UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the quarterly period ended June 30, 20192020
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the transition period from            to            

FOR THE TRANSITION PERIOD FROM ___________TO __________
Commission file number            1-11535


bnsflogo63019a021.jpg

BURLINGTON NORTHERN SANTA FE, LLC
(Exact name of registrant as specified in its charter)
Delaware 27-1754839
(State or other jurisdiction
of incorporation or organization)
 
(I.R.S. Employer
Identification No.)

2650 Lou Menk Drive
Fort Worth, Texas
(Address of principal executive offices)

76131-2830
(Zip Code)

(800) 795-2673
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
NoneNoneNone
Securities registered pursuant to Section 12(g) of the Act: Limited Liability Company Membership Interest
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.YesNo
  Yes  [x]  No  [  ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).YesNo
Yes  [x]  No  [  ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”and “emerging"emerging growth company”company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]  Accelerated filer  [  ]  Non-accelerated filer  [x]  Smaller reporting company  [  ] Emerging growth company  [  ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YesNo

Yes  [  ]  No  [x]
Registrant meets the conditions set forth in General Instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format permitted by General Instruction H (2).






Table of Contents
 
 
PART IFINANCIAL INFORMATIONPAGE
   
   
   
   
   
PART IIOTHER INFORMATION 
   
   
 

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PART I
FINANCIAL INFORMATION

Item 1.Financial Statements.Statements

BURLINGTON NORTHERN SANTA FE, LLC and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In millions)
(Unaudited)

 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018 2020 2019 2020 2019
Revenues $5,893
 $5,878
 $11,655
 $11,502
 $4,602
 $5,893
 $10,019
 $11,655
        
Operating expenses:                
Compensation and benefits 1,334
 1,328
 2,734
 2,643
 993
 1,334
 2,237
 2,734
Depreciation and amortization 612
 595
 1,227
 1,186
Purchased services 560
 687
 1,226
 1,400
Fuel 775
 830
 1,486
 1,597
 327
 775
 941
 1,486
Purchased services 687
 714
 1,400
 1,406
Depreciation and amortization 595
 575
 1,186
 1,146
Equipment rents 187
 167
 378
 359
 154
 187
 319
 378
Materials and other 308
 381
 685
 721
 226
 308
 516
 685
Total operating expenses 3,886
 3,995
 7,869
 7,872
 2,872
 3,886
 6,466
 7,869
Operating income 2,007
 1,883
 3,786
 3,630
 1,730
 2,007
 3,553
 3,786
Interest expense 267
 256
 535
 512
 260
 267
 522
 535
Other (income) expense, net (33) (28) (187) (50) (24) (33) (47) (187)
        
Income before income taxes 1,773
 1,655
 3,438
 3,168
 1,494
 1,773
 3,078
 3,438
Income tax expense 435
 346
 847
 714
 363
 435
 757
 847
Net income $1,338
 $1,309
 $2,591
 $2,454
 $1,131
 $1,338
 $2,321
 $2,591

See accompanying Notes to Consolidated Financial Statements.

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BURLINGTON NORTHERN SANTA FE, LLC and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)

 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018 2020 2019 2020 2019
Net income $1,338
 $1,309
 $2,591
 $2,454
 $1,131
 $1,338
 $2,321
 $2,591
        
Other comprehensive income:                
Change in pension and retiree health and welfare benefits, net of tax 
 
 63
 
 1
 
 1
 63
Change in accumulated other comprehensive income (loss) of equity method investees 
 
 (1) 1
 
 
 1
 (1)
Other comprehensive income (loss), net of tax 
 
 62
 1
 1
 
 2
 62
Total comprehensive income $1,338
 $1,309
 $2,653
 $2,455
 $1,132
 $1,338
 $2,323
 $2,653

See accompanying Notes to Consolidated Financial Statements.


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BURLINGTON NORTHERN SANTA FE, LLC and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
 
 June 30,
2019
 December 31,
2018
 June 30,
2020
 December 31,
2019
ASSETS    
Assets    
Current assets:        
Cash and cash equivalents $1,994
 $1,985
 $1,941
 $1,984
Accounts receivable, net 1,538
 1,499
 1,239
 1,401
Materials and supplies 784
 793
 693
 789
Other current assets 166
 257
 125
 113
Total current assets 4,482
 4,534
 3,998
 4,287
        
Property and equipment, net of accumulated depreciation of $11,206 and $10,004, respectively 63,576
 63,185
Property and equipment, net of accumulated depreciation of $12,401 and $12,101, respectively 64,955
 64,533
Goodwill 14,851
 14,851
 14,851
 14,851
Operating lease right-of-use assets 2,532
 
 2,102
 2,285
Intangible assets, net of accumulated amortization of $297 and $279, respectively 355
 373
Other assets 2,314
 2,150
 2,660
 2,618
Total assets $88,110
 $85,093
 $88,566
 $88,574
        
LIABILITIES AND EQUITY    
Liabilities and Equity    
Current liabilities:        
Accounts payable and other current liabilities $4,108
 $3,261
 $3,813
 $3,634
Long-term debt due within one year 1,075
 830
Long-term debt and finance leases due within one year 476
 571
Total current liabilities 5,183
 4,091
 4,289
 4,205
        
Long-term debt 22,117
 22,396
Long-term debt and finance leases 22,776
 22,640
Deferred income taxes 14,056
 13,795
 14,505
 14,353
Operating lease liabilities 1,724
 
 1,327
 1,632
Casualty and environmental liabilities 472
 486
 441
 442
Intangible liabilities, net of accumulated amortization of $1,036 and $1,022, respectively 367
 381
Pension and retiree health and welfare liability 274
 267
��280
 285
Other liabilities 1,015
 1,028
 1,305
 1,297
Total liabilities 45,208
 42,444
 44,923
 44,854
Commitments and contingencies (see Notes 5 and 6) 
 
Commitments and contingencies (see Note 5) 
 
Equity:        
Member’s equity 42,710
 42,519
 43,496
 43,575
Accumulated other comprehensive income (loss) 192
 130
 147
 145
Total equity 42,902
 42,649
 43,643
 43,720
Total liabilities and equity $88,110
 $85,093
 $88,566
 $88,574

See accompanying Notes to Consolidated Financial Statements.

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BURLINGTON NORTHERN SANTA FE, LLC and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 Six Months Ended June 30, Six Months Ended June 30,
 2019 2018 2020 2019
OPERATING ACTIVITIES    
Operating Activities    
Net income $2,591
 $2,454
 $2,321
 $2,591
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization 1,186
 1,146
 1,227
 1,186
Deferred income taxes 240
 144
 151
 240
Long-term casualty and environmental liabilities, net (9) (19) (11) (9)
Other, net (239) (93) (122) (239)
Changes in current assets and liabilities:        
Accounts receivable, net (39) (14) 150
 (39)
Materials and supplies 9
 14
 96
 9
Other current assets (165) (104) (21) (165)
Accounts payable and other current liabilities 471
 266
 136
 471
Net cash provided by operating activities 4,045
 3,794
 3,927
 4,045
        
INVESTING ACTIVITIES    
Investing Activities    
Capital expenditures excluding equipment (1,417) (1,224) (1,575) (1,417)
Acquisition of equipment (111) (72) (96) (111)
Purchases of investments and investments in time deposits (6) (13) 
 (6)
Proceeds from sales of investments and maturities of time deposits 7
 17
 21
 7
Other, net (73) (108) 45
 (73)
Net cash used in investing activities (1,600) (1,400) (1,605) (1,600)
        
FINANCING ACTIVITIES    
Financing Activities    
Proceeds from issuance of long-term debt 
 750
 575
 
Payments on long-term debt (36) (696)
Payments on long-term debt and finance leases (531) (36)
Cash distributions (2,400) (2,275) (2,400) (2,400)
Other, net 
 (9) (9) 
Net cash used in financing activities (2,436) (2,230) (2,365) (2,436)
Increase in cash and cash equivalents 9
 164
(Decrease) increase in cash and cash equivalents (43) 9
Cash and cash equivalents:        
Beginning of period 1,985
 1,975
 1,984
 1,985
End of period $1,994
 $2,139
 $1,941
 $1,994
        
SUPPLEMENTAL CASH FLOW INFORMATION    
Supplemental Cash Flow Information    
Interest paid, net of amounts capitalized $529
 $532
 $534
 $529
Capital investments accrued but not yet paid $163
 $93
 $240
 $163
Income taxes paid, net of refunds $163
 $226
 $31
 $163
Non-cash asset financing $6
 $
 $9
 $6

See accompanying Notes to Consolidated Financial Statements. 

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BURLINGTON NORTHERN SANTA FE, LLC and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In millions)
(Unaudited)

 
Member’s
Equity

 
Accumulated
Other
Comprehensive Income (Loss)

 
Total
Equity

 
Member’s
Equity

 
Accumulated
Other
Comprehensive Income (Loss)

 
Total
Equity

Balance at December 31, 2018 $42,519
 $130
 $42,649
Balance as of December 31, 2018 $42,519
 $130
 $42,649
Cash distributions (1,200) 
 (1,200) (1,200) 
 (1,200)
Comprehensive income (loss), net of tax 1,253
 62
 1,315
 1,253
 62
 1,315
Balance at March 31, 2019 42,572
 192
 42,764
Balance as of March 31, 2019 42,572
 192
 42,764
Cash distributions (1,200) 
 (1,200) (1,200) 
 (1,200)
Comprehensive income (loss), net of tax 1,338
 
 1,338
 1,338
 
 1,338
Balance at June 30, 2019 $42,710
 $192
 $42,902
Balance as of June 30, 2019 $42,710
 $192
 $42,902

  
Member’s
Equity

 
Accumulated
Other
Comprehensive Income (Loss)

 
Total
Equity

Balance at December 31, 2017 $42,778
 $231
 $43,009
Adoption of ASC Topic 606a
 (3) 
 (3)
Equity method investee adoption of ASU 2016-01b
 1
 (1) 
Reclassification upon early adoption of ASU 2018-02c
 (26) 26
 
Cash distributions (1,100) 
 (1,100)
Comprehensive income (loss), net of tax 1,145
 1
 1,146
Balance at March 31, 2018 42,795
 257
 43,052
Cash distributions (1,175) 
 (1,175)
Comprehensive income (loss), net of tax 1,309
 
 1,309
Balance at June 30, 2018 $42,929
 $257
 $43,186
       
Balance as of December 31, 2019 $43,575
 $145
 $43,720
Cash distributions (1,100) 
 (1,100)
Comprehensive income (loss), net of tax 1,190
 1
 1,191
Balance as of March 31, 2020 43,665
 146
 43,811
Cash distributions (1,300) 
 (1,300)
Comprehensive income (loss), net of tax 1,131
 1
 1,132
Balance as of June 30, 2020 $43,496
 $147
 $43,643
a
Accounting Standards Codification Topic 606 - Revenue from Contracts with Customers
b
Accounting Standards Update (ASU) No. 2016-01 Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities
c
ASU No. 2018-02 Income Statement - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

See accompanying Notes to Consolidated Financial Statements.

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BURLINGTON NORTHERN SANTA FE, LLC and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
1.Accounting Policies and Interim Results
 
The Consolidated Financial Statements should be read in conjunction with Burlington Northern Santa Fe, LLC’s Annual Report on Form 10-K for the year ended December 31, 2018,2019, including the financial statements and notes thereto. Burlington Northern Santa Fe, LLC (BNSF) is a holding company that conducts no operating activities and owns no significant assets other than through its interests in its subsidiaries. The Consolidated Financial Statements include the accounts of BNSF and its majority-owned subsidiaries, all of which are separate legal entities (collectively, the Company). BNSF’s principal operating subsidiary is BNSF Railway Company (BNSF Railway). All intercompany accounts and transactions have been eliminated.

On February 12, 2010, Berkshire Hathaway Inc., a Delaware corporation (Berkshire), acquired 100 percent of the outstanding shares of Burlington Northern Santa Fe Corporation common stock that it did not already own. The acquisition was completed through the merger (Merger) of a Berkshire wholly-owned merger subsidiary and Burlington Northern Santa Fe Corporation with the surviving entity renamed Burlington Northern Santa Fe, LLC. Earnings per share data is not presented because BNSF has only one holder of its membership interests.

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, the unaudited financial statements reflect all adjustments (consisting of only normal recurring adjustments, except as disclosed) necessary for the fair statement of BNSF’s consolidated financial position as of June 30, 2019,2020, and the results of operations for the three and six months ended June 30, 20192020 and 2018.2019.

2.Revenue from Contracts with Customers
    
The Company disaggregates revenue from contracts with customers based on the characteristics of the services being provided and the types of products being transported and other revenues (in millions):
 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018 2020 2019 2020 2019
Consumer Products $1,903
 $1,979
 $3,905
 $3,839
 $1,571
 $1,903
 $3,336
 $3,905
Industrial Products 1,577
 1,482
 3,049
 2,840
 1,160
 1,577
 2,625
 3,049
Agricultural Products 1,221
 1,182
 2,334
 2,334
 1,072
 1,221
 2,216
 2,334
Coal 883
 911
 1,752
 1,859
 541
 883
 1,307
 1,752
Total freight revenues 5,584
 5,554
 11,040
 10,872
 4,344
 5,584
 9,484
 11,040
Non-rail logistics subsidiary 200
 214
 396
 406
 149
 200
 322
 396
Accessorial and other 109
 110
 219
 224
 109
 109
 213
 219
Total other revenues 309
 324
 615
 630
 258
 309
 535
 615
Total operating revenues $5,893
 $5,878
 $11,655
 $11,502
 $4,602
 $5,893
 $10,019
 $11,655

Contract assets and liabilities are immaterial. Receivables from contracts with customers is a component of accounts receivable, net on the Consolidated Balance Sheets. At bothAs of June 30, 20192020 and December 31, 2018, $1.32019, $0.9 billion and $1.1 billion, respectively, represented net receivables from contracts with customers.

Remaining performance obligations primarily consist of in-transit freight revenues, which will be recognized in the next reporting period. AtAs of June 30, 20192020 and December 31, 2018,2019, remaining performance obligations were $244$179 million and $237$175 million, respectively.

3.Accounts Receivable, Net
 
Accounts receivable, net consists of freight and other receivables, reduced by an allowance for bill adjustments and uncollectible accounts,credit losses which is based upon expected collectibility. AtAs of June 30, 20192020 and December 31, 2018, $862019, $50 million and $87$51 million, respectively, of such allowancesallowance had been recorded.


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BURLINGTON NORTHERN SANTA FE, LLC and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

4.Leases

On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842), using a modified retrospective approach for leases existing at or entered into after the effective date. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard. The standard requires the recognition of right-of-use assets and lease liabilities for operating leases on the Company’s Consolidated Balance Sheets. The accounting for finance leases remained unchanged. There was no effect of adopting Topic 842 on member’s equity, operating income, or net income. Results for reporting periods beginning after January 1, 2019, are presented under Topic 842, while prior period amounts have not been adjusted.

The Company has substantial lease commitments for locomotives, freight cars, office buildings, operating facilities, and other property. Many of the Company’s leases provide the option to purchase the leased item at fair market value or a fixed purchase price at the end of the lease, and some leases include early buyout options at a fixed purchase price. Also, many of the Company’s leases include both fixed rate and fair market value renewal options.
As the implicit interest rate is not readily available for most leases, the Company used its incremental borrowing rate to determine the present value of lease payments at the transition date. The Company has lease agreements that contain both lease and non-lease components, but only freight cars are accounted for as a single lease component. BNSF has applied the short-term lease exemption to all asset classes, and as a result, short-term leases are not recognized on the Consolidated Balance Sheets. Variable lease costs, sublease income, and lessor transactions were not significant.

The following table shows the components of lease cost (in millions):
Lease Cost Three Months Ended June 30, 2019 Six Months Ended June 30, 2019
Operating lease cost $124
 $245
Finance lease cost:    
     Amortization of right-of-use assets 9
 19
     Interest on lease liabilities 6
 12
Short-term lease cost 22
 42
      Total lease cost $161
 $318
Supplemental balance sheet information related to leases was as follows (in millions):
Operating Leases June 30,
2019
Operating lease right-of-use assets $2,532
   
Accounts payable and other current liabilities $474
Operating lease liabilities 1,724
      Total operating lease liabilities $2,198
Finance Leases June 30,
2019
Property and equipment $795
Accumulated depreciation (332)
      Property and equipment, net $463
   
Long-term debt due within one year $48
Long-term debt 348
      Total finance lease liabilities $396

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BURLINGTON NORTHERN SANTA FE, LLC and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)


Supplemental cash flow information related to leases was as follows (in millions):
Cash Flow Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease obligations:  
     Operating cash flows for operating leases $295
     Operating cash flows for finance leases $12
     Financing cash flows for finance leases $24
Right-of-use assets obtained in exchange for lease obligations:  
     Operating leases $110

Other information related to leases was as follows:
Other InformationJune 30,
2019
Weighted-average remaining lease term (in years):
     Operating leases7.9
     Finance leases5.0
Weighted-average discount rate:
     Operating leases3.7%
     Finance leases6.3%

Maturities of lease liabilities as of June 30, 2019 are summarized as follows (in millions):
June 30, Operating Leases
 Finance Leases
2019 $116
 $36
2020 513
 69
2021 439
 200
2022 347
 35
2023 301
 28
Thereafter 816
 101
      Total lease payments 2,532
 469
Less amount representing interest (334) (73)
      Total $2,198
 $396

Future minimum lease payments as of December 31, 2018 are summarized as follows (in millions):
December 31, Operating Leases
 Capital Leases
2019 $400
 $72
2020 496
 69
2021 421
 200
2022 328
 35
2023 289
 28
Thereafter 787
 101
      Total lease payments $2,721
 505
Less amount representing interest 

 (86)
      Total 

 $419

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BURLINGTON NORTHERN SANTA FE, LLC and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)


5.Debt
 
Notes and Debentures
In May 2019, BNSF filed a new automatic shelf registration with the Securities and Exchange Commission (SEC) for the issuance of debt securities which became effective on May 8, 2019 and will remain effective for three years.

In May 2019, the Board of Managers (the Board) authorized an additional $2.25 billion of debt securities that may beApril 2020, BNSF issued pursuant to the debt shelf registration statement filed with the SEC, for a total of $2.5 billion that was authorized by the Board to be issued through the SEC debt shelf offering process.

The Company is required to maintain certain financial covenants in conjunction with $500$575 million of certain issued and outstanding junior subordinated notes. As of June 30, 2019, the Company was in compliance with these financial covenants.

Subsequent Event

In July 2019, BNSF issued $825 million of 3.553.05 percent debentures due February 15, 2050.2051. The net proceeds from the sale of the debentures will be used for general corporate purposes, which may include but are not limited to working capital, capital expenditures, repayment of outstanding indebtedness and distributions.

After this issuance, $1.675 As of June 30, 2020, $1.1 billion remained authorized by the Board of Managers to be issued through the SECSecurities and Exchange Commission debt shelf offering process.

On June 1, 2020, BNSF redeemed all of its $250 million 3.60 percent debentures maturing on September 1, 2020.

The Company is required to maintain certain financial covenants in conjunction with $500 million of certain issued and outstanding junior subordinated notes. As of June 30, 2020, the Company was in compliance with these financial covenants.

Fair Value of Debt Instruments
 
At As of June 30, 20192020 and December 31, 2018,2019, the fair value of BNSF’s debt, excluding capitalfinance leases, was $26.2$28.5 billion and $24.1$26.6 billion, respectively, while the book value, which also excludes capitalfinance leases, was $22.9 billion and $22.8 billion, at each date.respectively. The fair value of BNSF’s debt is primarily based on market value price models using observable market-based data for the same or similar issues, or on the estimated rates that would be offered to BNSF for debt of the same remaining maturities (Level 2 inputs).

Guarantees 

As of June 30, 20192020, BNSF has not been called upon to perform under the guarantees specifically disclosed in this footnote and does not anticipate a significant performance risk in the foreseeable future.

Debt and other obligations of non-consolidated entities guaranteed by the Company as of June 30, 20192020, were as follows (dollars in millions):
Guarantees   Guarantees   
BNSF
Ownership
Percentage

 
Principal
Amount
Guaranteed

 
Maximum
Future
Payments

 
Maximum
Recourse
Amounta

 
Remaining
Term
(in years)
 Capitalized Obligations
 
BNSF
Ownership
Percentage
 
Principal
Amount
Guaranteed
 
Maximum
Future
Payments
 
Maximum
Recourse
Amounta
 
Remaining
Term
(in years)
 Capitalized Obligations 
Kinder Morgan Energy Partners, L.P.0.5% $190
 $190
 $
 Termination of Ownership $2
b 
0.5% $190
 $190
 $
 Termination of Ownership $2
b 
Chevron Phillips Chemical Company LP% 
N/Ad

 
N/Ad

 
N/Ad

 8 $17
c 
% 
N/Ad

 
N/Ad

 
N/Ad

 7 $15
c 
a 
Reflects the maximum amount the Company could recover from a third party other than the counterparty.
b 
Reflects capitalized obligations that are recorded on the Company’s Consolidated Balance Sheets.
c 
Reflects the asset and corresponding liability for the fair value of these guarantees required by authoritative accounting guidance related to guarantees.
d 
There is no cap to the liability that can be sought from BNSF for BNSF’s negligence or the negligence of the indemnified party. However, BNSF could receive reimbursement from certain insurance policies if the liability exceeds a certain amount.


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Kinder Morgan Energy Partners, L.P.
 
Santa Fe Pacific Pipelines, Inc., an indirect, wholly-owned subsidiary of BNSF, has a guarantee in connection with its remaining special limited partnership interest in Santa Fe Pacific Pipeline Partners, L.P. (SFPP), a subsidiary of Kinder Morgan Energy Partners, L.P., to be paid only upon default by the partnership. All obligations with respect to the guarantee will cease upon termination of ownership rights, which would occur upon a put notice issued by BNSF or the exercise of the call rights by the general partners of SFPP.


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Chevron Phillips Chemical Company LP
 
BNSF has an indemnity agreement with Chevron Phillips Chemical Company LP (Chevron Phillips), granting certain rights of indemnity from BNSF, in order to facilitate access to a storage facility. Under certain circumstances, payment under this obligation may be required in the event Chevron Phillips were to incur certain liabilities or other incremental costs resulting from trackage access.

Indemnities
 
In the ordinary course of business, BNSF enters into agreements with third parties that include indemnification clauses. The Company believes that these clauses are generally customary for the types of agreements in which they are included. At times, these clauses may involve indemnification for the acts of the Company, its employees and agents, indemnification for another party’s acts, indemnification for future events, indemnification based upon a certain standard of performance, indemnification for liabilities arising out of the Company’s use of leased equipment or other property, or other types of indemnification. Despite the uncertainty whether events which would trigger the indemnification obligations would ever occur, the Company does not believe that these indemnity agreements will have a material adverse effect on the Company’s results of operations, financial position, or liquidity. Additionally, the Company believes that, due to lack of historical payment experience, the fair value of indemnities cannot be estimated with any amount of certainty and that the fair value of any such amount would be immaterial to the Consolidated Financial Statements. Unless separately disclosed above, no fair value liability related to indemnities has been recorded in the Consolidated Financial Statements.

6.5.Commitments and Contingencies

Personal Injury
 
BNSF’s personal injury liability includes the cost of claims for employee work-related injuries, third-party claims, and asbestos claims. BNSF records a liability for asserted and unasserted claims when the expected loss is both probable and reasonably estimable. Because of the uncertainty of the timing of future payments, the liability is undiscounted. Defense and processing costs, which are recorded on an as-reported basis, are not included in the recorded liability. Expense accruals and adjustments are classified as materials and other in the Consolidated Statements of Income.

Personal injury claims by BNSF Railway employees are subject to the provisions of the Federal Employers’ Liability Act (FELA) rather than state workers’ compensation laws. Resolution of these cases under the FELA’s fault-based system requires either a finding of fault by a jury or an out of court settlement. Third-party claims include claims by non-employees for compensatory damages and may, from time to time, include requests for punitive damages or treatment of the claim as a class action.

BNSF estimates its personal injury liability claims and expense using standard actuarial methodologies based on the covered population, activity levels and trends in frequency, and the costs of covered injuries. The Company monitors actual experience against the forecasted number of claims to be received, the forecasted number of claims closing with payment, and expected claim payments and records adjustments as new events or changes in estimates develop.

BNSF is party to asbestos claims by employees and non-employees who may have been exposed to asbestos. Because of the relatively finite exposed population, the Company has recorded an estimate for the full amount of probable exposure. This is determined through an actuarial analysis based on estimates of the exposed population, the number of claims likely to be filed, the number of claims that will likely require payment, and the cost per claim. Estimated filing and dismissal rates and average cost per claim are determined utilizing recent claim data and trends.
 

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The following table summarizes the activity in the Company’s accrued obligations for personal injury claims (in millions):
 Six Months Ended June 30, Six Months Ended June 30,
 2019 2018 2020 2019
Beginning balance $308
 $307
 $275
 $308
Accruals / changes in estimates 50
 34
 24
 50
Payments (50) (46) (27) (50)
Ending balance $308
 $295
 $272
 $308
Current portion of ending balance $85
 $75
 $70
 $85

The amount recorded by the Company for the personal injury liability is based upon the best information currently available. Because of the uncertainty surrounding the ultimate outcome of personal injury claims, it is reasonably possible that future costs to resolve these claims may be different from the recorded amounts. The Company estimates that costs to resolve the liability may range from approximately $270$230 million to $375$330 million.

Although the final outcome of these personal injury matters cannot be predicted with certainty, it is the opinion of BNSF that none of these items, when finally resolved, will have a material adverse effect on the Company’s financial position or liquidity. However, the occurrence of a number of these items in the same period could have a material adverse effect on the results of operations in a particular quarter or fiscal year.

Environmental
 
BNSF is subject to extensive federal, state, and local environmental regulation. The Company’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 or 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. Under federal (in particular, the Comprehensive Environmental Response, Compensation, and Liability Act) and state statutes, the Company may be held jointly and severally liable for cleanup and enforcement costs associated with a particular site without regard to fault or the legality of the original conduct. The Company participates in the study, cleanup, or both of environmental contamination at approximately 200 sites.
    
Environmental costs may include, but are not limited to, site investigations, remediation, and restoration. The liability is recorded when the expected loss is both probable and reasonably estimable and is undiscounted due to uncertainty of the timing of future payments. Expense accruals and adjustments are classified as materials and other in the Consolidated Statements of Income.
    
BNSF estimates the cost of cleanup efforts at its known environmental sites based on experience gained from cleanup efforts at similar sites, estimated percentage to closure ratios, possible remediation work plans, estimates of the costs and likelihood of each possible outcome, historical payment patterns, and benchmark patterns developed from data accumulated from industry and public sources. The Company monitors actual experience against expectations and records adjustments as new events or changes in estimates develop.

The following table summarizes the activity in the Company’s accrued obligations for environmental costs (in millions):
 Six Months Ended June 30, Six Months Ended June 30,
 2019 2018 2020 2019
Beginning balance $298
 $317
 $282
 $298
Accruals / changes in estimates 2
 2
 2
 2
Payments (11) (9) (10) (11)
Ending balance $289
 $310
 $274
 $289
Current portion of ending balance $40
 $40
 $35
 $40


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The amount recorded by the Company for the environmental liability is based upon the best information currently available. It has not been reduced by anticipated recoveries from third parties and includes both asserted and unasserted claims. BNSF’s total cleanup 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 cleanup efforts, developments in ongoing environmental analyses related to sites determined to be contaminated, and developments in environmental surveys and studies of contaminated sites. Because of the uncertainty surrounding various factors, it is reasonably possible that future costs to settle these claims may be different from the recorded amounts. The Company estimates that costs to settle the liability may range from approximately $235$220 million to $385$370 million.

Although the final outcome of these environmental matters cannot be predicted with certainty, it is the opinion of BNSF that none of these items, when finally resolved, will have a material adverse effect on the Company’s financial position or liquidity. However, the occurrence of a number of these items in the same period could have a material adverse effect on the results of operations in a particular quarter or fiscal year.

Other Claims and Litigation
 
In addition to personal injury and environmental matters, BNSF and its subsidiaries are also parties to a number of other legal actions and claims, governmental proceedings, and private civil suits arising in the ordinary course of business, including those related to disputes and complaints involving certain transportation rates and charges. Some of the legal proceedings include claims for compensatory damages and may, from time to time, include requests for punitive damages or treatment of the claim as a class action. Although the final outcome of these matters cannot be predicted with certainty, it is the opinion of BNSF that none of these items, when finally resolved, will have a material adverse effect on the Company’s financial position or liquidity. However, the occurrence of a number of these items in the same period could have a material adverse effect on the results of operations in a particular quarter or fiscal year.

BNSF Insurance Company
 
BNSF has a consolidated, wholly-owned subsidiary, Burlington Northern Santa Fe Insurance Company, Ltd. (BNSFIC), that offers insurance coverage for certain risks, including FELA claims, railroad protective and force account insurance claims, certain excess general liability and property coverage, and certain other claims which are subject to reinsurance. BNSFIC has entered into annual reinsurance treaty agreements with several other companies. The treaty agreements insure workers’ compensation, general liability, auto liability, and FELA risk. In accordance with the agreements, BNSFIC cedes a portion of its FELA exposure through the treaties and assumes a proportionate share of the entire risk. Each year, BNSFIC reviews the objectives and performance of the treaties to determine its continued participation. The treaty agreements provide for certain protections against the risk of treaty participants’ non-performance. On an ongoing basis, BNSF and/or the treaty manager reviews the creditworthiness of each of the participants. The Company does not believe its exposure to treaty participants’ non-performance is material at this time. BNSFIC typically invests in time deposits, and money market accounts. Ataccounts, and treasuries. As of June 30, 2019,2020, there was $514$530 million related to these third-party investments, which were classified as cash and cash equivalents on the Company’s Consolidated Balance Sheets, as compared with $519$492 million at December 31, 2018.2019.

In 2019, the Company experienced significant flooding across parts of the network. The Company is insured for certain costs incurred as a result of the flooding, including property damage, business interruption, and extra expense. As of June 30, 2020, the Company had recognized and resolved $250 million, which is the full amount that may be recovered for the claim.

7.6.Employment Benefit Plans

BNSF provides a funded, noncontributory qualified pension plan (BNSF Retirement Plan), which covers most non-union employees, and an unfunded non-tax-qualified pension plan (BNSF Supplemental Retirement Plan), which covers certain officers and other employees. The benefits under these pension plans are based on years of credited service and the highest consecutive sixty months of compensation for the last ten years of salaried employment with the Company. BNSF also provides two funded, noncontributory qualified pension plans which cover certain union employees of the former The Atchison, Topeka and Santa Fe Railway Company (Union Plans). The benefits under these pension plans are based on elections made at the time the plans were implemented. With respect to the funded plans, the Company's funding policy is to contribute annually not less than the regulatory minimum and not more than the maximum amount deductible for income tax purposes. The BNSF Retirement Plan, the BNSF Supplemental Retirement Plan, and the Union Plans are collectively referred to herein as the Pension Plans.


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During the first quarter of 2019, the Company amended its funded, noncontributory qualified pension plan, which covers most non-union employees,the BNSF Retirement Plan and its unfunded, non-tax-qualified pension plan, which covers certain officers and other employees (collectively, the BNSF Supplemental Retirement Plans).Plan. Non-union employees hired on or after April 1, 2019 willare not be eligible for the Retirement Plansto participate in these retirement plans and instead will receive an additional companyemployer contribution as part of the qualified 401(k) plan based on the employeesemployees’ age and years of service. Current employees will beare being transitioned away from the Retirement Plansretirement plans within the next ten years, beginningwhich began October 1, 2019, and upon transition will beare eligible for the additional companyemployer contribution. As a result of the plan amendments, the Company recognized a curtailment gain of $120 million in the first quarter of 2019 consisting of $117 million for the reduction in projected benefit obligation and $3 million for the recognition of prior service credits.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

Components of the net (benefit) cost for the periods presented below for certain employee benefit plansPension Plans were as follows (in millions):
  Pension Benefits
  Three Months Ended June 30,
Net (Benefit) Cost 2019 2018
Service cost $7
 $11
Interest cost 20
 21
Expected return on plan assets (40) (39)
Net (benefit) cost recognized $(13) $(7)
  Pension Benefits
  Six Months Ended June 30,
Net (Benefit) Cost 2019 2018
Service cost $17
 $22
Interest cost 42
 42
Expected return on plan assets (79) (79)
Amortization of net gain (1) 
Amortization of prior service credits (3) 
Curtailment gain (117) 
Net (benefit) cost recognized $(141) $(15)
  Retiree Health and Welfare Benefits
  Three Months Ended June 30,
Net (Benefit) Cost 2019 2018
Interest cost $2
 $2
Net (benefit) cost recognized $2
 $2
 Retiree Health and Welfare Benefits Pension Benefits
 Six Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30,
Net (Benefit) Cost 2019 2018

 2020 2019 2020 2019
Service cost $5
 $7
 $10
 $17
Interest cost $4
 $4
 17
 20
 35
 42
Expected return on plan assets (42) (40) (84) (79)
Amortization of net gain 1
 
 1
 (1)
Amortization of prior service credits 
 
 
 (3)
Curtailment gain 
 
 
 (117)
Net (benefit) cost recognized $4
 $4
 $(19) $(13) $(38) $(141)

Service cost is included in compensation and benefits expense and the other components of net periodic benefit costs are included in other (income) expense, net in the Consolidated Statements of Income.

8.7.Related Party Transactions

The companies identified as affiliates of BNSF include Berkshire and its subsidiaries. DuringIn each of the six months ended June 30, 20192020 and 2018,2019, the Company declared and paid cash distributions of $2.4 billion and $2.3 billion, respectively, to its parent company. In each of the six-month periods ended June 30, 2020 and 2019, the Company made tax payments of less than $1 million to Berkshire. Additionally, in the six months ended June 30, 2019 and 2018,2020, the Company received no$29 million of tax refunds and refunds of $217 million, respectively, from Berkshire and made tax payments to Berkshire of less than $1 million and $347 million, respectively.Berkshire. As of June 30, 20192020 and December 31, 2018,2019, the Company had a payable to Berkshire of $500$546 million and $54$31 million, respectively.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

BNSF engages in various transactions with related parties in the ordinary course of business. The following tables summarizetable summarizes revenues earned by BNSF for services provided to related parties and expenditures to related parties (in millions):
  Three Months Ended June 30,
  2019 2018
Revenues $42
 $33
Expenditures $100
 $97
 Six Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2020 2019 2020 2019
Revenues $79
 $67
 $29
 $42
 $66
 $79
Expenditures $193
 $186
 $81
 $100
 $174
 $193

BNSF owns owns 17.3 percent of TTX Company (TTX) while other North American railroads own the remaining interest. As BNSF possesses the ability to exercise significant influence, but not control, over the operating and financial policies of TTX, BNSF applies the equity method of accounting to its investment in TTX. The investment in TTX recorded under the equity method is recorded in other assets. Equity income or losses are recorded in materials and other in the Consolidated Statements of Income. North American railroads pay TTX car hire to use TTX’s freight equipment to serve their customers. BNSF’s car hire expenditures incurred with TTX are included in the table above. BNSF had $629$673 million and $609and $656 million recognized as investments related to TTX in its Consolidated Balance Sheets as of June 30, 20192020 and December 31, 2018,2019, respectively.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

9.8.Accumulated Other Comprehensive Income
 
Other comprehensive income refers to revenues, expenses, gains, and losses that under generally accepted accounting principles are included in accumulated other comprehensive income, a component of equity within the Consolidated Balance Sheets, rather than net income on the Consolidated Statements of Income. OtherUnder existing accounting standards, other comprehensive income may include, among other things, unrecognized gains and losses and prior service credit related to pension and other postretirement benefit plans.

The following table provides the components of accumulated other comprehensive income (loss) (AOCI) by component (in millions):
 Pension and Retiree Health and Welfare Benefit Items Equity Method Investments Accumulated Other Comprehensive Income (Loss) Pension and Retiree Health and Welfare Benefit Items Equity Method Investments Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2018 $133
 $(3) $130
Balance as of December 31, 2018 $133
 $(3) $130
Other comprehensive income (loss), net before reclassifications 66
 (1) 65
 66
 (1) 65
Amounts reclassified from AOCI:            
Amortization of net gaina
 (1) 
 (1) (1) 
 (1)
Amortization of prior service creditsa
 (3) 
 (3) (3) 
 (3)
Tax expense (benefit) 1
 
 1
 1
 
 1
Balance at June 30, 2019 $196
 $(4) $192
Balance as of June 30, 2019 $196
 $(4) $192
            
Balance at December 31, 2017 $234
 $(3) $231
Balance as of December 31, 2019 $149
 $(4) $145
Other comprehensive income (loss), net before reclassifications 
 1
 1
 
 1
 1
Amounts reclassified from AOCI:            
Reclassification due to ASU 2016-01 adoption 
 (1) (1)
Reclassification due to ASU 2018-02 adoption 26
 
 26
Balance at June 30, 2018 $260
 $(3) $257
Amortization of net gaina
 1
 
 1
Balance as of June 30, 2020 $150
 $(3) $147
a
This accumulated other comprehensive income component is included in the computation of net periodic pension and retiree health and welfare cost (see Note 76 for additional details).


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10.9.Accounting Pronouncements

No pronouncements materially affectingIn August 2018, the Company’s financial statements have beenFASB issued sinceAccounting Standards Update No. 2018-15 (ASU 2018-15), Intangibles—Goodwill and Other - Internal-Use Software (Subtopic 350-40). ASU 2018-15 aligns the filingrequirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance requires an entity in such an arrangement to capitalize costs for certain implementation activities in the application development stage, expense the capitalized implementation costs over the term of the Company’s 2018 Annual Reporthosting arrangement, and present the expense with the associated hosting fees in the Consolidated Statements of Income. BNSF adopted the standard as of January 1, 2020. Adoption of the standard did not have a material impact on Form 10-K.the Company's Consolidated Financial Statements and disclosures.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (ASU 2016-13), Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires the use of an "expected loss" model on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. ASU 2016-13 replaces the incurred loss methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. BNSF adopted the standard as of January 1, 2020. Adoption of the standard did not have a material impact on the Company's Consolidated Financial Statements and disclosures.


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Item 2.Management’s Narrative Analysis of Results of Operations.Operations

Management’s narrative analysis relates to the results of operations of Burlington Northern Santa Fe, LLC and its majority-owned subsidiaries (collectively, BNSF, Registrant, or Company). The principal operating subsidiary of BNSF is BNSF Railway Company (BNSF Railway) through which BNSF derives substantially all of its revenues. The following narrative analysis should be read in conjunction with the Consolidated Financial Statements and the accompanying notes.

BNSF is an important part of the national and global supply chain and, as an essential business, has continued to operate throughout the duration of the COVID-19 pandemic. However, the COVID-19 pandemic has caused a significant economic slowdown that has adversely affected the demand for the Company's services. The COVID-19 pandemic continues to evolve, and the full extent to which it may impact the Company's business, operating results, financial condition, or liquidity will depend on future developments which are highly uncertain and cannot be predicted with confidence. The fundamentals of the Company remain strong, and BNSF believes it has sufficient liquidity to continue business operations during this volatile period.
 
The following narrative analysis of results of operations includes a brief discussion of the factors that materially affected the Company’s operating results in the six months ended June 30, 2019,2020, and a comparative analysis to the six months ended June 30, 2018.2019.

Results of Operations

Revenues Summary
 
The following tables present BNSF’s revenue information by business group:
 Revenues (in millions) Cars / Units (in thousands) Revenues (in millions) Cars / Units (in thousands)
 Six Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018 2020 2019 2020 2019
Consumer Products $3,905
 $3,839
 2,631
 2,798
 $3,336
 $3,905
 2,376
 2,631
Industrial Products 3,049
 2,840
 970
 964
 2,625
 3,049
 830
 970
Agricultural Products 2,334
 2,334
 574
 609
 2,216
 2,334
 562
 574
Coal 1,752
 1,859
 856
 899
 1,307
 1,752
 676
 856
Total freight revenues 11,040
 10,872
 5,031
 5,270
 9,484
 11,040
 4,444
 5,031
Other revenues 615
 630
     535
 615
    
Total operating revenues $11,655
 $11,502
     $10,019
 $11,655
    

 Average Revenue Per Car / Unit Average Revenue Per Car / Unit
 Six Months Ended June 30, Six Months Ended June 30,
 2019 2018 2020 2019
Consumer Products $1,484
 $1,372
 $1,404
 $1,484
Industrial Products 3,143
 2,946
 3,163
 3,143
Agricultural Products 4,066
 3,833
 3,943
 4,066
Coal 2,047
 2,068
 1,933
 2,047
Total freight revenues $2,194
 $2,063
 $2,134
 $2,194

Fuel Surcharges
 
Freight revenues include both revenue for transportation services and fuel surcharges. Where BNSF’s fuel surcharge program is applied, it is intended to recover BNSF’s incremental fuel costs when fuel prices exceed a threshold fuel price. Fuel surcharges are calculated differently depending on the type of commodity transported. BNSF has two standard fuel surcharge programs – Percent of Revenue and Mileage-Based. In addition, in certain commodities, fuel surcharge is calculated using a fuel price from a time period that can be up to 60 days earlier. In a period of volatile fuel prices or changing customer business mix, changes in fuel expense and fuel surcharge may differ significantly.


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The following table presents fuel surcharge and fuel expense information (in millions):
  Six Months Ended June 30,
  2019 2018
Total fuel expense a
 $1,486
 $1,597
BNSF fuel surcharges $641
 $636
  Six Months Ended June 30,
  2020 2019
Fuel expense a
 $941
 $1,486
Fuel surcharges $447
 $641
a  Total fuelFuel expense includes locomotive and non-locomotive fuel.

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Six Months Ended June 30, 20192020 vs. the Six Months Ended June 30, 20182019

Revenues
 
Revenues for the six months ended June 30, 20192020 were $11.7$10.0 billion, an increasea decrease of $153 million,$1.6 billion, or 114 percent, as compared with the six months ended June 30, 2018.2019. The increasedecrease in revenue is primarily due to a 612 percent increasedecrease in unit volume and a 3 percent decrease in average revenue per car / unit asdue to a result of increased rates per car / unit and aone-time favorable outcome of an arbitration hearing. This increase was partially offset by a 5 percenthearing recognized in the first quarter of 2019 and lower fuel surcharges. The volume decrease is primarily due to the COVID-19 pandemic, which negatively impacted volumes beginning late in the first quarter and continued through the second quarter. The decrease in unit volume due to severe winter weather and flooding on parts of the network, as well asalso resulted from the following:

Consumer Products volumes decreased primarily due to lower intermodal volumes, which were driven by reduced consumer demand and available truck capacity as well as lower international intermodal market share and decreased imports.automotive volumes attributable to the COVID-19 pandemic.

Industrial Products volumes increaseddecreased primarily due to strengtha decrease in U.S. industrial production driven by the aforementioned pandemic and reduced demand in the energy sector, which drove higher demand forlower sand and petroleum products and liquefied petroleum gas, offset by lower sand volumes and reduced loadings due to the aforementioned challenging weather conditions.volume.

Agricultural Products volumes decreased primarily due to export competition from non-U.S. sources, trade policy,the impacts of the COVID-19 pandemic on ethanol and the aforementioned challenging weather conditions.related commodities and due to lower net exports.

Coal volumes decreased primarily due to lower electricity demand driven by the aforementioned challengingCOVID-19 pandemic and mild winter weather, conditions.low natural gas prices, and plant retirements.

Expenses

Operating expenses for the six months ended June 30, 20192020 were $7.9$6.5 billion, a decrease of $3 million,$1.4 billion, or 18 percent, as compared with the six months ended June 30, 2018. This2019. The decrease in expenses is primarily due to lower volume-related costs, productivity improvements, and lower costs related to improved weather conditions compared to the first half of 2019, including the following changes in expenses, which include increased costs related to severe winter weather and flooding more than offset by lower volume-related costs and cost controls:expenses:

Compensation and benefits expense increaseddecreased primarily due to wage inflationlower employee counts associated with lower volume and higher employee counts.due to improved productivity.

Purchased services expense decreased primarily due to lower volume and improved productivity, lower purchased transportation costs of the Company's logistics services business, as well as insurance recoveries in 2020 related to 2019 flooding.

Fuel expense decreased primarily due to lower average fuel prices, lower volumes, and improved efficiency.

Materials and other expenses decreased primarily as a result of lower volume-related costs, the effects of cost controls, and lower volumes.personal injury expense.

There were no significant changes in purchased services, depreciation and amortization and equipment rents materials and other, and interest expense.

Other (income) expense, net income increaseddecreased primarily due to a curtailment gain related to arecognized in the first quarter of 2019 amendmentrelated to the Company’s retirement plans.

The effective tax rate was 24.6 percent and 22.5 percent forin each of the six months ended June 30, 20192020 and 2018, respectively. The 2018 effective tax rate included the impact of various state income tax rate reductions enacted during the second quarter of 2018.2019.

Capital Commitments

BNSF anticipates that capital commitments for 2020 will be approximately $3.1 billion, or a $300 million decrease from its original capital commitment plan.


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Forward-Looking Information
 
To the extent that statements made by the Company relate to the Company’s future economic performance or business outlook, projections or expectations of financial or operational results, or refer to matters that are not historical facts, such statements are “forward-looking” statements within the meaning of the federal securities laws.
 
Forward-looking statements involve a number of risks and uncertainties, and actual performance or results may differ materially. For a discussion of material risks and uncertainties that the Company faces, see the discussion in "Part I, Item 1A, “Risk Factors,”1A. Risk Factors" of the Company’sCompany's Annual Report on Form 10-K.10-K as supplemented by the risk factor in this quarterly report on Form 10-Q in "Part II, Item 1A. Risk Factors". Important factors that could cause actual results to differ materially include, but are not limited to, the following:

•  Economic and industry conditions: material adverse changes in economic or industry conditions, both in the United States and globally; volatility in the capital or credit markets including changes affecting the timely availability and cost of capital; changes in customer demand; effects of adverse economic conditions affecting shippers or BNSF’s supplier base; effects due to more stringent regulatory policies such as the regulation of greenhouse gas emissions that could reduce the demand for coal or governmental tariffs or subsidies that could affect the demand for products BNSF hauls; the impact of low natural gas or oil prices on energy-related commodities demand; changes in environmental laws and other laws and regulations that could affect the demand for drilling products and products produced by drilling; changes in prices of fuel and other key materials, the impact of high barriers to entry for prospective new suppliers, and disruptions in supply chains for these materials; competition and consolidation within the transportation industry; and changes in crew availability, labor and benefits costs and labor difficulties, including stoppages affecting either BNSF’s operations or customers’ abilities to deliver goods to BNSF for shipment.
 
•   Legal, legislative and regulatory factors: developments and changes in laws and regulations, including those affecting train operations, the marketing of services or regulatory restrictions on equipment; the ultimate outcome of shipper and rate claims subject to adjudication; claims, investigations, or litigation alleging violations of the antitrust laws; increased economic regulation of the rail industry through legislative action and revised rules and standards applied by the U.S. Surface Transportation Board in various areas including rates and services; developments in environmental investigations or proceedings with respect to rail operations or current or past ownership or control of real property or properties owned by others impacted by BNSF operations; losses resulting from claims and litigation relating to personal injuries, asbestos, and other occupational diseases; the release of hazardous materials, environmental contamination, and damage to property; regulation, restrictions or caps, or other controls on transportation of energy-related commodities or other operating restrictions that could affect operations or increase costs; the availability of adequate insurance to cover the risks associated with operations; and changes in tax rates and tax laws.
 
•   Operating factors: changes in operating conditions and costs; operational and other difficulties in implementing positive train control technology, including increased compliance or operational costs or penalties; restrictions on development and expansion plans due to environmental concerns; disruptions to BNSF’s technology network including computer systems and software, such as cybersecurity intrusions, misappropriation of assets or sensitive information, corruption of data or operational disruptions; network congestion, including effects of greater than anticipated demand for transportation services and equipment; as well as pandemics or natural events such as severe weather, fires, floods, and earthquakes or man-made or other disruptions of BNSF’s or other railroads’ operating systems, structures, or equipment including the effects of acts of war or terrorism on the Company’s system or other railroads’ systems or other links in the transportation chain.
 
The Company cautions against placing undue reliance on forward-looking statements, which reflect its current beliefs and are based on information currently available to it as of the date a forward-looking statement is made. The Company undertakes no obligation to revise forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs. In the event the Company does update any forward-looking statement, no inference should be made that the Company will make additional updates with respect to that statement, related matters, or any other forward-looking statements.


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Item 4.Controls and Procedures.Procedures
 
Based on their evaluation as of the end of the period covered by this quarterly report on Form 10-Q, the Company’s principal executive officer and principal financial officer have concluded that BNSF’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) are effective to ensure that information required to be disclosed by BNSF in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to BNSF’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Additionally, as of the end of the period covered by this report, BNSF’s principal executive officer and principal financial officer have concluded that there have been no changes in BNSF’s internal control over financial reporting that occurred during BNSF’s second fiscal quarter that have materially affected, or are reasonably likely to materially affect, BNSF’s internal control over financial reporting.


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BURLINGTON NORTHERN SANTA FE, LLC and SUBSIDIARIES

PART II
OTHER INFORMATION

Item 1. Legal Proceedings
On June 22, 2018, a loaded BNSF Railway train derailed in Doon, Iowa due to flooding. Some of the derailed railcars released petroleum hydrocarbons into floodwaters. The Company worked with federal and state authorities to remediate property impacted by the incident. The Company believes that no proceedings or monetary sanctions related to the incident are being contemplated by governmental authorities, and no notice of penalty has been issued. The resolution of this matter has not had a material adverse effect on the Company’s financial position, results of operations or liquidity.


Item 1A.Risk Factors

In addition to the information set forth in this report, you should carefully consider the risks discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, under the heading “Part I, Item 1A. Risk Factors” as supplemented by the risk factor below, which risks could materially affect the Company’s business, financial condition or future results.
The Company faces risks related to epidemics, pandemics, and other outbreaks, including the COVID-19 coronavirus, which may adversely affect its business, results of operations, and financial condition.

The Company faces risks related to epidemics, pandemics, and other outbreaks, including the COVID-19 coronavirus (“COVID-19”) pandemic, which has impacted geographic areas in which the Company has operations, suppliers, customers, and employees. The COVID-19 pandemic has caused a significant economic slowdown that has adversely affected demand for the Company’s services. The COVID-19 pandemic continues to evolve, and the full extent to which it may impact the Company’s business, operating results, financial condition, or liquidity will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, travel restrictions, business and workforce disruptions, and the effectiveness of actions taken to contain and treat the disease.  Any one or more of these consequences or other unpredictable events, including future epidemics, pandemics and other outbreaks, could materially adversely affect the Company’s operating results, financial condition, or liquidity. Further, the COVID-19 pandemic and other like events could also precipitate or heighten the other risks discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, under the heading “Part I, Item 1A. Risk Factors”.

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BURLINGTON NORTHERN SANTA FE, LLC and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

Item 6.Exhibits.Exhibits
 
Incorporated by Reference
(if applicable)
 
Incorporated by Reference
(if applicable)
Exhibit Number and DescriptionFormFile DateFile No.ExhibitExhibit Number and DescriptionFormFile DateFile No.Exhibit
  
8-K2/16/2010001-115353.18-K2/16/2010001-115353.1
  
8-K2/16/2010001-115353.28-K2/16/2010001-115353.2
  
8-K4/13/2010001-115353.18-K4/13/2010001-115353.1
  
8-K7/24/2019001-115354.1
 
8-K7/24/2019001-115354.2
 
  
  
  
  
  
  
101eXtensible Business Reporting Language (XBRL) documents submitted electronically:

101.INS - XBRL Instance Document
101.SCH - XBRL Taxonomy Extension Schema Document
101.CAL - XBRL Extension Calculation Linkable Document
101.DEF - XBRL Taxonomy Extension Definition Linkable Document
101.LAB - XBRL Taxonomy Extension Label Linkbase
101.PRE - XBRL Taxonomy Extension Presentation Linkbase Document
 eXtensible Business Reporting Language (XBRL) documents submitted electronically:

101.INS - XBRL Instance Document
101.SCH - XBRL Taxonomy Extension Schema Document
101.CAL - XBRL Extension Calculation Linkable Document
101.DEF - XBRL Taxonomy Extension Definition Linkable Document
101.LAB - XBRL Taxonomy Extension Label Linkbase
101.PRE - XBRL Taxonomy Extension Presentation Linkbase Document
 
  
The following unaudited information from Burlington Northern Santa Fe, LLC’s Form 10-Q for the three and six months ended June 30, 2019 formatted in XBRL includes: (i) the Consolidated Statements of Income for the three and six months ended June 30, 2019 and 2018, (ii) the Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2019 and 2018, (iii) the Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018, (iv) the Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018, (v) the Consolidated Statements of Changes in Equity for the periods ended June 30, 2019 and 2018, and (vi) the Notes to the Consolidated Financial Statements. * The following unaudited information from Burlington Northern Santa Fe, LLC’s Form 10-Q for the three and six months ended June 30, 2020 formatted in XBRL includes: (i) the Consolidated Statements of Income for the three and six months ended June 30, 2020 and 2019, (ii) the Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2020 and 2019, (iii) the Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019, (iv) the Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019, (v) the Consolidated Statements of Changes in Equity for the periods ended June 30, 2020 and 2019, and (vi) the Notes to the Consolidated Financial Statements. * 
Certain instruments evidencing long-term indebtedness of BNSF are not being filed as exhibits to this report because the total amount of securities authorized under any single instrument does not exceed 10 percent of BNSF’s total assets. BNSF will furnish copies of any material instruments upon request of the Securities and Exchange Commission.
__________________
* Filed herewith

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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, LLC
(Registrant)
   
 By:/s/    Julie A. Piggott       
  
Julie A. Piggott
Executive Vice President and Chief Financial Officer
(On behalf of the Registrant and
as principal financial officer)

Date:  August 2, 201910, 2020


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