<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, 2000
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 28, 2000
----- -----------------------------
Common stock, $.01 par value 421,273,156 shares
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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,
----------------------------------------------
<S> <C> <C>
2000 1999
------------------- ---------------------
Revenues $2,238 $2,183
------------------- ---------------------
Operating expenses:
Compensation and benefits 698 690
Purchased services 231 229
Depreciation and amortization 222 219
Equipment rents 179 193
Fuel 211 165
Materials and other 187 207
------------------- ---------------------
Total operating expenses 1,728 1,703
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Operating income 510 480
Interest expense 104 94
Other income (expense), net (15) (9)
------------------- ---------------------
Income before income taxes 391 377
Income tax expense 148 141
------------------- ---------------------
Net income $ 243 $ 236
=================== =====================
Earnings per share:
Basic $ 0.55 $ 0.50
=================== =====================
Diluted $ 0.55 $ 0.50
=================== =====================
Average shares (in millions):
Basic 444.2 469.3
Dilutive effect of stock options 1.3 5.4
------------------- ---------------------
Diluted 445.5 474.7
=================== =====================
Dividends declared per share $ 0.12 $ 0.12
</TABLE>
See accompanying notes to consolidated financial statements.
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BURLINGTON NORTHERN SANTA FE CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Shares in thousands. Dollars in millions.)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
------------------- -------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 32 $ 22
Accounts receivable, net 332 397
Materials and supplies 228 255
Current portion of deferred income taxes 306 326
Other current assets 90 66
------------------- -------------------
Total current assets 988 1,066
Property and equipment, net 21,755 21,681
Other assets 1,151 953
------------------- -------------------
Total assets $23,894 $23,700
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities $ 1,865 $ 1,917
Long-term debt due within one year 127 158
------------------- -------------------
Total current liabilities 1,992 2,075
Long-term debt and commercial paper 6,285 5,655
Deferred income taxes 6,133 6,097
Casualty and environmental liabilities 435 423
Employee merger and separation costs 285 302
Other liabilities 977 976
------------------- -------------------
Total liabilities 16,107 15,528
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Commitments and contingencies (see Notes 2, 3, 5, and 6)
Stockholders' equity:
Common stock, $.01 par value, 600,000 shares authorized;
484,985 shares and 484,572 shares issued, respectively 5 5
Additional paid-in capital 5,401 5,390
Retained earnings 3,914 3,726
Treasury stock, at cost, 56,711 shares and 30,013 shares, (1,498) (913)
respectively
Unearned compensation (28) (29)
Accumulated other comprehensive deficit (7) (7)
------------------- -------------------
Total stockholders' equity 7,787 8,172
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Total liabilities and stockholders' equity $23,894 $23,700
=================== ===================
</TABLE>
See accompanying notes to consolidated financial statements.
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BURLINGTON NORTHERN SANTA FE CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
Operating Activities:
Net income $ 243 $ 236
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 222 219
Deferred income taxes 56 74
Employee merger and separation costs paid (20) (24)
Other, net 18 (57)
Changes in current assets and liabilities:
Accounts receivable 65 39
Materials and supplies 27 (3)
Other current assets (24) -
Accounts payable and other current liabilities (47) (68)
---------------- ----------------
Net cash provided by operating activities 540 416
---------------- ----------------
Investing Activities:
Capital expenditures (257) (373)
Other, net (235) (204)
---------------- ----------------
Net cash used for investing activities (492) (577)
---------------- ----------------
Financing Activities:
Net increase (decrease) in commercial paper and bank borrowings 764 (107)
Proceeds from issuance of long-term debt - 404
Payments on long-term debt (165) (31)
Purchase of BNSF common stock (583) (100)
Dividends paid (55) (56)
Proceeds from stock options exercised 1 43
Other, net - 2
---------------- ----------------
Net cash provided by (used for) financing activities (38) 155
---------------- ----------------
Increase (decrease) in cash and cash equivalents 10 (6)
Cash and cash equivalents:
Beginning of period 22 25
---------------- ----------------
End of period $ 32 $ 19
================ ================
Supplemental cash flow information:
Interest paid, net of amounts capitalized $ 109 $ 97
Income taxes paid, net of refunds 54 7
</TABLE>
See accompanying notes to consolidated financial statements.
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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, 1999, including the financial statements and notes thereto
incorporated by reference from the Registrant's 1999 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, 2000 and December 31, 1999 and the consolidated results
of operations for the three month periods ended March 31, 2000 and 1999 have
been included. For the three month periods ended March 31, 2000 and 1999, 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. PROPOSED COMBINATION WITH CANADIAN NATIONAL RAILWAY COMPANY
On December 18, 1999, BNSF and Canadian National Railway Company ("CN") entered
into an agreement to combine the two companies ("Combination"). See the
discussion under "Proposed Combination With Canadian National Railway Company"
in Note 1 to the Consolidated Financial Statements on pages 34-35 of BNSF's 1999
Annual Report to Shareholders, which information is hereby incorporated by
reference.
Completion of the Combination requires approval of the shareholders of BNSF and
CN. The Combination is also subject to approval of the U. S. Surface
Transportation Board (STB), compliance with the Competition Act (Canada), and
approval by the Quebec Superior Court. On March 17, 2000, the STB served a
Decision (STB Ex Parte No. 582) directing Class I railroads to suspend activity
relating to any railroad transaction that would be deemed a "major transaction"
under STB regulations, "pending development of new rules" by the STB governing
merger transactions. The Decision followed a four-day hearing that ended March
10, 2000, which the STB held to discuss the impact of future rail consolidations
on the present and future structure of the rail industry and what the evolving
structure of the North American railroad industry should be. The Decision
stated that no filings relating to a major railroad transaction will be accepted
for 15 months. The Decision also suspended the Notice of Intent to File
Railroad Control Application that had been filed by BNSF and CN on December 20,
1999, giving notice of the intent to file a joint application for STB approval
of the Combination on or after March 20, 2000.
On March 17, 2000, BNSF, CN, and the Western Coal Traffic League filed petitions
for review of the STB's March 17, 2000 Decision in the United States Court of
Appeals for the District of Columbia Circuit. On March 20, 2000, BNSF filed a
petition for stay pending judicial review with the STB. In the stay petition,
BNSF argued that the STB lacks statutory authority to impose a moratorium on the
filing of railroad applications, failed to observe required procedures before
entering its moratorium, and could not suspend the Notice of Intent to File
Railroad Application without conducting an adjudicatory proceeding. BNSF also
argued that during the pendency of the stay, the Board should accept the BNSF/CN
control application and should review it within the statutorily prescribed 16-
month period. In the absence of action by the STB on the petition for a stay by
March 29, 2000, BNSF filed on that date a motion for stay pending judicial
review of the United States Court of Appeals for the District of Columbia
Circuit, seeking similar relief to the petition for a stay filed with the STB.
On April 7, 2000, the STB denied the stay petition filed on March 20, 2000.
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On April 25, 2000, the District of Columbia Circuit Court of Appeals granted
BNSF's motion for expedited judicial review of the merits of the STB-issued
moratorium order with oral argument to be heard on June 13, 2000. The Court
deferred action on the stay motion pending oral argument.
Upon favorable resolution of the previously discussed litigation matters
concerning the Combination, a special shareholders' meeting to vote on the
Combination will be held pursuant to the Combination agreement.
3. DEBT
In February 2000, a put option on $100 million of medium-term notes paying
interest of 6.1 percent was exercised by the holders and the Company repaid the
holders primarily with proceeds from the issuance of commercial paper.
In April 2000, BNSF issued $300 million of 7.9 percent notes due April 2007 and
$200 million of 8.1 percent debentures due April 2020. The net proceeds of the
debt issuance were used for the repayment of outstanding commercial paper which
increased primarily as a result of higher share repurchases (see Note 7). At
the time of issuing the $300 million of 7.9 percent notes and the $200 million
of 8.1 percent debentures discussed above, the Company closed out two treasury
lock transactions, each in an amount of $100 million (one based on the 10-year
and one based on the 30-year U.S. treasury rates), at gains of approximately
$9.5 million and $12.8 million, respectively, which have been deferred and are
being amortized to interest expense over the lives of the notes and the
debentures, respectively. Subsequent to this debt issuance, the Company had no
remaining capacity under its existing shelf registration statement.
In April 2000, BNSF issued $50 million of privately placed debt secured by
locomotives that were acquired in 1999. This debt carries an interest rate of
7.8 percent and matures in April 2015.
In May 2000, the Company filed a new shelf registration statement that is
expected to become effective during May 2000 for the issuance of debt securities
which may be issued in one or more series at an aggregate offering price not to
exceed $1 billion.
4. EMPLOYEE MERGER AND SEPARATION COSTS
Current and long-term employee merger and separation liabilities totaling $337
million are included in the consolidated balance sheet at March 31, 2000, 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 2000, the Company made employee merger and separation
payments of $20 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, 2000, $52 million of the remaining liabilities are
included within current liabilities for anticipated costs to be paid over the
next twelve months.
5. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL
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 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 31 Superfund sites for
which investigation and remediation payments are or will be made or are yet to
be determined (the
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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 375 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 $12 million during
the first three months of 2000 for mandatory and unasserted clean-up efforts,
including amounts expended under federal and state voluntary clean-up programs.
BNSF has accruals of approximately $237 million for remediation and restoration
of all known sites. BNSF anticipates that the majority of the accrued costs at
March 31, 2000, 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.
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 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.
6. HEDGING ACTIVITIES
FUEL
During the past three years, fuel expenses approximated 10 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
maintains 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 by entering
into fuel hedge instruments based on management's evaluation of current and
expected diesel fuel price trends. However, to the extent the Company hedges
portions of its fuel purchases, it will not realize the impact of decreases in
fuel prices. Conversely, to the extent the Company does not hedge portions of
its fuel purchases, it may be adversely affected by increases 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
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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 2000 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, 2000, BNSF had entered into fuel swaps for approximately 746
million gallons at an average price of approximately 50 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 41 percent of
estimated fuel purchases for the remaining nine months of 2000, and
approximately 23 percent and 8 percent of estimated annual and quarterly fuel
purchases for 2001 and 2002, respectively. Hedge positions are closely monitored
to ensure that they will not exceed actual fuel requirements in any period.
Unrecognized gains from BNSF's fuel swap transactions were approximately $80
million as of March 31, 2000, of which $54 million relates to swap transactions
that will expire in 2000. BNSF also monitors its hedging positions and credit
ratings of its counterparties and does not anticipate losses due to counterparty
nonperformance.
INTEREST RATE
As of March 31, 2000, the Company had outstanding 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. In 2000, $100 million of 10-year treasury lock transactions and
$100 million of 30-year treasury lock transactions will expire, and the
remaining $200 million of treasury lock transactions will expire in 2001.
Unrecognized gains on the treasury lock transactions were approximately $46
million as of March 31, 2000.
As discussed in Note 3, at the time of issuing the $300 million of 7.9 percent
notes and the $200 million of 8.1 percent debentures in April 2000, the Company
closed out the two treasury lock transactions with expiration dates in 2000 at
gains of approximately $9.5 million and $12.8 million, respectively, which have
been deferred and are being amortized to interest expense over the lives of the
notes and the debentures, respectively.
7. COMMON STOCK REPURCHASE PROGRAM
During the first quarter of 2000, BNSF repurchased 26.7 million shares of its
common stock at an average price of $21.87 per share under the Company's share
repurchase program amounting to a total cost of $583 million. On April 20,
2000, the Board of Directors authorized the extension of the current BNSF share
repurchase program, adding 30 million shares to the total of 60 million shares
previously authorized in equal amounts in July 1997 and December 1999. Total
repurchases under BNSF's 90 million share-repurchase program were 64.2 million
shares through May 12, 2000 at an average price of $26.08 per share at a total
cost of $1.68 billion.
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, 2000 compared with three months ended March 31,
1999
BNSF recorded net income for the first quarter of 2000 of $243 million ($0.55
per share), compared with first quarter 1999 net income of $236 million ($0.50
per share). This increase is primarily due to an increase of $30 million in
operating income as a result of higher revenues in most business units partially
offset by significantly higher fuel costs and higher interest expense resulting
from increased debt.
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Revenues
The following table presents BNSF's revenue information by commodity for the
three months ended March 31, 2000 and 1999 and includes certain
reclassifications of prior year information to conform to current year
presentation:
<TABLE>
<CAPTION>
Average Revenue
Revenues Cars/Units Per Car/Unit
--------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
2000 1999 2000 1999 2000 1999
----------- ----------- ------------- ----------- ------------- ------------
(In Millions) (In Thousands)
Carload $ 645 $ 619 439 430 $ 1,469 $ 1,440
Intermodal 618 572 800 738 773 775
Coal 529 565 507 527 1,043 1,072
Agricultural Commodities 322 310 175 168 1,840 1,845
Automotive 124 108 67 63 1,851 1,714
----------- ----------- ------------- ----------- ------------- ------------
Total Freight Revenues 2,238 2,174 1,988 1,926 $ 1,126 $ 1,129
============= =========== ============= ============
Other Revenues - 9
----------- -----------
Total Operating Revenues $ 2,238 $ 2,183
=========== ===========
</TABLE>
Total revenues for first quarter of 2000 were $2,238 million or 3 percent higher
than revenues of $2,183 million for the first quarter of 1999. The increase
primarily reflects increases in the carload, intermodal, agricultural, and
automotive sectors, partially offset by lower coal revenues. Average revenue
per car/unit decreased slightly in the first quarter of 2000 to $1,126 from
$1,129 in the first quarter of 1999.
Carload revenues of $645 million for the first quarter of 2000 were $26 million
or 4 percent higher than the first quarter of 1999 due to increases in the
chemicals, forest products, metals and other consumer products sectors,
partially offset by decreased machinery revenues. The increases were a result of
increased plastics shipments in the chemicals sector due to plant expansions,
strong shipments of lumber and pulpboard in the forest products sector,
increased steel coil loadings in the metals sector, and strong increases in
beverages and cotton in the other consumer products sector. These increases
were partially offset by decreased shipments of heavy machinery.
Intermodal revenues of $618 million for the first quarter of 2000 increased $46
million or 8 percent reflecting increases in the international, direct and
truckload sectors. Direct marketing revenues benefited from increased units
shipped for UPS. International revenues were up due to increased loadings from
Maersk, Evergreen, and Hyundai as well as record trade from Far Eastern
countries to the United States. Truckload marketing revenues benefited from
increased shipments with Schneider National. These revenue increases were
partially offset by decreases in the intermodal marketing companies (IMC) sector
due to Union Pacific Corporation/CSX Intermodal, Inc. pricing pressures and
increased trucking capacity. In addition, IMC has been negatively affected by
eastern railroad service issues, which has resulted in some intermodal rail
traffic converting to highway service.
Coal revenues of $529 million for the first quarter of 2000 decreased $36
million or 6 percent due in part to decreased demand as a result of mild winter
weather.
Agricultural commodities revenues of $322 million for the first quarter of 2000
were $12 million or 4 percent higher than revenues for the first quarter of 1999
due to strong soybean export markets and increased northern wheat shipments,
partially offset by decreased corn syrup, sugar and molasses shipments.
Automotive revenues of $124 million for the first quarter of 2000 were $16
million or 15 percent higher than the first quarter of 1999. This increase can
be attributed to increased sales of domestic and foreign vehicles in the United
States in the first quarter of 2000 which were partially driven by increases in
regional demand for GM, Hyundai, Ford, Honda, and Mitsubishi vehicles.
Expenses
Total operating expenses for the first quarter of 2000 were $1,728 million, an
increase of $25 million or 1 percent, over 1999 despite a 3 percent increase in
cars and units handled. The operating ratio improved to 77.2 percent for the
first quarter of 2000, compared with a 78.0 percent operating ratio for the
first quarter 1999.
Compensation and benefits expenses of $698 million were $8 million or 1 percent
higher than the first quarter of 1999 primarily due to increased wages for both
the salaried and union workforce, higher incentive compensation expense
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and increased health and welfare costs partially offset by lower employment
levels.
Purchased services of $231 million for the first quarter of 2000 were $2 million
or 1 percent higher than the first quarter of 1999 principally due to increased
equipment maintenance costs due to an increase in the number of locomotives
under maintenance contracts partially offset by lower professional services
costs.
Equipment rents expenses for the first quarter of 2000 of $179 million were $14
million or 7 percent lower than the first quarter of 1999 reflecting a decrease
in the number of leased cars and lower lease rates.
Fuel expenses of $211 million for the first quarter of 2000 were $46 million or
28 percent higher than the first quarter of 1999, as a result of a 16 cent or 28
percent increase in the average all-in cost per gallon of diesel fuel.
Consumption was essentially flat at 292 million gallons compared to 293 million
gallons in the first quarter of 1999. The increase in the average all-in cost
per gallon of diesel fuel includes a 38 cent increase in the average purchase
price, partially offset by the favorable impact in 2000 from the Company's fuel
hedging program of 10 cents per gallon compared with additional expense from
hedging of 12 cents per gallon in 1999.
Materials and other expenses of $187 million for the first quarter of 2000 were
$20 million or 10 percent lower than the first quarter of 1999 due to lower
locomotive material costs, lower derailment expenses and gains from easement
sales.
Interest expense of $104 million for the first quarter of 2000 was $10 million
or 11 percent higher than in the first quarter of 1999, principally reflecting
higher debt levels partially resulting from the Company's share repurchase
program and higher interest rates. Total debt increased to $6,412 million at
March 31, 2000 from $5,718 million at March 31, 1999.
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.
OPERATING ACTIVITIES
Net cash provided by operating activities was $540 million for the three months
ended March 31, 2000, compared with $416 million for the three months ended
March 31, 1999. The increase in cash from operations was primarily due to an
increase in cash provided by changes in working capital, principally lower
accounts receivable, as well as the receipt of a $43 million dividend from the
Company's equity investment in TTX Company.
INVESTING ACTIVITIES
Net cash used for investing activities for the three months ended March 31, 2000
was $492 million consisting of $257 million of capital expenditures, as
discussed below, and $235 million of other investing activities that primarily
reflects the temporary acquisition of equipment which the Company expects will
be ultimately sold and leased back through operating leases.
A breakdown of cash capital expenditures for the three months ended March 31,
2000 and 1999, is set forth in the following table (in millions):
<TABLE>
<S> <C> <C>
Three Months Ended March 31, 2000 1999
- --------------------------------------------------------------- --------------- ---------------
Maintenance of Way $ 165 $ 130
Mechanical 42 48
Information Services 13 16
Other 22 15
- --------------------------------------------------------------- --------------- ---------------
Total Maintenance of Business 242 209
New Locomotives and Freight Cars - 121
Terminal and Line Expansion 8 40
Other Projects 7 3
- --------------------------------------------------------------- --------------- ---------------
Total $ 257 $ 373
- --------------------------------------------------------------- =============== ===============
</TABLE>
-9-
<PAGE>
Maintenance of Way expenditures for the first quarter 2000 increased primarily
due to an earlier start on projects as a result of a mild winter. Terminal and
Line Expansion expenditures, principally main line track and major facility
construction, decreased due to a reduced capital program in 2000 and timing of
scheduled projects.
Through March 31, 2000, BNSF has received 95 of the 196 locomotives it has
committed to acquire in 2000. Locomotive acquisitions in 2000 are expected to
ultimately be acquired through operating leases rather than a mix of capital and
operating leases as in the prior year.
FINANCING ACTIVITIES
Net cash used for financing activities during the first three months of 2000 was
$38 million, primarily related to common stock repurchases of $583 million and
dividend payments of $55 million partially offset by net proceeds from total
debt of $599 million.
During the first quarter of 2000, BNSF repurchased 26.7 million shares of its
common stock at an average price of $21.87 per share under the Company's share
repurchase program amounting to a total cost of $583 million. On April 20,
2000, the Board of Directors authorized the extension of the current BNSF share
repurchase program, adding 30 million shares to the total of 60 million shares
previously authorized in equal amounts in July 1997 and December 1999. Total
repurchases under BNSF's 90 million share-repurchase program were 64.2 million
shares through May 12, 2000 at an average price of $26.08 per share at a total
cost of $1.68 billion. 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,
financial ratios, and stockholder returns.
In February 2000, a put option on $100 million of medium-term notes paying a
coupon of 6.1 percent was exercised by the holders and the Company repaid the
holders primarily with proceeds from the issuance of commercial paper.
In April 2000, BNSF issued $300 million of 7.9 percent notes due April 2007 and
$200 million of 8.1 percent debentures due April 2020. The net proceeds of the
debt issuance were used for the repayment of outstanding commercial paper which
increased primarily as a result of higher share repurchases, as discussed above.
At the time of issuing the $300 million of 7.9 percent notes and the $200
million of 8.1 percent debentures discussed above, the Company closed out two
treasury lock transactions, each in an amount of $100 million (one based on the
10-year and one based on the 30-year U.S. treasury rates), at gains of
approximately $9.5 million and $12.8 million, respectively, which have been
deferred and are being amortized to interest expense over the lives of the notes
and the debentures, respectively. Subsequent to this debt issuance, the Company
had no remaining capacity under its existing shelf registration statement.
In May 2000, the Company filed a new shelf registration statement that is
expected to become effective during May 2000 for the issuance of debt securities
which may be issued in one or more series at an aggregate offering price not to
exceed $1 billion.
In April 2000, BNSF issued $50 million of privately placed debt secured by
locomotives that were acquired in 1999. This debt carries an interest rate of
7.8 percent and matures in April 2015.
BNSF's ratio of total debt to total capital was 45.2 percent and 41.6 percent at
March 31, 2000 and December 31, 1999, respectively. This increase is
attributable to the increase in debt due primarily to higher share repurchases
as discussed above.
CREDIT AGREEMENTS
BNSF issues commercial paper from time to time which is supported by bank
revolving credit agreements. At March 31, 2000, there were no borrowings against
the revolving credit agreements. However, outstanding commercial paper balances
are considered as reducing the amount of borrowings available under these
agreements. The bank revolving credit agreements which were renewed and
extended effective June 28, 1999, allow borrowings of up to $750 million on a
short-term basis and $750 million on a long-term basis. Annual facility fees
are currently 0.10 percent and 0.125 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 determined by 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 in June 2000. The commitments
of the lenders under the long-term agreement are scheduled to expire in June
2004.
-10-
<PAGE>
The maturity value of commercial paper outstanding as of March 31, 2000 was
$1,245 million, reducing the total capacity available under the revolving credit
agreements to $255 million. BNSF must maintain compliance with certain
financial covenants under its revolving credit agreements and at March 31, 2000,
the Company was in compliance. As discussed in Note 3 to the Company's
consolidated financial statements, in April 2000 the Company issued $500 million
of debt and the proceeds were used to reduce commercial paper borrowings.
DIVIDENDS
Common stock dividends declared for the three months ended March 31, 2000 and
1999 were $0.12 per share, respectively. Dividends paid on common stock during
the first three months of 2000 and 1999 were $55 million and $56 million,
respectively. On January 20, 2000, 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 3, 2000, to shareholders
of record on March 13, 2000. On April 20, 2000, 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 July 3, 2000 to
shareholders of record on June 14, 2000.
Other Matters
- -------------
Proposed Combination With Canadian National Railway Company
On December 18, 1999, BNSF and Canadian National Railway Company ("CN") entered
into an agreement to combine the two companies ("Combination"). See the
discussion under "Proposed Combination With Canadian National Railway Company"
in Note 1 to the Consolidated Financial Statements on pages 34-35 of BNSF's 1999
Annual Report to Shareholders, which information is hereby incorporated by
reference.
Completion of the combination requires approval of the shareholders of BNSF and
CN. The combination is also subject to approval of the U. S. Surface
Transportation Board (STB), compliance with the Competition Act (Canada), and
approval by the Quebec Superior Court. On March 17, 2000, the STB served a
Decision (STB Ex Parte No. 582) directing Class I railroads to suspend activity
relating to any railroad transaction that would be deemed a "major transaction"
under STB regulations, "pending development of new rules" by the STB governing
merger transactions. The Decision followed a four-day hearing that ended March
10, 2000, which the STB held to discuss the impact of future rail consolidations
on the present and future structure of the rail industry and what the evolving
structure of the North American railroad industry should be. The Decision
stated that no filings relating to a major railroad transaction will be accepted
for 15 months. The Decision also suspended the Notice of Intent to File
Railroad Control Application that had been filed by BNSF and CN on December 20,
1999, giving notice of the intent to file a joint application for STB approval
of the Combination on or after March 20, 2000.
On March 17, 2000, BNSF, CN, and the Western Coal Traffic League filed petitions
for review of the STB's March 17, 2000 Decision in the United States Court of
Appeals for the District of Columbia Circuit. On March 20, 2000, BNSF filed a
petition for stay pending judicial review with the STB. In the stay petition,
BNSF argued that the STB lacks statutory authority to impose a moratorium on the
filing of railroad applications, failed to observe required procedures before
entering its moratorium, and could not suspend the Notice of Intent to File
Railroad Application without conducting an adjudicatory proceeding. BNSF also
argued that during the pendency of the stay, the Board should accept the BNSF/CN
control application and should review it within the statutorily prescribed 16-
month period. In the absence of action by the STB on the petition for a stay by
March 29, 2000, BNSF filed on that date a motion for stay pending judicial
review of the United States Court of Appeals for the District of Columbia
Circuit, seeking similar relief to the petition for a stay filed with the STB.
On April 7, 2000, the STB denied the stay petition filed on March 20, 2000.
On April 25, 2000, the District of Columbia Circuit Court of Appeals granted
BNSF's motion for expedited judicial review of the merits of the STB-issued
moratorium order with oral argument to be heard on June 13, 2000. The Court
deferred action on the stay motion pending oral argument.
Upon favorable resolution of the previously discussed litigation matters
concerning the Combination, a special shareholders' meeting to vote on the
Combination will be held pursuant to the Combination agreement.
-11-
<PAGE>
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 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
The negotiating process for new, major collective bargaining agreements covering
all of BNSF Railway's union employees is underway. Wages, health and welfare
benefits, work rules, and other issues have traditionally been addressed through
industry-wide negotiations. These negotiations have generally taken place over
a number of months and have previously not resulted in any extended work
stoppages. The existing agreements remained in effect on January 1, 2000, and
will continue to remain in effect until new agreements are reached or the
Railway Labor Act's procedures (which include mediation, cooling-off periods,
and the possibility of Presidential intervention) are exhausted. The current
agreements provide for periodic wage increases until new agreements are reached.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133 "Accounting for Derivative
Instruments and Hedging Activities." BNSF will be required to adopt FAS 133
beginning January 1, 2001. While earlier adoption is permitted, the Company does
not currently believe it is likely to adopt the Statement before the effective
date. 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 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 affected by the variability of the cash flows of
the hedged item. The ineffective portion of all hedges will be recognized in
current-period earnings.
Based on interest rate and fuel hedging instruments outstanding at March 31,
2000 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 benefit to accumulated other comprehensive deficit of
approximately $60 million if adopted March 31, 2000. The Company is presently
evaluating the impact SFAS No. 133 will have on its ongoing results of
operations.
Forward-Looking Information
To the extent that statements made by the Company relate to the Company's future
economic performance or business outlook, predictions or expectations of
financial or operational results, or refer to matters which are not historical
facts, such statements are "forward-looking" statements within the meaning of
the federal securities laws. These forward-looking statements involve a number
of risks and uncertainties, and actual results may differ materially. Factors
that could cause actual results to differ materially include, but are not
limited to, economic and industry conditions: material adverse changes in
economic or industry conditions, customer demand, effects of adverse economic
conditions affecting shippers, adverse economic conditions in the industries and
geographic areas that produce and consume freight, changes in fuel prices, and
labor difficulties including strikes; legal and regulatory factors: change in
laws and regulations and the ultimate outcome of shipper claims, environmental
investigations or proceedings and other types of claims and litigation; and
operating factors: technical difficulties, changes in operating conditions and
costs, competition and commodity concentrations as well as natural events such
as severe weather, floods and earthquakes. The factors noted, individually or in
combination could, among other things, limit demand and pricing, affect costs
and the feasibility of certain operations, or affect traffic and pricing levels.
-12-
<PAGE>
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 1999 Annual
Report to Shareholders and in Item 7A of the Company's Annual Report on Form 10-
K for the year ended December 31, 1999, 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, 1999.
COMMODITY PRICE SENSITIVITY
As discussed in Note 6 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, 2000. 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, 2000
----------------------------------------------------------------
Maturity Date
------------------------------------ Fair
2000 2001 2002 Total Value (1)
---------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Diesel Fuel Swaps:
Gallons (in millions) 368 277 101 746 $80
Weighted average price per
gallon $0.50 $0.49 $0.50 $0.50 -
</TABLE>
(1) Represents unrecognized gains (in millions) based on the price of Gulf Coast
#2 heating oil.
TREASURY LOCK TRANSACTIONS
As discussed in Note 6 to the Company's consolidated financial statements, 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, 2000. The interest rates in the table
below exclude a credit spread which will be determined at the time of the actual
debt issuance and will be included in the all-in interest.
<TABLE>
<CAPTION>
March 31, 2000
-----------------------------------------------------------
Expiration Date
----------------------------- Fair
2000 2001 Total Value (1)
---- ---- ----- ---------
<S> <C> <C> <C> <C>
Fixed Rate Treasury Locks (in millions) $ 200 $ 200 $ 400 $46
Average Pay Rate 4.80% 4.84% 4.82% -
</TABLE>
(1) Represents unrecognized gains (in millions).
At the time of issuing the $300 million of notes and the $200 million of
debentures discussed in Note 3 to the Company's consolidated financial
statements, the Company closed out the $200 million of treasury lock
transactions with expiration dates in 2000 (one based on the 10-year and one
based on the 30-year U.S. treasury rates), at gains of approximately $9.5
million and $12.8 million, respectively, which have been deferred and are being
amortized to interest expense over the lives of the notes and the debentures,
respectively.
-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, 1999, of the petitions for expedited review by the
United States Court of Appeals for the District of Columbia of the United
States Surface Transportation Board's decision imposing a 15 month
moratorium (Burlington Northern Santa Fe Corporation and The Burlington
Northern and Santa Fe Railway Company v. Surface Transportation Board and
United States of America, No. 00-1120). On April 25, 2000, the District of
Columbia Court of Appeals approved this petition for expedited review of
the merits of the STB-issued moratorium with oral argument to be heard on
June 13, 2000.
Item 4. Submission of Matters to a Vote of Security Holders
At the April 19, 2000, annual meeting of shareholders, the Company's
shareholders elected 14 directors, each for a one-year term, and voted on
one shareholder proposal.
Election of Fourteen Directors
------------------------------
The shareholders elected the Company's fourteen nominees to the fourteen
director positions by the vote shown below; four shareholders nominees
received the votes shown below but were not elected:
Nominees (Elected*) Votes For Withheld
------------------- --------- --------
Joseph F. Alibrandi* 366,231,010 5,262,827
John J. Burns, Jr.* 366,456,614 5,037,223
George Deukmejian* 362,617,503 8,876,334
Robert D. Krebs* 366,189,255 5,304,582
Bill M. Lindig* 366,528,879 4,964,958
Vilma S. Martinez* 366,424,182 5,069,655
Roy S. Roberts* 366,532,924 4,960,913
Marc J. Shapiro* 366,531,774 4,962,063
Arnold R. Weber* 366,117,819 5,376,018
Robert H. West* 366,481,068 5,012,769
J. Steven Whisler* 366,525,136 4,968,701
Edward E. Whitacre, Jr.* 366,524,496 4,969,341
Ronald B. Woodard* 366,525,648 4,968,189
Michael B. Yanney* 366,457,918 5,035,919
William S. Purdy 268 371,493,569
Michael Coleman 268 371,493,569
Howard Morgan 268 371,493,569
Walter Vaughn 268 371,493,569
Shareholder Proposal
--------------------
The shareholders did not approve a shareholder proposal urging that the
BNSF board of directors solicit shareholder approval for any "shareholder
rights" plan adopted by the Board by the following vote:
For 143,183,322
Against 188,018,860
Abstentions 4,344,036
Broker Non-Votes 35,947,619
Item 5. Other Information
On April 20, 2000, the parties to the Amended and Restated Combination
Agreement dated as of December 18, 1999 ("Combination Agreement") between
Canadian National Railway Company ("CN"), Burlington Northern Santa Fe
Corporation ("BNSF"), North American Railways, Inc., and Western Merger
Sub, Inc., mutually agreed to waive the respective limitations in the
Combination Agreement on CN and BNSF repurchasing shares of their
respective common stock. These limitations had prohibited purchases which
in the aggregate would have the effect of decreasing the number of issued
and outstanding common shares by more than 8 percent in any calendar year.
-14-
<PAGE>
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 no Current Reports on Form 8-K since those
reported in its Annual Report on Form 10-K for the year ended December
31, 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/ Dennis R. Johnson
----------------------
Dennis R. Johnson
Vice President and Controller
(On behalf of the Registrant and as principal
accounting officer)
Fort Worth, Texas
May 15, 2000
-16-
<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION
Exhibit Index
3.1 Form of BNSF's 7.875% Notes Due April 15, 2007
3.2 Form of BNSF's 8.125% Debentures Due April 15, 2020
10.1* Burlington Northern Santa Fe Corporation Supplemental Investment
and Retirement Plan
12 Computation of Ratio of Earnings to Fixed Charges
13 1999 Annual Report to Shareholders of Burlington Northern Santa Fe
Corporation (pages 34-35 only)
27.1 Financial Data Schedule for the quarter ended March 31, 2000
27.2 Restated Financial Data Schedule for the quarter ended March 31,
1999
*Management contract or compensatory plan or arrangement.
E-1
<PAGE>
Exhibit 3.1
Burlington Northern Santa Fe Corporation
7.875% note due April 15, 2007
CUSIP No. 12189T AP 9 $ 300,000,000.00
This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary
or a nominee thereof. This Security may not be exchanged in whole or
in part for a Security registered, and no transfer of this Security in
whole or in part may be registered, in the name of any Person other
than such Depositary or a nominee thereof, except in the limited
circumstances described in the Indenture.
BURLINGTON NORTHERN SANTA FE CORPORATION, a corporation duly organized and
existing under the laws of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to CEDE & CO. or registered assigns, the
principal sum of Three Hundred Million Dollars ($300,000,000.00) on April 15,
2007, and to pay interest thereon from April 14, 2000 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually on April 15 and October 15 in each year, commencing October 15,
2000, at the rate of 7.875% per annum, until the principal hereof is paid or
made available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the April 1 or October 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: April 14, 2000 BURLINGTON NORTHERN SANTA FE CORPORATION
By
--------------------------------------
Thomas N. Hund
Senior Vice President, Chief Financial
Officer and Treasurer
Attest:
- -----------------------------------
Jeffrey T. Williams
Assistant Secretary
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
<PAGE>
BANK ONE TRUST COMPANY,
NATIONAL ASSOCIATION
As Trustee
By
--------------------------------------
Authorized Officer
<PAGE>
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of December 1, 1995 (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and Bank One Trust Company, National
Association, as successor to The First National Bank of Chicago, as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the face hereof, limited in
aggregate principal amount to $300,000,000.00
The Securities of this series are subject to redemption upon not less than
30 and not more than 60 days' notice by mail, at any time, as a whole or in
part, at the election of the Company, at a redemption price equal to the greater
of (i) 100% of their principal amount or (ii) the sum of the present values of
the remaining scheduled payments of principal and interest thereon discounted to
the date of redemption on a semiannual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Treasury Rate (as defined in the Officers'
Certificate establishing the Securities of this series), plus 20 basis points,
plus in either case accrued interest to the date of redemption.
In the event of redemption of this Security in part only, a new Security or
Securities of this series and of like tenor for the unredeemed portion hereof
will be issued in the name of the Holder, upon the cancellation hereof.
The Indenture contains provisions for defeasance at any time of the entire
indebtedness of this Security or certain restrictive covenants and Events of
Default with respect to this Security, in each case upon compliance with certain
conditions set forth in the Indenture.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and the Trustee shall have failed to institute any such
proceeding, for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder of
this Security for the enforcement of any payment of principal hereof or any
premium or interest hereon on or after the respective due dates expressed
herein.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Security at the times, place and rate, and in the coin or currency,
herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any place where the principal of and any premium and
interest on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series
and of like tenor, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security is overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
<PAGE>
EXHIBIT 3.2
BURLINGTON NORTHERN SANTA FE CORPORATION
8.125% Debenture due April 15, 2020
CUSIP No. 12189T AQ 7 $ 200,000,000.00
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR
IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN
WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN
SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
BURLINGTON NORTHERN SANTA FE CORPORATION, a corporation duly organized and
existing under the laws of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to CEDE & CO. or registered assigns, the
principal sum of Two Hundred Million Dollars ($200,000,000.00) on April 15,
2020, and to pay interest thereon from April 14, 2000 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually on April 15 and October 15 in each year, commencing October 15,
2000, at the rate of 8.125% per annum, until the principal hereof is paid or
made available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the April 1 or October 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
Reference is hereby made to the further provisions of this Security set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: April 14, 2000 BURLINGTON NORTHERN SANTA FE CORPORATION
By......................................
Thomas N. Hund
Senior Vice President, Chief Financial
Officer and Treasurer
Attest:
<PAGE>
.................................
Jeffrey T. Williams
Assistant Secretary
This is one of the Securities of the series designated therein referred to in
the within-mentioned Indenture.
BANK ONE TRUST COMPANY,
NATIONAL ASSOCIATION
As Trustee
By............................................
Authorized Officer
<PAGE>
This Security is one of a duly authorized issue of securities of the Company
(herein called the "Securities"), issued and to be issued in one or more series
under an Indenture, dated as of December 1, 1995 (herein called the "Indenture",
which term shall have the meaning assigned to it in such instrument), between
the Company and Bank One Trust Company, National Association, as successor to
The First National Bank of Chicago, as Trustee (herein called the "Trustee",
which term includes any successor trustee under the Indenture), and reference is
hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is one
of the series designated on the face hereof, limited in aggregate principal
amount to $200,000,000.00
The Securities of this series are subject to redemption upon not less than 30
and not more than 60 days' notice by mail, at any time, as a whole or in part,
at the election of the Company, at a redemption price equal to the greater of
(i) 100% of their principal amount or (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon discounted to the
date of redemption on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Rate (as defined in the Officers'
Certificate establishing the Securities of this series), plus 25 basis points,
plus in either case accrued interest to the date of redemption.
In the event of redemption of this Security in part only, a new Security or
Securities of this series and of like tenor for the unredeemed portion hereof
will be issued in the name of the Holder, upon the cancellation hereof.
The Indenture contains provisions for defeasance at any time of the entire
indebtedness of this Security or certain restrictive covenants and Events of
Default with respect to this Security, in each case upon compliance with certain
conditions set forth in the Indenture.
If an Event of Default with respect to Securities of this series shall occur
and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the Holder of
this Security shall not have the right to institute any proceeding with respect
to the Indenture or for the appointment of a receiver or trustee or for any
other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and the Trustee shall have failed to institute any such
proceeding, for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder of
this Security for the enforcement of any payment of principal hereof or any
premium or interest hereon on or after the respective due dates expressed
herein.
No reference herein to the Indenture and no provision of this Security or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Security at the times, place and rate, and in the coin or currency,
herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any place where the principal of and any premium and
interest on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series
and of like tenor, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
<PAGE>
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security is overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
<PAGE>
Exhibit 10.1
BURLINGTON NORTHERN SANTA FE CORPORATION
SUPPLEMENTAL INVESTMENT AND RETIREMENT PLAN
Effective January 1, 1997, as amended
ARTICLE I - GENERAL
Section 1.1 Establishment of Plan and Purpose. Burlington Northern Santa Fe
---------------------------------
Corporation, a Delaware Corporation, (hereinafter the "Company"), has
established the Burlington Northern Santa Fe Supplemental Investment and
Retirement Plan, (hereinafter the "Plan"), effective January 1, 1997. This plan
is intended to replace the Burlington Northern Inc. Restoration Plan and the
Santa Fe Pacific Corporation Supplemental Retirement and Savings Plan, and both
plans shall hereby be merged into this Plan, provided, however, that any
compensation deferred under the terms of a predecessor plan shall be distributed
pursuant to the terms of the deferral election made under such plan. The
purpose of this Plan is to provide certain highly compensated employees of the
Company and certain of its subsidiaries (hereinafter the "Employing Companies"),
the opportunity to defer the receipt of compensation and to receive additional
retirement income from the Employing Companies. This plan is not intended to
qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended
(hereinafter the "Code"), or be subject to Parts 2, 3, or 4 of Title I of the
Employee Retirement Income Security Act of 1974, as amended (hereinafter
"ERISA").
Section 1.2 Affiliated Companies. The term "Affiliated Company" shall mean
--------------------
every corporation (including the Company) which is a member of a controlled
group of corporations (within the meaning of Section 414(b) of the Internal
Revenue Code). The Company and each Affiliated Company which, with the consent
of the Chief Executive Officer or Board of Directors of the Company, adopts the
Plan are referred to herein collectively as the "Employing Companies" and
individually as an"Employing Company".
Section 1.3 Plan Administration. The authority to control and manage the
-------------------
operation and administration of the Plan shall be vested in the Burlington
Northern Santa Fe Employee Benefits Committee (hereinafter the "Committee").
Any interpretation of the Plan by the Committee or its delegate and any decision
made by the Committee or its delegate on any other matter within its discretion
are final and binding on all persons. The Committee shall have discretionary
authority to administer, construe and interpret the Plan, to decide all
questions including but not limited to
-1-
<PAGE>
eligibility, payment of any benefits hereunder and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The Committee shall act with or without a meeting by the vote or concurrence
of a majority of its members; but no member of the Committee who is a
Participant shall take part in any Committee action or any matter that has
particular reference to his own interest hereunder. The Committee shall
administer this Plan and discharge its responsibilities hereunder in a uniform
and non-discriminatory manner as to all Participants.
Section 1.4 Non-Alienation. Benefits payable to any individual under the
--------------
Plan may not be voluntarily or involuntarily assigned, alienated, pledged or
subject to attachment, anticipation, garnishment, levy, execution or other legal
or equitable process.
Section 1.5 Source of Benefits. Subject to the terms and conditions of the
------------------
Plan, any amount payable to or on account of a Participant under this Plan by
any Employing Company shall be paid from the general assets of that Employing
Company or from one or more trusts, the assets of which are subject to the
claims of the Employing Companies' general creditors. None of the individuals
entitled to benefits under the Plan shall have any preferred claim on, or any
beneficial ownership interest in, any assets of any Employing Company or of any
such trust, and any rights of such individuals under the Plan or any such trust
shall constitute unsecured contractual rights only.
Section 1.6 Plan Not Contract of Employment. The Plan does not constitute a
-------------------------------
contract of employment, and nothing in the Plan will give any participant the
right to be retained in the employ of any Employing Company, nor any right or
claim to any benefit under the Plan, except to the extent specifically provided
under the terms of the Plan.
Section 1.7 Notices. Any notice or document required to be given to or filed
-------
with an Employing Company, the Company or the Committee shall be considered to
be given or filed:
(a) on the date delivered to the Vice President - Human Resources of the
Company; or
(b) three days after the date sent by certified mail to the Secretary of the
Company.
Section 1.8 Applicable Law. The Plan shall be construed and administered in
--------------
accordance with the internal laws of the State of Texas.
Section 1.9 Gender and Number. Where the context admits, words in any gender
-----------------
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
Section 1.10 Plan Year. The Plan Year shall be the calendar year.
---------
-2-
<PAGE>
ARTICLE II - PARTICIPATION
Section 2.1 Participation. The Company shall establish from time to time the
-------------
Employing Companies which may participate and the class of highly-compensated
employees of each Employing Company who shall be eligible for the benefits
provided in Article IV below (hereinafter the "Participants"); provided,
however, that the class of eligible employees of each Employing Company shall be
limited to employees who are members of a select group of management or highly
compensated employees within the meaning of Section 401(a)(1) of ERISA.
Employees who become eligible to participate in the Plan after February 1 of a
calendar year shall not be eligible to participate in the Plan until January 1
of the following calendar year. If the Company determines that participation by
one or more Participants shall cause the Plan as applied to any Employing
Company to be subject to Parts 2, 3, or 4 of Title I of ERISA, the entire
interest of such Participant or Participants under the Plan shall be immediately
paid to such Participant by the applicable Employing Company, notwithstanding
any election of the Participant, or shall otherwise be segregated from the Plan
in the discretion of the Company, and such Participant or Participants shall
cease to have any interest under the Plan.
ARTICLE III - VESTING
Section 3.1 Vesting. A Participant shall be fully vested in his deferral
-------
amounts and earnings at all times and subject to investment gains and losses. A
Participant shall be vested in Employer Matching Contributions in accordance
with the vesting schedule set forth in Article 6 of the Burlington Northern
Santa Fe Investment and Retirement Plan (the "Investment Plan").
ARTICLE IV - DEFERRALS
Section 4.1 Deferral Elections. To become a Participant, subject to such
------------------
additional terms, conditions and limitations as the Committee may from time to
time impose, a Participant may make an election to irrevocably defer receipt of
certain eligible compensation otherwise payable to him by his Employer for a
Plan Year by means of such procedures as are approved by the Committee,
including filing a Deferral Election Form or by telephonic voice response or
other telephonic or electronic transmission indicating his or her desire to have
a portion of his or her eligible compensation deferred, or by failing to
indicate a desire not to participate in the Plan. Such deferral elections shall
be made as follows:
(a) With the approval of the Compensation Committee of the Board, a
Participant may elect not to participate in the Investment Plan and may elect to
defer up to 15% of (i) Compensation as defined in the Investment Plan, (ii) base
salary that is not eligible compensation under the Investment Plan, and (iii)
any cash incentive payments otherwise payable to him by his Employing Company
that Plan Year; or
-3-
<PAGE>
(b) Unless the Compensation Committee of the Board otherwise specifies, a
Participant may elect to defer (i) up to 15% of base salary that is not eligible
Compensation under the Investment Plan, (ii) up to 15% of any cash incentive
payments that are not eligible Compensation under the Investment Plan, and iii)
that to the extent that a Participant is subject to a limitation on before-tax
contributions under Section 402(g)(1) of the Code to the Investment Plan, the
amounts which could have been deferred into the Investment Plan but for such
limitation may be deferred under this Plan ("Deferred Compensation").
(c) Such elections shall be made at such time and in such manner as the
Committee shall provide. An election must specify the percentage, if any, which
the Participant chooses to defer and authorize his Employing Company to make
regular payroll deductions. The Committee may institute procedures whereby an
eligible employee's Contribution Election percentage under the Investment Plan
will automatically apply for purposes of the Plan unless the eligible employee
affirmatively elects otherwise.
(d) A Participant may elect to suspend all future deferrals in a Plan Year
other than in respect to incentive payments, and will not be permitted to resume
participation until the next Plan Year.
Section 4.2 Employer Matching Contribution. Subject to such limitations as
------------------------------
the Committee may from time to time impose, for each Plan Year, Participants
shall be credited with an "Employer Matching Contribution" with respect to 100%
of the compensation deferred hereunder that would be payable during that Plan
Year, provided that Employer Matching Contributions shall be equal to 50% of
Deferred Contributions deferred up to 6% of Compensation hereunder.
To the extent that additional employer contributions are made pursuant to the
second paragraph of Section 4.5 of the Investment Plan by reason of the
attainment of financial and other objectives of an Employing Company,
Participants who have Accounts in the Plan when such contributions are made
shall be credited after the close of the Plan Year to which such objectives
relate with an additional Employer Matching Contribution. The amount of such
additional Employer Matching Contributions shall be equal to the same uniform
percentage, not to exceed 30% of the Deferred Contributions up to 6 percent of
Compensation actually made hereunder, as is credited pursuant to the second
paragraph of Section 4.5 of the Investment Plan.
ARTICLE V - PLAN ACCOUNTING
Section 5.1 Accounts. The Committee shall establish an Account for each
--------
Participant who elects to participate in the Plan under subsection 4.1. Each
Account shall be adjusted in accordance with this Article V in a uniform, non-
discriminatory manner, as of such periodic "Accounting Dates" as may be
determined by the Committee from time to time (which Accounting Dates shall be
not less
-4-
<PAGE>
frequent than quarterly.) As of each Accounting Date, the balance of each
Account shall be adjusted as follows:
(a) first, charge to the Account balance the amount of any distributions
under the Plan with respect to that Account that have not previously been
charged;
(b) then, credit to the Account balance the amount of the compensation to be
deferred by the Participant in accordance with the provisions of subsection 4.1
and the amount of Employer Matching Contributions to be credited in accordance
with Section 4.2 that have not previously been credited;
(c) then, adjust the Account balance for the applicable assumed rate of
earnings in accordance with subsection 5.2.
Section 5.2 Adjustment of Accounts for Earnings. The amounts credited to a
-----------------------------------
Participant's Account in accordance with subsections 4.1 and 4.2 shall be
adjusted as of each Accounting Date to reflect the value of an investment equal
to the Participant's Account balance in one or more assumed investments that the
Committee offers from time to time, and which the Participant directs the
Committee to use for purposes of adjusting his Account. Such amount shall be
determined without regard to taxes that would be payable with respect to any
such assumed investment. The Committee may eliminate any assumed investment
alternative at any time; provided, however, that the Committee may not
retroactively eliminate any assumed investment alternative. To the extent
permitted by the Committee, the Participant may elect to have different portions
of his Account balance for any period adjusted on the basis of different assumed
investments. The Account of each Participant shall be credited with the amount
deferred by the Participant as of the date on which the amount of such Deferred
Compensation is communicated to the Plan recordkeeper which shall be as soon as
reasonably practicable after the date the compensation would otherwise have been
payable to the Participant, or, if such date is not an Accounting Date, as of
the first Accounting Date occurring thereafter. Notwithstanding the election by
Participants of certain assumed investments and the adjustment of their Accounts
based on such investment decisions, the Plan does not require, and no trust or
other instrument maintained in connection with the Plan shall require that any
assets or amounts which are set aside in a trust or otherwise for the purpose of
paying Plan benefits shall actually be invested in the investment alternatives
selected by Participants.
Section 5.3 Participant Statements. At least quarterly, the Committee shall
----------------------
cause to be furnished to each Participant a statement indicating, on the basis
of the latest available information, the status of the Participants' Accounts.
ARTICLE VI - PAYMENT OF DEFERRED AMOUNTS
Section 6.1 Termination of Employment. Subject to the provisions of
-------------------------
subsection 1.5 and such other rules as the Committee may establish, upon a
Participant's death or termination of active employment, the Participant's
entire Account balance, including the Employer's Matching
-5-
<PAGE>
Contribution on amounts deferred prior to the Participant's death or termination
date, shall be paid to or on account of the Participant as follows:
(a) in a single lump sum payment on March 1 of the year following
termination; or
(b) if elected by the Participant at least one year prior to the distribution
or such time period as may be established by the Committee, in annual
installments over a period of five or fewer years, beginning July 31 of the
calendar year following the year in which the date of termination occurs. Each
annual installment shall be equal to the Participant's entire Account balance
divided by the number of installments yet to be distributed.
Section 6.2 Beneficiary Designation. Each Participant may, from time to
-----------------------
time by signing a form furnished by the Committee, designate any legal or
natural person or persons (who may be designated contingently or successively)
to whom his benefits under the Plan are to be paid if he dies before he receives
all of his benefits. A beneficiary designation form will be effective only when
the signed form is filed with the Committee while the Participant is alive. A
beneficiary designation may be revoked or amended only by the completion of a
new beneficiary designation form, provided, however, that if a Participant's
spouse is named as such Participant's beneficiary, and the Participant and such
spouse are subsequently divorced, then the designation of the spouse made prior
to the divorce shall be null and void. In order to designate a former spouse as
a beneficiary, a new beneficiary designation form must be completed. If a
deceased Participant failed to designate a beneficiary as provided above, or if
the designated beneficiary of a deceased Participant died before him, his
benefits shall be paid in accordance with the following order of priority: (i)
to his surviving spouse, if any; (ii) to his surviving children in equal shares;
or (iii) the estate of the last to die of the Participant or his designated
beneficiary. The benefits under this plan which are payable to a beneficiary
shall be paid in a lump sum.
Section 6.3 Withholding for Tax Liability. The Company may withhold or cause
-----------------------------
to be withheld from any payment of benefits made pursuant to the Plan any taxes
required to be withheld with regard to such payment.
Section 6.4 Hardship Distributions. The Committee may, pursuant to rules
----------------------
adopted by it and applied in a uniform manner, accelerate the date of
distribution of a Participant's Account because of hardship at any time.
"Hardship" shall mean an unforeseeable, severe financial condition resulting
from (a) a sudden and unexpected illness or accident of the Participant or his
dependent (as defined in section 152(a) of the Code); (b) loss of the
Participant's property due to casualty; or (c) other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant, but which may not be relieved through other available resources
of the Participant, as determined by the Committee in accordance with uniform
rules adopted by it.
ARTICLE VII - CHANGE IN CONTROL
-6-
<PAGE>
Section 7.1 Change in Control. In the event of a change in control as
-----------------
defined in The Burlington Northern and Santa Fe Railway Company Severance
Agreements, all Accounts shall be fully vested, and the Company shall be
obligated to transmit funds equal to the outstanding liabilities under this Plan
to such trust as may be established by the Company to provide for security of
benefits hereunder.
ARTICLE VIII - AMENDMENT OR TERMINATION
Section 8.1 Administrative Amendments. The Chief Executive Officer of the
-------------------------
Company may make amendments to the Plan, provided that such amendments do not
materially increase the benefits to Participants or the costs of the Plan.
Section 8.2 Amendments and Termination. The Board of Directors of the
--------------------------
Company may amend the Plan at any time and may terminate the Plan at any time
without the consent of the participants or beneficiaries, provided however, that
no amendment shall divest any Participant or beneficiary of the credits to his
Account, or any rights to which he would have been entitled if the Plan had been
terminated immediately prior to the effective date of such amendment. Any
Employing Company may terminate its participation in the Plan at any time,
provided that it has made adequate provision for any amount payable by it under
the terms of the Plan as in effect on the date it terminates its participation
in the Plan. Upon termination of the Plan as to any Employing Company, the
Company may, in its discretion applied in a uniform manner, provided that
amounts attributed to that Employing Company shall be distributed in accordance
with the provisions of 6.1. Upon termination of the Plan as to all Employing
Companies, the Company may, in its sole discretion applied in a uniform manner
to all Participants, cause a lump sum payment of all benefits for all
Participants to be made as soon as reasonably practicable or the date
established for payment under subsection 4.1(c).
-7-
<PAGE>
The Burlington Northern Santa Fe Supplemental Investment and Retirement Plan is
hereby adopted, effective January 1, 1997, by Burlington Northern Santa Fe
Corporation.
IN WITNESS HEREOF, the Chairman and Chief Executive Officer of Burlington
Northern Santa Fe Corporation has hereby adopted this Plan on this ___________
day of November, 1999.
BURLINGTON NORTHERN SANTA FE CORPORATION
- ----------------------------------------
Robert D. Krebs
Chairman and Chief Executive Officer
- ----------------------------------------
Witness
(CORPORATE SEAL)
-8-
<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,
-----------------------------------
<S> <C> <C>
2000 1999
------------- --------------
Earnings:
Pre-tax income $ 391 $ 377
Add:
Interest and fixed charges,
excluding capitalized interest 104 94
Portion of rent under long-term
operating leases representative
of an interest factor 43 49
Distributed income of investees
accounted for under the equity method 43 -
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 $ 579 $ 518
============= ==============
Fixed charges:
Interest and fixed charges $ 106 $ 97
Portion of rent under long-term operating
leases representative of an interest factor 43 49
------------- --------------
Total fixed charges $ 149 $ 146
============= ==============
Ratio of earnings to fixed charges 3.89x 3.55x
</TABLE>
<PAGE>
EXHIBIT 13
Notes to Consolidated Financial Statements
Burlington Northern Santa Fe Corporation and
Subsidiaries
1 The Company
Burlington Northern Santa Fe Corporation including its majority-owned
subsidiaries (collectively, BNSF or Company) is engaged primarily in railroad
transportation through its principal subsidiary, The Burlington Northern and
Santa Fe Railway Company (BNSF Railway), which operates one of the largest
railroad networks in North America with 33,500 route miles covering 28 states
and two Canadian provinces. Through one operating transportation services
segment, BNSF Railway transports a wide range of products and commodities
including the transportation of containers and trailers (intermodal), coal and
agricultural commodities which constituted 28 percent, 24 percent and 15
percent, respectively, of total revenues for the year ended December 31, 1999.
Other significant aspects of BNSF's business include the transportation of
chemicals, forest products, consumer goods, metals, minerals, automobiles and
automobile parts. Revenues derived from other sources are not significant.
Proposed Combination With
Canadian National Railway Company
On December 18, 1999, BNSF and Canadian National Railway Company (CN) entered
into a Combination Agreement, as amended, providing for the combination of the
two companies (the Combination). To comply with Canadian legal requirements
that, among other things, prohibit any person and that person's associates from
holding more than 15 percent of the voting rights in CN, while ensuring that the
combination will be tax-efficient for each company's shareholders, the combined
enterprise will consist of two public companies: North American Railways, Inc.
(North American Railways) and CN. Upon completion of the combination, North
American Railways will be the parent company of BNSF and will own all of the
limited voting equity shares of CN. All shareholders will have voting interests
in both North American Railways and CN and economic interests in the combined
companies.
In the Combination, BNSF shareholders will receive one share of North
American Railways common stock and one CN voting share for each BNSF share.
Additionally, CN shareholders will receive, for each CN common share, 1.05 CN
voting shares and either 1.05 shares of North American Railways common stock or
1.05 CN exchangeable shares. The CN exchangeable shares will be exchangeable at
any time on a one-for-one basis for shares of North American Railways common
stock. CN shareholders who elect to receive the CN exchangeable shares will also
receive the right to vote on matters submitted to North American Railways
shareholders in proportion to their economic interest in the combined companies.
Dividends paid on the North American Railways common stock and the CN
exchangeable shares will be equivalent. Any shares of BNSF common stock owned by
BNSF or any of its subsidiaries as treasury stock will be automatically canceled
and cease to exist.
Each share of North American Railways common stock will be "stapled" to a
CN voting share and will trade as a single security. Similarly, each CN
exchangeable share will be "stapled" to a CN voting share and will trade as a
single security. In addition, CN will issue to North American Railways limited
voting equity shares carrying 10.1 percent of the voting rights in CN and 100
percent of CN's equity. The result of these arrangements will be that, at all
times, each company will have the same public shareholder base with each public
shareholder effectively having the same economic benefits and voting rights on a
per security basis.
The Combination is subject to, among other things, approval by the
shareholders of both companies, as well as approvals by the Quebec Superior
Court and the United States Surface Transportation Board (STB). North American
Railways, by its charter, will conform to the provisions of the CN
Commercialization Act and Canadian corporate law on the composition of boards of
directors. Like CN, North American Railways shareholders will be subject to an
ownership limit whereby no single shareholder can own more than 15 percent of
North American Railways' voting shares. The companies currently expect that all
required regulatory approvals can be obtained and the transaction consummated by
mid-2001. Shareholders of both CN and BNSF are expected to vote on the proposed
Combination during the second quarter of 2000.
Upon consummation, the Combination will be accounted for by North American
Railways pursuant to the purchase method of accounting in accordance with
Accounting Principles Board Opinion No. 16, "Business Combinations." Under this
method, North American Railways will prepare its financial statements reflecting
the assets and liabilities of BNSF at their historical cost basis and the fair
value of North American Railways common stock issued or issuable to the CN
shareholders will be allocated to the assets and liabilities of CN based on fair
value. CN's results of operations will be included with North American Railways
from the date the transaction is consummated. Based on the current agreement,
the fair value of North American Railways common stock will be based on a $25.63
per share fair value of BNSF common stock which was determined using the average
of the closing daily BNSF common stock prices as reported by The Wall Street
Journal for the two days preceding, the day of, and the two days following the
December 20, 1999 announcement of the Combination.
Under the terms of the Combination Agreement, as amended, BNSF is required
to pay a cash termination fee of $450 million to CN if the Combination is
terminated as a result of any of the following: i) another party has made a
proposal for an alternative transaction and the Company's shareholders do not
approve the Combination; ii) CN elects to terminate the Combination because
BNSF's Board of Directors changed its previously favorable recommendation of the
Combination to its shareholders or iii) BNSF breaches certain obligations not to
solicit or respond to alternative transaction proposals. CN is obligated to pay
a cash termination fee of $200 million to BNSF if the Combination is terminated
as a
Burlington Northern Santa Fe Corporation
34
<PAGE>
result of actions similar to those above that are caused by CN.
Pursuant to the Combination Agreement, as amended, CN and BNSF entered into
reciprocal stock option agreements. Each company's option is exercisable by the
other company under the same circumstances in which that party is entitled to
receive the $450 million or $200 million termination fee, as applicable,
referred to above. The option agreement allows BNSF and CN to purchase, in the
case of BNSF, approximately 29 million CN common shares and, in the case of CN,
approximately 65 million shares of BNSF common stock. The number of shares
subject to the stock options will be adjusted in each case so that the number of
shares issued will always be equal to, but not exceed, 12.5 percent of the
outstanding common shares of the option issuer after giving effect to the
issuance of shares under the option. The exercise price of the option is, in
each case, the average of the closing price of the option issuer's common stock
on the New York Stock Exchange on the five trading days preceding the date of
notice of exercise multiplied by the number of shares to be issued.
Additionally, BNSF is required to pay a cash termination fee of $300
million to CN if BNSF terminates the Combina-tion because of conditions imposed
by the STB that the Company believes would significantly and adversely affect
the benefits of the Combination, and CN is willing to complete the Combination
despite these conditions. CN is obligated to pay a cash termination fee of $150
million to BNSF if it terminates the Combination as a result of STB conditions
and BNSF is willing to complete the Combination.
Burlington Northern Santa Fe Corporation
35
<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>
<CIK> 0000934612
<NAME> BURLINGTON NORTHERN SANTA FE CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 32
<SECURITIES> 0
<RECEIVABLES> 381
<ALLOWANCES> 49
<INVENTORY> 228
<CURRENT-ASSETS> 988
<PP&E> 26,552
<DEPRECIATION> 4,797
<TOTAL-ASSETS> 23,894
<CURRENT-LIABILITIES> 1,992
<BONDS> 6,285
0
0
<COMMON> 5
<OTHER-SE> 7,782
<TOTAL-LIABILITY-AND-EQUITY> 23,894
<SALES> 0
<TOTAL-REVENUES> 2,238
<CGS> 0
<TOTAL-COSTS> 1,728
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104
<INCOME-PRETAX> 391
<INCOME-TAX> 148
<INCOME-CONTINUING> 243
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 243
<EPS-BASIC> 0.55
<EPS-DILUTED> 0.55
</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>
<CIK> 0000934612
<NAME> BURLINGTON NORTHERN SANTA FE CORPORATION
<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> 551
<ALLOWANCES> 66
<INVENTORY> 247
<CURRENT-ASSETS> 1,091
<PP&E> 26,004
<DEPRECIATION> 5,174
<TOTAL-ASSETS> 22,940
<CURRENT-LIABILITIES> 2,105
<BONDS> 5,416
0
0
<COMMON> 5
<OTHER-SE> 7,920
<TOTAL-LIABILITY-AND-EQUITY> 22,940
<SALES> 0
<TOTAL-REVENUES> 2,190<F1>
<CGS> 0
<TOTAL-COSTS> 1,710<F1>
<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-BASIC> 0.50
<EPS-DILUTED> 0.50
<FN>
<F1>Restated reflected herein is the result of reclassifications to prior periods'
financial statements to conform to the current period presentation.
</FN>
</TABLE>
