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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 1-11535
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BURLINGTON NORTHERN SANTA FE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 41-1804964
(State of Incorporation) (I.R.S. Employer Identification No.)
2650 Lou Menk Drive
Second Floor
Fort Worth, Texas 76131-2830
(Address of principal executive offices, including zip code)
817/333-2000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -----------------------
Common Stock, $0.01 par value New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
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 requirement for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $12.98 billion on February 28, 1997. For purposes
of this calculation only, the registrant has excluded stock beneficially owned
by directors and officers. By doing so, the registrant does not admit that
such persons are affiliates within the meaning of Rule 405 under the
Securities Act of 1933 or for any other purpose.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
Common Stock, $0.01 par value, 154,271,308 shares outstanding as of February
28, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the documents from which parts thereof have been incorporated
by reference and the part of the Form 10-K into which such information is
incorporated:
Annual
Report to
Shareholders
for the
fiscal year
ended
December
31, 1996... PARTS I, II, AND IV
Proxy
Statement
dated March
5, 1997.... PART III
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TABLE OF CONTENTS
PAGE
----
PART I
Items 1 and 2. Business and Properties.................................... 1
Rail.................................................................. 1
Pipeline Investment................................................... 10
Item 3. Legal Proceedings................................................. 11
Item 4. Submission of Matters to a Vote of Security Holders............... 16
EXECUTIVE OFFICERS OF THE REGISTRANT...................................... 17
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.................................................................. 18
Item 6. Selected Financial Data........................................... 18
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 18
Item 8. Financial Statements and Supplementary Data....................... 18
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure..................................................... 19
PART III
Item 10. Directors and Executive Officers of the Registrant............... 19
Item 11. Executive Compensation........................................... 19
Item 12. Security Ownership of Certain Beneficial Owners and Management... 19
Item 13. Certain Relationships and Related Transactions................... 19
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 20
SIGNATURES................................................................ S-1
REPORTS OF INDEPENDENT ACCOUNTANTS AND
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE............................ F-1
EXHIBITS.................................................................. E-1
i
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
Burlington Northern Santa Fe Corporation ("BNSF") was incorporated in the
State of Delaware on December 16, 1994. On September 22, 1995, the
stockholders of Burlington Northern Inc. ("BNI") and Santa Fe Pacific
Corporation ("SFP") became the stockholders of BNSF pursuant to a business
combination of the two companies. In order to effect the combination, BNSF was
formed to act as the parent holding company of BNI and SFP.
On October 13, 1994, BNI, Burlington Northern Railroad Company ("BNRR"),
SFP, and The Atchison, Topeka and Santa Fe Railway Company ("ATSF") filed a
railroad merger and control application with the Interstate Commerce
Commission ("ICC"). On August 23, 1995, the ICC issued its written decision
approving and authorizing BNI's acquisition of control of SFP and the business
combination by which BNI and SFP became subsidiaries of BNSF, the resulting
common control of BNRR and ATSF by BNSF, the consolidation of BNRR and ATSF by
BNSF, the consolidation of BNRR and ATSF operations, and the merger of BNRR
and ATSF. Pursuant to the ICC's permissive authority, the business combination
was effected on September 22, 1995.
On December 30, 1996, BNI merged with and into SFP. On December 31, 1996,
ATSF merged with and into BNRR, and BNRR changed its name to The Burlington
Northern and Santa Fe Railway Company ("BNSF Railway").
Through its subsidiaries, BNSF is engaged primarily in the rail
transportation business. BNSF also has an equity interest in Santa Fe Pacific
Pipeline Partners, L.P., which operates a refined petroleum products pipeline
system in six western and southwestern states.
At December 31, 1996, BNSF and its subsidiaries had approximately 43,000
employees.
RAIL
The rail operations of BNSF Railway, BNSF's principal operating subsidiary,
comprise one of the largest railroad systems in the United States.
TRACK CONFIGURATION
BNSF Railway operates over a railroad system of approximately 35,000 route
miles of track (excluding, among other things, second main track) at December
31, 1996, approximately 27,000 miles of which are owned route miles, including
easements, through 29 states and two Canadian provinces. Approximately 7,900
route miles of BNSF Railway's system consist of trackage rights which permit
BNSF Railway to operate its trains with its crews over another railroad's
tracks.
As of December 31, 1996, the total BNSF Railway system--including first,
second, third and fourth main tracks, yard tracks, and sidings--consisted of
approximately 52,500 operated miles of track, all of which were owned by or
held under easement by BNSF Railway except for approximately 8,700 miles
operated under trackage rights agreements with other parties. At December 31,
1996, approximately 28,100 miles of BNSF Railway's track consisted of 112-
pound per yard or heavier rail, including approximately 18,200 track miles of
131-pound per yard or heavier rail.
EQUIPMENT CONFIGURATION
BNSF Railway owned or had under non-cancelable leases exceeding one year the
following units of railroad rolling stock (represents combined BNRR and ATSF
amounts):
1
AT DECEMBER 31,
--------------------
1996 1995 1994
------ ------ ------
Diesel Locomotives...................................... 4,434 4,277 4,157
====== ====== ======
Freight Cars:
Box--general purpose................................... 1,082 1,204 1,529
Box--specially equipped................................ 10,719 10,985 10,971
Open Hopper............................................ 10,430 10,497 11,630
Covered Hopper......................................... 44,112 44,840 43,223
Gondola................................................ 11,714 11,467 10,665
Refrigerator........................................... 6,817 7,216 6,489
Autorack............................................... 3,597 3,600 3,567
Flat................................................... 5,508 5,774 5,517
Tank................................................... 493 505 552
Caboose................................................ 451 485 542
Other.................................................. 732 734 747
------ ------ ------
Total Freight Cars.................................... 95,655 97,307 95,432
====== ====== ======
Domestic Containers.................................... 15,595 16,230 16,793
Trailers............................................... 821 834 633
Domestic Chassis....................................... 5,273 5,274 7,365
Company Service Cars................................... 6,140 6,084 6,218
Commuter Passenger Cars................................ 141 141 141
In addition to the containers, trailers, and chassis shown above, BNSF
Railway had under short-term leases 6,615 containers, 2,766 trailers, and
16,758 chassis, at December 31, 1996. In addition to the owned and leased
locomotives identified above, BNSF Railway operated 196 freight locomotives
under power-purchase agreements as of December 31, 1996. The average ages from
date of manufacture or remanufacture of the locomotive and freight car fleets
at December 31, 1996, were 12.24 years for locomotives, and 18.83 years for
freight cars. These averages are not weighted to reflect the greater
capacities of the newer equipment.
2
CAPITAL EXPENDITURES AND MAINTENANCE
BNSF Railway capital expenditures for the periods indicated were as follows
(represents combined BNRR and ATSF amounts for all periods):
YEAR ENDED DECEMBER
31,
--------------------
(IN MILLIONS)
1996 1995 1994
------ ------ ------
Ties................................................... $ 225 $ 161 $ 136
Rail/Other Track Material.............................. 406 288 277
Ballast................................................ 184 138 131
Facilities and Other Roadway........................... 660 387 391
Locomotives............................................ 425 111 93
Freight Cars........................................... 55 25 42
Other.................................................. 279 105 90
------ ------ ------
Cash Capital Expenditures.......................... $2,234 $1,215 $1,160
====== ====== ======
The above expenditures do not include non-cash expenditures of $48 million,
$140 million, and $178 million in 1996, 1995, and 1994, respectively,
primarily relating to directly financed equipment acquisitions, nor do they
include equipment financed through operating leases (principally, locomotives
and rolling stock). BNSF expects 1997 capital expenditures for BNSF Railway to
approximate $1.85 billion. Approximately $1.1 billion of these expenditures
will be for maintaining productive capacity of the existing route structures.
The remainder will be spent on acquisition of new equipment, including at
least 180 locomotives, and capacity expansion projects throughout the system
including the Powder River Basin and the Pacific Northwest.
General Electric Company ("GE") and the Electro-Motive Division of General
Motors Corporation ("EMD") perform locomotive maintenance for BNSF Railway
under various maintenance agreements that covered approximately 1,530
locomotives as of December 31, 1996. Additionally, BNSF Railway has a similar
agreement with Boise Locomotive Corporation ("Boise") that provides for the
overhaul of 277 locomotives and the maintenance for each of the locomotives
for a period of eight years following its overhaul. The agreements with GE,
EMD, and Boise require the work to be done at BNSF Railway's facilities with
BNSF Railway employees.
The majority of maintenance of way expenditures for track have been for rail
and tie refurbishment and resurfacing. The extent of the BNSF Railway track
maintenance program (representing combined BNRR and ATSF amounts for all
periods) is depicted in the following chart:
YEAR ENDED DECEMBER
31,
--------------------
1996 1995 1994
------ ------ ------
Track miles of rail laid (1)............................ 1,139 945 1,010
Cross ties inserted (in thousands) (1).................. 3,768 2,974 2,879
Track resurfaced miles.................................. 12,033 11,088 11,055
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(1) Includes both maintenance of existing route system and expansion projects.
BNSF Railway anticipates that the 1997 track maintenance of way program,
together with expansion projects, will result in the installation of
approximately 1,000 track miles of rail, the replacement of about 3.5 million
ties, and the resurfacing of approximately 12,000 miles of track.
PROPERTY AND FACILITIES
BNSF Railway operates facilities and equipment for maintenance of track,
locomotives and freight cars. It also owns or leases other equipment to
support rail operations, such as highway trailers, containers and vehicles.
Support facilities for rail operations include yards and terminals throughout
its rail network, system
3
locomotive shops to perform continuous locomotive servicing and maintenance,
centralized network operations centers for train dispatching and network
operations monitoring and management in Fort Worth, Texas, and Schaumburg,
Illinois, computers, telecommunications equipment, signal systems, and other
support systems. Transfer facilities are maintained for rail-to-rail as well
as intermodal transfer of containers, trailers and other freight traffic.
These include 39 major intermodal hubs located across the system and nine
intermodal hub centers off-line used in connection with haulage agreements
with other railroads. BNSF Railway's largest intermodal facilities in terms of
volume are Hobart Yard (Los Angeles), Corwith Yard (Chicago), Willow Springs
(Illinois), Chicago Hub Center (Cicero, Illinois), Alliance (Texas), Seattle
International Gateway (SIG), and Tacoma, with approximately 707,500, 535,900,
440,000, 436,000, 292,900, 220,500, and 192,300 lifts, respectively, in 1996.
BNSF Railway also owns 28 automotive distribution facilities where automobiles
are loaded or unloaded from multi-level rail cars and serves eight port
facilities. Argentine Yard in Kansas City, Kansas, Barstow Yard in Barstow,
California, Northtown Yard in Minneapolis, Minnesota and Murray Yard in Kansas
City, Missouri are the largest freight car classification yards.
In December 1996, BNSF acquired Washington Central Railroad Company, Inc.
for shares of BNSF common stock, and BNSF Railway now operates over Washington
Central's route between Kennewick, Washington, an interchange point on BNSF
Railway, and Cle Elum, Washington. This acquisition, and BNSF Railway's
rehabilitation of the 229-mile Stampede Pass line between Pasco and Auburn,
Washington, provides BNSF Railway with a third route linking Central
Washington with the Pacific Coast. During 1996, BNSF Railway also disposed of
approximately 2,000 route miles of secondary lines.
A substantial portion of all railroad property, real or personal, owned by
BNSF Railway is subject to liens securing, as of December 31, 1996,
approximately $544 million of mortgage bonds. On January 1, 1997,
approximately $77 million of this mortgage debt matured and was paid. Certain
locomotives and rolling stock of BNSF Railway are subject to equipment
obligations, as referred to in Note 10 to the consolidated financial
statements on page 30 of BNSF's 1996 Annual Report to Shareholders, which
information is hereby incorporated by reference.
EMPLOYEES AND LABOR RELATIONS
Productivity as measured by revenue ton miles per employee has risen steadily
in the last three years, while compensation and benefits expense per revenue
ton mile has declined, as shown in the table below (represents combined BNRR
and ATSF operating statistics for all periods):
YEAR ENDED
DECEMBER 31,
-----------------
1996 1995 1994
----- ----- -----
Thousand revenue ton-miles/average number of employees.... 9,398 8,715 7,887
Compensation and benefits expense/thousand revenue ton-
miles.................................................... $6.23 $6.78 $7.27
Labor unions represent approximately 88 percent of BNSF Railway employees
under collective bargaining agreements with 13 different labor organizations.
BNRR, ATSF and other major railroads were actively involved in industry-wide
labor contract negotiations beginning in late 1994. Through this process,
wages, health and welfare benefits, work rules and other issues have now been
negotiated for all BNSF Railway union-represented employees. On February 26,
1997, BNSF Railway reached an agreement with the approximately 425 employees
represented by the American Train Dispatchers Department of the Brotherhood of
Locomotive Engineers, to bring the 1995 round of labor contract negotiations
to a close.
The new collective bargaining agreements will remain in effect through at
least December 31, 1999 and until new agreements are reached or the Railway
Labor Act's procedures are exhausted. The new collective bargaining agreements
include provisions for retroactive and prospective wage increases, signing
bonuses and lump-sum payments. Throughout the negotiation process, BNSF
accrued for anticipated retroactive elements of the contract settlements, and
these agreements therefore did not have a material effect on BNSF's 1996
results of operations.
4
Railroad industry personnel are covered by the Railroad Retirement System
instead of Social Security. BNSF Railway's contributions under the Railroad
Retirement System are approximately triple those in industries covered by
Social Security.
Railroad industry personnel are also covered by the Federal Employers'
Liability Act ("FELA") rather than by state workers' compensation systems.
FELA is a fault-based system, with compensation for injuries settled by
negotiation and litigation, not subject to specific statutory limitations on
the amount of recovery. By contrast, most other industries are covered under
state administered no-fault plans with standard compensation schedules. BNSF
Railway believes it has adequate reserves for its FELA claims. However, the
future costs of FELA claims are uncertain and such costs could be
significantly higher in the future.
BUSINESS MIX
In serving the Midwest, Pacific Northwest and the Western, Southwestern, and
Southeastern regions of the country, BNSF Railway transports a range of
commodities derived from manufacturing, agricultural, and natural resource
industries. Accordingly, its financial performance is influenced by, among
other things, general and industry economic conditions at the international,
national, and regional levels.
Major markets served directly by BNSF Railway include Albuquerque, Billings,
Birmingham, Cheyenne, Chicago, Corpus Christi, Dallas, Denver, Des Moines,
Duluth/Superior, Fargo/Moorhead, Fort Worth, Houston, Kansas City, Lincoln,
Little Rock, Los Angeles, Memphis, Mobile, New Orleans, Oklahoma City, Omaha,
Pensacola, Phoenix, Portland, Reno, Salt Lake City, San Antonio, the San
Francisco Bay area, St. Louis, St. Paul/Minneapolis, Seattle, Spokane,
Springfield (Missouri), Tacoma, Tulsa, Wichita, Vancouver (British Columbia),
and Winnipeg (Manitoba). Other major cities are served through 24 Intermodal
Market Extension ("IMX") terminals located at various off-line points. Major
ports served include Galveston, Houston, Long Beach, Los Angeles, New Orleans,
Mobile, Portland, Richmond (Oakland), San Diego, Seattle, Duluth/Superior,
Tacoma and Vancouver (British Columbia).
As a result of agreements and conditions stemming from the merger of the
Union Pacific and Southern Pacific railroads, BNSF Railway gained new access
to the growing Mexican market. Previously, BNSF reached the United
States/Mexico crossings of Eagle Pass and El Paso, Texas and San Diego,
California. As a result of the UP/SP merger, BNSF Railway now also reaches
Brownsville, Texas and, through connection with the Texas Mexican Railway
Company, the major border crossing point at Laredo, Texas.
In 1996, approximately one quarter of revenues were derived from Intermodal
traffic and another quarter were derived from the transportation of Coal.
About 14 percent of 1996 revenues reflected the transportation of Agricultural
Commodities. The transportation of commodities in the areas serviced by
Chemicals, Forest Products, Consumer and Food Products, Metals, Automotive,
and Minerals and Ores, accounted for the rest of 1996 revenues.
Intermodal. The Intermodal freight business consists of the hauling of
freight containers or truck trailers by combinations of water, rail, or motor
carriers. The intermodal business is highly service-driven, and in many cases
motor carriers and railroads jointly market intermodal service. The first such
joint intermodal arrangement was Quantum, through which BNSF Railway and J. B.
Hunt Transport provide customers full service, customized door-to-door
transportation (truck and rail), with a common communication system and
integrated billing at a single rate.
In 1994, major national Less-Than-Truckload ("LTL") carriers and the
Teamsters union signed a new National Master Freight Agreement that allows the
LTL carriers to shift up to 28 percent of their total line-haul miles to
intermodal service. BNSF Railway is a major beneficiary of this service-
sensitive traffic, and it provides transportation services to major LTL
carriers including Yellow Freight, Roadway Express, and Consolidated
Freightways.
5
Intermodal 1996 results include revenue from four types of business:
. Direct Marketing. Direct marketing efforts resulted in approximately 33
percent of total intermodal revenue. These center around traffic contracted
from United Parcel Service and the United States Postal Service, and service
for nationwide LTL carriers.
. Truckload. Truckload traffic represented approximately 14 percent of total
intermodal revenue. The joint service arrangement with J.B. Hunt, referred to
as Quantum, represented the largest truckload component, while Schneider
National was the next largest.
. Intermodal Marketing Companies. Approximately 25 percent of total
intermodal revenue was generated through intermodal marketing companies,
primarily shipper agents and consolidators.
. International. International business consists primarily of traffic from
steamship companies and accounted for approximately 28 percent of intermodal
revenues.
Coal. Based on carloadings and tons hauled, BNSF Railway is the largest
transporter of western low-sulfur coal in the United States. Over 90 percent
of BNSF Railway's coal traffic originated in the Powder River Basin of Wyoming
and Montana during the three years ended December 31, 1996. These coal
shipments were destined for coal-fired electric generating stations located
primarily in the North Central, South Central and Mountain regions of the
United States with smaller quantities exported.
BNSF Railway also handles increasing amounts of low-sulfur coal from the
Powder River Basin for delivery to markets in the eastern and southeastern
portion of the United States. The low-sulfur coal from the Powder River Basin
is abundant, inexpensive to mine and clean-burning. Because the Clean Air Act
of 1990 requires power plants to reduce harmful emissions either by burning
coal with a lower sulfur content or by installing expensive scrubbing units,
opportunities for increased shipments of this low-sulfur coal still exist.
Other coal shipments originate principally in Wyoming, Colorado, and New
Mexico on the lines of the former ATSF and other rail carriers. These
shipments are moved to electrical generating stations and industrial plants in
the Midwest and Southwest.
Agricultural Commodities. Agricultural Commodities include barley, corn,
wheat, soybeans, oils, feeds, flour and mill products, specialty grains,
malts, and milo. The BNSF Railway system is strategically located to serve the
Midwest and Great Plains grain-producing regions where BNSF Railway serves
most major terminal, storage, feeding and food-processing locations.
Additionally, BNSF Railway has access to major export markets in the Pacific
Northwest, western Great Lakes and Texas Gulf regions.
Chemicals. The Chemicals business is comprised of fertilizer, petroleum and
chemical commodities. Chemicals and plastics resins are transported for
industrial and agricultural use. Industrial chemicals and plastics resins are
used by the automotive, housing, and packaging industries, as well as for
feedstocks for other chemical and plastic products. Access to significant
additional chemicals producers along the Louisiana and Texas Gulf Coasts was
gained as a result of the agreement and conditions resulting from the merger
of the Union Pacific and Southern Pacific railroads. Agricultural minerals
include sulphur that generally moves to the Gulf Coast and from there via
vessels to Florida and overseas markets for use in making phosphatic
fertilizers. Potash is transported to domestic markets and to export points
for markets in Canada, Mexico, and overseas.
Forest Products. The primary commodities in Forest Products are lumber,
plywood, oriented strand board, paper products, pulpmill feedstock, and wood
pulp. Based on carloadings and tonnage hauled, BNSF Railway is the largest
rail transporter of forest products in the United States. Commodity origins
are primarily from the Pacific Northwest, upper Midwest, and the Southeast for
shipment mainly into domestic markets. Industries served include construction,
furniture, photography, publishing, newspaper, and industrial packaging.
6
Consumer and Food Products. Beverages, canned goods, and perishables are the
principal food commodities moved by BNSF Railway. Other consumer products
handled include sugars and sweeteners, cotton, salt, rubber and tires,
machinery, aircraft parts, military and miscellaneous boxcar shipments.
Shipments of waste, ranging from municipal waste to contaminated soil, move to
landfills and reclamation centers across the country. Distribution services,
including transloading and warehousing services, are also offered. A truck-
competitive transportation product in tank containers for customers shipping
specialty chemicals, other liquids and dry material is also offered.
Metals. The Metals business includes virtually all of the commodities
included in or resulting from the production of steel. Taconite, an iron ore
derivative produced in northern Minnesota, scrap steel, and coal coke are BNSF
Railway's primary input products, while finished steel products range from
structural beams and steel coils to wire and nails. BNSF Railway also hauls
both ferrous and non-ferrous products including recyclable metals. BNSF
Railway links the integrated steel mills in the East with fabricators in the
West and Southwest. Service is also provided to various mini-mills in the
Southwest that feed rebar, beams, and coiled rod to the construction industry.
Various non-ferrous products such as copper, lead, and aluminum are
transported for the beverage, automotive, and telecommunications industries.
Automotive. The Automotive group is responsible for both assembled motor
vehicles and shipments of vehicle parts to numerous destinations throughout
the Midwest, Southwest, West and Pacific Northwest.
Minerals and Ores. Commodities in this group include clays, sands, cements,
aggregates, sodium compounds and other industrial minerals. Both the oil and
the construction industries are serviced. Industrial minerals include various
mined and processed commodities such as cement and aggregates (construction
sand, gravel and crushed stone) that generally move to domestic markets for
use in general construction and public work projects, such as highway
projects. Borates and clays move to domestic points as well as to export
markets primarily through West Coast ports. Sodium compounds, primarily soda
ash, is moved to domestic markets for use in the manufacturing of glass and
other industrial products. Sand is utilized in the manufacturing of glass and
for use in foundry and oil drilling applications.
Freight Statistics. The following tables set forth certain freight
statistics relating to rail operations for the periods indicated. Amounts
shown represent combined BNRR and ATSF results for all periods; certain
amounts have been reclassified to reflect changes in the business groups and
to conform to current year presentation.
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994
------- ------- -------
Revenue ton-miles (millions)......................... 411,059 397,902 360,605
Freight revenue per thousand revenue ton-miles....... $19.82 $20.11 $20.84
Average haul per ton (miles)......................... 875 864 821
7
REVENUES
YEAR ENDED DECEMBER
31,
--------------------
1996 1995 1994
------ ------ ------
(IN MILLIONS)
Intermodal............................................. $2,088 $2,000 $1,956
Coal................................................... 1,973 1,962 1,907
Agricultural Commodities............................... 1,170 1,290 955
Chemicals.............................................. 765 712 701
Forest Products........................................ 555 557 569
Consumer and Food Products............................. 469 486 481
Metals................................................. 413 397 356
Automotive............................................. 397 398 380
Minerals and Ores...................................... 319 313 302
------ ------ ------
Total Freight Revenue.................................. 8,149 8,115 7,607
Other Revenue.......................................... 38 35 50
------ ------ ------
Total Revenues....................................... $8,187 $8,150 $7,657
====== ====== ======
CARS/UNITS
YEAR ENDED DECEMBER
31,
--------------------
1996 1995 1994
------ ------ ------
(IN THOUSANDS)
Intermodal............................................. 2,571 2,527 2,465
Coal................................................... 1,854 1,878 1,847
Agricultural Commodities............................... 585 664 578
Chemicals.............................................. 449 435 431
Forest Products........................................ 334 347 357
Consumer and Food Products............................. 309 332 337
Metals................................................. 391 399 370
Automotive............................................. 250 264 238
Minerals and Ores...................................... 249 257 246
------ ------ ------
Total Cars/Units..................................... 6,992 7,103 6,869
====== ====== ======
AVERAGE REVENUE PER CAR/UNIT
YEAR ENDED DECEMBER
31,
--------------------
1996 1995 1994
------ ------ ------
Intermodal............................................. $ 812 $ 791 $ 794
Coal................................................... 1,064 1,045 1,032
Agricultural Commodities............................... 2,000 1,943 1,652
Chemicals.............................................. 1,704 1,637 1,626
Forest Products........................................ 1,662 1,605 1,594
Consumer and Food Products............................. 1,518 1,464 1,427
Metals................................................. 1,056 995 962
Automotive............................................. 1,588 1,508 1,597
Minerals and Ores...................................... 1,281 1,218 1,228
------ ------ ------
Average Revenue Per Car/Unit....................... $1,165 $1,142 $1,107
====== ====== ======
8
GOVERNMENT REGULATION AND LEGISLATION
Rail operations are subject to the regulatory jurisdiction of the Surface
Transportation Board of the United States Department of Transportation
("DOT"), the Federal Railroad Administration of DOT, the Occupational Safety
and Health Administration ("OSHA"), and state regulatory agencies. The Surface
Transportation Board, which is the successor to the Interstate Commerce
Commission ("ICC"), has jurisdiction over certain rates, routes, and services,
the extension, sale, or abandonment of rail lines, and consolidation or merger
with, or acquisition of control of, rail common carriers. DOT and OSHA have
jurisdiction under several federal statutes over a number of safety and health
aspects of rail operations. State agencies regulate some aspects of rail
operations with respect to health and safety in areas not otherwise preempted
by federal law.
BNSF Railway's rail operations, as well as those of its competitors, are
subject to extensive federal, state and local environmental regulation. These
laws cover discharges to waters, air emissions, toxic substances, and the
generation, handling, storage, transportation, and disposal of waste and
hazardous materials. This regulation has the effect of increasing the cost and
liabilities associated with rail operations. Environmental risks are also
inherent in rail operations which frequently involve transporting chemicals
and other hazardous materials.
The railroad industry, including BNSF Railway, will become subject to future
requirements regulating air emissions from diesel locomotives that may
increase operating and capital costs. The United States Environmental
Protection Agency ("EPA") issued in early 1997 proposed regulations nationally
applicable to new locomotive engines and certain engines remanufactured after
1999. Final regulations are to be promulgated by the end of the year. It is
anticipated that these regulations will be effective for locomotive engines
installed after 1999 and through 2010. Under some interpretations of federal
law, older locomotive engines may be regulated by states based on standards
and procedures which the State of California ultimately adopts. At this time
it is unknown whether California will adopt any locomotive emission standards.
Many of BNSF Railway'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 Railway is now subject and will from time to time continue
to be subject to environmental cleanup and enforcement actions. In particular,
the federal Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), also known as the "Superfund" law, generally imposes joint and
several liability for cleanup and enforcement costs, without regard to fault
or the legality of the original conduct, on current and former owners and
operators of a site. Accordingly, BNSF Railway may be responsible under CERCLA
and other federal and state statutes for all or part of the costs to clean up
sites at which certain substances may have been released by BNSF Railway, its
current lessees, former owners or lessees of properties, or other third
parties. For further discussion, reference is made to Note 13 to the
consolidated financial statements on pages 31 and 32 of BNSF's 1996 Annual
Report to Shareholders, which information is hereby incorporated by reference.
COMPETITION
The business environment in which BNSF Railway operates remains highly
competitive. Depending on the specific market, deregulated motor carriers,
other railroads and river barges exert pressure on various price and service
levels. The presence of advanced, high service truck lines with expedited
delivery, subsidized infrastructure and minimal empty mileage continues to
affect the market for non-bulk, time sensitive freight. The potential
expansion of longer combination vehicles could further encroach upon markets
traditionally served by railroads. In order to remain competitive, BNSF
Railway and other railroads continue to develop and implement operating
efficiencies to improve productivity.
As railroads streamline, rationalize and otherwise enhance their franchises,
competition among rail carriers intensifies. BNSF Railway's primary rail
competitor in the western region of the United States is
9
Union Pacific Railroad Company ("UP"), which now includes the former Southern
Pacific Transportation Company ("SP") and Chicago & North Western
Transportation Company ("C&NW"). Other Class I railroads and numerous regional
railroads and motor carriers also operate in parts of the same territories
served by BNSF Railway. Coal, one of BNSF Railway's primary commodities, has
experienced significant pressure on rates due to competition from the joint
effort of C&NW/UP and from BNSF Railway's effort to penetrate new markets.
The Surface Transportation Board approved the proposed common control and
merger of rail carriers controlled by UP and SP in its written decision dated
August 12, 1996, and the transaction was consummated on September 11, 1996. As
a condition of the merger, the STB imposed the provisions of the rights
agreement between BNSF Railway and UP/SP which grants rights to BNSF Railway
to approximately 4,000 miles of track and requires the purchase by BNSF
Railway from UP/SP of more than 335 miles of track for $150 million. Approval
of the UP/SP transaction created an enhanced competitor to BNSF Railway. The
Board's decision also provides BNSF Railway with greater access to Gulf Coast
and West Coast markets and improves its route structure. BNSF Railway has
commenced operations and is handling rail traffic utilizing the rights
obtained from UP/SP.
BNSF is monitoring proposals involving the possible merger with or other
disposition of Consolidated Rail Corporation (Conrail) between CSX Corporation
and Norfolk Southern Corporation and will evaluate any definitive agreement
and related filings with the Surface Transportation Board to determine the
impact, if any, on BNSF Railway. Conrail, CSX and Norfolk Southern operate the
three largest rail systems in the eastern United States.
BNSF is also studying the ongoing privatization of the Mexican rail network.
The northeastern Mexico rail concession has been awarded to a group including
Kansas City Southern Railway; the northwestern Mexico rail concession is now
going through the bid process, with a successful bidder to be announced by
mid-1997.
PIPELINE INVESTMENT
Santa Fe Pacific Pipelines, Inc. ("SFP Pipelines"), an indirect, wholly-
owned subsidiary of BNSF, serves as the general partner of Santa Fe Pacific
Pipeline Partners, L.P. (the "Partnership"), a Delaware master limited
partnership formed in 1988 to acquire and operate the refined petroleum
products pipeline business of SFP. SFP Pipelines owns a two percent interest
as the Partnership's general partner and an approximate 42 percent interest as
limited partner. As general partner, SFP Pipelines is entitled to receive two
percent of all amounts available for distribution by the Partnership and also
an additional incentive depending upon the level of cash distributions paid to
holders of limited partner interests in the Partnership ("Partnership Units").
BNSF accounts for its interest in the Partnership on the equity basis.
In September 1990, SFP Pipeline Holdings, Inc., an indirect, wholly-owned
subsidiary of BNSF, issued $219 million principal amount of Variable Rate
Exchangeable Debentures due 2010 (the "Holdings Debentures") at an eight
percent discount. The Holdings Debentures are exchangeable under certain
circumstances at the option of the holders upon the first to occur of certain
specified events, or final maturity, for substantially all of the Partnership
Units that are owned by SFP Pipelines. The interest payable with respect to
the Holdings Debentures for a particular quarter is equal to the greater of
(i) the distributions of cash from operations declared by the Partnership on
the Partnership Units for which such Holdings Debentures are exchangeable and
(ii) two percent of the weighted average unpaid balance of such Holdings
Debentures outstanding during such quarter, provided that in no event shall
the amount of interest paid on the Holdings Debentures exceed an average
annual rate of 16 percent since their date of issuance.
The Partnership is one of the largest independent pipeline common carriers
of refined petroleum products in the United States, and the largest in the
western United States, in terms of product deliveries,
10
barrel miles, and pipeline mileage, with approximately 3,300 miles of pipeline
serving six states. The Partnership transports refined petroleum products,
including gasoline, diesel fuel, and commercial and military jet fuel,
primarily for major petroleum companies, independent refiners, the United
States military, and marketers and distributors of such products. The
Partnership also operates 14 truck loading terminals and provides pipeline
service to 40 customer-owned terminals, three commercial airports, and 11
military bases. The Partnership shipped 365.4 million barrels in 1996, up from
354.3 million barrels in 1995.
Substantially all of the Partnership's pipeline operations are common
carrier operations that are subject to federal or state rate regulation. The
Federal Energy Regulatory Commission (FERC) exercises economic regulatory
jurisdiction over interstate shipments through the Partnership's system. For a
description of certain FERC proceedings challenging certain of the
Partnership's rates and seeking refunds and prospective rate reductions, see
the section entitled "East Line Civil Litigation and FERC Proceedings" under
Item 3, Legal Proceedings, in the Partnership's Annual Report on Form 10-K for
the year ended December 31, 1996, which section is hereby incorporated by
reference. Intrastate shipments are subject to economic regulation by the
California Public Utilities Commission.
ITEM 3. LEGAL PROCEEDINGS
Set forth below is a description of certain legal proceedings involving BNSF
and its subsidiaries.
WHEAT AND BARLEY TRANSPORTATION RATES
In September 1980, a class action lawsuit was filed against BNSF Railway in
United States District Court for the District of Montana ("Montana District
Court") challenging the reasonableness of BNSF Railway export wheat and barley
rates. The class consists of Montana grain producers and elevators. The
plaintiffs sought a finding that BNSF Railway single car export wheat and
barley rates for shipments moving from Montana to the Pacific Northwest were
unreasonably high and requested damages in the amount of $64 million. In March
1981, the Montana District Court referred the rate reasonableness issue to the
ICC. Subsequently, the state of Montana filed a complaint at the ICC
challenging BNSF Railway's multiple car rates for Montana wheat and barley
movements occurring after October 1, 1980.
The ICC issued a series of decisions in this case from 1988 to 1991. Under
these decisions, the ICC applied a revenue to variable cost test to the rates
and determined that BNSF Railway owed $9,685,918 in reparations plus interest.
In its last decision, dated November 26, 1991, the ICC found BNSF Railway's
total reparations exposure to be $16,559,012 through July 1, 1991. The ICC
also found that BNSF Railway's current rates were below a reasonable maximum
and vacated its earlier rate prescription order.
BNSF Railway appealed to the United States Court of Appeals for the District
of Columbia Circuit ("D.C. Circuit") those portions of the ICC's decisions
concerning the post-October 1, 1980 rate levels. BNSF Railway's primary
contention on appeal was that the ICC erred in using the revenue to variable
cost rate standard to judge the rates instead of Constrained Market
Pricing/Stand Alone Cost principles. The limited portions of decisions that
cover pre-October 1, 1980 rates were appealed to the Montana District Court.
On March 24, 1992, the Montana District Court dismissed plaintiffs' case as
to all aspects other than those relating to pre-October 1, 1980 rates. On
February 9, 1993, the D.C. Circuit served its decision regarding the appeal of
the several ICC decisions in this case. The court held that the ICC did not
adequately justify its use of the revenue to variable cost standard as BNSF
Railway had argued and remanded the case to the ICC for further administrative
proceedings.
On July 22, 1993, the ICC served an order in response to the D.C. Circuit's
February 9, 1993 decision. In its order, the ICC stated it would use the
Constrained Market Pricing/Stand-Alone Cost principles in assessing the
reasonableness of BNSF Railway wheat and barley rates moving from Montana to
Pacific Coast ports from 1978 forward. The ICC assigned the case to the Office
of Hearings to develop a procedural
11
schedule. On October 28, 1994, plaintiffs filed their opening evidence arguing
that the revenue received by BNSF Railway exceeded the stand alone costs of
transporting that traffic and that BNSF Railway rates were unreasonably high.
BNSF Railway filed its evidence March 29, 1995, showing that the stand alone
costs of transporting the traffic exceeded the revenue derived by BNSF Railway
on that traffic and that consequently, its rates were not unreasonably high.
The parties filed briefs simultaneously on August 16, 1995, and the proceeding
awaits decision by the Surface Transportation Board, successor to the ICC.
COAL TRANSPORTATION CONTRACT LITIGATION
On April 26, 1991, an action was filed against BNSF Railway in the 102nd
Judicial District Court for Bowie County, Texas, seeking a reduction of the
transportation rates required to be paid under two contracts (Southwestern
Electric Power Company v. Burlington Northern Railroad Company, No. D-102-CV-
91-0720). The plaintiff, Southwestern Electric Power Company ("SWEPCO"), was
challenging the contract rates for transportation of coal to its electric
generating facilities at Cason, Texas, and Flint Creek, Arkansas. SWEPCO
contended that productivity gains achieved by BNSF Railway constituted unusual
economic conditions giving rise to a "gross inequity" because BNSF Railway's
costs of providing service have been reduced over the contracts' terms. On
August 2, 1994, plaintiff amended its complaint to further allege that BNSF
Railway had been unjustly enriched by retaining differences between the rates
actually charged and those that SWEPCO alleged should have been charged.
SWEPCO sought both prospective rate relief and recovery of alleged past
overcharges.
BNSF Railway's primary contention was that both parties anticipated
productivity gains in the rail industry when negotiating the contracts and
agreed that BNSF Railway would retain most of its productivity gains. BNSF
Railway further contended that there was no agreement that transportation
rates paid by SWEPCO would be based on BNSF Railway's cost of providing
service.
On November 18, 1994, the jury rendered a verdict denying plaintiff's
request for prospective rate relief and that plaintiff take nothing on its
principal claims of "gross inequity." However, BNSF Railway was assessed
damages approximating $56 million relating to plaintiff's alternative claim of
unjust enrichment. On January 20, 1995, the trial court rendered a judgment on
the verdict in an amount approximating $74 million, which included attorneys'
fees and interest. The judgment further awarded post-judgment interest at 10
percent per annum and issued declaratory orders pertaining to the two
contracts. BNSF Railway filed its notice of appeal in the case on February 17,
1995 and posted a bond staying enforcement of the judgment in the Court of
Appeals for the Sixth Court of Appeals District of Texas, Texarkana, Texas
(Burlington Northern Railroad Company v. Southwestern Electric Power Company,
No. 06-95-00024-CV). By decision dated April 30, 1996, the Court of Appeals
reversed the judgment of the trial court and rendered judgment in favor of
BNSF Railway. SWEPCO was assessed costs of appeal. SWEPCO has been denied two
motions for rehearing before the Court of Appeals. On October 14, 1996, SWEPCO
applied for discretionary review of the decision by the Texas Supreme Court.
ENVIRONMENTAL PROCEEDINGS
BNSF Railway has been advised that it is a target of a Grand Jury
investigation in the United States District Court for the Eastern District of
Missouri with respect to former railcar cleaning activities conducted by
independent contractors at Cherryville, Missouri. The proceeding relates to
alleged violations of federal environmental protection statutes with respect
to lead contamination at several sites in the Cherryville area. In addition,
BNSF Railway has received personal injury claims from certain individuals
formerly residing at or near some of these sites. The Missouri Department of
Natural Resources ("DNR") also is investigating the matter with respect to
possible violations of state environmental protection laws and has indicated
that it may seek a civil penalty from BNSF Railway. BNSF Railway and another
potentially responsible party had previously prepared investigation and
remediation plans in conjunction with the DNR. BNSF Railway modified the plans
and is expediting a response and implementing remediation with DNR approval.
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On December 18, 1995, the State of Illinois filed a Complaint captioned
People of the State of Illinois v. Burlington Northern Railroad Company,
Beazer East, Inc. and Koppers Industries, Inc. (PCB No. 96-132) before the
Illinois Pollution Control Board against BNSF Railway, Beazer East, Inc. and
Koppers Industries, Inc. alleging violations of the Illinois Environmental
Protection Act with respect to a facility in Galesburg, Illinois. This
facility is not operated by BNSF Railway. The proceeding may result in
monetary sanctions in excess of $100,000. BNSF Railway and Beazer East, Inc.
have made an offer to the State of Illinois to settle this matter.
On December 30, 1996, BNSF Railway was named a defendant in a lawsuit by the
Wisconsin Department of Natural Resources (State of Wisconsin v. Burlington
Northern Railroad Company, Case No. 96 CV403, Circuit Court, Douglas County)
in connection with two separate matters in Superior, Wisconsin. One of the
matters involves the alleged obligation to close a wastewater holding pond
located on property which BNSF Railway does not own. The State alleges that
BNSF Railway is an owner or operator of the pond and is subject to the
obligation because of its discharge of treated wastewater into the pond. The
other matter relates to petroleum impacts to property formerly owned by BNSF
Railway. The current owner discovered the petroleum and debris when excavating
the property. It is possible that BNSF Railway will be required to pay
monetary sanctions to the State in excess of $100,000 in connection with the
resolution of these two matters.
BNSF Railway has been issued a Notice of Violation by the Texas Natural
Resource Conservation Commission with respect to the alleged failure to timely
file wastewater discharge reports and other deficiencies at a facility in
Silsbee, Texas. The State has made a demand for penalties in excess of
$100,000, calling for the correction of alleged recordkeeping deficiencies and
a study of the ditch receiving the permitted discharges.
MERGER-RELATED LITIGATION
Numerous complaints were filed arising out of the Agreement and Plan of
Merger dated June 29, 1994, as amended, between BNI and SFP. On June 30, 1994,
shortly after announcement of the proposed BNI-SFP merger ("Merger"), two
purported stockholder class action suits were filed in the Court of Chancery
of the State of Delaware (Miller v. Santa Fe Pacific Corporation, C.A. No.
13587; Cosentino v. Santa Fe Pacific Corporation, C.A. No. 13588). On July 1,
1994, two additional purported stockholder class action suits were filed in
the Court of Chancery of the State of Delaware (Fielding v. Santa Fe Pacific
Corporation, C.A. No. 13591; Wadsworth v. Santa Fe Pacific Corporation, C.A.
No. 13597).
The actions named as defendants SFP, the individual members of the SFP Board
of Directors, and BNI. In general, the actions variously alleged that SFP's
directors breached their fiduciary duties to the stockholders by agreeing to
the proposed merger for allegedly "grossly inadequate" consideration in light
of recent operating results of SFP, recent trading prices of SFP's common
stock and other alleged factors, by allegedly failing to take all necessary
steps to ensure that stockholders will receive the maximum value realizable
for their shares (including allegedly failing to actively pursue the
acquisition of SFP by other companies or conducting an adequate "market
check"), and by allegedly failing to disclose to stockholders the full extent
of the future earnings potential of SFP, as well as the current value of its
assets. The Miller and Fielding cases further alleged that the proposed Merger
was unfairly timed and structured and, if consummated, would allegedly
unfairly deprive the stockholders of standing to pursue certain pending
stockholder derivative litigation. Plaintiffs also alleged that BNI was
responsible for aiding and abetting the alleged breach of fiduciary duty
committed by the SFP Board. The actions sought certification of a class action
on behalf of SFP's stockholders. In addition, the actions sought injunctive
relief against consummation of the Merger and, in the event that the Merger
was consummated, the rescission of the Merger, an award of compensatory or
rescissory damages and other damages, including court costs and attorneys'
fees, an accounting by defendants of all profits realized by them as a result
of the Merger, and various other forms of relief.
On October 6, 1994, shortly after Union Pacific Corporation ("UPC") issued a
press release in which it announced a proposal for UPC to acquire SFP (the
"UPC Proposal"), plaintiffs in the four lawsuits described
13
above filed in the Court of Chancery of the State of Delaware a Consolidated
Amended Complaint (Miller v. Santa Fe Pacific Corporation, C.A. No. 13587). In
their Consolidated Amended Complaint, plaintiffs repeated the allegations
contained in their earlier lawsuits and further alleged that, in light of the
UPC Proposal, SFP's directors had breached their fiduciary duties by failing
to fully inform themselves about and to adequately explore available
alternatives to the merger with BNI, including the alternative of a merger
transaction with UPC, and by failing to fully inform themselves about the
value of SFP. The Consolidated Amended Complaint sought the same relief sought
in plaintiffs' earlier lawsuits and, in addition, requested that SFP's
directors be ordered to explore alternative transactions and to negotiate in
good faith with all interested persons, including UPC.
Also, on October 6, 1994, five additional purported stockholder class action
suits relating to SFP's proposed participation in the Merger with BNI were
filed in the Court of Chancery of the State of Delaware (Weiss v. Santa Fe
Pacific Corporation, C.A. No. 13779; Lifshitz v. Krebs, C.A. No. 13780; Stein
v. Santa Fe Pacific Corporation, Lewis v. Santa Fe Pacific Corporation, C.A.
No. 13783; Abramson v. Lindig, C.A. No. 13784). On October 7, 1994, three more
purported stockholder class action suits relating to SFP's proposed
participation in the Merger with BNI were filed in the Court of Chancery of
the State of Delaware (Graulich v. Santa Fe Pacific Corporation, C.A. No.
13786; Anderson v. Santa Fe Pacific Corporation, C.A. No. 13787; Green v.
Santa Fe Pacific Corporation, C.A. No. 13788). All of these lawsuits named as
defendants SFP and the individual members of the SFP Board of Directors; the
Lifshitz case further named BNI as a defendant. In general, these actions
variously alleged that, in light of SFP's recent operating results and the UPC
Proposal, SFP's directors breached their fiduciary duties to stockholders by
purportedly not taking the necessary steps to ensure that SFP's stockholders
would receive "maximum value" for their shares of SFP stock, including
purportedly refusing to negotiate with UPC or to "seriously consider" the UPC
Proposal and failing to announce any active auction or open bidding
procedures. The actions generally sought relief that is materially identical
to the relief sought in the Miller case, and in addition sought entry of an
order requiring SFP's directors to immediately undertake an evaluation of
SFP's worth as a merger/acquisition candidate and to establish a process
designed to obtain the highest possible price for SFP, including taking steps
to "effectively expose" SFP to the marketplace in an effort to create an
"active auction" in SFP. The Weiss case further sought entry of an order
enjoining SFP's directors from implementing any poison pill or other device
designed to thwart the UPC Proposal or any other person's proposal to acquire
SFP.
The Anderson lawsuit was subsequently withdrawn. On October 14, 1994, the
Chancery Court entered an order consolidating the remaining 11 purported
stockholder class action suits under the heading In Re Santa Fe Pacific
Corporation Shareholder Litigation, C.A. No. 13587 (the "Shareholder
Litigation").
On October 26, 1994, BNI filed a Motion to Dismiss the Consolidated and
Amended Complaint.
On March 6, 1995, plaintiffs in the Shareholder Litigation filed a Revised
Second Consolidated and Amended Complaint, which superseded their previously
filed complaints. The Revised Second Consolidated and Amended Complaint
generally repeated many of the same allegations, and requested relief similar
to that requested in plaintiffs' earlier complaints. In addition, the Revised
Second Consolidated and Amended Complaint alleged that SFP's directors
breached their fiduciary duties: by proceeding with and completing the joint
SFP-BNI Tender Offer; by approving and implementing the Shareholder Rights
Plan, which purportedly resulted in a "premature ending" of the "bidding
process" by allegedly deterring and defeating UPC's acquisition overtures,
exempting BNI from its provisions, and "coercing" SFP stockholders to vote in
favor of the Merger; by approving the termination fee and expense
reimbursement provisions of the Merger Agreement by authorizing the stock
repurchase provisions of the Merger Agreement, which allegedly were designed
to "lock-up" the Merger by providing stockholders with an "illusory promise"
that the Merger Agreement exchange ratio would increase, while reserving SFP's
right not to repurchase such stock; and by purportedly failing to disclose all
material facts necessary for SFP's stockholders to evaluate in an informed
manner and vote on the Merger, including purportedly failing to fully disclose
the risks that the ICC would not approve the Merger and purportedly failing to
fully disclose SFP's intentions with respect to the repurchase of SFP stock,
as permitted by the Merger Agreement, as well as whether there will be a fair
opportunity for all SFP stockholders to "participate" in any SFP stock
repurchases, and on what basis. As
14
additional relief to that requested in the earlier complaints, plaintiffs
requested injunctive and other relief: enjoining consummation of the Merger;
ordering SFP, SFP's directors, and BNI to make unspecified supplemental
disclosures to stockholders; requiring SFP to conduct a new vote on the Merger
subsequent to such disclosures; enjoining SFP from improperly or
discriminatorily implementing the Shareholder Rights Plan or any other
"defensive" tactic; ordering SFP's directors to take all appropriate steps to
enhance SFP's value and attractiveness as a merger or acquisition candidate,
including "effectively exposing" SFP to the marketplace by means of an active
auction on a "level playing field"; and declaring the termination fee and
expense reimbursement provisions of the Merger Agreement invalid and
unenforceable.
On March 13, 1995, SFP and SFP's directors filed a motion to dismiss the
Shareholder Litigation on the grounds that the Plaintiffs failed to state a
cause of action upon which relief may be granted. BNI also filed a motion to
dismiss the Revised Second Consolidated and Amended Complaint. On May 31,
1995, the Delaware Chancery Court rendered its decision granting the motion to
dismiss that was filed by SFP and SFP's directors on March 13, 1995 and the
motion to dismiss filed by BNI. The plaintiffs appealed the dismissal to the
Delaware Supreme Court.
On November 22, 1995, the Delaware Supreme Court issued an opinion that
affirmed in part and reversed in part the May 31, 1995 decision of the
Delaware Chancery Court. The Delaware Supreme Court reversed the Chancery
Court's dismissal of plaintiffs' claims that, in taking the alleged
"defensive" actions identified in the Revised Second Consolidated and Amended
Complaint, including approval and implementation of the Shareholder Rights
Plan, SFP's directors violated their fiduciary duties to stockholders. The
Delaware Supreme Court affirmed the Chancery Court's dismissal of all other
claims asserted by plaintiffs in the litigation, including all claims against
BNI.
On December 11, 1995, the SFP defendants filed with the Delaware Chancery
Court a motion for summary judgment against plaintiffs' remaining claims in
the Shareholder Litigation, which motion is pending. On December 29, 1995, the
SFP defendants filed their Answer to plaintiffs' Revised Second Consolidated
and Amended Complaint.
BNSF believes this lawsuit is meritless and continues to oppose it
vigorously.
ICC MERGER CASE
On October 13, 1994, BNI, BNRR, SFP, and ATSF ("Applicants") filed a
railroad merger and control application with the ICC, Finance Docket No.
32549, Burlington Northern Inc. and Burlington Northern Railroad Company--
Control and Merger--Santa Fe Pacific Corporation and The Atchison, Topeka and
Santa Fe Railway Company. Applicants sought an order, pursuant to 49 U.S.C.
(S)(S) 11343-11347 (1988), approving and authorizing BNI's acquisition of
control of and merger with SFP, the resulting common control of BNRR and ATSF
by BNSF, the consolidation of BNRR and ATSF by BNSF, the consolidation of BNRR
and ATSF operations, and the merger of BNRR and ATSF. The ICC approved the
application in its written decision served August 23, 1995, which decision was
effective as of September 22, 1995. Several petitions for reconsideration or
to reopen the ICC's decision were filed by parties to the proceeding and all
of these have been denied. Additionally, eight parties to the proceeding filed
petitions for review of the ICC's approval decision with the United States
Court of Appeals for the District of Columbia, which petitions are now pending
before that court. Each of the petitions for reconsideration or to reopen and
for review challenge various aspects of the ICC's decision, including the
extent of conditions imposed on its approval. The principal challenges to the
ICC decision were rejected by the Court of Appeals for the District of
Columbia on March 28, 1997, and the remaining challenge is not expected to
affect materially the benefits to be realized by the acquisition of common
control of BNRR and ATSF by BNSF.
CROW RESERVATION CROSSING ACCIDENT CASE
At approximately 10:15 a.m. on November 22, 1993, there was an accident at a
BNSF Railway crossing located within the boundaries of the Crow reservation in
which three members of the Crow tribe were killed. The crossing, which is
located on a rural gravel road just south of Lodge Grass, Montana, was
protected by crossbucks and advance warning signs.
15
A lawsuit was filed in the Crow Tribal Court (Estates of Red Wolf, Red Horse
and Bull Tail v. Burlington Northern Railroad Company, Case No. 94-31) on
behalf of the estates of the driver and the two passengers. One of the
passenger cases was severed and has yet to go to trial. The other two cases
proceeded to trial in January 1996 and, on February 6, 1996, a Crow Tribal
Court jury rendered a verdict against BNSF Railway for compensatory damages in
the total amount of $250 million.
BNSF Railway has filed an appeal to the Crow Court of Appeals in and for the
Crow Indian Reservation, where it will seek, among other things, to have the
case dismissed on the basis that the Crow Tribal Court lacks subject matter
jurisdiction over these claims. If the appellate court fails to grant relief
to BNSF Railway, BNSF Railway will pursue its defenses in federal court. On
February 26, 1996, the Federal District Court for the District of Montana
entered an order enjoining any action by the Tribal Court plaintiffs to
enforce the judgment pending appeal through the tribal court and federal court
systems. BNSF Railway was required to post a $5 million bond with the federal
court. The Tribal Court plaintiffs appealed that decision to the Unted States
Court of Appeals for the Ninth Circuit.
On January 29, 1997, the Ninth Circuit issued an opinion which reversed the
district court and remanded the matter to that trial court with directions to
dissolve the injunction. The basis for the appellate court's decision was a
determination that BNSF Railway had failed to exhaust its remedies in the
tribal court. BNSF Railway filed a petition for rehearing, which petition is
pending before the Ninth Circuit.
In Tribal Court, the plaintiffs filed a Notice and Request with the Tribal
Appellate Court requesting, among other things, the entry of an order reducing
the amount of the judgment from $250 million to $25 million. On February 7,
1997, the Tribal Appellate court issued an order setting forth its intention
to grant the motion to reduce the judgment by remanding the matter to the
trial court for the limited purpose of reducing the judgment in accordance
with the request.
OTHER CLAIMS
BNSF and its subsidiaries also are parties to a number of other 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. For a description of certain
claims against SFP Pipelines and the Partnership, see the sections entitled
"East Line Civil Litigation and FERC Proceedings," "East Line Civil
Litigation," and "FERC Proceedings" under Item 3, Legal Proceedings, of the
Partnership's Annual Report on Form 10-K for the year ended December 31, 1996,
which sections are hereby incorporated by reference.
While the final outcome of these and other legal actions referred to under
Item 3 of this Report on Form 10-K cannot be predicted with certainty,
considering among other things the meritorious legal defenses available, it is
the opinion of BNSF management that none of these items, when finally
resolved, will have a material adverse effect on the annual results of
operations, financial position or liquidity of BNSF, although an adverse
resolution of a number of these items could have a material adverse effect on
the results of operations in a particular quarter or fiscal year.
Reference is made to Note 6 to the consolidated financial statements on page
27 of BNSF's 1996 Annual Report to Shareholders for information concerning
certain pending administrative appeals with the Internal Revenue Service,
which information is hereby incorporated by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted by BNSF to a vote of its securities holders during
the fourth quarter of 1996.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Listed below are the names, ages, and positions of all executive officers of
BNSF (excluding Robert D. Krebs, an executive officer who is also a director
of BNSF, information as to whom is included in BNSF's Proxy Statement dated
March 5, 1997) and their business experience during the past five years.
Executive officers hold office until their successors are elected or
appointed, or until their earlier death, resignation, or removal.
DOUGLAS J. BABB, 44
Senior Vice President and Chief of Staff since September 1995. Prior to
that, Vice President and General Counsel of BNRR from December 1986.
JAMES B. DAGNON, 57
Senior Vice President-Employee Relations since September 1995. Prior to
that, Executive Vice President, Employee Relations of BNI since January 1992,
and Senior Vice President, Employee Relations of BNI since August 1991.
THOMAS N. HUND, 43
Vice President and Controller since September 1995. Prior to that, Vice
President and Controller of SFP since July 1990.
DONALD G. MCINNES, 56
Senior Vice President and Chief Operations Officer since September 1995.
Prior to that, Senior Vice President and Chief Operating Officer of ATSF since
January 1994, Senior Vice President-Intermodal Business Unit of ATSF since
January 1992, and Vice President-Intermodal of ATSF since July 1989.
JEFFREY R. MORELAND, 52
Senior Vice President-Law and General Counsel since September 1995. Prior to
that, Vice President-Law and General Counsel of SFP from October 1994, and
Vice President-Law and General Counsel of ATSF from June 1989.
MATTHEW K. ROSE, 37
Senior Vice President-Merchandise Business Unit since May 1996. Prior to
that, Vice President-Chemicals and Plastics of ATSF and BNRR from January
1996, Vice President, South Region Field Marketing of BNRR from January 1995,
Vice President, Automotive of BNRR from June 1994, and General Manager,
Facilities and Technology of BNRR from January 1993. Prior to that, Vice
President-Transportation of Triple Crown Services, a subsidiary of Norfolk
Southern Corporation.
CHARLES L. SCHULTZ, 49
Senior Vice President-Intermodal and Automotive Business Unit since February
1996. Prior to that, Vice President-Intermodal of ATSF and BNRR from September
1995, Vice President-Intermodal of ATSF from January 1994, Vice President-
Management Services of ATSF from June 1991, and Vice President-Information
Services of ATSF from July 1989.
DENIS E. SPRINGER, 51
Senior Vice President and Chief Financial Officer since September 1995.
Prior to that, Senior Vice President and Chief Financial Officer of SFP from
October 1993, Senior Vice President, Treasurer and Chief
17
Financial Officer of SFP from January 1992, and Vice President, Treasurer and
Chief Financial Officer of SFP from January 1991.
GREGORY T. SWIENTON, 47
Senior Vice President-Coal and Agricultural Commodities Business Unit since
May 1996. Prior to that, Senior Vice President-Consumer and Industrial
Business Unit from February 1996, Senior Vice President-Industrial Business
Unit from September 1995, Executive Vice President, Intermodal Business of
BNRR from June 1994, and Executive Director-Europe and Africa (Brussels) of
DHL Worldwide Express (international freight company) from January 1991.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
BNSF's common stock is listed on the New York Stock Exchange under the
symbol "BNI." The common stock is also listed on the Chicago Stock Exchange
and Pacific Stock Exchange. Information as to the high and low sales prices of
such stock for the two years ending December 31, 1996 (or the common stock of
BNI prior to September 22, 1995) and the frequency and amount of dividends
declared on such stock during such period, is set forth below the heading
"Quarterly Financial Data-Unaudited" on page 37 of BNSF's 1996 Annual Report
to Shareholders and is hereby incorporated by reference. The approximate
number of record holders of the common stock at January 31, 1997 was 74,000.
As consideration for its acquisition of Washington Central Railroad Company,
Inc. ("Washington Central") on December 4, 1996, BNSF issued 363,008 shares of
its common stock, $.01 par value, to the four individuals who were Washington
Central's shareholders immediately prior to the merger transaction (the
"Shareholders"), each of whom was an "accredited investor" as defined in Rule
501 under the Securities Act of 1933, plus an additional 46,096 shares to be
held in escrow for four years to assure the performance of certain obligations
of the Shareholders. The offer and sale of BNSF common stock in connection
with the acquisition of Washington Central was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 of
Regulation D promulgated thereunder.
ITEM 6. SELECTED FINANCIAL DATA
There is disclosed on page 1 of BNSF's 1996 Annual Report to Shareholders
selected financial data of BNSF for each of the last five fiscal years. Such
data with respect to the following topics are incorporated by reference:
Revenues; Operating income; Income before extraordinary item and cumulative
effect of change in accounting method; Accounting change/Extraordinary item;
Net income; Primary earnings per share; Fully diluted earnings per share;
Dividends declared per common share; Total assets; and Long-term debt and
commercial paper, including current portion.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations appearing on pages 11 through 18 of BNSF's 1996 Annual Report to
Shareholders is hereby incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of BNSF and subsidiary companies,
together with the reports thereon, appearing in Part IV of this Report on Form
10-K and on pages 19 through 37 of BNSF's 1996 Annual Report to Shareholders,
are hereby incorporated by reference.
18
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Reference is made to BNSF's Current Report on Form 8-K filed with the
Securities and Exchange Commission on June 26, 1996, regarding BNSF's change
in its independent accountants.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the directors of BNSF is provided on pages 2 through
4 of BNSF's proxy statement dated March 5, 1997, under the heading "Name, Age
and Business Experience of the Company's Nominees for Directors" and the
information under that heading is hereby incorporated by reference.
Information concerning the executive officers of BNSF (excluding one
executive officer who is also a director of BNSF) is included in Part I of
this Report.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning the compensation of directors and executive officers
of BNSF is provided on pages 5 through 6 under the heading "Directors'
Compensation" and pages 16 through 22 under the heading "EXECUTIVE
COMPENSATION AND OTHER INFORMATION" in BNSF's proxy statement dated March 5,
1997, and the information under those headings is hereby incorporated by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning the ownership of BNSF equity securities by certain
beneficial owners and management is provided on pages 7 through 9 under the
headings "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS" and "SECURITY
OWNERSHIP OF MANAGEMENT" of BNSF's proxy statement dated March 5, 1997, and is
hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is
provided on page 6 under the heading "Certain Relationships and Related
Transactions" of BNSF's proxy statement dated March 5, 1997, and the
information under that heading is hereby incorporated by reference.
19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
PAGE
--------
1. Consolidated Financial Statements:
Report of Price Waterhouse LLP........................................ [19*]
Report of Coopers & Lybrand L.L.P..................................... F-2
Consolidated Statement of Income for the three years ended December
31, 1996............................................................. [20*]
Consolidated Balance Sheet at December 31, 1996 and 1995.............. [21*]
Consolidated Statement of Cash Flows for the three years ended
December 31, 1996.................................................... [22*]
Consolidated Statement of Changes In Stockholders' Equity for the
three years ended December
31, 1996............................................................. [23*]
Notes to Consolidated Financial Statements............................ [24-37*]
- --------
(*Incorporated by reference from the indicated pages of BNSF's 1996 Annual
Report to Shareholders.)
2. Consolidated Financial Statement Schedules for the three years ended
December 31, 1996:
Report of Price Waterhouse LLP............................................ F-1
Report of Coopers & Lybrand L.L.P......................................... F-2
Schedule II--Valuation and Qualifying Accounts............................ F-3
Schedules other than that listed above are omitted because they are not
required or applicable, or the required information is included in the
consolidated financial statements or related notes.
3. Exhibits:
See Index to Exhibits on pages E-1-E-4 for a description of the exhibits
filed as a part of this Report.
(b) Reports on Form 8-K
BNSF filed the following Current Reports on Form 8-K during the quarter ended
December 31, 1996, or subsequently:
Current Report on Form 8-K (Date of earliest event reported: October 22,
1996) which referenced under Item 5, Other Events, and filed as an exhibit
under Item 7, Financial Statements, Pro Forma Financial Information and
Exhibits, the registrant's third quarter 1996 earnings press release.
Current Report on Form 8-K (Date of earliest event reported: January 21,
1997) which referenced under Item 5, Other Events, and filed as an exhibit
under Item 7, Financial Statements, Pro Forma Financial Information and
Exhibits, the registrant's fourth quarter 1996 and full year 1996 earnings
press release.
20
SIGNATURES
BURLINGTON NORTHERN SANTA FE CORPORATION, PURSUANT TO THE REQUIREMENTS OF
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, HAS DULY CAUSED
THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED.
BURLINGTON NORTHERN SANTA FE
CORPORATION
/s/ Robert D. Krebs
By: _________________________________
Robert D. Krebs
President and Chief
Executive Officer
Dated: March 31, 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF BURLINGTON
NORTHERN SANTA FE CORPORATION AND IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE
--------- -----
/s/ Robert D. Krebs President and Chief Executive Officer
___________________________________________ (Principal Executive Officer), and
Robert D. Krebs Director
/s/ Denis E. Springer Senior Vice President and Chief Financial
___________________________________________ Officer (Principal Financial Officer)
Denis E. Springer
/s/ Thomas N. Hund Vice President and Controller
___________________________________________ (Principal Accounting Officer)
Thomas N. Hund
/s/ Joseph F. Alibrandi* Director
___________________________________________
Joseph F. Alibrandi
/s/ Jack S. Blanton* Director
___________________________________________
Jack S. Blanton
/s/ John J. Burns, Jr.* Director
___________________________________________
John J. Burns, Jr.
/s/ Daniel P. Davison* Chairman of the Board, Director
___________________________________________
Daniel P. Davison
/s/ George Deukmejian* Director
___________________________________________
George Deukmejian
S-1
SIGNATURE TITLE
--------- -----
/s/ Daniel J. Evans* Director
___________________________________________
Daniel J. Evans
/s/ Bill M. Lindig* Director
___________________________________________
Bill M. Lindig
/s/ Ben F. Love* Director
___________________________________________
Ben F. Love
/s/ Roy S. Roberts* Director
___________________________________________
Roy S. Roberts
/s/ Marc J. Shapiro* Director
___________________________________________
Marc J. Shapiro
/s/ Arnold R. Weber* Director
___________________________________________
Arnold R. Weber
/s/ Robert H. West* Director
___________________________________________
Robert H. West
/s/ J. Steven Whisler* Director
___________________________________________
J. Steven Whisler
/s/ Edward E. Whitacre, Jr.* Director
___________________________________________
Edward E. Whitacre, Jr.
/s/ Ronald B. Woodard* Director
___________________________________________
Ronald B. Woodard
/s/ Michael B. Yanney* Director
___________________________________________
Michael B. Yanney
/s/ Jeffrey R. Moreland
*By: ________________________________
Jeffrey R. Moreland
Senior Vice President-Law and
General Counsel
Attorney in Fact
Dated: March 31, 1997
S-2
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Burlington Northern Santa Fe Corporation and Subsidiaries
Our audit of the consolidated financial statements for the year ended
December 31, 1996 referred to in our report dated February 7, 1997 appearing
on page 19 of the 1996 Annual Report to Shareholders of Burlington Northern
Santa Fe Corporation (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 14(a)2. of this Form
10-K. In our opinion, the Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein for the year ended
December 31, 1996 when read in conjunction with the related consolidated
financial statements.
Price Waterhouse LLP
Chicago, Illinois
February 7, 1997
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Burlington Northern Santa Fe Corporation and Subsidiaries
We have audited the consolidated financial statements of Burlington Northern
Santa Fe Corporation and Subsidiaries as of December 31, 1995, and for each of
the two years in the period ended December 31, 1995, which financial
statements are included on pages 20 through 37 of the 1996 Annual Report to
Shareholders of Burlington Northern Santa Fe Corporation and incorporated by
reference herein. We have also audited the financial statement schedule for
each of the two years in the period ended December 31, 1995 listed in Item 14
of this Form 10-K. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Burlington
Northern Santa Fe Corporation and Subsidiaries as of December 31, 1995, and
the consolidated results of their operations and their cash flows for each of
the two years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
As discussed in Note 4 to the consolidated financial statements, the Company
changed its method of accounting for periodic major locomotive overhauls in
1995 and for postemployment benefits in 1994.
Coopers & Lybrand L.L.P.
Fort Worth, Texas
February 15, 1996
F-2
SCHEDULE II
BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN MILLIONS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- --------- --------- -------- ---------- --------
BALANCE
BALANCE ADDITION AT END
AT ADDITIONS OF SFP OF
BEGINNING CHARGED ACCRUAL DEDUCTIONS PERIOD
DESCRIPTION OF PERIOD TO INCOME (1) (2) (3)
----------- --------- --------- -------- ---------- --------
December 31, 1996
Casualty and environmental
liabilities.................. $916 $262 $-- $368 $810
==== ==== ==== ==== ====
December 31, 1995
Casualty and environmental
liabilities.................. $637 $164 $320 $205 $916
==== ==== ==== ==== ====
December 31, 1994
Casualty and environmental
liabilities.................. $689 $183 $-- $235 $637
==== ==== ==== ==== ====
- --------
(1) Represents SFP's recorded liability at date of Merger
(2) Principally represents cash payments
(3) Classified in the consolidated balance sheet as follows:
1996 1995 1994
---- ---- ----
Casualty and environmental liabilities (current
liabilities)............................................. $267 $290 $221
Casualty and environmental liabilities (noncurrent
liabilities)............................................. 543 626 416
---- ---- ----
$810 $916 $637
==== ==== ====
F-3
BURLINGTON NORTHERN SANTA FE CORPORATION
INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2 Agreement and Plan of Merger dated as of June 29, 1994 between
Burlington Northern Inc. and Santa Fe Pacific Corporation as amended
by Amendments 1 and 2 thereto, together with Amendments 3 and 4
thereto. Schedules have been omitted. Schedules will be furnished
supplementally to the Securities and Exchange Commission upon request.
Incorporated by reference to Exhibit 2.1 to BNSF's Report on Form 8-K
(Date of earliest event reported: September 22, 1995).
3.1 Amended and Restated Certificate of Incorporation of BNSF (amended as
of September 11, 1995). Incorporated by reference to Exhibit 3.1 to
BNSF's Report on Form 10-Q for the quarter ended September 30, 1995.
3.2 By-Laws of BNSF (amended as of January 18, 1996). Incorporated by
reference to Exhibit 3.2 to BNSF's Report on Form 10-K for the fiscal
year ended December 31, 1995.
4.1 Amended and Restated Five-Year Revolving Credit Agreement dated as of
November 15, 1996, between Burlington Northern Santa Fe Corporation
and Chemical Securities Inc. and J.P. Morgan Securities Inc. as Co-
arrangers, The Chase Manhattan Bank as Administrative Agent, Morgan
Guaranty Trust Company of New York as Documentation Agent, and a
consortium of lenders.
4.2 Amended and Restated 364-Day Revolving Credit Agreement dated as of
November 15, 1996, between Burlington Northern Santa Fe Corporation
and Chemical Securities Inc. and J.P. Morgan Securities Inc., The
Chase Manhattan Bank as Administrative Agent, Morgan Guaranty Trust
Company of New York as Documentation Agent, and a consortium of
lenders.
BNSF is not filing any other instruments evidencing indebtedness
because the total amount of securities authorized under any single
such instrument does not exceed 10% of BNSF's total assets. BNSF will
furnish copies of any material instruments upon request of the
Securities and Exchange Commission.
10.1* Burlington Northern Santa Fe Non-Employee Directors' Stock Plan.
Incorporated by reference to Appendix A to BNSF's Proxy Statement
dated March 5, 1996. Amendment to Burlington Northern Santa Fe Non-
Employee Directors' Stock Plan dated January 16, 1997.
10.2* Burlington Northern Santa Fe Corporation 1987 Stock Option Incentive
Plan. Incorporated by reference to BNSF's Registration Statement on
Form S-8 (File No. 33-62833).
10.3* Burlington Northern Santa Fe Corporation Incentive Compensation Plan.
Incorporated by reference to BNSF's Registration Statement on Form S-8
(File No. 33-62835).
10.4* Burlington Northern Inc. Senior Executive Survivor Benefit Plan as of
April 1, 1986. Incorporated by reference to Amendment No. 1 to BNI's
Report on Form 10-K for the fiscal year ended December 31, 1987.
10.5* Burlington Northern Inc. Deferred Compensation Plan as amended
effective January 1, 1991. Incorporated by reference to Exhibit 10.5
to BNSF's Report on Form 10-K for the fiscal year ended December 31,
1995.
10.6* Burlington Northern Inc. Performance Share Unit Plan (1981) as of
January 1, 1988. Incorporated by reference to Amendment No. 1 to BNI's
Report on Form 10-K for the fiscal year ended December 31, 1987.
10.7* Burlington Northern Inc. 1987 Performance Share Unit Plan as of
January 1, 1988. Incorporated by reference to Amendment No. 1 to BNI's
Report on Form 10-K for the fiscal year ended December 31, 1987.
- --------
*Management contract or compensatory plan or arrangement.
E-1
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.8* Burlington Northern Inc. Supplemental Benefits Plan (as amended and
restated effective September 21, 1995). Incorporated by reference to
Exhibit 10.8 to BNSF's Report on Form 10-K for the fiscal year ended
December 31, 1995.
10.9* 1989 Burlington Northern Inc. Restricted Stock Incentive Plan.
Incorporated by reference to BNI's Report on Form 10-K for the fiscal
year ended December 31, 1990.
10.10* Burlington Northern Santa Fe Corporation 1990 Directors Stock Option
Plan. Incorporated by reference to BNSF's Registration Statement on
Form S-8 (File No. 33-62825).
10.11* Burlington Northern Santa Fe Incentive Bonus Stock Program.
Incorporated by reference to Exhibit 10.11 to BNSF's Report on Form
10-K for the fiscal year ended December 31, 1995.
10.12* Burlington Northern Santa Fe Corporation 1992 Stock Option Incentive
Plan. Incorporated by reference to BNSF's Registration Statement on
Form S-8 (File No. 33-62839).
10.13* Burlington Northern Santa Fe 1996 Stock Incentive Plan. Incorporated
by reference to Appendix B to BNSF's Proxy Statement dated March 5,
1996.
10.14* Burlington Northern Santa Fe Supplemental Retirement Plan,
Incorporated by reference to Exhibit 10.1 to BNSF's Report on Form 10-
Q for the quarter ended September 30, 1996.
10.15* Burlington Northern Santa Fe Estate Enhancement Program, as amended
and restated effective October 1, 1996.
10.16* Agreement between BNSF and Robert D. Krebs dated as of January 30,
1997.
10.17* Form of BNSF Change-in-Control Agreement (which may be entered into by
all executive officers of BNSF, except for Mr. Krebs, and which would
replace any BNI or SFP change-in-control agreement currently held).
10.18* Employment Agreement by and between Burlington Northern Inc. and
Gregory T. Swienton. Incorporated by reference to Exhibit 10.23 to
BNI's Report on Form 10-K for the fiscal year ended December 31, 1994.
10.19* Burlington Northern Santa Fe Deferred Compensation Plan for Directors
as amended January 16, 1997.
10.20* Burlington Northern Inc. Nonqualified 401(k) Restoration Plan.
Incorporated by reference to Exhibit 10.20 to BNSF's Report on Form
10-K for the fiscal year ended December 31, 1995.
10.21* Burlington Northern Inc. Form of Severance Agreement and amendments
through September 18, 1995 (applicable to Messrs. Babb, Dagnon, Rose
and Swienton as of March 26, 1997). Incorporated by reference to
Exhibit 10.21 to BNSF's Report on Form 10-K for the fiscal year ended
December 31, 1995.
10.22* Burlington Northern Inc. Director's Charitable Award Program.
Incorporated by reference to Exhibit 10.22 to BNSF's Report on Form
10-K for the fiscal year ended December 31, 1995.
10.23* Burlington Northern Santa Fe Salary Exchange Option Program.
Incorporated by reference to Exhibit 10.23 to BNSF's Report on Form
10-K for the fiscal year ended December 31, 1995. Amendment to
Burlington Northern Santa Fe Salary Exchange Option Program dated
January 15, 1997.
10.24* Santa Fe Pacific Corporation Supplemental Retirement Plan
("Supplemental Plan"). Incorporated by reference to Exhibit 10(d) to
SFP's Report on Form 10-K for the fiscal year ended December 31, 1984.
Supplemental Plan as amended October 1, 1989, and Amendment to
Supplemental Plan dated February 27, 1990, are incorporated by
reference to Exhibit 10(d) to SFP's Report on Form 10-K for the fiscal
year ended December 31, 1989. Amendment to Supplemental Plan dated
March 22, 1994, and effective January 1, 1994, is incorporated by
reference to Exhibit 10.24 to BNSF's Report on Form 10-K for the
fiscal year ended December 31, 1995.
- --------
*Management contract or compensatory plan or arrangement.
E-2
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.25* SFP Incentive Stock Compensation Plan. Incorporated by reference to
Exhibit 10(e) to SFP's Report on Form 10-K for the fiscal year ended
December 31, 1985. Amendments to SFP Incentive Stock Compensation Plan
dated May 28, 1987 and October 29, 1987 are incorporated by reference
to Exhibit 10(e) to SFP's Report on Form 10-K for the fiscal year
ended December 31, 1987. Amendments to SFP Incentive Stock
Compensation Plan dated March 8, 1989, June 8, 1989, and February 27,
1990 are incorporated by reference to Exhibit 10(e) to SFP's Report on
Form 10-K for the fiscal year ended December 31, 1989. Amendment to
SFP Incentive Stock Compensation Plan effective as of July 24, 1990 is
incorporated by reference to SFP's Report on Form 10-Q for the quarter
ended June 30, 1990. Amendment to SFP Incentive Stock Compensation
Plan dated December 4, 1990, is incorporated by reference to Exhibit
10(e) to SFP's Report on Form 10-K for the fiscal year ended December
31, 1990.
10.26* SFP Form of Severance Agreement dated November 2, 1987 (applicable to
Messrs. Hund, McInnes, Moreland, Schultz and Springer as of March 26,
1997), as adopted in May 1987 and amended in October 1987.
Incorporated by reference to Exhibit 10(j) to SFP's Report on
Form 10-K for the fiscal year ended December 31, 1987. Amendment to
Form of Severance Agreement dated July 24, 1990 is incorporated by
reference to SFP's Report on Form 10-Q for the quarter ended June 30,
1990. Amendment to Form of Severance Agreement adopted January 25,
1994 is incorporated by reference to Exhibit 10.1 to SFP's Report on
Form 10-Q for the quarter ended June 30, 1994. Amendment to Form of
Severance Agreement dated March 28, 1995 is incorporated by reference
to Exhibit 10.5 to SFP's Report on Form 10-K for the fiscal year ended
December 31, 1994.
10.27* Burlington Northern Santa Fe Directors' Retirement Plan. Incorporated
by reference to Exhibit 10.29 to BNSF's Report on Form 10-K for the
fiscal year ended December 31, 1995.
10.28* Benefits Protection Trust Agreement dated as of January 22, 1996 by
and between BNSF and Bankers Trust Company.
10.29* Retirement Benefit Agreement dated February 26, 1992 between SFP and
R. D. Krebs. Incorporated by reference to Exhibit 10(l) to SFP's
Report on Form 10-K for the fiscal year ended December 31, 1991.
10.30* Amended and Restated Trust Agreement dated as of April 1, 1994 by and
between SFP and The Bank of New York. Incorporated by reference to
Exhibit 10.32 to BNSF's Report on Form 10-K for the fiscal year ended
December 31, 1995.
10.31* Trust Agreement dated as of July 26, 1994 by and between SFP and The
Bank of New York. Incorporated by reference to Exhibit 10.33 to BNSF's
Report on Form 10-K for the fiscal year ended December 31, 1995.
10.32* The Atchison, Topeka and Santa Fe Railway Company Incentive
Compensation Plan. Incorporated by reference to Exhibit 10(n) to SFP's
Report on Form 10-K for the fiscal year ended December 31, 1991.
10.33* Burlington Northern Santa Fe Long Term Incentive Stock Plan.
Incorporated by reference to BNSF's Registration Statement on Form S-8
(File No. 33-63247).
10.34* Santa Fe Pacific Corporation Supplemental Retirement and Savings Plan.
Incorporated by reference to Exhibit 10(s) to SFP's Report on Form 10-
K for the fiscal year ended December 31, 1993.
10.35* Burlington Northern Santa Fe Incentive Stock Compensation Plan.
Incorporated by reference to BNSF's Registration Statement on Form S-8
(File No. 33-63253).
11 Computation of Earnings per Common Share.
- --------
*Management contract or compensatory plan or arrangement.
E-3
EXHIBIT
NUMBER DESCRIPTION
------- -----------
12 Computation of Ratio of Earnings to Fixed Charges.
13 1996 Annual Report to Shareholders of BNSF (Consolidated Financial
Highlights on page 1, and pages 11-37, only).
21 Subsidiaries of BNSF.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Price Waterhouse LLP.
24 Powers of Attorney.
27 Financial Data Schedule.
99 Santa Fe Pacific Pipeline Partners, L.P. Report on Form 10-K for the
fiscal year ended December 31, 1996 (sections in Item 3, Legal
Proceedings, under the headings "East Line Civil Litigation and FERC
Proceedings," "East Line Civil Litigation" and "FERC Proceedings,"
only).
E-4