<PAGE>
UNITED STATES
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, 1999
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)
2650 Lou Menk Drive
Fort Worth, Texas 76131
(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, 1999
----- -----------------------------
Common stock, $.01 par value 469,860,919 shares
<PAGE>
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)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1999 1998
---- ----
<S> <C> <C>
Revenues $2,190 $2,148
Operating expenses:
Compensation and benefits 690 702
Purchased services 236 217
Depreciation and amortization 219 202
Equipment rents 193 191
Fuel 165 181
Materials and other 207 208
------ ------
Total operating expenses 1,710 1,701
====== ======
Operating income 480 447
Interest expense 94 88
Other income (expense), net (9) 77
------ ------
Income before income taxes 377 436
Income tax expense 141 171
------ ------
Net income $ 236 $ 265
====== ======
Earnings per share:
Basic $ 0.50 $ 0.56
====== ======
Diluted $ 0.50 $ 0.56
====== ======
Average shares (in millions):
Basic 469.3 469.1
Dilutive effect of
stock options 5.4 6.2
------ ------
Diluted 474.7 475.3
====== ======
Dividends declared per share $ 0.12 $ 0.10
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Shares in thousands. Dollars in millions.)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 19 $ 25
Accounts receivable, net 555 594
Materials and supplies 247 244
Current portion of deferred income taxes 306 335
Other current assets 34 34
------- -------
Total current assets 1,161 1,232
Property and equipment, net 20,830 20,662
Other assets 1,019 822
------- -------
Total assets $23,010 $22,716
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current
liabilities $ 1,873 $ 1,955
Long-term debt due within one year 302 268
------- -------
Total current liabilities 2,175 2,223
Long-term debt and commercial paper 5,416 5,188
Deferred income taxes 5,706 5,662
Casualty and environmental liabilities 390 389
Employee merger and separation costs 387 409
Other liabilities 1,023 1,075
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Total liabilities 15,097 14,946
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Commitments and contingencies (See notes 4 and 5)
Stockholders' equity:
Common stock, $.01 par value, 600,000
shares authorized; 480,066 shares and
477,436 shares issued, respectively 5 5
Additional paid-in capital 5,249 5,177
Retained earnings 2,991 2,811
Treasury stock, at cost, 10,185 shares
and 6,961 shares, respectively (323) (213)
Accumulated other comprehensive deficit (8) (8)
Other (1) (2)
------- -------
Total stockholders' equity 7,913 7,770
------- -------
Total liabilities and stockholders' equity $23,010 $22,716
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1999 1998
----- -----
<S> <C> <C>
Operating Activities:
Net income $ 236 $ 265
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 219 202
Deferred income taxes 74 28
Employee merger and separation costs paid (24) (30)
Other, net (65) (31)
Changes in current assets and liabilities:
Accounts receivable 39 65
Materials and supplies (3) (8)
Other current assets - (20)
Accounts payable and other current liabilities (68) (10)
----- -----
Net cash provided by operating activities 408 461
----- -----
Investing Activities:
Capital expenditures (373) (366)
Other, net (196) (82)
----- -----
Net cash used for investing activities (569) (448)
----- -----
Financing Activities:
Net decrease in commercial paper
and bank borrowings (107) (122)
Proceeds from issuance of long-term debt 404 127
Payments on long-term debt (31) (26)
Dividends paid (56) (47)
Proceeds from stock options exercised 43 63
Purchase of BNSF common stock (100) (6)
Other, net 2 -
----- -----
Net cash provided by (used for)
financing activities 155 (11)
----- ------
Increase (decrease) in cash and cash equivalents (6) 2
Cash and cash equivalents:
Beginning of period 25 31
----- -----
End of period $ 19 $ 33
===== =====
Supplemental cash flow information:
Interest paid, net of amounts capitalized $ 97 $ 92
Income taxes paid (refunded), net 7 (1)
</TABLE>
See accompanying notes to consolidated financial statements.
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<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 Annual Report on Form 10-K for the year
ended December 31, 1998, as amended, including the financial statements and
notes thereto incorporated by reference from the Registrant's 1998 Annual Report
to Shareholders. The consolidated financial statements include the accounts of
Burlington Northern Santa Fe Corporation and its majority-owned subsidiaries,
all of which are separate legal entities (collectively, BNSF or Company). BNSF
was incorporated in Delaware on December 16, 1994. The Company's principal
operating subsidiary is The Burlington Northern and Santa Fe Railway Company
(BNSF Railway). All significant intercompany accounts and transactions have been
eliminated.
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, 1999 and December 31, 1998 and the consolidated results
of operations for the three month periods ended March 31, 1999 and 1998 have
been included. For the three month periods ended March 31, 1999 and 1998, the
Company's comprehensive income was equal to net income.
Certain comparative prior year amounts in the consolidated financial statements
have been reclassified to conform to the current year presentation.
2. DEBT
In February 1999, the Company filed a new shelf registration statement that
became effective in March 1999 for the issuance of debt securities, including
medium-term notes, which may be issued in one or more series at an aggregate
offering price not to exceed $750 million. Additionally, in February 1999, prior
to the effective date of the new shelf registration, the Company amended its
March 1998 shelf registration to combine it with the February 1999 shelf
registration. Subsequently, the Company had $1.1 billion of borrowing capacity
available under its shelf registration statement.
In March 1999, BNSF issued $200 million of 6.125 percent notes due March 2009
and $200 million of 6.75 percent debentures due March 2029 under the February
1999 shelf registration statement. The net proceeds were used for general
corporate purposes including the repayment of commercial paper.
On April 29, 1999, the holder of a call option on $200 million of the Company's
puttable reset debentures due 2029 exercised the call option. As a result, on
May 13, 1999, the holder repurchased the debentures which were subsequently
resold to investors. The interest rate on the debentures was reset to a fixed
interest rate of 7.082 percent. The Company did not receive any proceeds from
the resale of these debentures; however, the resale of these debentures reduced
the amount available for borrowing under the Company's February 1999 shelf
registration statement to $500 million.
3. EMPLOYEE MERGER AND SEPARATION COSTS
Current and long-term employee merger and separation liabilities totaling $450
million are included in the consolidated balance sheet at March 31, 1999, and
principally represent: (i) employee-related severance costs for the
consolidation of clerical functions; (ii) deferred benefits payable upon
separation or retirement to certain active conductors, trainmen and locomotive
engineers; and (iii) certain non-union employee severance costs. During the
first three months of 1999, the Company made employee merger and separation
payments of $24 million.
Liabilities related to the consolidation of clerical functions are paid to
affected employees in the form of a lump-sum payment or payments made over five
to ten years, or in some cases, through retirement. Liabilities related to
deferred benefits payable to certain active conductors, trainmen and locomotive
engineers are paid upon the employees' separation or retirement. Liabilities
principally related to certain remaining non-union employee severances will be
paid over the next several years based on deferral elections made by affected
employees. At March 31, 1999, $63
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million of the remaining liabilities are included within current liabilities for
anticipated costs to be paid over the next twelve months.
4. ENVIRONMENTAL AND OTHER CONTINGENCIES
The Company'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 risks inherent
in railroad operations, which include 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 32 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 clean-up efforts at approximately 400 sites, including the Superfund
sites, at which it is participating in the study or clean-up, or both, of
alleged environmental contamination. BNSF paid approximately $8 million during
the first three months of 1999 for mandatory and unasserted clean-up efforts,
including amounts expended under federal and state voluntary clean-up programs.
BNSF has accruals of approximately $191 million for remediation and restoration
of all known sites. BNSF anticipates that the majority of the accrued costs at
March 31, 1999, will be paid over the next five years. No individual site is
considered to be material.
Liabilities recorded 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 parties' 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,
management believes that it is unlikely that any identified matters, either
individually or in the aggregate, will have a material adverse effect on BNSF's
consolidated financial position or liquidity.
The railroad industry, including BNSF Railway, is subject to future requirements
regulating air emissions from diesel locomotives. Final regulations applicable
to new and rebuilt locomotive engines were promulgated by the United States
Environmental Protection Agency (EPA) and became effective June 15, 1998. The
new standards will be phased in between 2000 and 2005. BNSF Railway has
evaluated compliance requirements and associated costs and believes the costs
will not be material in any given year. BNSF Railway has also entered into
agreements with the
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California State Air Resources Board and the EPA regarding a program to reduce
emissions in Southern California through accelerated deployment of locomotives
which comply with the federal standards.
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 could have a material adverse effect on
the results of operations in a particular quarter or fiscal year.
5. HEDGING ACTIVITIES AND OTHER COMMITMENTS
FUEL
During the past three years, fuel expenses approximated 11 percent of total
operating expenses. Due to the significance of diesel fuel expenses to the
operations of BNSF and the historical volatility of fuel prices, the Company has
established a program to hedge against fluctuations in the price of its diesel
fuel purchases. The intent of the program is to protect the Company's operating
margins and overall profitability from adverse fuel price changes. However, to
the extent the Company hedges portions of its fuel purchases, it will not
realize the impact of decreases in fuel prices. The fuel-hedging program
includes the use of commodity swap transactions that are accounted for as
hedges. Any gains or losses associated with changes in the market value of the
fuel swaps are deferred and recognized as a component of fuel expense in the
period in which the fuel is purchased and used. Based on annualized fuel
consumption during the first three months of 1999 and excluding the impact of
the hedging program, each one-cent increase in the price of fuel would result in
approximately $12 million of additional fuel expense on an annual basis.
As of March 31, 1999, BNSF had entered into fuel swaps for approximately 1,550
million gallons at an average price of approximately 49 cents per gallon. The
above price does not include taxes, transportation costs, certain other fuel
handling costs, and any differences which may occur from time to time between
the prices of commodities hedged and the purchase price of BNSF's diesel fuel.
Currently, BNSF's fuel hedging program covers approximately 76 percent of
estimated fuel purchases for the remaining nine months of 1999, and
approximately 40 percent, 22 percent and 7 percent of estimated annual and
quarterly fuel purchases for 2000, 2001, and 2002, respectively. Hedge positions
are closely monitored to ensure that they will not exceed actual fuel
requirements in any period. Unrecognized losses from BNSF's fuel swap
transactions were approximately $129 million as of March 31, 1999, of which $58
million relates to swap transactions that will expire in 1999. BNSF also
monitors its hedging positions and credit ratings of its counterparties and does
not anticipate losses due to counterparty nonperformance.
INTEREST RATE
During March 1999, at the time of issuing $400 million of debt as discussed in
Note 2, the Company closed out a $100 million treasury lock transaction at a
gain of approximately $8 million which has been deferred and is being amortized
to interest expense over the life of the debt.
As of March 31, 1999, the Company has outstanding remaining treasury lock
transactions, based on the 10-year and 30-year U.S. treasury rates, totaling
$200 million and $200 million, respectively. The 10-year and 30-year treasury
lock transactions have average interest rates of approximately 4.6 percent and
5.0 percent, respectively, and expire between 2000 and 2001. Unrecognized gains
on the treasury lock transactions were approximately $33 million as of March 31,
1999.
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6. SHARE REPURCHASE PROGRAM
During the first three months of 1999, the Company repurchased approximately 3
million shares of its common stock at an average price of $33.79 per share under
the Company's share repurchase program.
Since March 31, 1999, the Company repurchased approximately 2.7 million shares
of its common stock at an average price of $34.41 per share. Since commencing
its share repurchase program in January 1998, the Company has repurchased 10.7
million shares at an average cost of $32.54 per share through May 13, 1999.
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, Registrant or Company). The
principal operating subsidiary of BNSF is The Burlington Northern and Santa Fe
Railway Company (BNSF Railway). All earnings per share information is stated on
a diluted basis.
Results of Operations
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Three months ended March 31, 1999 compared with three months ended March 31,
1998
BNSF recorded net income for the first quarter of 1999 of $236 million ($0.50
per share), compared with first quarter 1998 net income of $265 million ($0.56
per share). The decrease in net income is primarily due to a $67 million pre-
tax gain ($32 million after-tax or $0.07 per share) on the sale of substantially
all of the Company's interest in Santa Fe Pacific Pipeline Partners, L.P.
recorded in the first quarter of 1998. Excluding the after-tax gain on the
pipelines sale, BNSF's net income and earnings per share increased $3 million,
or $0.01 per share from 1998.
Revenues
The following table presents BNSF's revenue information by commodity for the
three months ended March 31, 1999 and 1998 and includes certain
reclassifications of prior year information to conform to current year
presentation:
<TABLE>
<CAPTION>
Average Revenue
Revenues Cars/Units Per Car/Unit
------------------------ ------------------------- -------------------------
1999 1998 1999 1998 1999 1998
---------- ---------- ----------- ---------- ----------- -----------
(In Millions) (In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Intermodal $ 583 $ 562 745 703 $ 783 $ 799
Coal 566 559 527 510 1,074 1,096
Commercial Products 280 275 176 171 1,591 1,608
Agricultural Commodities 262 279 141 148 1,858 1,885
Chemicals 208 201 123 122 1,691 1,648
Industrial Products 174 180 151 150 1,152 1,200
Automotive 108 92 63 58 1,714 1,586
------ ------ ------ ------ ------ ------
Total Freight Revenues 2,181 2,148 1,926 1,862 $1,132 $1,154
====== ====== ====== ======
Other Revenues 9 -
------ ------
Total Operating Revenues $2,190 $2,148
====== ======
</TABLE>
Total revenues for first quarter of 1999 were $2,190 million or 2 percent higher
compared with revenues of $2,148 million for the first quarter of 1998. The
increase primarily reflects increases in the intermodal, coal, chemicals,
commercial products, and automotive sectors, partially offset by lower
agricultural commodities and industrial products revenues. Average revenue per
car/unit decreased in the first quarter of 1999 to $1,132 from $1,154 in the
first quarter of 1998.
Intermodal revenues of $583 million for the first quarter of 1999 increased $21
million or 4 percent reflecting increases in the direct marketing and
international sectors. Direct marketing revenues benefited from increased units
shipped for UPS, less than truckload (LTL) customers and the United States
Postal Service. International revenues were up due to new business established
with Sealand, NYK, Maersk and K-Line.
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Coal revenues of $566 million for the first quarter of 1999 increased $7 million
or 1 percent primarily due to continued strong demand for Powder River Basin
coal and favorable weather conditions.
Commercial products revenues of $280 million for the first quarter of 1999 were
$5 million or 2 percent higher than the first quarter of 1998 primarily due to
increased inland lumber shipments and volume increases in bulk foods due to an
increase in beet and corn syrup shipments.
Agricultural commodities revenues of $262 million for the first quarter of 1999
were $17 million or 6 percent lower than revenues for the first quarter of 1998
due to poor northern wheat exports, partially offset by increased Pacific
Northwest corn exports.
Chemicals revenues of $208 million for the first quarter of 1999 were $7 million
or 3 percent higher than the first quarter of 1998 primarily due to increases in
fertilizer, petroleum products and plastics revenues.
Industrial products revenues of $174 million for the first quarter of 1999 were
$6 million or 3 percent lower than the first quarter of 1998. Weaknesses in
steel products, resulting from increased steel imports, and weaknesses in clay
markets, due to reductions in clay used in oil and gas drilling as a result of
the continued decline in oil prices and U.S. rig counts, contributed to the
decrease. These decreases were partially offset by strength in cement and
sodium compounds.
Automotive revenues of $108 million for the first quarter of 1999 were $16
million or 17 percent higher than the first quarter of 1998 reflecting increases
in vehicle volumes for GM, Ford and Nissan, and increases in parts revenues due
to strength in Ford loadings.
Expenses
Total operating expenses for the first quarter of 1999 were $1,710 million, an
increase of $9 million or 1 percent, over 1998 despite a 3 percent increase in
cars and units handled. The operating ratio improved to 78.1 percent for the
first quarter of 1999, compared with a 79.2 percent operating ratio for the
first quarter 1998.
Compensation and benefits expenses of $690 million were $12 million or 2 percent
lower than the first quarter of 1998 primarily due to lower employment levels
and lower incentive compensation expense.
Purchased services of $236 million for the first quarter of 1999 were $19
million or 9 percent higher than the first quarter of 1998 principally due to
increased equipment maintenance costs and higher ramping costs related to
increased intermodal volumes.
Equipment rents expenses for the first quarter of 1999 of $193 million were $2
million or 1 percent higher than the first quarter of 1998 reflecting higher
leased equipment expense.
Fuel expenses of $165 million for the first quarter of 1999 were $16 million or
9 percent lower than the first quarter of 1998, as a result of a 7 cent or 11
percent decrease in the average all-in cost per gallon of diesel fuel, partially
offset by a 2 percent volume driven increase in consumption from 288 million to
293 million gallons. The decrease in the average all-in cost per gallon of
diesel fuel includes a 15 cent decrease in the average purchase price, partially
offset by losses related to the Company's fuel hedging.
Materials and other expenses of $207 million for the first quarter of 1999 were
slightly lower than the first quarter of 1998 principally reflecting lower
maintenance of way expenses and locomotive overhaul expenses, partially offset
by higher personal injury and casualties expenses.
Interest expense of $94 million for the first quarter of 1999 was $6 million or
7 percent higher than in the first quarter of 1998, reflecting higher debt
levels which increased to $5,718 million at March 31, 1999 from $5,266 million
at March 31, 1998.
Other income (expense), net was unfavorable $86 million compared to first
quarter 1998 due to the $67 million pre-tax gain on the pipeline partnership
sale in the first quarter of 1998, and the first quarter 1998 included gains of
$18 million from the sale of a real estate portfolio.
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Capital Resources and Liquidity
- -------------------------------
Cash generated from operations is BNSF's principal source of liquidity. BNSF
generally funds any additional liquidity requirements through debt issuance,
including commercial paper, or leasing of assets.
BNSF issues commercial paper from time to time, which is supported by bank
revolving credit agreements. Outstanding commercial paper balances are
considered as reducing the amount of borrowings available under these
agreements. The bank revolving credit agreements allow borrowings of up to $425
million on a short-term basis and $1.5 billion on a long-term basis. Annual
facility fees are currently 0.075 percent and 0.09 percent, respectively, and
are subject to change based upon changes in BNSF's senior unsecured debt
ratings. Borrowing rates are based upon i) LIBOR plus a spread based upon BNSF's
senior unsecured debt ratings, ii) money market rates offered at the option of
the lenders, or iii) an alternate base rate. The commitments of the lenders
under the short-term agreement are scheduled to expire on June 15, 1999. The
commitments of the lenders under the long-term agreement are scheduled to expire
on November 12, 2002.
At March 31, 1999, there were no borrowings against the revolving credit
agreements and the maturity value of commercial paper outstanding was $392
million, leaving a total remaining capacity of $1,108 million available under
the long-term revolving credit agreement and $425 million available under the
short-term credit agreement.
OPERATING ACTIVITIES
Net cash provided by operating activities was $408 million for the three months
ended March 31, 1999, compared with $461 million for the three months ended
March 31, 1998. The decrease in cash from operations was primarily due to an
increase in cash used for working capital reflecting the timing of payments.
INVESTING ACTIVITIES
Net cash used for investing activities for the three months ended March 31,
1999, was $569 million comprised of $373 million in capital expenditures, as
discussed below, and $196 million of other investing activities that primarily
reflects the temporary acquisition of equipment which will ultimately be sold
and leased back through operating leases.
BNSF reduced planned 1999 cash capital expenditures by approximately $200
million to $1.9 billion. The reductions primarily relate to various expansion
projects that will be deferred beyond 1999.
A breakdown of cash capital expenditures for the three months ended March 31,
1999 and 1998, is set forth in the following table (in millions):
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999 1998
----------------------------- ----------------------------------
<S> <C> <C>
Maintenance of Way $ 139 $ 201
Equipment 168 73
Expansion Projects 41 76
Other 25 16
----------------------------- ----- -----
Total $ 373 $ 366
----------------------------- ===== =====
</TABLE>
Maintenance of Way expenditures for 1999 decreased primarily due to timing of
scheduled projects. Equipment expenditures increased in 1999 reflecting higher
locomotive purchases. Expansion Project expenditures, principally relating to
double and triple tracking of main line track, decreased primarily due to the
reduced capital plan and timing of scheduled projects.
Through March 31, 1999, BNSF has acquired 132 of the 476 locomotives it has
committed to acquire in 1999. Remaining locomotive commitments will be financed
from one or a combination of sources including, but not limited to, cash from
operations, capital or operating leases, and debt issuances. The decision on
the method used will depend upon the current market conditions at the time of
financing.
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FINANCING ACTIVITIES
Net cash provided by financing activities during the first three months of 1999
was $155 million, primarily related to net proceeds from total debt of $266
million and proceeds from stock options exercised of $43 million, partially
offset by common stock repurchases of $100 million and dividend payments of $56
million.
In February 1999, the Company filed a new shelf registration statement that
became effective in March 1999 for the issuance of debt securities, including
medium-term notes, which may be issued in one or more series at an aggregate
offering price not to exceed $750 million. Additionally, in February 1999,
prior to the effective date of the new shelf registration, the Company amended
its March 1998 shelf registration to combine it with the February 1999 shelf
registration. Subsequently, the Company had $1.1 billion of borrowing capacity
available under its shelf registration statement.
In March 1999, BNSF issued $200 million of 6.125 percent notes due March 2009
and $200 million of 6.75 percent debentures due March 2029 under the February
1999 shelf registration statement. The net proceeds were used for general
corporate purposes including the repayment of commercial paper.
During March 1999, at the time of issuing $400 million of debt as discussed
above, the Company closed out a $100 million treasury lock transaction at a gain
of approximately $8 million which has been deferred and is being amortized to
interest expense over the life of the debt.
On April 29, 1999, the holder of a call option on $200 million of the Company's
puttable reset debentures due 2029 exercised the call option. As a result, on
May 13, 1999, the holder repurchased the debentures which were subsequently
resold to investors. The interest rate on the debentures was reset to a fixed
interest rate of 7.082 percent. The Company did not receive any proceeds from
the resale of these debentures; however, the resale of these debentures reduced
the amount available for borrowing under the Company's February 1999 shelf
registration statement to $500 million.
BNSF's ratio of total debt to total capital was 41.9 percent and 41.3 percent at
March 31, 1999 and December 31, 1998, respectively.
During the first three months of 1999, the Company repurchased approximately 3
million shares of its common stock at an average price of $33.79 per share.
Since commencing its share repurchase program in January 1998, the Company has
repurchased 10.7 million shares at an average cost of $32.54 per share through
May 13, 1999. Repurchased shares are available to satisfy future requirements of
various stock-based employee compensation programs. In evaluating the timing of
share repurchases, management considers many factors including, among other
things, economic, market and business conditions and outlook, alternative uses
of cash and debt, balance sheet ratios, and stockholder returns. In connection
with its share repurchase program, BNSF sold equity put options in April 1999
for 0.1 million shares of BNSF common stock to an independent third party and
received cash proceeds of $0.1 million. The option contract has an exercise
price of $29.00 per share with an expiration date of October 12, 1999.
DIVIDENDS
Common stock dividends declared for the three months ended March 31, 1999 and
1998 were $0.12 and $0.10 per share, respectively. Dividends paid on common
stock during the first three months of 1999 and 1998 were $56 million and $47
million, respectively. On January 21, 1999, the Board of Directors declared a
regular quarterly common stock dividend of 12 cents per share upon its
outstanding shares of common stock, $0.01 par value, payable April 1, 1999, to
shareholders of record on March 10, 1999.
OTHER MATTERS
- -------------
YEAR 2000
BACKGROUND
The Company has established a committee of managers and employees, chaired by
the Company's Chief Information Officer, to evaluate and manage the costs and
risks associated with becoming Year 2000 compliant and to minimize the impact of
the Year 2000 problem on the Company. Because many existing computer programs
and microprocessors recognize only the last two digits of years (and not the
century designation), they may be unable to accurately recognize and process
dates beyond December 31, 1999, and consequently may fail or produce erroneous
-10-
<PAGE>
data. The Year 2000 problem may adversely affect the Company's operations and
financial performance if its remediation efforts are not successfully
implemented or if the railroads with which the Company connects, critical
customers or suppliers fail to become Year 2000 compliant.
STATE OF READINESS
Year 2000 issues were reviewed in September 1995 following the approval of the
merger of the two railroads that now constitute BNSF railway. The core mainframe
systems for the merged railroad were selected in part because they were
substantially Year 2000 compliant. These systems integrate all transportation-
related activities and computer systems that support BNSF's transportation
network, including operations, customer information, and revenue data. This
merger-related information systems integration and upgrade activity was
substantially completed by July 1997.
Following this systems integration, BNSF adopted a three-phase approach to Year
2000: Inventory and Assessment; Remediation; and Certification Testing. Separate
teams address technologies administered or maintained by the Information Systems
Services department (ISS technologies) and other enterprise-wide products and
technologies used by the Company, including embedded microprocessor technology
(Enterprise technologies). BNSF has completed the Inventory and Assessment phase
for both ISS and Enterprise technologies. During this phase, BNSF Inventoried
all ISS-administered source code, hardware, software and communications
equipment that could be affected by the Year 2000 problem, and identified items
potentially needing remediation. In addition, the Enterprise team completed a
company-wide audit of Enterprise technologies and associated suppliers and
service providers for potential Year 2000 problems.
The Remediation phase is more than 90 percent complete. Remediation includes
converting source code and replacing or upgrading purchased software and
hardware. Remediation is substantially complete for ISS technologies and is
expected to be completed by July 1999 for Enterprise technologies.
The Certification Testing phase includes validating the performance of ISS and
Enterprise technologies in a Year 2000 test environment. The Certification
testing phase also includes validating year 2000 compliance for critical third
party suppliers and service providers. This phase, which is ongoing, overlaps
with the Remediation phase. Certification testing for ISS technologies began in
November 1998, with critical applications receiving priority, and is 50 percent
complete; testing for all applications is scheduled for completion by the end of
September 1999. Certification testing of all critical Enterprise technologies
began in May 1998 and is scheduled for completion in May 1999; testing for non-
critical Enterprise technologies is scheduled for completion by July 1999.
COSTS
As a result of its merger-related systems integration that was completed in
1997, BNSF achieved substantial Year 2000 compliance on its core mainframe
systems. In addition, spending on Year 2000 activities approximates $11 million
to date. Currently, the total cost of achieving Year 2000 compliance for the
Company's ISS and Enterprise technologies is estimated to be approximately $20
million.
YEAR 2000 RISKS AND CONTINGENCY PLANS
Certain BNSF business processes rely on third parties for the efficient
functioning of its transportation network. The Association of American Railroads
(AAR) administers systems that benefit all North American railroads and their
customers, including interline settlement, shipment tracing and waybill
processing. BNSF and other AAR-member railroads are participating in a process
to test and certify these systems for Year 2000 compliance. The AAR expects that
these systems will be compliant and pilot tested by specific carriers by July
1999, with open carrier testing conducted promptly thereafter. BNSF has
developed contingency plans for critical business processes supported by AAR
systems.
Certain BNSF routes and resulting revenues are dependent on the use of trackage
rights over other railroads, including UP, Montana Rail Link and the Arizona and
California Railroad. Other BNSF traffic may originate or terminate on other
carriers' lines or may otherwise involve use of a foreign connection en route.
Approximately 60 percent of units handled by BNSF run over BNSF facilities only.
BNSF's traffic levels and revenues could be significantly reduced and/or its
operational network significantly impaired through congestion and other factors
if other railroads are not able to accommodate BNSF trains or interchange
traffic for any extended period of time due to Year 2000 problems. However, as a
result of its work with other railroads to address Year 2000 problems on an
industry-wide basis,
-11-
<PAGE>
management believes that the possibility of extended failures on other railroads
is not significant. At present, the Company is in the process of determining
which of its larger customers may have Year 2000 problems that could result in
reduced traffic for the Company.
It is the opinion of management that Year 2000 problems in BNSF's internal
information systems and technology infrastructure will not have a materially
adverse effect on the results of operations, liquidity or financial position of
the Company. However, there can be no assurance that the systems or equipment of
other parties which interact with BNSF's systems will be compliant on a timely
basis. BNSF believes that the failure of systems or equipment of one or more of
its key third parties or customers is the most reasonably likely worst case Year
2000 scenario, and that an extended failure could have a material adverse effect
on the results of operations, liquidity or financial position of the Company.
Where appropriate, BNSF continues to develop contingency plans in the event that
BNSF's key third parties do not become Year 2000 compliant on a timely basis,
which effort includes the formalization of existing disaster recovery plans.
FORWARD LOOKING INFORMATION
The Year 2000 discussion above contains forward-looking statements, including
those concerning the Company's plans and estimated completion dates, cost
estimates, assessments of Year 2000 readiness of BNSF Railway and third parties,
and possible consequences of any failure on the part of the Company or third
parties to be Year 2000 compliant on a timely basis. Forward-looking statements
involve a number of risks and uncertainties that could cause actual results to
differ materially from those projected in the forward-looking statements. Such
factors include, but are not limited to, the following: continued availability
of qualified personnel to assess, remediate, and test ISS and Enterprise
technologies at current estimated costs; emergence of unforeseen software or
hardware problems, including where applications interact with each other in ways
not anticipated, which could delay or hinder commercial transactions or other
operations; the ability to locate and remediate Year 2000 problems with software
source code and embedded computer chips in equipment; the failure, in whole or
in part, of other railroads or AAR-supported systems to be Year 2000 compliant;
the Year 2000 compliance of its business partners and customers and reduced
traffic levels due to their failure, in whole or part, to be Year 2000
compliant; business interruption due to delays in obtaining supplies, parts, or
equipment from key vendors or suppliers that are affected by Year 2000 problems;
the ripple effect of Year 2000-related failures in industries supporting the
nation's basic infrastructure, including fuel vendors and pipelines, gas,
electric, and water utilities, communications companies, banks and financial
institutions, and highway, water, and air transportation systems; and any
significant downturn in the general economy, and adverse industry-specific
economic conditions at the international, national, and regional levels, wholly
or partially caused by Year 2000 problems.
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.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133 "Accounting for Derivative
Instruments and Hedging Activities." The Statement is effective for the
Company's fiscal year 2000; however, early adoption is permitted. SFAS No. 133
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in fair value of derivatives are recorded each period
in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. For fair value hedge transactions in which the Company is
hedging changes in the fair value of an asset, liability or an unrecognized firm
commitment, changes in the fair value of the derivative instrument will
generally be offset in the income statement by changes in the hedged item's fair
value. For cash-flow hedge transactions in which the Company is hedging the
variability of cash flows related to a variable rate asset, liability, or a
forecasted transaction, changes in the fair value of the derivative instrument
will be reported in other comprehensive income to the extent it offsets changes
in the cash flows related to the variable rate
-12-
<PAGE>
asset, liability or forecasted transaction, with the difference reported in
current period earnings. The gains and losses on the derivative instrument that
are reported in other comprehensive income will be reclassified in earnings in
the periods in which earnings are impacted by the variability of the cash flows
of the hedged item. The ineffective portion of all hedges will be recognized in
current-period earnings.
The Company is currently evaluating SFAS No. 133 and whether it will adopt this
pronouncement prior to the effective date. Based on interest rate and fuel
hedging instruments outstanding at March 31, 1999, and previously deferred
losses from past interest rate hedging transactions, all of which are cash-flow
hedge transactions, the Company currently estimates that the impact of SFAS No.
133 would result in a net-of-tax cumulative-effect charge to accumulated other
comprehensive deficit of approximately $85 million if adopted March 31, 1999.
The Company is presently evaluating the impact SFAS No. 133 will have on its
ongoing results of operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
In the ordinary course of business, BNSF utilizes various financial instruments
which inherently have some degree of market risk. The qualitative and
quantitative information presented in the Management's Discussion and Analysis
of Financial Condition and Results of Operations section of the 1998 Annual
Report to Shareholders and in Item 7A of the Company's Annual Report on Form
10-K for the year ended December 31, 1998, describes significant aspects of
BNSF's financial instrument programs which have material market risk. Presented
below is updated quantitative information for those programs that have changed
significantly from the information reported in BNSF's Form 10-K for the year
ended December 31, 1998.
COMMODITY PRICE SENSITIVITY
As discussed in Note 5 to the Company's consolidated financial statements, BNSF
has a program to hedge against fluctuations in the price of its diesel fuel
purchases. The table below provides information about BNSF's diesel fuel
hedging instruments that are sensitive to changes in diesel fuel prices. The
table presents notional amounts in gallons and the weighted average contract
price by contractual maturity date as of March 31, 1999. The prices included in
the table below do not include taxes, transportation costs, certain other fuel
handling costs and any differences which may occur from time to time between the
prices of commodities hedged and the purchase price of BNSF's diesel fuel.
<TABLE>
<CAPTION>
March 31, 1999
-------------------------------------------------------------------------
Maturity Date
-------------------------------------------- Fair
1999 2000 2001 2002 Total Value (1)
----- ----- ----- ----- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Diesel Fuel Swaps:
Gallons (in millions) 681 491 277 101 1,550 $(129)
Weighted average price per
gallon $0.48 $0.50 $0.49 $0.50 $0.49 -
</TABLE>
(1) Represents unrecognized loss (in millions) based on the price of Gulf Coast
#2 heating oil.
TREASURY LOCK TRANSACTIONS
In anticipation of future debt issuances, BNSF has entered into treasury lock
transactions, based on the 10-year and 30-year U.S. treasury rates, as reflected
in the following table as of March 31, 1999.
<TABLE>
<CAPTION>
March 31, 1999
--------------------------------------
Maturity Date
-------------
Fair
2000 2001 Total Value (1)
---- ---- ----- ---------
<S> <C> <C> <C> <C>
Fixed Rate Treasury Locks (in millions) $200 $200 $400 $33
Average Pay Rate 4.80% 4.84% 4.82% -
</TABLE>
(1) Represents unrecognized gains (in millions).
-13-
<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION and SUBSIDIARIES
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the discussion in the Company's Form 10-K for the year
ended December 31, 1998, as amended, of the environmental proceeding with
respect to former railcar cleaning activities conducted by independent
contractors hired by BNSF Railway's predecessors at a rail siding near
Cherryville, Missouri. The consent judgment in the State of Missouri was
entered on April 28, 1999, by the Crawford County Circuit Court (State of
Missouri v. The Burlington Northern and Santa Fe Railway Company, C.V.
199-191-C), and this matter is now considered terminated.
Item 4. Submission of Matters to a Vote of Security Holders
At the April 15, 1999, annual meeting of stockholders, the Company's
stockholders elected 15 directors, each for a one-year term, and voted on
one Company proposal, and on one stockholder proposal raised from the floor
at the meeting.
Election of Fifteen Directors
-----------------------------
The Stockholders elected the Company's fifteen nominees to the fifteen
director positions by the vote shown below; four stockholder nominees
received the votes shown below but were not elected:
<TABLE>
<CAPTION>
Nominees (Elected*) Votes For Withheld
-------------------- --------- --------
<S> <C> <C>
Joseph F. Alibrandi* 400,019,066 2,663,858
Jack S. Blanton* 400,199,754 2,482,170
John J. Burns, Jr.* 400,370,565 2,312,359
George Deukmejian* 397,228,371 5,454,553
Robert D. Krebs* 399,984,430 2,698,494
Bill M. Lindig* 400,475,012 2,207,912
Vilma S. Martinez* 400,358,616 2,324,308
Roy S. Roberts* 400,455,944 2,226,980
Marc J. Shapiro* 400,424,140 2,258,784
Arnold R. Weber* 400,304,359 2,378,565
Robert H. West* 400,402,893 2,280,031
J. Steven Whisler* 400,440,944 2,241,980
Edward E. Whitacre, Jr.* 400,433,878 2,249,046
Ronald B. Woodard* 400,430,786 2,252,138
Michael B. Yanney* 400,374,471 2,308,453
Darla Ann Purdy 594 402,682,330
William S. Purdy 594 402,682,330
Lanee Marie Purdy 594 402,682,330
Howard W. Morgan 685 402,682,239
</TABLE>
Company Proposal
----------------
The stockholders approved a Company proposal for approval of the Burlington
Northern Santa Fe 1999 Stock Incentive Plan by the following vote:
<TABLE>
<CAPTION>
<S> <C>
For 368,740,296
Against 31,440,969
Abstentions 2,502,253
Broker Non-Votes 0
</TABLE>
-14-
<PAGE>
Stockholder Proposal
--------------------
The stockholders did not approve a stockholder proposal raised from the
floor recommending that the Board shorten the advance notice required to be
given for stockholder proposals and nominations, that interested
stockholders be invited to attend and give their opinions at Board
meetings, that a committee be appointed to make corporate governance more
"open" and include employees and former employees in all decisions
affecting railroad safety, that the Company terminate officers who have
"inappropriately disciplined" employees "for attempting to work in a safe
manner and consistent with railroad safety or operating rules," and that
the Company give safety commendations and publicly accept safety
commendations from other organizations awarded to its employees, by the
following vote:
<TABLE>
<CAPTION>
<S> <C>
For 594
Against 402,682,924
Abstentions 0
Broker Non-Votes 0
</TABLE>
Item 5. Other Information
On May 6, 1999, the Company announced that Denis E. Springer, Senior Vice
President and Chief Financial Officer will be retiring and that Thomas N.
Hund, the Company's Vice President and Controller, will be promoted to
Senior Vice President and Chief Financial Officer effective August 1, 1999.
At that time, Dennis R. Johnson, presently Assistant Vice President and
Assistant Controller, will be appointed Vice President and Controller.
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 has filed one Current Report on Form 8-K since those
reported in its Annual Report on Form 10-K for the year ended December 31,
1998, as amended:
On May 7, 1999, the Registrant filed a Current Report on Form 8-K (Date of
earliest event reported: April 20, 1999), which referenced under Item 5,
Other Events, and filed as exhibits under Item 7, Financial Statements and
Exhibits the following: a statement regarding the computation of ratio of
earnings to fixed charges (as of March 31, 1999) and the Company's press
release concerning its first quarter 1999 earnings (dated April 20, 1999).
-15-
<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 of the Registrant and as principal
accounting officer)
Fort Worth, Texas
May 14, 1999
-16-
<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION
Exhibit Index
12 Computation of Ratio of Earnings to Fixed Charges
27.1 Financial Data Schedule for the quarter ended March 31, 1999
27.2 Restated Financial Data Schedule for the year ended December 31, 1998
<PAGE>
EXHIBIT 12
BURLINGTON NORTHERN SANTA FE CORPORATION and SUBSIDIARIES
COMPUTATION of RATIO of EARNINGS to FIXED CHARGES
(In Millions, Except Ratio Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1999 1998
----- -----
<S> <C> <C>
Earnings:
Pre-tax income $377 $436
Add:
Interest and fixed charges,
excluding capitalized interest 94 88
Portion of rent under long-term
operating leases representative
of an interest factor 49 45
Amortization of capitalized interest 1 1
Less: Undistributed equity in earnings
of investments accounted for
under the equity method 3 3
----- -----
Total earnings available for fixed charges $518 $567
----- -----
Fixed charges:
Interest and fixed charges $ 97 $ 91
Portion of rent under long-term operating
leases representative of an interest factor 49 45
----- -----
Total fixed charges $146 $136
----- -----
Ratio of earnings to fixed charges 3.55x 4.17x(1)
</TABLE>
(1) Earnings for the three months ended March 31, 1998 include a pre-tax gain
on the pipeline partnerships sale of $67 million. Excluding this gain, the
ratio for the three months ended March 31, 1998 would have been 3.68x.
<TABLE> <S> <C>
<PAGE>
<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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 25
<SECURITIES> 0
<RECEIVABLES> 634
<ALLOWANCES> 79
<INVENTORY> 247
<CURRENT-ASSETS> 1,161
<PP&E> 26,004
<DEPRECIATION> 5,174
<TOTAL-ASSETS> 23,010
<CURRENT-LIABILITIES> 2,175
<BONDS> 5,416
0
0
<COMMON> 5
<OTHER-SE> 7,908
<TOTAL-LIABILITY-AND-EQUITY> 23,010
<SALES> 0
<TOTAL-REVENUES> 2,190
<CGS> 0
<TOTAL-COSTS> 1,710
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94
<INCOME-PRETAX> 377
<INCOME-TAX> 141
<INCOME-CONTINUING> 236
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 236
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This restated financial data 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>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 25
<SECURITIES> 0
<RECEIVABLES> 678
<ALLOWANCES> 84
<INVENTORY> 244
<CURRENT-ASSETS> 1,232<F1>
<PP&E> 25,701
<DEPRECIATION> 5,039
<TOTAL-ASSETS> 22,716<F1>
<CURRENT-LIABILITIES> 2,223<F1>
<BONDS> 5,188
0
0
<COMMON> 5
<OTHER-SE> 7,765
<TOTAL-LIABILITY-AND-EQUITY> 22,716<F1>
<SALES> 0
<TOTAL-REVENUES> 8,941
<CGS> 0
<TOTAL-COSTS> 6,783
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 354
<INCOME-PRETAX> 1,849
<INCOME-TAX> 694
<INCOME-CONTINUING> 1,155
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,155
<EPS-PRIMARY> 2.45
<EPS-DILUTED> 2.43
<FN>
<F1> Restatement reflected herein is the result of reclassifications to prior
periods' financial statements to conform to the current period
presentation.
</FN>
</TABLE>
