UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 22, 1995
BURLINGTON NORTHERN SANTA FE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-11535 41-1804964
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3800 Continental Plaza
777 Main Street
Fort Worth, Texas 76102-5384
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 333-2000
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
The Registrant hereby amends Item 7.B. of Part II of the Registrant's Current
Report on Form 8-K, dated September 22, 1995, as follows:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
B. Pro Forma Financial Information
On June 29, 1994, Burlington Northern Inc. (BNI) and Santa Fe Pacific
Corporation (SFP) entered into an Agreement and Plan of Merger (as amended by
amendments as of October 26, 1994, December 18, 1994, January 24, 1995 and
September 19, 1995, the Merger Agreement) pursuant to which, on the terms and
conditions set forth in the Merger Agreement, SFP would merge with BNI
(effected in the manner set forth below, the Merger). Stockholders of BNI and
SFP approved the Merger Agreement at special stockholders' meetings held on
February 7, 1995. On August 23, 1995, the Interstate Commerce Commission
issued a written decision approving the Merger and on September 22, 1995 the
Merger was consummated.
Pursuant to the Merger Agreement, on December 23, 1994, BNI and SFP commenced
tender offers (together, the Tender Offer) to acquire 25 million and 38
million shares of SFP common stock, respectively, at $20 per share in cash.
During the first quarter of 1995, SFP borrowed $1.0 billion under a credit
facility (the SFP Credit Facility) of which $760 million of the proceeds were
used to purchase the 38 million shares pursuant to the Tender Offer. In
addition, BNI borrowed $500 million under a credit facility (the BNI Tender
Offer Facility) of which the proceeds were used to finance BNI's purchase of
25 million shares of SFP common stock in the Tender Offer. Funding of the
Tender Offer was completed on February 21, 1995.
Also, pursuant to the Merger Agreement, BNI and SFP were entitled to elect to
consummate the Merger through the use of one of two possible structures: (i)
a merger of SFP with and into BNI and (ii) the Holding Company Structure
described below. To ensure that the transaction contemplated by the Merger
Agreement qualified as a tax-free transaction (the Exchange) for federal
income tax purposes, the parties utilized the Holding Company Structure.
Under the Holding Company Structure, Burlington Northern Santa Fe Corporation
(BNSF) created two subsidiaries. One such subsidiary merged with and into
BNI, and the other such subsidiary merged with and into SFP. Each holder of
one share of BNI common stock received one share of BNSF common stock and each
holder of one share of SFP common stock, excluding the SFP common stock
acquired by BNI in the Tender Offer and the SFP common stock held by SFP as
treasury stock, received 0.41143945 shares of BNSF common stock, which
reflects the effects of the Repurchase Program discussed below. The SFP
common stock acquired by BNI in the Tender Offer remains outstanding and the
SFP common stock held by SFP as treasury stock will be canceled. The rights
of each stockholder of BNSF are substantially identical to the rights of a
stockholder of BNI, and the Holding Company Structure has the same economic
effect with respect to the stockholders of BNI and SFP as would a direct
merger of BNI and SFP.
Under the Repurchase Program as set forth in the Merger Agreement, SFP was
permitted, at its discretion and subject to certain financial and performance
criteria of SFP set forth in its credit agreement and the Merger Agreement
(including minimum cash flows, cash capital expenditures and maximum total
debt), to repurchase up to 10 million shares of SFP common stock prior to
consummation of the Merger. In the Merger Agreement, the exchange ratio of
BNSF common shares for each share of outstanding SFP common stock upon
consummation of the Merger was set at not less than 0.40 shares, with
repurchases under the Repurchase Program increasing the exchange ratio pro
rata to not more than 0.4347 shares (the Exchange Ratio). As of September 22,
1995, the date of consummation, SFP had repurchased approximately 3.6 million
shares which, along with the effect of SFP stock options exercised, resulted
in the final exchange ratio of 0.41143945 shares.
The unaudited pro forma combined statements of operations included herein have
been prepared to display the effect of the Tender Offer and the Exchange as if
they occurred on January 1, 1994. The historical BNSF statement of operations
for the nine months ended September 30, 1995 reflects the historical results
of operations of BNI, and the results of operations for SFP from September 22,
1995 through September 30, 1995. The historical BNSF statement of operations
for the year ended December 30, 1994 reflects the historical results of
operations of BNI. The BNSF consolidated balance sheet as of September 30,
1995 in BNSF's quarterly report on Form 10-Q for the quarter ended September
30, 1995 reflects the effects of the business combination with SFP and is
incorporated by reference herein.
The business combination with SFP was accounted for under the purchase method.
The pro forma combined adjustments do not reflect any potential increases in
operating income (or one-time costs to achieve such increases) which may arise
from the Merger. See "Notes to Pro Forma Combined Financial Statements." The
unaudited pro forma combined statements of operations are presented for
illustrative purposes only and are not necessarily indicative of the results
of operations that might have occurred had the Merger actually taken place on
the date indicated, or of future results of operations of the combined
entities.
The unaudited pro forma combined statements of operations are based on the
historical consolidated financial statements of BNSF, BNI and SFP and should
be read in conjunction with such historical financial statements and the notes
thereto, which are incorporated by reference in this Form 8-K/A.
<PAGE>
Pro Forma Combined Statement of Operations
Nine Months Ended September 30, 1995
Unaudited
(Dollars in Millions, Except Per Share Data)
<TABLE>
<CAPTION>
Santa Fe
Pacific
Corporation Burlington
Burlington January 1 Northern
Northern through Santa Fe
Santa Fe September 21, Pro Forma Corporation
Corporation 1995 Adjustments Pro Forma
------------ --------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 4,091 $ 1,987 $ - $ 6,078
Operating expenses
Compensation and benefits 1,404 604 6 (A) 2,014
Equipment rents 352 180 - 532
Purchased services 325 278 - 603
Fuel 307 183 - 490
Depreciation and amortization 307 152 61 (B) 520
Materials 227 78 - 305
Other 288 150 - 438
Merger and severance 148 - (24) (C) 124
------------ --------------- ------------- ------------
Total operating expenses 3,358 1,625 43 5,026
------------ --------------- ------------- ------------
Operating income 733 362 (43) 1,052
Interest expense 145 124 (4) (D) 265
Other income (expense), net 31 (32) 10 (E) 9
------------ --------------- ------------- ------------
Income before income taxes 619 206 (29) 796
Income tax expense 242 81 (18) (F) 305
------------ --------------- ------------- ------------
Income from continuing operations $ 377 $ 125 $ (11) $ 491
============ =============== ============= ============
Earnings per common share
(Primary):
Income from continuing
operations $ 3.90 $ .75 $ 3.27 (G)
============ =============== ============
Shares used in computation
(in thousands) 92,685 166,476 145,258 (G)
Earnings per common share
(Fully Diluted):
Income from continuing
operations $ 3.76 $ .75 $ 3.20 (G)
============ =============== ============
Shares used in computation
(in thousands) 100,496 166,883 153,237 (G)
</TABLE>
(See accompanying Notes to Pro Forma Combined Financial Statements)
<PAGE>
Pro Forma Combined Statement of Operations
Year Ended December 31, 1994
Unaudited
(Dollars in Millions, Except Per Share Data)
<TABLE>
<CAPTION>
Burlington
Burlington Northern
Northern Santa Fe Santa Fe
Santa Fe Pacific Pro Forma Corporation
Corporation Corporation Adjustments Pro Forma
------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 4,995 $ 2,681 $ - $ 7,676
Operating expenses
Compensation and benefits 1,779 836 7 (A) 2,622
Equipment rents 429 248 - 677
Purchased services 472 377 - 849
Fuel 369 253 - 622
Depreciation and amortization 362 200 83 (B) 645
Materials 305 119 - 424
Other 426 219 - 645
------------- -------------- ------------- ------------
Total operating expenses 4,142 2,252 90 6,484
------------- -------------- ------------- ------------
Operating income 853 429 (90) 1,192
Interest expense 155 122 68 (D) 345
Other income (expense), net (3) 44 4 (E) 45
------------- -------------- ------------- ------------
Income before income taxes 695 351 (154) 892
Income tax expense 269 152 (65) (F) 356
------------- -------------- ------------- ------------
Income from continuing
operations $ 426 $ 199 $ (89) $ 536
============= ============== ============= ============
Earnings per common share
(Primary):
Income from continuing
operations $ 4.48 $ 1.05 $ 3.63 (G)
============= ============== ============
Shares used in computation
(in thousands) 90,187 190,800 141,570 (G)
Earnings per common share
(Fully Diluted):
Income from continuing
operations $ 4.38 $ 1.04 $ 3.59 (G)
============= ============== ============
Shares used in computation
(in thousands) 97,528 191,900 149,363 (G)
</TABLE>
(See accompanying Notes to Pro Forma Combined Financial Statements)
<PAGE>
Notes to Pro Forma Combined Financial Statements
Pursuant to the Merger Agreement, on December 23, 1994, BNI and SFP commenced
tender offers (together, the Tender Offer) to acquire 25 million and 38
million shares of SFP common stock, respectively, at $20 per share in cash.
During the first quarter of 1995, SFP borrowed $1.0 billion under a credit
facility (the SFP Credit Facility) of which $760 million of the proceeds were
used to purchase the 38 million shares pursuant to the Tender Offer. In
addition, BNI borrowed $500 million under a credit facility (the BNI Tender
Offer Facility) of which the proceeds were used to finance BNI's purchase of
25 million shares of SFP common stock in the Tender Offer. Funding of the
Tender Offer was completed on February 21, 1995.
The pro forma combined statements of operations have been prepared based on an
estimated fair value of BNSF common stock of $51 per share. The fair value was
determined from the average of the daily closing prices of BNI common stock
for the five trading days immediately preceding and the five trading days
immediately following approval of the Merger by BNI and SFP shareholders which
occurred on February 7, 1995. As of September 22, 1995, the date of
consummation, SFP had repurchased approximately 3.6 million shares which,
along with the effect of SFP stock options exercised, resulted in the final
exchange ratio of 0.41143945 shares.
The following summarizes the purchase price (dollars in millions, except per
share data, and shares in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
BNI investment in SFP $ 516
Shares of SFP common stock outstanding
at September 22, 1995 151,396
Less SFP shares held by BNI (25,000)
-----------
Remaining SFP shares outstanding 126,396
Exchange ratio .41143945
-----------
Shares of BNSF common stock issued 52,004
Per share value of BNSF common stock $ 51
-----------
Total value of BNSF common stock issued 2,652
Value of outstanding SFP stock options 119
BNI direct acquisition costs 32
------
Purchase price $3,319
======
</TABLE>
The Merger with SFP was accounted for by BNSF under the purchase method of
accounting in accordance with Accounting Principles Board Opinion (APB) No.
16, "Business Combinations," and Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes." Accordingly, these methods have been
applied in the unaudited pro forma combined statements of operations. The
purchase price was allocated to assets acquired and liabilities assumed based
on their fair values.
<PAGE>
The purchase price was allocated as shown in the table below (in millions):
<TABLE>
<CAPTION>
<S> <C>
Book Value of SFP net assets at September 22,
1995 $ 570
Increase (decrease) to SFP's net book value at
September 22, 1995:
Current assets (19)
Property and equipment, net 4,469
Other long-term assets 235
Current liabilities 3
Long-term debt (141)
Deferred income taxes (1,700)
Other long-term liabilities (98)
---------
Total allocation of purchase price $3,319
=========
</TABLE>
The accompanying pro forma combined statements of operations are presented for
illustrative purposes only and do not give effect to any potential increases
in operating income or related costs to achieve such increases which may arise
from the Merger. The purchase price allocation includes a $120 million
increase in other liabilities for anticipated nonrecurring costs and expenses
for severance and relocation of prior SFP employees. This amount reflects
BNSF's best current estimate of such costs. Changes to this liability may
affect the final purchase price allocation.
Certain amounts in the historical financial statements of SFP have been
reclassified in the unaudited pro forma combined statements of operations to
conform to BNI's historical financial statement presentation.
A. Compensation and benefits expense
Compensation and benefits expense was increased $6 million and $7 million for
the nine months ended September 30, 1995 and the year ended December 31, 1994,
respectively, as a result of an adjustment to SFP's pension assets and
post-retirement benefits liability based on current actuarial estimates.
B. Depreciation expense
A significant portion of the fair value adjustments were allocated to
long-lived track structures as well as land used for transportation purposes.
The increase in the fair value of depreciable assets was depreciated under the
straight-line method over the remaining estimated useful lives of the
property. Depreciation expense of $61 million for the nine months ended
September 30, 1995 and $83 million for the year ended December 31, 1994
related to the increase in fair value has been included in the unaudited pro
forma combined statements of operations.
C. Merger and severance expenses
BNSF expenses which were directly attributable to the Merger of $24 million,
associated with the vesting of BNI restricted stock upon shareholder approval
of the Merger on February 7, 1995, were eliminated in the pro forma combined
statement of operations for the nine months ended September 30, 1995.
<PAGE>
D. Interest expense
SFP's long-term debt was adjusted to its estimated fair value as of September
22, 1995. The fair value adjustment of $141 million was amortized to offset
interest expense over the estimated lives of the instruments.
On February 21, 1995, SFP and BNI completed the Tender Offer through
borrowings of $760 million and $500 million of debt, respectively, (the Tender
Offer Debt). Additionally, SFP borrowed $240 million to repay $200 million of
outstanding 12.65% senior notes, including related costs. Interest expense
has been adjusted in the pro forma combined statements of operations to
reflect interest expense as if the debt had been issued on January 1, 1994.
The effect of these adjustments for the nine months ended September 30, 1995
and for the year ended December 31, 1994 are as follows (in millions):
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
Interest expense on: September 30, 1995 December 31, 1994
- -------------------------------- -------------------- -------------------
<S> <C> <C>
SFP Tender Offer Debt $ 11 $ 73
BNI Tender Offer Debt 6 38
SFP 12.65% Senior Notes (5) (25)
Fair Value Adjustment (16) (18)
-------------------- -------------------
Total $ (4) $ 68
==================== ===================
</TABLE>
E. Other income (expense), net
SFP incurred expenses which were directly attributable to the Merger of $34
million for the nine months ended September 30, 1995 and $14 million for the
year ended December 31, 1994. These expenses were eliminated from the pro
forma combined statements of operations.
Prior to consummation of the Merger, BNI accounted for its investment in SFP
under the cost method. However, upon consummation of the Merger, BNI's equity
in earnings of SFP of $16 million prior to the Merger was recorded as other
income. Other income (expense), net has been adjusted to exclude BNI's equity
in earnings of SFP.
SFP's gain on sales of real estate has been eliminated due to the write-up of
real estate to its fair value. These gains were excluded from the pro forma
combined statement of operations for the nine months ended September 30, 1995
and the year ended December 31, 1994.
In addition, certain investments, primarily SFP's pipeline investment, which
is accounted for under the equity method, were adjusted to their estimated
fair values as of September 22, 1995. Amortization of this adjustment is
reflected in the pro forma combined statements of operations for the nine
months ended September 30, 1995 and the year ended December 31, 1994.
<PAGE>
The effect of these adjustments for the nine months ended September 30, 1995
and for the year ended December 31, 1994 have been included in the unaudited
pro forma combined statements of operations as follows (in millions):
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, 1995 December 31, 1994
-------------------- -------------------
<S> <C> <C>
SFP's expenses directly
attributable to the
Merger $ 34 $ 14
BNI's equity in earnings
of SFP (16) -
Gains on sales of real
estate (5) (6)
Pipeline investment
amortization (3) (4)
-------------------- -------------------
Total $ 10 $ 4
==================== ===================
</TABLE>
F. Income tax expense
Income tax expense has been reduced from tax computed at BNSF's incremental
income tax rate by $7 million and $3 million in the unaudited pro forma
statements of operations for the nine months ended September 30, 1995 and the
year ended December 31, 1994, respectively. Tax expense on adjustments varies
from BNSF's incremental income tax rate of approximately 40 percent because
certain merger expenses were not deductible for income tax purposes.
G. Earnings per common share
Pro forma weighted average shares outstanding represent the conversion at an
exchange ratio of 0.41143945 shares of BNSF common stock for each share of SFP
common stock as if the Tender Offer, SFP repurchases and the Exchange had
occurred as of January 1, 1994. Primary earnings per common share are
computed by dividing income from continuing operations, after deduction of
preferred stock dividends, by the weighted average number of common shares and
common share equivalents outstanding. Fully diluted earnings per common share
are computed by dividing income from continuing operations by the weighted
average number of common share and common share equivalents outstanding.
Common share equivalents are computed using the treasury stock method. An
average market price is used to determine the number of common share
equivalents for primary earnings per common share. The higher of the average
or end-of-period market price is used to determine common share equivalents
for fully diluted earnings per common share. In addition, the if-converted
method is used for convertible preferred stock when computing fully diluted
earnings per common share.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
C. Exhibits
Exhibit 13.1 BNSF Report on Form 10-Q for the quarter ended September 30,
1995. *
Exhibit 13.2 BNI Report on Form 10-K for the year ended December 31, 1994. *
Exhibit 13.3 BNI Report on Form 10-Q for the quarter ended June 30, 1995. *
Exhibit 13.4 SFP Report on Form 10-K for the year ended December 31, 1994. *
Exhibit 13.5 SFP Report on Form 10-Q for the quarter ended June 30, 1995. *
Exhibit 23.1 Consent of Coopers & Lybrand L.L.P.
Exhibit 23.2 Consent of Price Waterhouse LLP.
* Exhibit is incorporated by reference as indicated.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BURLINGTON NORTHERN SANTA FE CORPORATION
(Registrant)
By: /s/Thomas N. Hund
Thomas N. Hund
Vice President and Controller
(On behalf the Registrant and as
principal accounting officer)
Schaumburg, Illinois
November 13, 1995
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-62823; 33-62829; 33-62831; 33-62839; 33-62833;
33-62825; 33-62835; 33-62827; 33-62837; 33-62841; 33-62943; 33-63247;
33-63249; 33-63253; and 33-63255) of Burlington Northern Santa Fe Corporation
of our report dated January 16, 1995, on our audits of the consolidated
financial statements of Burlington Northern Inc. and Subsidiaries as of
December 31, 1994 and 1993 and for the years ended December 31, 1994, 1993 and
1992, included in Burlington Northern Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1994.
COOPERS & LYBRAND L.L.P.
Fort Worth, Texas
November 10, 1995
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-62823; 33-62829; 33-62831; 33-62839; 33-62833;
33-62825; 33-62835; 33-62827; 33-62837; 33-62841; 33-62943; 33-63247;
33-63249; 33-63253; and 33-63255) of Burlington Northern Santa Fe Corporation
of our report dated February 21, 1995, related to the consolidated financial
statements of Santa Fe Pacific Corporation, which appears on page 19 of the
1994 Annual Report to Shareholders which is incorporated by reference in Santa
Fe Pacific Corporation's Annual Report on Form 10-K for the year ended
December 31, 1994.
PRICE WATERHOUSE LLP
Kansas City, Missouri
November 10, 1995
