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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1998
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Commission File Number 0-19150
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WISCONSIN CENTRAL TRANSPORTATION CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 36-3541743
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6250 North River Road, Suite 9000
Rosemont, Illinois 60018
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (847) 318-4600
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Indicate by check [X] whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X YES NO
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Indicate the number of shares outstanding of the
Issuer's common stock as of April 30, 1998: 51,026,283 shares
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WISCONSIN CENTRAL TRANSPORTATION CORPORATION
FORM 10-Q
Quarter Ended March 31, 1998
CONTENTS PAGE
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets.............................. 1
Consolidated Statements of Income........................ 3
Consolidated Statements of Cash Flows.................... 4
Notes to Consolidated Financial Statements............... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 8
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K......................... 10
Signatures.............................................................. 11
Index to Exhibits....................................................... 12
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
Assets
March 31, December 31,
1998 1997
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(Unaudited) (Audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................................. $ 7,753 $ 4,630
Receivables, net of allowance for doubtful accounts of $1,641
and $1,628 at March 31, 1998 and December 31, 1997................................. 82,571 79,722
Income taxes receivable............................................................... 1,856 2,106
Materials and supplies................................................................ 24,514 20,560
Deferred income taxes................................................................. 1,250 1,250
Other current assets.................................................................. 2,142 2,014
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Total current assets............................................................... 120,086 110,282
Investment in affiliates.................................................................. 158,512 152,489
Properties:
Roadway and structures................................................................ 621,970 609,932
Equipment............................................................................. 124,175 116,781
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Total properties................................................................... 746,145 726,713
Less accumulated depreciation......................................................... (82,737) (77,888)
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Net properties..................................................................... 663,408 648,825
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Total assets....................................................................... $ 942,006 $ 911,596
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The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share amounts)
Liabilities and Stockholders' Equity
March 31, December 31,
1998 1997
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(Unaudited) (Audited)
<S> <C> <C>
Current liabilities:
Short-term debt....................................................................... $ 1,436 $ 1,387
Accounts payable...................................................................... 44,239 47,077
Accrued expenses...................................................................... 90,672 80,390
Accrued disputed switching charges and associated interest............................ 20,916 20,611
Interest payable...................................................................... 1,182 1,370
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Total current liabilities.......................................................... 158,445 150,835
Long-term debt............................................................................ 278,051 279,383
Other liabilities......................................................................... 4,624 4,664
Deferred income taxes..................................................................... 103,828 97,199
Deferred income........................................................................... 9,550 9,830
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Total liabilities.................................................................. 554,498 541,911
Stockholders' equity:
Preferred stock, par value $1.00; authorized 1,000,000
shares; none issued or outstanding................................................. -- --
Common stock, par value $0.01; authorized 150,000,000 shares;
issued and outstanding, 51,022,083 shares at March 31, 1998
and 51,011,042 shares at December 31, 1997......................................... 510 510
Paid in capital....................................................................... 112,637 112,492
Accumulated other comprehensive income................................................ 285 3,036
Retained earnings..................................................................... 274,076 253,647
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Total stockholders' equity......................................................... 387,508 369,685
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Total liabilities and stockholders' equity......................................... $ 942,006 $ 911,596
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The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
For the Quarter Ended
March 31,
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1998 1997
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<S> <C> <C>
Operating revenues......................................................................... $ 83,957 $ 80,261
Operating expenses:
Roadway and structures................................................................ 13,672 12,269
Equipment ......................................................................... 16,921 19,141
Transportation........................................................................ 27,708 25,015
General and administrative............................................................ 9,668 8,751
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Operating expenses................................................................ 67,969 65,176
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Income from operations..................................................................... 15,988 15,085
Other income (expense):
Sale of rights under transportation agreement......................................... 5,445 --
Interest expense...................................................................... (4,208) (3,179)
Other, net ......................................................................... 138 278
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Total other income (expense), net................................................. 1,375 (2,901)
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Income before income taxes and equity in net income of affiliates.......................... 17,363 12,184
Provision for income taxes................................................................. 6,875 4,823
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Income before equity in net income of affiliates........................................... 10,488 7,361
Equity in net income of affiliates......................................................... 9,941 10,273
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Net income................................................................................. $ 20,429 $ 17,634
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Earnings per common share:
Basic................................................................................. $ .40 $ .35
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Diluted............................................................................... $ .40 $ .34
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Average common shares outstanding:
Basic................................................................................. 51,014 50,803
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Diluted, including dilutive effect of common stock options............................ 51,369 51,413
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The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
For the Quarter Ended
March 31,
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1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 20,429 $ 17,634
Reconciliation of net income to net cash
provided by operating activities:
Depreciation and amortization...................................................... 4,844 4,035
Deferred income taxes.............................................................. 6,629 4,813
Equity in net income of affiliates................................................. (9,941) (10,273)
Gains on property sales............................................................ (65) (179)
Net amortization of deferred gain on sale-leaseback of equipment................... (280) (280)
Changes in working capital:
Accounts receivable........................................................... (2,849) (2,811)
Materials and supplies........................................................ (3,954) (3,974)
Other current assets, excluding deferred income taxes......................... (5) 2
Current liabilities........................................................... 7,561 10,604
Other, net......................................................................... (40) 469
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Net cash provided by operating activities.............................................. 22,329 20,040
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Cash flows from investing activities:
Property acquisition................................................................... -- (88,282)
Property additions..................................................................... (19,640) (11,028)
Property sales and other transactions.................................................. 405 837
Investment in affiliate................................................................ -- (8,402)
Dividend from affiliate................................................................ 1,167 3,374
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Net cash used for investing activities................................................. (18,068) (103,501)
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Cash flows from financing activities:
Repayment of long-term debt............................................................ (1,283) --
Long-term debt issued.................................................................. -- 83,109
Issuance of common stock under stock option plans...................................... 145 717
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Net cash (used for) provided by financing activities................................... (1,138) 83,826
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Net increase in cash and cash equivalents.............................................. 3,123 365
Cash and cash equivalents, beginning of period......................................... 4,630 5,637
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Cash and cash equivalents, end of period............................................... $ 7,753 $ 6,002
========= =========
Supplemental cash flow information: Cash paid during the period for:
Interest........................................................................... $ 4,291 $ 2,786
Income taxes....................................................................... -- 10
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
</TABLE>
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WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 1998
Basis of Presentation
The consolidated financial statements presented herein present the results
of operations of Wisconsin Central Transportation Corporation ("WCTC") and its
wholly owned subsidiaries, Wisconsin Central Ltd. ("WCL"), Fox Valley & Western
Ltd. ("FV&W"), WCL Railcars, Inc., Sault Ste. Marie Bridge Company ("SSM"),
Wisconsin Central International, Inc. ("WCI"), WC Canada Holdings, Inc. and
Algoma Central Railway Inc. ("ACRI"). WCTC, through WCI, also holds a 34% equity
interest in English Welsh and Scottish Railway Holdings Limited ("EWS"), whose
subsidiaries operate railways in Great Britain, a 23% equity interest in Tranz
Rail Holdings Limited ("Tranz Rail"), which operates a nationwide railway in New
Zealand, and a 33% equity interest in Australian Transport Network Limited
("ATN") which provides all the commercial rail freight service in Tasmania, an
island state of Australia. WCTC and its subsidiaries are hereinafter referred to
as the Company. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. Accordingly, these
unaudited consolidated financial statements should be read in conjunction with
the Company's audited financial statements and the notes thereto for the year
ended December 31, 1997. In the opinion of management, the information provided
in these statements reflects all adjustments necessary to present fairly such
information. The results of operations for any interim period are not
necessarily indicative of the results of operations for an entire year.
Reclassifications
Certain amounts in the 1997 financial statements have been reclassified to
conform to the 1998 presentation.
Comprehensive Income Information
In January 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." The Company's comprehensive
income consists of (a) net income as reported in the statements of income and
(b) other comprehensive income (loss), which is comprised solely of foreign
currency translation adjustments. The Company has not recorded income tax
effects of its foreign currency translation adjustments. For the first quarter
of 1998, comprehensive income was $17.7 million, as compared to comprehensive
income of $13.8 million in the first quarter of 1997. The accumulated amount of
other comprehensive income through the date of each balance sheet is presented
as a component of stockholders' equity. Comprehensive income will be reported in
a separate financial statement in each of the Company's future annual reports.
Sale of Debt Securities
In January 1998, the Company filed a shelf registration statement with the
Securities and Exchange Commission registering $250 million of notes for
potential issuance to the public. In April 1998, the Company sold $150 million
of these debt securities in a public offering to take advantage of the current
long-term interest rate level as well as the Company's improved
creditworthiness. The net proceeds from the sale have been used to repay
outstanding borrowings under the Company's bank revolving credit facility. The
debt securities mature on April 15, 2008 and bear interest at 6.625% and yield
6.676%. Concurrent with the public sale of debt securities, the Company reduced
the total capacity under its bank revolving credit facility from $325 million to
$175 million.
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Sale of Rights Under Transportation Agreement
Prior to November 1997, the Company, together with another railroad,
handled metallic ore movements from the upper Midwest to Geneva Steel's plant in
Utah under a five year transportation agreement that was scheduled to terminate
in 1999. In March 1998, the Company sold its rights under this transportation
agreement for $5.4 million. The amount, payable in two equal installments in
March 1998 and March 1999, was recorded as non-operating income in the Company's
financial statements. The Company received its first installment of $2.7 million
in March 1998.
Safety Compliance Agreement with FRA
In February 1998, WCL and FV&W agreed to a one year extension period for
the voluntary cooperative Safety Compliance Agreement with the Federal Railroad
Administration ("FRA") pursuant to the Safety Assurance and Compliance Program
("SACP") which was originally entered into in February 1997. The SACP is a
program to permit railroads and the FRA to develop and monitor agreed upon
programs to improve safety conditions on a systematic basis throughout a
railroad. The SACP is focusing on improving track conditions, inspection
procedures and training for railroad employees. As a result of the Safety
Compliance Agreement, the Company increased capital expenditures in 1997 to
improve safety and increase the utility of its track. The Company also incurred
certain additional operating expenses related to the disruption of regular train
service while the track improvements were made. The Company expects the
increased level of capital spending and operating expenses to continue during
the one-year extension period of the Safety Compliance Agreement.
ATN Acquisition
In November 1997 the Company led a consortium which acquired the
government-owned rail business in Tasmania, an island state of Australia, for
approximately $15.4 million in a privatization transaction. The Company owns
approximately 33% of the Australian company, Australian Transport Network
Limited ("ATN"), which provides all the commercial rail freight service in
Tasmania. ATN operates a 360 route mile rail system with approximately 180
employees, 28 locomotives and 560 railcars. The Company invested approximately
$5.1 million in ATN.
Lomira Derailment
In November 1997, eleven cars of a WCL train derailed in Lomira, Wisconsin.
Several of the cars collided with a portion of the wall of a nearby factory,
damaging the factory, killing one factory worker and injuring four others. No
lawsuits have been filed. WCL intends to use its best efforts to settle any
claims that may arise as a result of this accident. The Company maintains $125.0
million in third party liability insurance coverage for personal injuries,
including death, property damage and other specified risks of its operations in
excess of a self-insured retention of $2.0 million per occurrence (except for
ACRI which has a self-insured retention of $0.5 million per occurrence). The
Company also maintains $20.0 million in all risks property damage coverage,
including property of shippers, in excess of retentions of $1.0 million per
occurrence with respect to rail accidents. The Company believes any costs
incurred as a result of this derailment in excess of self-insured retentions
will be covered under its insurance policies.
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<PAGE>
Duck Creek North Acquisition
On January 27, 1997, SSM completed the purchase of 195 route miles of
railroad track and trackage rights in Wisconsin and the Upper Peninsula of
Michigan from another railroad. The rail lines are commonly known as the "Duck
Creek North" lines. The rail lines, together with contiguous property and
associated facilities, were purchased for approximately $85.0 million of cash
plus provisions for labor protection and other reserves of $2.8 million and
deferred acquisition costs of $0.8 million. The purchase was funded through
borrowings under existing revolving credit facilities. This acquisition is
referred to herein as the "Duck Creek North Acquisition".
Waukesha Environmental Matter
On April 2, 1996, WCL received a request for documents from the U.S.
Department of Justice ("DOJ") relating to the demolition of a foundry and
roundhouse on WCL's property in Waukesha, Wisconsin, performed by contractors
for WCL in 1993. A request for additional documents was received on November 21,
1996. WCL has complied with the requests. Previously, in March 1994, WCL had
received a Notice of Violation of the Clean Air Act (the "Act") and the National
Emission Standard for Asbestos (the "Asbestos NESHAP") promulgated thereunder
from the USEPA in connection with the demolition. The Notice of Violation
alleged that WCL violated the Clean Air Act and the Asbestos NESHAP because of
the failure of the demolition contractor hired by WCL to provide notice of its
intent to demolish a building containing asbestos and the failure of the
contractor to have on the site during demolition an authorized representative
trained in NESHAP. The Notice of Violation did not specify any penalty or demand
any relief. The USEPA held a conference with WCL on April 11, 1994 to discuss
the Notice of Violation prior to a determination of any enforcement action to be
taken under section 113 of the Act. WCL has not been informed whether the 1996
request for documents is related to the 1994 Notice of Violation. In June 1997,
WCL was notified by the EPA that the DOJ had determined there was no cause to
seek criminal prosecution against WCL or any individual employee. On March 10,
1998, the Company received notice that the DOJ is considering a federal court
action against WCL seeking injunctive relief and civil penalties in an
unspecified amount, unless the matter is settled. WCL plans to seek a reasonable
settlement and to defend itself vigorously if such a settlement is not possible.
If it were to be determined that WCL violated the Asbestos NESHAP or the Act,
WCL could be subject to fines of up to $25,000 per day for each violation.
BOCT Complaint
On June 4, 1993, WCL was served with a complaint filed by the Baltimore &
Ohio Chicago Terminal Railway Company ("BOCT") in the United States District
Court for the Northern District of Illinois, Eastern Division. In its complaint,
the BOCT claimed that WCL owed BOCT for intermediate switching and car hire
reclaim charges allegedly incurred from July 1988 through February 1993.
Arbitration hearings were held in 1995, and in June 1996 the arbitration panel
ruled in favor of BOCT. The arbitration panel's ruling awarded BOCT $16.8
million of disputed switching and car hire reclaim charges, and $2.5 million of
interest relating to such charges. Additional interest of $1.6 million has been
accrued on the unpaid award amount through March 31, 1998.
In April 1997, WCL filed a petition with the Surface Transportation Board
("STB") contesting substantially all BOCT switching charges. That matter is
pending before the STB. The U.S. District Court issued a final ruling on the
case affirming the arbitration award on August 28, 1997. WCL appealed this
ruling to the U.S. Court of Appeals in September 1997. Along with the appeal,
WCL posted a $23.5 million letter of credit to cover amounts which may be
payable to BOCT if the appeal is unsuccessful. Separately, during the U.S.
District Court proceedings, WCL was authorized to pursue with the STB various
matters included in the dispute.
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<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction with the unaudited
consolidated financial statements and related notes included herein.
Results of Operations: First Quarter 1998 Compared to First Quarter 1997
The Company's net income for the quarter ended March 31, 1998 was $20.4
million compared to $17.6 million for the same period in 1997.
Operating revenues. Operating revenues during the quarter ended March 31,
1998 were $84.0 million compared with $80.3 million for the same period in 1997,
an increase of 5%. Gross revenues for the quarter ended March 31, 1998 increased
in three of six commodity groups, compared with the same period in 1997. Traffic
volume, as measured by carloads handled (including as a carload each loaded
trailer or container), for the quarter ended March 31, 1998 approximated 136,600
carloads compared with approximately 137,500 carloads in 1997.
Volume and gross revenues for paper and other forest products increased by
5% and 6%, respectively, primarily due to the Company's increased market share
of lumber shipments originating in western Canada, as well as increased demand
for pulpwood logs for the paper industry. Volume and gross revenues for
industrial products increased by 12% and 14%, respectively, primarily due to
increased demand for inbound unfinished steel for a major customer of ACRI. Food
and grain volume and gross revenues increased by 5% and 10%, respectively,
primarily due to increased production by a major malting customer in the
Company's operating territory, as well as the Company's increased market share
of corn shipments from 1997 corn crops.
Gross revenues for minerals decreased by 4% primarily due to a decrease in
metallic ore revenues. The first quarter 1997 included approximately 6,900
carloads of metallic ore handled under a five year transportation agreement that
was scheduled to terminate in 1999. No carloads were handled under this
agreement in the first quarter of 1998. As discussed in the Notes to
Consolidated Financial Statements, the Company's rights under this
transportation agreement were sold in the first quarter of 1998. The first
quarter 1998 volume included metallic ore shipments for a full quarter from the
Company's Duck Creek North lines which were acquired on January 27, 1997.
Both volume and gross revenues for intermodal shipments decreased by 29%
primarily due to the conversion of approximately 6,400 intermodal units to a
haulage arrangement. Intermodal units subject to this haulage agreement are not
included in the Company's carload volume. Haulage revenue of approximately $1.1
million for the first quarter of 1998 is included in other operating revenue.
Operating expenses. Operating expenses for the first quarter of 1998 were
$68.0 million, $2.8 million or 4% higher than last year. The increase consists
primarily of higher labor costs and depreciation, offset in part by a decrease
in equipment rents and fuel costs. The Company's operating ratio (operating
expenses as a percentage of operating revenues) was 81.0% in the first quarter
of 1998, compared to 81.2% in the first quarter of 1997. Operating income for
the first quarter of 1998 was $16.0 million, $0.9 million or 6% higher than last
year.
Labor expense increased by $3.6 million or 14% in the first quarter of 1998
as compared to the same period in 1997 primarily due to an average 3.0% increase
in wages and salaries granted to employees at the
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beginning of the year, as well as a 10% increase in the work force in
expectation of higher business volumes. Depreciation increased by $0.8 million
or 21% primarily due to higher capital spending programs related to the Safety
Compliance Agreement with the FRA discussed in the Notes to Consolidated
Financial Statements. Net equipment rent expense decreased by $2.5 million or
29% primarily due to a 13% reduction in transit times as a result of improved
operating performance. Fuel expense decreased by $0.8 million or 12% in the
first quarter of 1998 compared with the same period of 1997 primarily as a
result of a 15% decrease in fuel prices.
Interest expense and income taxes. Interest expense increased $1.0 million
in the first quarter of 1998 to $4.2 million, primarily due to the increased
borrowings to finance the Duck Creek North Acquisition discussed in the Notes to
Consolidated Financial Statements, as well as the higher capital spending
programs.
The income tax provision for the first quarter of 1998 was $6.9 million, an
increase of $2.1 million from the first quarter of 1997, due to an increase in
pre-tax income.
Equity in net income of affiliates. The Company's 1998 first quarter
results included equity in net income of its affiliates of $9.9 million as
compared to $10.3 million for the same period of 1996. The Company's equity in
the net income of Tranz Rail for the first quarter of 1998 was $2.0 million,
versus $3.2 million in the same quarter a year ago. The decrease in Tranz Rail's
contribution is largely the result of continued softness in the New Zealand and
Asian economies and the decline in the value of the New Zealand dollar versus
the U.S. dollar. The Company's equity in the net income of EWS for the first
quarter of 1998 was $7.9 million versus $7.1 million in the same quarter a year
ago.
Financial Condition: March 31, 1998 Compared to December 31, 1997
The Company generated cash in the amount of $24.0 million during the first
three months of 1998 from operations, a cash dividend received from Tranz Rail,
the sale of assets and equity issuances. These resources, as well as cash on
hand, were used to finance capital-related expenditures of $19.6 million and
long-term debt repayments of $1.3 million.
The Company had $279.5 million of total debt outstanding at March 31, 1998,
which constituted 41.9% of its total capitalization, compared to 43.2% at
December 31, 1997. At March 31, 1998, the Company's aggregate unused borrowing
availability under its loan facilities totaled $43.5 million.
As discussed in the Notes to Consolidated Financial Statements, in April
1998, the Company sold $150 million of debt securities in a public offering to
take advantage of the current long-term interest rate level as well as the
Company's improved creditworthiness. The net proceeds from the sale have been
used to repay outstanding borrowings under the Company's bank revolving credit
facility. The debt securities mature on April 15, 2008 and bear interest at
6.625% and yield 6.676%. Concurrent with the public sale of debt securities, the
Company reduced the total capacity under its bank revolving credit facility from
$325 million to $175 million.
Disclaimer Regarding Forward-Looking Statements
This report contains certain statements that are "forward-looking", within
the meaning of Section 21E of the Securities Exchange Act of 1934, including
statement regarding, among other matters, the beliefs, expectations, plans and
estimates of the Company with respect to certain future events, the impact of
governmental regulation, the impact of litigation and regulatory proceedings,
the actions to be taken by others and similar expressions concerning matters
that are not historical facts. Such forward-looking statements are not
guarantees of future performance and involve known and unknown risks,
uncertainties and other factors that could cause actual events to differ
materially from those expressed in those statements.
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<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The exhibits set forth on the accompanying Index to Exhibits are filed as
part of this report.
The Company filed a report on Form 8-K dated February 5, 1998, reporting
the Company's financial results for the quarter and year ended December 31,
1997.
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<PAGE>
WISCONSIN CENTRAL TRANSPORTATION CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WISCONSIN CENTRAL TRANSPORTATION
CORPORATION
Date: May 14, 1998 By: /s/ Walter C. Kelly
----------------------
Walter C. Kelly
Vice President, Finance
Date: May 14, 1998 By: /s/ Walter C. Kelly
----------------------
Walter C. Kelly
Chief Accounting Officer
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<PAGE>
INDEX TO EXHIBITS
Sequentially
Numbered
Exhibit No. Description Page
- ---------- ----------- ----
4.1 Indenture dated as of April 21, 1998 between
the Company and The Bank of New York, as
Trustee (incorporated by reference to Exhibit
4.1 to Form S-3 filed under the Securities Act
on January 12, 1998) (File No. 333-44049)
4.2 Form of Security issued pursuant to Indenture
filed as Exhibit 4.1 15
27 Financial Data Schedule 18
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EXHIBIT NO. 4.2
This Security is a Book-Entry Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee of a Depositary. This Security is exchangeable for Securities registered
in the name of a Person other than the Depositary or its nominee only in the
limited circumstances described in the Indenture and may not be transferred
except as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary.
WISCONSIN CENTRAL TRANSPORTATION CORPORATION
No. R-1
$150,000,000.00
CUSIP No. 976592AA3
Wisconsin Central Transportation Corporation, a corporation duly
organized and existing under the laws of Delaware (herein called the "Company",
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to Cede & Co., or
registered assigns, the principal sum of One Hundred Fifty Million Dollars on
April 15, 2008 and to pay interest thereon (computed on the basis of a 360-day
year of twelve 30-day months) from April 21, 1998 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semiannually on April 15 and October 15 in each year, commencing October 15,
1998 at the rate of 6.625% per annum, until the principal hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the April 1 or October 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the principal corporate trust office of The Bank of New
York as Trustee, 101 Barclay Street, Floor 21 West, New York, New York 10286,
Attention: Corporate Trust Trustee Administration, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts. So long as the Securities are represented
by Global Debt Securities, the interest payable on the Securities will be paid
to Cede & Co., the nominee of DTC, or its registered assigns as the registered
owner of the Global Debt Securities. If the Securities are no longer represented
by Global Debt Securities, payment of interest may, at the option of the
Company, be made by check mailed to the address of the Person entitled thereto.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
In Witness Whereof, the Company has caused this instrument to be duly
executed under its corporate seal.
Wisconsin Central Transportation Corporation
By:
Attest:
<PAGE>
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of April 21, 1998 (herein called the
"Indenture"), between the Company and The Bank of New York, as Trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the Holders of
the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof, limited in aggregate principal amount to $150,000,000.
The Securities of this series are subject to redemption upon not less
than 30 nor more than 60 days' notice by mail, as a whole or in part, at the
election of the Company, at Redemption Prices determined as follows: the greater
of (I) 100% of the principal amount of such Securities or (ii) the sum of the
present values of the remaining scheduled payments of principal and interest
discounted to the redemption date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury Rate (determined on
the third Business Day preceding such redemption date) (where "Adjusted Treasury
Rate" is defined as (A) the arithmetic mean of the yields under the heading
"Week Ending" published in the Statistical Release most recently published prior
to the date of determination under the caption "Treasury Constant Maturities"
for the maturity (rounded to the nearest month) corresponding to the remaining
life to maturity, as of the redemption date, of the principal being redeemed
plus (B) 0.10%; if no maturity set forth under such heading exactly corresponds
to the maturity of such principal, yields for the two published maturities most
closely corresponding to the maturity of such principal shall be calculated
pursuant to the immediately preceding sentence, and the Adjusted Treasury Rate
shall be interpolated or extrapolated from such yields on a straight-line basis,
rounding in each of the relevant periods to the nearest month; and "Statistical
Release" is defined as the statistical release designated "H.15(519)" or any
successor publication which is published weekly by the Federal Reserve System
and which establishes yields on actively-traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the terms of the
Securities, then such other reasonably comparable index which shall be
designated by the Company), together in the case of any such redemption with
accrued interest to the Redemption Date, but interest installments whose Stated
Maturity is on or prior to such Redemption Date will be payable to the Holders
of such Securities, or one or more Predecessor Securities, of record at the
close of business on the relevant Regular Record Dates or Special Record Dates
referred to on the face hereof, all as provided in the Indenture.
In the event of redemption of this Security in part only, a new
Security or Securities of this series and of like tenor for the unredeemed
portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security or certain restrictive covenants and Events
of Default with respect to this Security, in each case upon compliance with
certain conditions set forth in the Indenture.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
<PAGE>
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
This Security shall be governed by and construed in accordance with the
laws of the State of New York, without regard to conflicts of laws principles
thereof.
Trustee's Certificate of Authentication
Dated:_______________________________________
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
The Bank of New York, As Trustee
By:__________________________________________
Authorized Signatory
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet at March 31, 1998 (unaudited) and the
Condensed Consolidated Statement of Income for the Three Months Ended March 31,
1998 (unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 7,753
<SECURITIES> 0
<RECEIVABLES> 84,212
<ALLOWANCES> 1,641
<INVENTORY> 24,514
<CURRENT-ASSETS> 120,086
<PP&E> 746,145
<DEPRECIATION> 82,737
<TOTAL-ASSETS> 942,006
<CURRENT-LIABILITIES> 158,445
<BONDS> 278,051
0
0
<COMMON> 510
<OTHER-SE> 386,998
<TOTAL-LIABILITY-AND-EQUITY> 942,006
<SALES> 0
<TOTAL-REVENUES> 83,957
<CGS> 0
<TOTAL-COSTS> 67,969
<OTHER-EXPENSES> (5,583)
<LOSS-PROVISION> 87
<INTEREST-EXPENSE> 4,208
<INCOME-PRETAX> 17,363
<INCOME-TAX> 6,875
<INCOME-CONTINUING> 10,488
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,429
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
</TABLE>
