SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-11535
BURLINGTON NORTHERN SANTA FE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 41-1804964
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3800 Continental Plaza, 777 Main St.
Fort Worth, Texas 76102-5384
(Address of principal executive offices) (Zip Code)
(817) 333-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes__X__ No_____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares
Class Outstanding at April 30, 1996
Common stock, $.01 par value 152,114,257 shares
<PAGE>
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended
March 31,
1996 1995
-------- --------
<S> <C> <C>
Revenues $ 2,031 $ 1,347
Operating expenses:
Compensation and benefits 671 483
Purchased services 205 113
Depreciation and amortization 185 107
Equipment rents 177 116
Fuel 167 98
Materials and other 241 193
Merger, severance and asset charge - 32
-------- --------
Total operating expenses 1,646 1,142
-------- --------
Operating income 385 205
Interest expense 75 43
Other income (expense), net (4) 3
-------- --------
Income before income taxes 306 165
Income tax expense 119 64
-------- --------
Income before cumulative effect of
change in accounting method 187 101
Cumulative effect of change in
accounting method, net of tax - (100)
-------- --------
Net income $ 187 $ 1
======== ========
Net income (loss) per common share:
Income before cumulative effect of
change in accounting method $ 1.21 $ 1.05
Change in accounting method - (1.11)
-------- --------
Net income (loss) per common share $ 1.21 $ (0.06)
======== ========
Average shares (in millions) 155.0 90.3
======== ========
Dividends declared per common share $ .30 $ .30
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
---------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 34 $ 50
Accounts receivable, net 686 620
Materials and supplies 250 220
Current portion of deferred income taxes 318 320
Other current assets 53 54
---------- --------
Total current assets 1,341 1,264
Property and equipment, net 16,205 16,001
Other assets 972 1,004
---------- --------
Total assets $ 18,518 $18,269
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities $ 2,187 $ 2,289
Long-term debt and commercial paper due
within one year 152 80
---------- --------
Total current liabilities 2,339 2,369
Long-term debt and commercial paper 4,087 4,153
Deferred income taxes 4,301 4,233
Casualty and environmental reserves 625 626
Employee, merger and separation costs 519 530
Other liabilities 1,379 1,321
---------- --------
Total liabilities 13,250 13,232
---------- --------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 300,000,000
shares authorized; 151,573,910 shares and
149,649,930 shares issued, respectively 2 1
Additional paid-in capital 4,697 4,606
Retained earnings 601 459
Other (32) (29)
---------- --------
Total stockholders' equity 5,268 5,037
---------- --------
Total liabilities and stockholders'
equity $ 18,518 $18,269
========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
------ ------
<S> <C> <C>
Operating Activities:
Net income $ 187 $ 1
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in accounting method - 100
Depreciation and amortization 185 107
Deferred income taxes 69 17
Merger, severance and asset charge - 32
Employee, merger and separation costs paid (56) (9)
Other, net 34 (11)
Changes in working capital (116) (157)
------ ------
Net cash provided by operating activities 303 80
------ ------
Investing Activities:
Cash used for capital expenditures (354) (161)
Investment in Santa Fe Pacific Corporation - (500)
Other, net 41 4
------ ------
Net cash used for investing activities (313) (657)
------ ------
Financing Activities:
Net increase (decrease) in commercial paper (165) 119
Proceeds from issuance of long-term debt 175 510
Payments on long-term debt (25) (23)
Dividends paid (47) (32)
Proceeds from stock options 56 1
------ ------
Net cash provided by (used for) financing activities (6) 575
------ ------
Decrease in cash and cash equivalents (16) (2)
Cash and cash equivalents:
Beginning of period 50 27
------ ------
End of period $ 34 $ 25
====== ======
Supplemental cash flow information:
Interest paid, net of amounts capitalized $ 67 $ 37
Income taxes paid (refunded), net (7) 2
Assets financed through capital lease obligations 24 -
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Accounting policies and interim results
The consolidated financial statements should be read in conjunction with the
Burlington Northern Santa Fe Corporation ("BNSF", "Registrant" or "Company")
Annual Report on Form 10-K for the year ended December 31, 1995, including
those financial statements and notes thereto incorporated by reference from
the Registrant's 1995 Annual Report to Shareholders. The principal
subsidiaries of BNSF are Burlington Northern Inc. (BNI), Burlington Northern
Railroad Company (BNRR), Santa Fe Pacific Corporation (SFP) and The Atchison,
Topeka and Santa Fe Railway Company (ATSF). As a result of a business
combination, SFP and ATSF became wholly owned subsidiaries of BNSF on
September 22, 1995. The BNSF consolidated balance sheet at December 31, 1995
and March 31, 1996 and consolidated statements of income and cash flows for
the three month period ended March 31, 1996 include the results of both BNI
and SFP. The statements of income and cash flows for the three months ended
March 31, 1995 reflect only BNI historical amounts.
The results of operations for any interim period are not necessarily
indicative of the results of operations to be expected for the entire year.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments, except as disclosed) necessary to present fairly BNSF's
consolidated financial position as of March 31, 1996 and December 31, 1995 and
the consolidated results of operations for the three month periods ended March
31, 1996 and 1995 have been included.
Certain comparative prior year amounts in the consolidated financial
statements and notes have been reclassified to conform with the current year
presentation.
2. Employee, merger and separation costs
Current and long-term employee merger and separation liabilities totaling $684
million are included in the consolidated balance sheet at March 31, 1996.
During the first quarter of 1996, the Company paid $56 million of employee,
merger and separation costs.
At March 31, 1996, approximately $165 million of the total liability is
included within current liabilities for anticipated costs to be paid over the
next twelve months. The remaining costs are anticipated to be paid over the
next five years, except for certain costs related to conductors, trainmen and
locomotive engineers which will be paid upon the employees' separation or
retirement.
Certain merger and separation costs, including relocation costs associated
with clerical employees, will be recorded as operating expenses in 1996 and
future periods. The ultimate timing and magnitude of any such future expense
is presently unknown.
Results for the 1995 first quarter were reduced by $32 million of merger-
related expenses principally related to restricted stock which vested upon
approval of the merger by BNI shareholders.
3. Accounting change
Effective January 1, 1995, BNSF changed its method of accounting for periodic
major locomotive overhauls. Under the new method, costs of owned locomotives
relating to components requiring major overhaul are depreciated, on a
straight-line basis, to the first major overhaul date. The remaining cost of
the owned locomotive is depreciated, on a straight-line basis, over the
estimated economic life of the locomotive. The cost of overhauls on owned
units are then capitalized when incurred and depreciated, on a straight-line
basis, until the next anticipated overhaul. In addition, estimated costs for
major overhauls on leased units are accrued on a straight-line basis over the
life of the leases. BNSF previously expensed locomotive overhauls when the
costs were incurred. The cumulative effect of this change on years prior to
1995 was a reduction in net income of $100 million, net of a $63 million tax
benefit.
4. Environmental and other contingencies
BNSF's operations, as well as those of its competitors, are subject to
extensive federal, state and local environmental regulation. BNSF's operating
procedures include practices to protect the environment from the environmental
risks inherent in railroad operations, which frequently involve transporting
chemicals and other hazardous materials.
Additionally, many of BNSF'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. As a result, BNSF is subject to environmental clean-up and
enforcement actions. In particular, the Federal Comprehensive Environmental
Response Compensation and Liability Act of 1980 (CERCLA), also known as the
"Superfund" law, as well as similar state laws generally impose joint and
several liability for clean-up and enforcement costs without regard to fault
or the legality of the original conduct on current and former owners and
operators of a site. BNSF has been notified that it is a potentially
responsible party (PRP) for study and clean-up costs at approximately 30
Superfund sites for which investigation and remediation payments are or will
be made or are yet to be determined (the Superfund sites) and, in many
instances, is one of several PRPs. In addition, BNSF may be considered a PRP
under certain other laws. Accordingly, under CERCLA and other federal and
state statutes, BNSF may be held jointly and severally liable for all
environmental costs associated with a particular site. If there are other
PRPs, BNSF generally participates in the clean-up of these sites through
cost-sharing agreements with terms that vary from site to site. Costs are
typically allocated based on relative volumetric contribution of material, the
amount of time the site was owned or operated, and/or the portion of the total
site owned or operated by each PRP.
Environmental costs include initial site surveys and environmental studies of
potentially contaminated sites as well as costs for remediation and
restoration of sites determined to be contaminated. Liabilities for
environmental clean-up costs are initially recorded when BNSF's liability for
environmental clean-up is both probable and a reasonable estimate of
associated costs can be made. Adjustments to initial estimates are recorded
as necessary based upon additional information developed in subsequent
periods. BNSF conducts an ongoing environmental contingency analysis, which
considers a combination of factors including independent consulting reports,
site visits, legal reviews, analysis of the likelihood of participation in and
the ability of other PRPs to pay for clean-up, and historical trend analyses.
BNSF is involved in a number of administrative and judicial proceedings and
other mandatory clean-up efforts at approximately 320 sites, including the
Superfund sites, at which it is being asked to participate in the study or
clean-up of the alleged environmental contamination. BNSF paid approximately
$10 million during the three months ended March 31, 1996 relating to mandatory
clean-up efforts, including amounts expended under federal and state voluntary
clean-up programs. BNSF has accruals of approximately $230 million for
remediation and restoration of all known sites, including $225 million
pertaining to mandated sites, of which approximately $60 million relates to
the Superfund sites. BNSF anticipates that the majority of the accrued costs
at March 31, 1996 will be paid over the next five years. No individual site
is considered to be material.
Liabilities for environmental costs represent BNSF's best estimates for
remediation and restoration of these sites and include both asserted and
unasserted claims. Unasserted claims are not considered to be a material
component of the liability. Although recorded liabilities include BNSF's
best estimates of all costs, without reduction for anticipated recoveries from
third parties, BNSF's total clean-up costs at these sites cannot be predicted
with certainty due to various factors such as the extent of corrective actions
that may be required, evolving environmental laws and regulations, advances in
environmental technology, the extent of other PRPs' participation in clean-up
efforts, developments in ongoing environmental analyses related to sites
determined to be contaminated, and developments in environmental surveys and
studies of potentially contaminated sites. As a result, future charges to
income for environmental liabilities could have a significant effect on
results of operations in a particular quarter or fiscal year as individual
site studies and remediation and restoration efforts proceed or as new sites
arise. However, expenditures associated with such liabilities are typically
paid out over a long period, and are therefore not expected to have a material
adverse effect on BNSF's consolidated financial position or liquidity.
BNSF expects that it will become subject to future requirements regulating air
emissions from diesel locomotives that may increase their operating costs.
Regulations applicable to new locomotive engines are expected to be issued by
the Environmental Protection Agency soon. It is anticipated that these
regulations will be effective for locomotive engines installed after 1999.
Under some interpretations of federal law, older locomotive engines may be
regulated by states based on standards and procedures which the State of
California ultimately adopts. At this time it is unknown whether California
will adopt locomotive emission standards that may differ from federal
standards.
BNSF and its subsidiaries are parties to a number of legal actions and claims,
various governmental proceedings and private civil suits arising in the
ordinary course of business, including those related to environmental matters
and personal injury claims. While the final outcome of these items cannot be
predicted with certainty, considering among other things the meritorious legal
defenses available, it is the opinion of management that none of these items,
when finally resolved, will have a material adverse effect on the annual
results of operations, financial position or liquidity of BNSF, although an
adverse resolution of a number of these items in a single period could have a
material adverse effect on the results of operations in a particular quarter
or fiscal year.
5. Hedging activities
Fuel
BNSF has a program to hedge against fluctuations in the price of its diesel
fuel purchases. This program includes forward purchases for delivery at
fueling facilities. Additionally, this program includes exchange-traded
petroleum futures contracts and various commodity swap and collar transactions
which are accounted for as hedges. Any gains or losses associated with
changes in market value of these hedges are deferred and recognized as a
component of fuel expense in the period in which the hedged fuel is purchased
and used. To the extent BNSF hedges portions of its fuel purchases, it may
not fully benefit from decreases in fuel prices.
As of March 31, 1996, BNSF had entered into forward purchases for
approximately 57 million gallons at an average price of approximately 49 cents
per gallon, fuel swaps for approximately 69 million gallons at an average
price of approximately 46 cents per gallon and petroleum futures contracts
representing approximately 36 million gallons at an average price of
approximately 48 cents per gallon. These contracts have expiration dates
ranging from April 1996 to December 1996.
The above prices do not include taxes, fuel handling costs, certain
transportation costs and, except for forward contracts, any differences which
may occur from time to time between the prices of commodities hedged and the
purchase price of BNSF's diesel fuel.
BNSF's current fuel hedging program covers approximately 21 percent of
projected fuel purchases for the remaining nine months of 1996. The current
and future fuel delivery prices are monitored continuously and hedge positions
are adjusted accordingly. Hedge positions are also closely monitored to
ensure that they will not exceed actual fuel requirements in any period.
Unrealized gains from BNSF's fuel hedging transactions were approximately $5
million at March 31, 1996. BNSF monitors its hedging positions and credit
ratings of its counterparties and does not anticipate losses due to
counterparty nonperformance.
Interest rates
BNSF has interest rate swap transactions to fix interest rates on floating
rate debt with a total principal amount of $250 million. The interest rate
swap transactions require payment of a weighted average fixed interest rate of
approximately 4.8 percent, and the receipt of a variable interest rate based
on LIBOR and mature from February 1997 through August 1997. Unrealized gains
from BNSF's swap transactions were approximately $2 million for the three
months ended March 31, 1996.
<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis relates to the financial condition and
results of operations of Burlington Northern Santa Fe Corporation and its
majority-owned subsidiaries (collectively BNSF or Company). The principal
subsidiaries are Burlington Northern Inc. (BNI), Burlington Northern Railroad
Company (BNRR), Santa Fe Pacific Corporation (SFP) and The Atchison, Topeka
and Santa Fe Railway Company (ATSF).
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1995
BNSF recorded net income for the first quarter of 1996 of $187 million or
$1.21 per common share, compared with first quarter 1995 net income of $1
million and a net loss of $0.06 per common share after reduction for preferred
dividends. Results for the first quarter of 1995 include the results of BNI
only and were further reduced by a $100 million after-tax charge for the
cumulative effect of a change in accounting for locomotive overhauls.
REVENUES
The following table presents BNSF's revenue information by commodity for the
three months ended March 31, 1996 and 1995 and includes certain
reclassifications of prior year information to conform to current year
presentation. The revenue, revenue ton miles and revenue per thousand ton
miles for the three month period ended March 31, 1995 represents historical
BNI amounts.
<TABLE>
<CAPTION>
Revenue
Revenue Per Thousand
Revenues Ton Miles Ton Miles
1996 1995 1996 1995 1996 1995
(In Millions) (In Millions)
<S> <C> <C> <C> <C> <C> <C>
Intermodal $ 496 $ 182 16,940 6,099 $29.27 $29.84
Coal 478 453 41,363 37,793 11.55 11.99
Agricultural Commodities 328 248 17,288 12,359 18.98 20.07
Chemicals 157 77 5,833 3,053 26.99 25.22
Forest Products 131 109 5,803 4,733 22.56 23.03
Consumer and Food Products 110 79 4,263 2,699 25.82 29.27
Metals 102 71 4,918 3,108 20.72 22.84
Minerals and Ores 96 56 3,856 2,489 25.01 22.50
Automotive 91 37 1,314 528 69.20 70.07
------ ------ ------- ------ ------ ------
Total Freight Revenues 1,989 1,312 101,578 72,861 19.58 18.01
Other Revenues 42 35 - - - -
------ ------ ------- ------ ------ ------
Total Operating Revenues $2,031 $1,347 101,578 72,861 $19.58 $18.01
====== ====== ======= ====== ====== ======
</TABLE>
Total revenues for the first quarter of 1996 were $2,031 million compared with
revenues of $1,347 million for the first quarter of 1995. The increase in
revenues of $684 million is principally due to additional revenues from the
acquisition of SFP as a result of the business combination effected September
22, 1995.
Intermodal revenues of $496 million for the 1996 first quarter increased $314
million compared to revenues of $182 million for the 1995 first quarter. The
increase was due to additional revenues resulting from the acquisition of SFP.
Coal revenues of $478 million for the 1996 first quarter increased $25 million
compared to revenues of $453 million for the 1995 first quarter. This
increase was due primarily to additional revenues resulting from the
acquisition of SFP partially offset by lower Powder River Basin (PRB) volumes
as compared to 1995 due to severe weather conditions and related operating
constraints which reduced PRB coal traffic during the 1996 first quarter.
Agricultural Commodities revenues of $328 million for the 1996 first quarter
were $80 million greater than revenues of $248 million for the 1995 first
quarter. Approximately two-thirds of this increase is due to additional
revenues from the acquisition of SFP; the remainder of the increase was due to
higher average revenue per car reflecting stronger export demand.
Chemicals revenues of $157 million increased by $80 million for the first
quarter of 1996 as compared to the first quarter of 1995. The increase is due
to continued strong petroleum products demand as well as additional revenues
from the acquisition of SFP.
Revenue increases in all other commodity groups are principally due to the
acquisition of SFP.
EXPENSES
Total operating expenses for the first quarter of 1996 were $1,646 million, an
increase of $504 million or 44 percent, compared with operating expenses for
the 1995 first quarter of $1,142 million. First quarter 1995 operating
expenses reflect BNI only. The operating ratio was 81.0 percent for the first
quarter of 1996, an improvement over the 84.8 percent operating ratio for the
first quarter 1995. Excluding the merger, severance and asset charge of $32
million, the operating ratio was 82.4 percent for the 1995 first quarter.
Compensation and benefit expenses of $671 million were $188 million or 39
percent higher than the first quarter of 1995. A majority of the increase was
due to expenses related to the inclusion of SFP employees partially offset by
lower salaried employee cost due to a reduction in the number of salaried
employees.
Purchased services expenses for the 1996 first quarter of $205 million were
$92 million or 81 percent higher than expenses of $113 million for the 1995
first quarter. The increase principally reflects the additional expenses
related to former SFP operations.
Depreciation and amortization expense of $185 million for the 1996 first
quarter was $78 million or 73 percent higher than depreciation and
amortization expense for the first quarter of 1995. This increase was due to
an increase in BNSF's asset base which includes former SFP assets which have
been adjusted to reflect values assigned in the merger.
Equipment rents expenses for the first quarter of 1996 of $177 million was $61
million or 53 percent higher than the 1995 first quarter. The increase was
primarily due to the inclusion of equipment rents expenses related to former
SFP equipment and operations.
Fuel expenses of $167 million for the 1996 first quarter were $69 million
higher than fuel expenses for the first quarter of 1995 primarily due to an
increase in consumption of $62 million, reflecting additional volumes due to
the acquisition of SFP. An increase in the average price paid per gallon of
diesel fuel also contributed to the increase.
Materials and other expenses of $241 million for the 1996 first quarter were
$48 million or 25 percent higher than the 1995 first quarter due to the
inclusion of expenses related to former SFP operations and higher costs
associated with severe weather and derailments.
Interest expense for the first quarter of 1996 was $75 million compared with
interest expense of $43 million for the first quarter of 1995. The increase
is primarily due to interest expense associated with the inclusion of former
SFP debt partially offset by favorable variable interest rates.
As discussed in Note 3, BNSF changed its accounting for locomotive overhauls,
effective January 1, 1995, resulting in an after-tax charge in 1995 of $100
million for the cumulative effect of the change.
CAPITAL RESOURCES AND LIQUIDITY
CASH FROM OPERATIONS
Cash generated from operations is BNSF's principal source of liquidity. BNSF
generally funds any additional liquidity requirements through the issuance of
debt or financing through capital or operating leases.
Operating activities provided cash of $303 million for the three months ended
March 31, 1996 compared with $80 million for the three months ended March 31,
1995. The increase in cash from operations was attributable primarily to a
$216 million increase in net income before depreciation and amortization,
deferred income taxes and the 1995 change in accounting. The above was
partially offset by an increase in payments for employee, merger and
separation costs. BNSF's cash outflows from investing and financing
activities for the three months ended March 31, 1996 principally relate to
dividend payments of $47 million and capital expenditures of $354 million
which are further discussed below.
OTHER CAPITAL RESOURCES
BNSF maintains a program for the issuance, from time to time, of commercial
paper. These borrowings are supported by bank revolving credit agreements.
Outstanding commercial paper balances are considered as reducing available
borrowings under these agreements. The bank revolving credit agreements allow
borrowings of up to $1.0 billion on a short-term basis and $1.5 billion on a
long-term basis. Annual facility fees are currently 0.08 percent and 0.125
percent, respectively, and are subject to change based upon changes in BNSF's
senior secured debt ratings. Borrowing rates are based upon LIBOR plus a
spread based upon BNSF's senior unsecured debt ratings, money market rates as
offered by the lenders, or an alternate base rate. The commitment of the
banks to make the loans are currently scheduled to expire on November 19, 1996
and November 21, 2000, respectively. At March 31, 1996, borrowings against the
long-term revolving credit agreement were $179 million and the maturity value
of commercial paper outstanding was $726 million, leaving a total of $595
million of the long-term revolving credit agreement available and $1.0 billion
of the short-term credit agreement available.
In February 1996, BNSF issued $175 million of 6 7/8% Debentures due February
15, 2016 under a shelf registration statement. The net proceeds from the sale
of the debentures were used primarily for the repayment of short-term debt.
Pursuant to a newly filed shelf registration statement, BNSF expects to have
available in the near future the capacity through its registrations to issue
from time to time up to $675 million aggregate principal amount of debt
securities.
CAPITAL EXPENDITURES AND RESOURCES
A breakdown of capital expenditures is set forth in the following table (in
millions):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
<S> <C> <C>
1996 1995
----- -----
Road, roadway structures and real estate $ 250 $ 142
Equipment 134 28
----- -----
Total $ 384 $ 170
===== =====
</TABLE>
Capital roadway expenditures during the three months ended March 31, 1996
increased when compared with the first three months of 1995 as a result of
expanded maintenance requirements due to the increase in BNSF's route system
and related structures resulting from the business combination with SFP.
Additionally, expenditures increased due to capacity expansion projects in the
PRB. For the three months ended March 31, 1996, the Company inserted 360,000
cross ties and laid 108 track miles of rail compared to 102,000 cross ties
inserted and 64 track miles of rail laid for the three months ended March 31,
1995. Capital equipment expenditures also increased for the 1996 first
quarter as compared to the 1995 first quarter because of additional purchases
of locomotives.
BNSF has a commitment to acquire 299 locomotives during 1996 and 1997,
including 150 locomotives committed to in April 1996 to replace older, less
cost efficient units. From January 1996 to April 30, 1996, 19 of these
locomotives were acquired and have been financed through capital leases. The
remaining commitment will be financed from one or a combination of sources
including, but not limited to, cash from operations, leases and debt
issuances. The decision on the method used to finance equipment depends upon
current market conditions and other factors and will be based upon the most
appropriate alternative available at such time. The total remaining
commitment for locomotive acquisitions described above is approximately $410
million.
DIVIDENDS
Common stock dividends declared for the three months ended March 31, 1996 and
1995 were $.30 per common share. Dividends paid on common stock during the
first quarter of 1996 and 1995 were $47 million and $26 million, respectively.
During the first quarter of 1995, a preferred stock dividend of $6 million
was paid; the Company currently has no preferred stock outstanding. On April
1, 1996, BNSF paid to stockholders of record on March 11, 1996 a common stock
dividend of $0.30 per share.
CAPITAL STRUCTURE
BNSF's ratio of total debt to total capital was 45 percent at March 31, 1996
compared with 46 percent at December 31, 1995.
OTHER MATTERS
OTHER CLAIMS AND LITIGATION
BNSF and its subsidiaries are parties to a number of legal actions and claims,
various governmental proceedings and private civil suits arising in the
ordinary course of business, including those related to environmental matters
and personal injury claims. While the final outcome of these items cannot be
predicted with certainty, considering among other things the meritorious legal
defenses available, it is the opinion of management that none of these items,
when finally resolved, will have a material adverse effect on the annual
results of operations, financial position or liquidity of BNSF, although an
adverse resolution of a number of these items in a single period could have a
material adverse effect on the results of operations in a particular quarter
or fiscal year.
LABOR
Labor unions represent approximately 87 percent of BNRR and ATSF employees
under collective bargaining agreements with 13 different labor organizations.
BNRR and ATSF are actively involved in industry-wide labor contract
negotiations which began in late 1994. Wages, health and welfare benefits,
work rules and other issues are being negotiated for substantially all rail
union employees. An agreement with the yardmasters union was reached in
December 1994 with respect to wages, work rules and all other matters other
than health and welfare benefits; health and welfare issues are being
addressed at the national level and will apply to BNRR's approximately 250
yardmasters.
In December 1995, BNRR's and ATSF's multi-employer bargaining representative,
the National Carriers' Conference Committee ("NCCC"), reached a tentative
agreement with the United Transportation Union ("UTU"), subject to UTU member
ratification, resolving wage, benefit and work rule issues through 1999. In
April 1996, the UTU members voted to reject the tentative agreement. However,
the UTU and the NCCC agreed to accept binding arbitration of the
settlement, thus averting any job action or service interruption over the
issues being resolved. On May 8, 1996, an arbitration panel imposed the terms
of the previously-reached tentative agreement on the NCCC and the UTU.
An agreement similar to the UTU agreement was reached in February 1996 with
the Brotherhood of Locomotive Engineers ("BLE"). The results of the BLE
membership ratification process should be known in late May 1996. A tentative
agreement was reached between the NCCC and the Brotherhood of Railway
Signalman ("BRS") in May 1996. The results of the BRS ratification process
should be known by the end of June 1996.
On April 5, 1996, the National Mediation Board ("NMB") proffered binding
arbitration to the Transportation Communications Union ("TCU"); following the
TCU's rejection of the NMB's proffer, the TCU was released from mediation on
April 8, 1996. On April 15, 1996, the NMB proffered binding arbitration to
the International Brotherhood of Electrical Workers ("IBEW"), the
International Association of Machinists and Aerospace Workers ("IAM"), and the
Sheet Metal Workers' International Association ("SMW"). All four unions
rejected the NMB's proffer and were released from mediation on April 17, 1996.
On April 29, 1996, the NMB proffered binding arbitration to the Brotherhood of
Maintenance of Way Employees ("BMWE"). The NCCC has agreed to accept binding
arbitration but the BMWE is expected to reject the NMB's proffer. The BMWE
and one other union are challenging the railroads' right to negotiate on a
multi-employer basis and the issue is currently pending in federal district
court in Washington, D.C.
The NMB's releases trigger the procedures under the Railway Labor Act,
starting with a 30-day "cooling-off" period. Unless presidential emergency
boards are appointed, which the NMB has recommended, the unions and the
railroads would be free to engage in "self-help" remedies, such as a strike or
lockout after the cooling-off periods expire. The appointment of presidential
emergency boards by President Clinton would defer the possibility of an
interruption of service for an additional 60 days, after which the parties
could engage in self-help absent congressional intervention. The TCU
announced that it intended to strike one or more of the nation's major freight
railroads on May 9, 1996 following the expiration of its cooling-off period.
However, President Clinton appointed Presidential Emergency Board ("PEB") No.
228 on May 8, 1996 to investigate and report on the dispute between the TCU
and the NCCC. The PEB's report is due within 30 days. Another 30-day
cooling-off period will commence after issuance of the report, after which the
parties would be able to exercise their rights to self-help. A cooling-off
period for the BMWE would commence if the BMWE rejects arbitration.
The ultimate outcome of negotiations cannot predicted. While there is the
possibility of presidential or congressional intervention, or both, the
potential exists for one or more work stoppages in the railroad industry in
1996 which may affect the Company. Existing collective bargaining agreements
will remain in effect until new agreements are reached or until the Railway
Labor Act's procedures are exhausted.
BNRR and ATSF are each parties to service interruption agreements under which
on a combined basis they would be required to pay premiums of up to a maximum
of approximately $106 million in the event of work stoppages on other
railroads related to ongoing national bargaining. BNRR and ATSF are also
entitled to receive payments under certain conditions if a work stoppage
occurs on either property.
<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
COAL TRANSPORTATION CONTRACT LITIGATION
Reference is made to the discussion in Registrant's Report on Form 10-K for
the fiscal year ended December 31, 1995 of the action filed by Southwestern
Electric Power Company ("SWEPCO") against Burlington Northern Railroad Company
("BNRR") in the 102nd Judicial District Court for Bowie County, Texas seeking
a reduction of the transportation rates required to be paid under two
contracts (Southwestern Power Company v. Burlington Northern Railroad Company,
No. D-102-CV-91-0720). BNRR had appealed the trial court's judgment (which
approximated $74 million and contained other relief) to the Court of Appeals
for the Sixth Court of Appeals District of Texas, Texarkana, Texas (Burlington
Northern Railroad Company v. Southwestern Electric Power Company, No.
06-95-00024-CV), and SWEPCO had filed a notice of cross appeal. The matter
was argued on April 23, 1996. By decision dated April 30, 1996, the Court of
Appeals reversed the judgment of the trial court and rendered judgment in
favor of BNRR. SWEPCO was assessed costs of the appeal. SWEPCO may seek
rehearing before the Court of Appeals and may further apply for discretionary
review of the decision by the Texas Supreme Court.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the April 18, 1996, annual meeting of stockholders, the Registrant's
stockholders elected 17 directors, each for a one-year term, and voted on two
Registrant proposals.
<TABLE>
<CAPTION>
Election of Seventeen Directors
The stockholders elected the seventeen nominees as directors by the
following vote:
<S> <C> <C>
Nominees Elected Votes For Withheld
- --------------------------------------------------------------
Joseph F. Alibrandi 135,767,010 697,657
Jack S. Blanton 135,790,907 673,760
John J. Burns, Jr. 135,764,808 699,859
Daniel P. Davison 135,759,296 705,371
George Deukmejian 135,244,173 1,220,494
Daniel J. Evans 135,751,674 712,993
Robert D. Krebs 135,742,215 722,452
Bill M. Lindig 135,771,771 692,896
Ben F. Love 135,755,924 708,743
Roy S. Roberts 135,787,957 676,710
Marc J. Shapiro 135,781,991 682,676
Arnold R. Weber 135,793,411 671,256
Robert H. West 135,814,164 650,503
J. Steven Whisler 135,820,338 644,329
Edward E. Whitacre, Jr. 135,825,670 638,997
Ronald B. Woodard 133,163,276 3,301,391
Michael B. Yanney 135,800,425 664,242
</TABLE>
Approval of Burlington Northern Santa Fe Non-Employee Directors' Stock Plan
- ---------------------------------------------------------------------------
The stockholders approved the Burlington Northern Santa Fe Non-Employee
Directors' Stock Plan by the following vote:
For 114,019,404
Against 7,869,294
Abstentions 2,243,613
Broker Non-votes 12,332,356
Approval of Burlington Northern Santa Fe 1996 Stock Incentive Plan
- ------------------------------------------------------------------
The stockholders approved the Burlington Northern Santa Fe 1996 Stock
Incentive Plan by the following vote:
For 101,964,251
Against 21,098,426
Abstentions 1,069,634
Broker Non-votes 12,332,356
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
See Index to Exhibits on page E-1 for a description of the exhibits filed as
part of this report.
B. Reports on Form 8-K
The Registrant filed the following Current Reports on Form 8-K during the
quarter ended March 31, 1996:
Registrant filed a Current Report on Form 8-K (Date of earliest event
reported: February 13, 1996), in which it reported, under Item 5, Other
Events, on a jury verdict in a crossing accident case in Montana and on a
freight train derailment in California. Also, attached as an exhibit was a
statement regarding computation of ratio of earnings to fixed charges for the
year ended December 31, 1995 and a pro forma computation of ratio of earnings
to fixed charges for the year ended December 31, 1995 reflecting the business
combination of Burlington Northern Inc. and Santa Fe Pacific Corporation on
September 22, 1995.
Registrant filed a Current Report on Form 8-K (Date of earliest event
reported: April 12, 1996), which included as an exhibit an unaudited Pro Forma
Combined Statement of Income for the year ended December 31, 1995 prepared as
if the business combination of Burlington Northern Inc. and Santa Fe Pacific
Corporation (consummated on September 22, 1995) took place as of January 1,
1995.
<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
May 15, 1996
<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
11 Computation of earnings per common share.
12 Statement regarding computation of ratio
of earnings to fixed charges.
27 Financial Data Schedule.
<TABLE>
<CAPTION>
EXHIBIT 11
BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
March 30,
------------------
1996 1995
------- --------
Net income
<S> <C> <C>
Primary:
Net income $ 187 $ 1
Convertible preferred stock dividends - (5)
------- --------
Net income (loss) available for
common shareholders $ 187 $ (4)
======= ========
Fully diluted:
Net income $ 187 $ 1
======= ========
Weighted average number of shares
- ---------------------------------
Primary:
Average common shares outstanding 150.2 89.3
Common share equivalents resulting
from assumed exercise of stock
options 4.8 1.0
------- --------
155.0 90.3
======= ========
Fully diluted:
Average common shares outstanding 150.2 89.3
Common share equivalents resulting from
assumed conversion of convertible
preferred stock - 7.4
Common share equivalents resulting
from assumed exercise of stock
options assuming full dilution 4.8 1.2
------- --------
155.0 97.9
======= ========
Net income (loss) per common share(1)
- -------------------------------------
Primary $ 1.21 $ (0.06)
Fully diluted 1.21 (0.06)
</TABLE>
Primary earnings per common share are computed by dividing net income, 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 net income by the weighted
average number of common shares 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.
(1) For the three months ended March 31, 1995, the computation of fully
diluted earnings per share was antidilutive; therefore, the amounts
reported for primary and fully diluted earnings per share are the same.
<TABLE>
<CAPTION>
EXHIBIT 12
BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS, EXCEPT RATIO AMOUNTS)
(UNAUDITED)
Three Months Ended
March 31,
-----------------
1996 1995
------- -------
Earnings:
<S> <C> <C>
Pre-tax income $ 306 $ 165
Add:
Interest and fixed charges,
excluding capitalized interest 75 43
Portion of rent under long-term
operating leases representative
of an interest factor 44 28
Amortization of capitalized interest 1 -
Less: Undistributed equity in earnings
of investments accounted for
under the equity method 2 -
------- -------
Total earnings available for fixed charges $ 424 $ 236
======= =======
Fixed charges:
Interest and fixed charges $ 79 $ 44
Portion of rent under long-term operating
leases representative of an interest
factor 44 28
------- -------
Total fixed charges $ 123 $ 72
======= =======
Ratio of earnings to fixed charges 3.45x 3.28x
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Burlington Northern Santa Fe Corporation's Consolidated Financial Statements
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 34
<SECURITIES> 0
<RECEIVABLES> 752
<ALLOWANCES> (66)
<INVENTORY> 250
<CURRENT-ASSETS> 1341
<PP&E> 20570
<DEPRECIATION> (4365)
<TOTAL-ASSETS> 18518
<CURRENT-LIABILITIES> 2339
<BONDS> 4087
<COMMON> 2
0
0
<OTHER-SE> 5266
<TOTAL-LIABILITY-AND-EQUITY> 18518
<SALES> 0
<TOTAL-REVENUES> 2031
<CGS> 0
<TOTAL-COSTS> 1646
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75
<INCOME-PRETAX> 306
<INCOME-TAX> 119
<INCOME-CONTINUING> 187
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 187
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.21
</TABLE>
