------------------
SHAREHOLDERS' EQUITY
Common stock 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 $5,937.0 $5,345.4
=============================================================================================== ====================
(See notes to consolidated financial statements)
</TABLE>
21
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
- -------------------------------------------------------------------------------
Santa Fe Pacific Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
(In millions) 1993 1992 1991
==================================================================================== ================================
<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:
Depreciation, depletion and amortization 247.9 216.1 208.4
Deferred income taxes 215.8 66.2 20.9
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 exchange of mineral assets (217.5) -- --
Gain on sales of property, plant and equipment (156.0) (218.7) (36.9)
Other--net (8.0) (23.8) 16.1
Changes in Working Capital:
Accounts receivable (16.8) (13.9) 1.0
Inventories (9.9) (18.1) (4.5)
Accounts payable and accrued liabilities 48.8 47.9 51.5
Short term investments and other current assets (36.9) (26.8) (30.3)
- ------------------------------------------------------------------------------------ --------------------------------
Net Cash Provided By Operating Activities 351.9 312.2 241.9
- ------------------------------------------------------------------------------------ --------------------------------
INVESTING ACTIVITIES
Cash used for capital expenditures (488.6) (322.5) (295.5)
Proceeds from the sale of property, plant and equipment 247.9 320.7 91.0
Other--net 77.3 40.4 57.3
- ------------------------------------------------------------------------------------ --------------------------------
Net Cash Provided By (Used For) Investing Activities (163.4) 38.6 (147.2)
- ------------------------------------------------------------------------------------ --------------------------------
FINANCING ACTIVITIES
Proceeds from long-term borrowings and deferred gold revenues 188.8 17.7 91.4
Principal payments on long-term borrowings and deferred gold revenues (382.4) (444.2) (157.4)
Proceeds from sale of stock -- -- 36.2
Decrease in restricted funds -- 14.9 15.9
Cash dividends paid (18.5) (18.2) (17.9)
Other--net 19.9 15.5 12.0
- ------------------------------------------------------------------------------------ --------------------------------
Net Cash Used For Financing Activities (192.2) (414.3) (19.8)
- ------------------------------------------------------------------------------------ --------------------------------
Increase (Decrease) In Cash and Cash Equivalents (3.7) (63.5) 74.9
Cash and Cash Equivalents:
Beginning of year 100.1 163.6 88.7
- ------------------------------------------------------------------------------------ --------------------------------
End of year $ 96.4 $ 100.1 $ 163.6
==================================================================================== ================================
</TABLE>
(See notes to consolidated financial statements)
22
<PAGE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Santa Fe Pacific Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
Shares of Shares of
Common Treasury Common Treasury Paid-In Retained
(Shares in thousands) (Dollars in millions) Stock Stock Stock Stock Capital Income
=================================================== ====================================================================
<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) --
Shareholder 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)
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Santa Fe Pacific Corporation and Subsidiary Companies
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 noncash capital expenditures
totaling $157.6 million, $9.5 million, and $35.2 million in 1993, 1992, and
1991, respectively. Noncash capital expenditures consist principally of directly
financed equipment acquisitions and reimbursed projects at The Atchison, Topeka
and Santa Fe Railway Company (Santa Fe Railway). The exchange of mineral assets
was a non-cash transaction and has been excluded from the Statement of Cash
Flows (see Note 3: Gain on Exchange of Mineral Assets).
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.
Other Current Assets
Other current assets include $76.8 million and $48.9 million at December 31,
1993 and 1992, respectively, of deferred mining costs at Santa Fe Pacific Gold
Corporation (SFP Gold).
Inventories
Material and supply inventories, which represent substantially all 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 $8.7 million in 1993, $3.8 million in 1992, and $4.4 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 of
railroad properties is computed under the straight-line method. Depreciation and
depletion of gold operating properties is based on either the unit-of-production
or straight-line method.
Exploration and Development Costs
Exploration and development costs incurred in gold operations, prior to the
determination of the feasibility of proceeding with mining operations, are
expensed as incurred. Development costs incurred thereafter are capitalized and
amortized on a unit-of-production basis.
NOTE 2: 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.
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 and $201.0 million were used to retire debt in 1993 and 1992,
respectively (see Note 11: Long-Term Debt).
NOTE 3: GAIN ON EXCHANGE OF MINERAL ASSETS
On June 25, 1993, SFP Gold closed an asset exchange with Hanson Natural
Resources Company (Hanson), an affiliate of Hanson, PLC. SFP Gold received
certain gold assets of Hanson, including two operating gold mines in Nevada and
California, two late stage development projects in Nevada and Montana and other
gold prospects. Hanson acquired essentially all coal assets of SFP Gold
including the Lee Ranch Mine and undeveloped coal reserves and six crushed stone
and aggregate quarries.
The exchange was recorded as a purchase of assets and accordingly,
the results from the gold assets have been reflected in operations
prospectively from the date of closing. The fair value of the gold assets
for financial reporting purposes was approximately $425 million. SFP
recognized an after tax, non-cash gain of $108.3 million on the
exchange which represents the excess of the fair value of the gold assets
received over the sum of the carrying value of the coal and aggregate
assets and expenses of the exchange.
24
<PAGE>
The following represents SFP's unaudited pro forma results of operations for
the years ended December 31, 1993 and 1992, respectively, assuming the exchange
had occurred at the beginning of each fiscal year, but excluding the gain on the
transaction, described above. The pro forma results include higher amortization
resulting from the write-up of the gold assets received in the exchange. The pro
forma results do not reflect any operating efficiencies and cost savings which
SFP believes are achievable with respect to the gold assets received in the
exchange.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Year Ended December 31, 1993 1992
==================================================== ====================
<S> <C> <C>
(In millions, except per share data)
Revenues $2,744.3 $2,582.8
- ---------------------------------------------------- --------------------
Income before extraordinary charge and
cumulative effect of a change in accounting 220.6 62.9
Extraordinary charge -- (5.0)
Cumulative effect of a change in accounting -- (163.0)
- ---------------------------------------------------- --------------------
Net Income (Loss) $ 220.6 $ (105.1)
- ---------------------------------------------------- --------------------
Income per share of common stock
Before extraordinary charge and a change in
accounting $ 1.18 $ 0.34
Extraordinary charge -- (0.03)
Cumulative effect of a change in accounting -- (0.88)
- ---------------------------------------------------- --------------------
Net Income (Loss) per share $ 1.18 $ (0.57)
==================================================== ====================
</TABLE>
NOTE 4: RAIL OPERATING EXPENSES
The operating expenses of Santa Fe Railway, excluding the 1992 Rail Special
Charge discussed in Note 5, consisted of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
(In millions) 1993 1992 1991
======================================== ================================
<S> <C> <C> <C>
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
- ---------------------------------------- --------------------------------
Total $2,091.5 $1,954.1 $1,898.1
======================================== ================================
</TABLE>
NOTE 5: RAIL SPECIAL CHARGE
During 1992, Santa Fe Railway recorded a $320.4 million pre-tax special charge
which included provisions for restructuring and environmental.
Restructuring
Approximately $253 million of the charge related to restructuring and included
$149 million for the present value of costs of an agreement reached in 1992 with
the United Transportation Union (UTU) which provided for reduced crew sizes and
elimination of productivity payments on the eastern half of the railroad while
establishing additional security and other benefits for UTU employees. $73
million of the charge was for costs related to the centralization of certain
operations. These costs include relocation, amounts associated with vacated
facilities and the present value of employees' separation. The remainder of the
restructuring portion of the charge related to other employee and facility
costs. Restructuring costs paid in 1993 totaled $80.9 million and were primarily
related to the operations centralization and employee related costs for the
above crew consist and other previously established labor agreements. A
significant portion of the remaining restructuring expenditures will be
incurred over the next several years; however, certain labor agreement
modifications will not be paid until the employees' retirement. Santa Fe Railway
has obtained letters of credit of approximately $18 million supporting certain
of its obligations under these labor agreements.
Environmental
Approximately $67 million of the special charge was to increase accruals for
environmental clean-up and remediation, primarily on abandoned properties (see
Note 15: 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 6: 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%
general partner interest and a 42% limited partner interest. The Company
accounts for its interest in the partnership under the equity method.
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
======================================== ================================
<S> <C> <C> <C>
(In millions, except per unit data)
Income Statement Data
Total revenues $219.5 $205.0 $193.4
Operating income 78.3 91.4 95.8
Interest expense 37.1 36.9 36.9
Net income 41.6 54.1(1) 60.6
Per Unit Data
Net income per unit $ 2.13 $ 2.77(1) $ 3.10
Cash distributions per unit 2.80 2.80 2.75
- ---------------------------------------- --------------------------------
December 31, 1993 1992
======================================== ====================
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) 1992 net income and net income per unit exclude a charge for the cumulative
effect of a change in accounting for postretirement and postemployment
benefits of $16.4 million or $0.84 per unit.
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Santa Fe Pacific Corporation and Subsidiary Companies
NOTE 7: OTHER INCOME-NET
Other income-net consisted of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
(In millions) 1993 1992 1991
==================================== ============================
<S> <C> <C> <C>
Real estate activities $ 19.4 $ 23.9 $ 45.6
Interest income 12.8 19.9 32.0
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) (9.9) (11.3)
- ------------------------------------ ----------------------------
Total $ 6.9 $ 2.2 $ 31.8
==================================== ============================
</TABLE>
NOTE 8: INCOME TAXES
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
(In millions) 1993 1992 1991
==================================== ============================
<S> <C> <C> <C>
Current:
Federal $ 66.8 $(24.6) $26.7
State 5.8 (0.6) 3.4
- ------------------------------------ ----------------------------
Total Current 72.6 (25.2) 30.1
- ------------------------------------ ----------------------------
Deferred:
Federal 213.3 54.3 18.1
State 25.5 11.9 2.8
- ------------------------------------ ----------------------------
Total Deferred 238.8 66.2 20.9
- ------------------------------------ ----------------------------
Total $311.4 $ 41.0 $51.0
==================================== ============================
</TABLE>
Income taxes as reflected in the consolidated statement of operations differ
from the amounts computed by applying the statutory federal corporate tax rate
to income as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
(In millions) 1993 1992 1991
==================================== ============================
<S> <C> <C> <C>
Federal income tax at statutory rate
(35% in 1993, 34% in 1992-1991) $227.5 $ 35.5 $50.1
Increase (decrease) in taxes
resulting from:
State income taxes, net of
federal benefit 20.3 7.5 4.1
1% increase in federal tax rate 25.5 - -
Exchange of mineral assets 23.5 - -
Depletion (8.7) (3.5) (3.0)
Other 23.3 1.5 (0.2)
- ------------------------------------ ----------------------------
Total $311.4 $ 41.0 $51.0
==================================== ============================
</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.
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 $25.5 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 $32
million. The difference between the $25.5 million impact as of the beginning of
the year and the $32 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>
- ---------------------------------------------------------------------------
(In millions) 1993 1992
================================================ =======================
<S> <C> <C>
Deferred tax debits:
Accrued liabilities not deductible until paid:
Restructuring $ 119.5 $ 144.6
Postretirement benefits 113.3 108.2
Other 243.2 247.5
Non-expiring AMT credit carryforwards 106.9 88.0
Other 26.1 39.4
- ------------------------------------------------ -----------------------
Subtotal $ 609.0 $ 627.7
- ------------------------------------------------ -----------------------
Deferred tax credits:
Depreciation $(1,303.1) $(1,231.8)
Condemnation sales (211.8) (123.1)
Other (250.6) (166.8)
- ------------------------------------------------ -----------------------
Subtotal $(1,765.5) $(1,521.7)
- ------------------------------------------------ -----------------------
Net deferred tax liability $(1,156.5) $ (894.0)
================================================ =======================
</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 9: 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-Net, were $8.3 million, $9.4 million and $14.5 million in 1993,
1992 and 1991, respectively.
26
<PAGE>
NOTE 10: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at December 31, 1993 and
1992 consisted of the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Accounts and wages payable $169.2 $172.0
Accrued claims 90.3 88.3
Rail restructuring 57.8 122.6
Vacations 52.1 50.5
Taxes other than income taxes 36.9 39.5
Interest 29.6 30.7
Other 279.8 219.7
- ------------------------------------------------------------
Total $715.7 $723.3
============================================================
</TABLE>
NOTE 11: LONG-TERM DEBT
Long-term debt at December 31, 1993 and 1992 consisted of the
following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992
- ------------------------------------------------------------
<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
Gold Master Credit Facility, 4.2%
(variable) maturing from 1996 to 1998 140.0 --
Term Loan, 4.0% (variable), maturing
from 1994 to 1995 108.7 181.2
Mortgage Bonds, 4%, maturing 1995 95.8 95.8
Lone Tree Gold Facility 4.5% (variable)
maturing from 1994 to 2000 60.0 17.7
Bank Term Loan, 4.1% (variable),
maturing from 1994 to 1997 50.0 130.8
Minerals Credit Agreement (variable) -- 126.0
Other Obligations, 9.4% to 10.3%,
maturing from 1994-2014 40.2 44.9
Debt discount (16.8) (17.0)
- ------------------------------------------------------------
Total long-term debt 1,375.8 1,451.5
- ------------------------------------------------------------
Due within one year (190.7) (205.8)
- ------------------------------------------------------------
Due after one year $1,185.1 $1,245.7
============================================================
</TABLE>
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 October 1993, SFP Gold entered into a $190 million unsecured revolving
credit facility involving several banks (Gold Master Credit Facility). SFP Gold
is required to pay a commitment fee of 0.05% on outstanding commitments and a
facility fee of 0.26% on outstanding borrowings. As of December 31, 1993, $140.0
million was outstanding under the Gold Master Credit Facility. The use of
proceeds from the Gold Master Credit Facility is restricted to financing
transaction costs associated with the exchange of mineral assets (see Note 3:
Gain on Exchange of Mineral Assets), and financing working capital requirements.
All the assets of the Lone Tree Gold Mine are pledged as collateral for the
cash and gold borrowings under Lone Tree Mining, Inc.'s Gold Loan Agreement
(Lone Tree Gold Facility) (see Note 13: Deferred Gold Revenues). Additionally,
cash and gold borrowings under the Lone Tree Gold Facility are guaranteed by
SFP.
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. Additionally, in
March 1993, SFP acceler-ated the repayment of $126.0 million associated with the
Minerals Credit Agreement. Both of the above repayments were made using a
portion of the 1992 and 1993 proceeds from Santa Fe Railway's sale of California
lines (see Note 2: 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 $188.9
million, $218.5 million, $56.1 million, $102.5 million and $202.7 million,
respectively. Total interest paid was $120.7 million in 1993, $158.5 million in
1992 and $177.6 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; however, the Company believes that it could change the designation of
SFP Gold under the restrictive debt agreement or distribute SFP Gold to SFP
shareholders to eliminate the dividend restriction. 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.
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Santa Fe Pacific Corporation and Subsidiary Companies
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 $1,375.8 million and $1,451.5 million compared with
estimated fair values of approximately $1,595 million and $1,620 million,
respectively.
NOTE 13: DEFERRED GOLD REVENUES
SFP Gold has borrowed gold to finance the development of its Twin
Creeks and Lone Tree Mines. Proceeds from the sale of the borrowed
gold are recorded as deferred revenue at the average price realized. As
SFP Gold delivers gold from production, in repayment of the gold
loan, revenue will be recorded at this average loan price, reducing the
deferred revenue balance accordingly.
Deferred gold revenue borrowings outstanding under loan and security
agreements for the Twin Creeks and Lone Tree Mines total $98.0 million and $51.2
million, respectively, as of December 31, 1993, and $111.0 million and $51.2
million, respectively, as of December 31, 1992. Under the agreements, all assets
of the mines are pledged as collateral. Interest on the borrowings are based on
the banks' cost of gold funding plus a credit spread of 1%. As of December 31,
1993, repayments under the agreements, in ounces of gold, during the next five
years 1994 through 1998 are 36,844; 67,552; 55,252; 55,252 and 64,484,
respectively.
NOTE 14: LEASES AND OTHER COMMITMENTS
SFP leases certain locomotives, freight cars, trailers, data processing
equipment and other property. Future minimum lease payments for
operating leases (which reflect operating leases having non-cancelable
lease terms in excess of one year) as of December 31, 1993 are
summarized as follows:
- -------------------------------------------------------------
(In millions)
- -------------------------------------------------------------
1994 $61.7
1995 56.2
1996 47.0
1997 36.7
1998 30.5
Later years 174.7
- -------------------------------------------------------------
Total minimum payments $406.8
=============================================================
Rental expense for all operating leases was $97.7 million in 1993, $76.2
million in 1992 and $70.7 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. SFP Gold is committed to acquire mining
equipment valued at approximately $7.0 million in 1994.
Santa Fe Railway has entered into hedging positions which are
anticipated to cover approximately two-thirds of 1994 fuel purchases.
These positions are settled quarterly based on average commodity
prices with gains or losses recognized within fuel expense upon
settlement.
SFP Gold has entered into various forward sales contracts, excluding gold
loans (see Note 13: Deferred Gold Revenues), providing for the future delivery
of gold. The forward sales contracts have an aggregate sales value of
approximately $224 million which commit SFP Gold to the future delivery of
570,500 ounces of gold at an average price of $393 per ounce. Scheduled delivery
dates under the forward sales contracts range from the beginning to the end of
1994. In addition, SFP Gold has committed 114,000 ounces in 1994 under call
options at prices ranging between $375 and $385 per ounce and has purchased put
options on 114,000 ounces at strike prices ranging between $318 and $331 per
ounce. These put and call options expire at a rate of 9,500 ounces per month
during 1994.
NOTE 15: 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
28
<PAGE>
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. 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, and potential recoveries from third parties.
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 5: Rail Special Charge). In addition, the Company
monitors, on a regular basis, accruals for environmental sites which have been
identified. Payment of these accrued costs are expected to be made over the next
five years. It is the opinion of SFP management that any future costs in excess
of recorded liabilities will not have a material adverse effect on the
consolidated financial position of SFP.
Other Claims and Litigation
SFP is also a party to a number of other legal actions arising in the
ordinary course of business, including various governmental proceedings and
private civil suits. While the final outcome of these other legal actions
cannot be predicted with certainty, considering the meritorious legal defenses
available, it is the opinion of SFP management that none of these other legal
actions, when finally resolved, will have a material adverse effect on the
consolidated financial position of SFP.
NOTE 16: 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 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 relating to the Retirement and
Supplemental Plans for 1993, 1992 and 1991 were as follows:
<TABLE>
<CAPTION>
RETIREMENT PLAN
(In millions) 1993 1992 1991
- -----------------------------------------------------------------
<S> <C> <C> <C>
Components of pension (income) expense
Service cost $ 6.6 $ 7.7 $ 8.7
Interest cost 42.4 39.6 40.4
Actual return on plan assets (111.7) (59.1) (99.9)
Net amortization and deferral 47.2 (5.4) 37.0
- -----------------------------------------------------------------
Total $(15.5) $(17.2) $(13.8)
=================================================================
SUPPLEMENTAL PLAN
(In millions) 1993 1992 1991
- -----------------------------------------------------------------
Components of pension expense
Service cost $0.1 $0.1 $0.1
Interest cost 0.7 0.7 0.7
Net amortization and deferral 0.5 0.6 0.6
- -----------------------------------------------------------------
Total $1.3 $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:
RETIREMENT PLAN
<TABLE>
<CAPTION>
(In millions) 1993 1992
- -----------------------------------------------------------------
<S> <C> <C>
Plan assets at fair value, primarily invested in
common stock, and U.S. and corporate bonds $ 667.0 $ 597.5
Actuarial present value of projected
benefit obligation
Accumulated benefit obligation
Vested (540.7) (425.7)
Nonvested (30.8) (29.3)
Provision for future salary increases (43.5) (47.4)
- -----------------------------------------------------------------
Excess of plan assets over projected benefit
obligation 52.0 95.1
Unrecognized net (gain) loss 31.3 (30.1)
Unrecognized prior service cost 13.4 17.8
Unrecognized net transition asset being
recognized ratably through 2002 (16.1) (18.1)
- -----------------------------------------------------------------
Prepaid pension asset $ 80.6 $ 64.7
=================================================================
SUPPLEMENTAL PLAN
(In millions) 1993 1992
- ------------------------------------------------------------------
Actuarial present value of projected benefit
obligation
Accumulated vested benefit obligation $(8.6) $(7.4)
Provision for future salary increases (0.6) (1.2)
- ------------------------------------------------------------------
Projected benefit obligation (9.2) (8.6)
Unrecognized net gain (0.8) (1.2)
Unrecognized net transition obligation being
recognized ratably through 2003 5.7 6.3
Adjustment required to recognize minimum
liability (4.3) (3.9)
- ------------------------------------------------------------------
Accrued pension liability $(8.6) $(7.4)
- ------------------------------------------------------------------
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>
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Santa Fe Pacific Corporation and Subsidiary Companies
NOTE 17: 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 18: Change
in Method of Accounting for Postretirement and Postemployment Benefits).
Components of net periodic postretirement benefit cost relating to the medical
plan and the life insurance plan were as follows:
<TABLE>
<CAPTION>
MEDICAL PLAN
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Components of net periodic
postretirement benefit cost
Service cost $ 3.8 $ 5.4
Interest cost 15.3 18.4
Net amortization and deferral (3.5) --
- ------------------------------------------------------------
Total $15.6 $23.8
============================================================
LIFE INSURANCE PLAN
(In millions) 1993 1992
- ------------------------------------------------------------
Components of net periodic
postretirement benefit cost
Service cost $ 0.3 $ 0.2
Interest cost 3.9 3.8
- ------------------------------------------------------------
Total $ 4.2 $ 4.0
============================================================
</TABLE>
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
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation
Retirees $139.0 $114.4
Fully eligible active plan participants 16.2 9.5
Other active plan participants 80.2 57.1
- ------------------------------------------------------------
Accumulated postretirement
benefit obligation 235.4 181.0
- ------------------------------------------------------------
Unrecognized prior service credit 42.1 45.6
Unrecognized net gain (loss) (39.7) 3.1
- ------------------------------------------------------------
Accrued postretirement liability $237.8 $229.7
============================================================
LIFE INSURANCE PLAN
(In millions) 1993 1992
- ------------------------------------------------------------
Accumulated postretirement
benefit obligation
Retirees $45.9 $43.6
Fully eligible active plan participants 0.2 --
Other active plan participants 5.1 4.3
- ------------------------------------------------------------
Accumulated postretirement
benefit obligation 51.2 47.9
- ------------------------------------------------------------
Unrecognized net gain (loss) (5.4) (1.3)
- ------------------------------------------------------------
Accrued postretirement liability $45.8 $46.6
============================================================
</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.
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 18: 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
30
<PAGE>
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, expenses in 1992 were $14 million higher than in 1991 as a
result of the change in accounting for these costs.
NOTE 19: 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.
Approximately 4.9 million of outstanding options are 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 20: 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.
NOTE 21: INFORMATION ON BUSINESS SEGMENTS
Identifiable assets at December 31, 1993, 1992, and 1991, and capital
expenditures and depreciation and amortization expenses for the three years then
ended, are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
(In millions) 1993 1992 1991
- ------------------------------------------------------------------
<S> <C> <C> <C>
Identifiable assets
Rail $4,906.9 $4,603.8 $4,558.7
Gold 832.6 485.4 446.7
Pipeline 65.1 72.2 80.7
Corporate 132.4 184.0 134.5
- ------------------------------------------------------------------
Total $5,937.0 $5,345.4 $5,220.6
==================================================================
Properties, plant and equipment
Rail
Track structure $2,326.8 $2,199.8 $2,202.9
Equipment 1,952.6 1,864.0 1,910.2
Other road properties 1,478.9 1,337.5 1,264.6
Real estate and other 127.8 122.7 116.6
- ------------------------------------------------------------------
Total Rail $5,886.1 $5,524.0 $5,494.3
Gold 778.3 445.5 381.2
Corporate -- -- 1.2
- ------------------------------------------------------------------
Total $6,664.4 $5,969.5 $5,876.7
==================================================================
Accumulated depreciation,
depletion and amortization
Rail
Track structure $ 558.0 $ 420.0 $ 465.5
Equipment 872.6 828.9 790.6
Other road properties 140.1 279.6 278.3
Real estate and other 7.0 6.8 7.0
- ------------------------------------------------------------------
Total Rail $1,577.7 $1,535.3 $1,541.4
Gold 90.5 94.9 66.3
- ------------------------------------------------------------------
Total $1,668.2 $1,630.2 $1,607.7
==================================================================
Depreciation, depletion and
amortization expense
Rail
Track structure $ 62.1 $ 60.8 $ 54.9
Equipment 92.1 89.4 93.1
Other road properties 34.3 31.1 36.1
Real estate and other -- -- 0.2
- ------------------------------------------------------------------
Total Rail $ 188.5 $ 181.3 $ 184.3
Gold 59.4 34.8 23.7
Corporate -- -- 0.4
- ------------------------------------------------------------------
Total $ 247.9 $ 216.1 $ 208.4
==================================================================
Capital expenditures
Rail $ 539.1 $ 265.5 $ 241.9
Gold 107.1 66.5 87.5
Corporate -- -- 1.3
- ------------------------------------------------------------------
Total $ 646.2 $ 332.0 $ 330.7
==================================================================
</TABLE>
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Santa Fe Pacific Corporation and Subsidiary Companies
NOTE 22: SUMMARIZED QUARTERLY OPERATING RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
(In millions, except per share data)
1993 1992
First Second Third Fourth First Second Third Fourth
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $653.3 $675.0 $665.5 $732.6 $616.7 $605.4 $642.1 $632.2
Operating Income (Loss) $105.5 $108.6 $65.2 $143.5 $96.3 $87.8 $(215.1) $108.6
Income (Loss)
Before Extraordinary Charge and
Accounting Change $127.1 $147.5 $(2.8) $67.0 $28.2 $26.5 $(165.1) $173.9
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
Before Extraordinary Charge and
Accounting Change $0.68 $0.79 $(0.01) $0.36 $0.15 $0.14 $(0.89) $0.94
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) The sum of net income (loss) per share for the four quarters of 1993 does
not equal net income (loss) per share for the full year due to incremental
shares resulting from stock options.
(2) 1993 income (loss) includes a first quarter $145.4 million pre-tax gain on
sale of California lines, a second quarter $217.5 million pre-tax gain on
the exchange of mineral assets, and a third quarter increase in income tax
expense of approximately $32 million reflecting the retroactive impact of
the increase in the federal income tax rate to 35%.
(3) 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.
NOTE 23: GOLD RESERVES (UNAUDITED)
<TABLE>
<CAPTION>
As of December 31, 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Proven and probable gold reserves
(thousands of ounces)
Contained 14,121 6,391 5,781 4,743 3,793
Portion projected recoverable 11,240 5,144 4,716 3,921 3,094
- -----------------------------------------------------------------------------
Average price received (per ounce) $387 $394 $410 $420 $445
Ounces produced (in thousands) 611 296 179 51 4
- -----------------------------------------------------------------------------
</TABLE>
32
<PAGE>
Exhibit 21
SUBSIDIARIES OF SANTA FE PACIFIC CORPORATION
--------------------------------------------
PINE CANYON LAND COMPANY (DE)
SFP FIBER OPTICS, INC. (DE)
SANTA FE PACIFIC INSURANCE COMPANY (VT)
SFP PROPERTIES, INC. (DE)
THE ATCHISON, TOPEKA, AND SANTA FE RAILWAY COMPANY (DE) 100%
Alameda Belt Line (CA) 50%
Aubrey Water Company (AZ) 100%
The Belt Railway Company of Chicago (IL) 8.33%
Central California Traction Company (CA) 33.33%
The Dodge City and Cimarron Valley Railway Company (KS) 100%
The Gulf and Inter-State Railway Company of Texas (TX) 100%
Houston Belt & Terminal Railway Company (TX) 25%
Kansas City Terminal Railway Company (MO) 8.33%
Los Angeles Junction Railway Company (CA) 100%
The Oakland Terminal Railway (CA) 50%
Oklahoma City Junction Railway Company (OK) 100%
Rio Grande, El Paso and Santa Fe Railroad Company (TX) 100%
St. Joseph Terminal Railroad Company (MO) 50%
Santa Fe Financial Holdings, Inc. (DE) 100%
Santa Fe Forwarding Company (DE) 100%
Santa Fe Rail Equipment Company (DE) 100%
Santa Fe Terminal Services, Inc. (DE) 100%
Star Lake Railroad Company (DE) 100%
Sunset Railway Company (CA) 50%
Texas City Terminal Railway Company (TX) 33.33%
TTX Company (DE) 10.9%
The Wichita Union Terminal Railway Company (KS) 33.33%
CONSTELLATION 130, INC. (CA) 100%
LIMITED PARTNERSHIP MANAGEMENT, INC, (DE) 100%
SANTA FE PACIFIC GOLD CORPORATION (DE) 100%
Santa Fe Canadian Mining, LTD. 100%
Minera Gold Fields De Mexico, S.A. 100%
Minera Santa Fe Pacific Chile Limitada 99%
Santa Fe Pacific Gold South America, Inc. 100%
(1% in Minera Santa Fe Pacific Chile Limitada)
San Juan Basin Coal Holding Company 100%
Santa Fe Pacific Mining, Inc. (KS) 100%
Hospah Coal Company (DE) 100%
SFPG Mining Company (DE) 100%
Compania Minera Florida, S.A. 100%
Compania Minera Santa Fe Uruguay S.A. 100%
Lone Tree Mining, Inc. (DE) 100%
Rabbit Creek Mining, Inc. (DE) 100%
SANTA FE PACIFIC RAILROAD COMPANY (ACT OF CONGRESS) 100%
SANTA FE PACIFIC CAPITAL, INC. (IL) 100%
SFP PIPELINE HOLDINGS, INC. (DE) 100%
Santa Fe Pacific Pipelines, Inc. (DE) 100%
SUNSET COMMUNICATIONS COMPANY (DE) 100%
WALKER-KURTH LUMBER COMPANY (TX) 100%
THE ZIA COMPANY (DE) 100%
<PAGE>
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of (i) the Registration Statement of Form S-3 (No. 33-51435),
(ii) the Registration Statements on Form S-8 (Nos. 33-12072; 33-26814; 33-33413;
33-41409; 33-60628; and 33-63208) and (iii) 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 appearing on page 19 of the
1993 Annual Report to Shareholders which is incorporated in this Annual Report
on Form 10-K. We also consent to the incorporation by reference of our report
on the Consolidated Financial Statement Schedules which appears on page F-1 of
this Form 10-K.
/s/ Price Waterhouse
PRICE WATERHOUSE
Kansas City, Missouri
March 30, 1994
<PAGE>
Exhibit 23(b)
March 28, 1994
The Board of Directors
Santa Fe Pacific Corporation
We hereby consent to the references to our firm in Santa Fe Pacific
Corporation's 1993 Annual Report to shareholders on Form 10-K which Annual
Report is incorporated by reference in the Prospectuses constituting part of (i)
the Registration Statement on Form S-3 (No. 33-51436), (ii) the Registration
Statements on Form S-8 (No. 33-12072; 33-26814; 33-33413; 33-41409; 33-60628;
and 33-68208), and (iii) 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.
PINCOCK, ALLEN & HOLT
By: /s/ GEORGE ARMBRUST
----------------------------------
George Armbrust
Manager, Geological Services
<PAGE>
Exhibit 24
POWER OF ATTORNEY
WHEREAS, SANTA FE PACIFIC CORPORATION, a Delaware corporation ("the
Company"), will file with the Securities and Exchange Commission, under the
provisions of the Securities Exchange Act of 1934, as amended, its Annual
Report on Form 10-K for the fiscal year ended December 31, 1993; and
WHEREAS, the undersigned serve the Company in the capacity indicated;
NOW, THEREFORE, the undersigned hereby constitutes and appoints DENIS E.
SPRINGER and JEFFREY R. MORELAND, his attorney with full power to act for him in
his name, place and stead, to sign his name in the capacity set forth below, to
the Annual Report on Form 10-K of the Company for the fiscal year ended
December 31, 1993, and to any and all amendments to such Annual Report on Form
10-K, and hereby ratifies and confirms all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been executed by the
undersigned this 22nd day of March, 1994.
/s/ JOSEPH F. ALIBRANDI /s/ GEORGE DEUKMEJIAN
- ----------------------------------- -----------------------------------
Joseph F. Alibrandi, Director George Deukmejian, Director
/s/ ROBERT D. KREBS /s/ BILL M. LINDIG
- ----------------------------------- -----------------------------------
Robert D. Krebs, Chairman, Bill M. Lindig, Director
President, Chief Executive
Officer and Director
/s/ MICHAEL A. MORPHY /s/ GEORGE B. MUNROE
- ----------------------------------- -----------------------------------
Michael A. Morphy, Director George B. Munroe, Director
/s/ ROY S. ROBERTS /s/ JOHN S. RUNNELLS II
- ----------------------------------- -----------------------------------
Roy S. Roberts, Director John S. Runnells II, Director
/s/ JEAN HEAD SISCO /s/ EDWARD F. SWIFT
- ----------------------------------- -----------------------------------
Jean Head Sisco, Director Edward F. Swift, Director
/s/ ROBERT H. WEST
- -----------------------------------
Robert H. West, Director
