SEC Info - BNSF Railway Co - ‘10-K’ for 12/31/94

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BNSF Railway Co – ‘10-K’ for 12/31/94

As of: Friday, 2/17/95 · For: 12/31/94 · Accession #: 950109-95-405 · File #: 1-06324

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 2/17/95  BNSF Railway Co                   10-K       12/31/94    3:264K                                   Donnelley R R & S… 01/FA

Annual Report — Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         51    209K 
 2: EX-10.3     3-Year Term Loan Agreement                            60    176K 
 3: EX-27       Financial Data Schedule                                2      8K

10-K — Annual Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Business Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Eleven, Twelve and Thirteen Exhibits, Financial Statement Schedules and Reports on Form 8-K Financial Statements and Supplementary Data Legal Proceedings Management's Narrative Analysis of Results of Operations Market for Registrant's Common Equity and Related Stockholder Matters Notes to Consolidated Financial Statements Properties Quarterly Financial Data-unaudited Report of Independent Accountants Revenues Selected Financial Data Submission of Matters to a Vote of Security Holders Table of Contents
1	1st Page - Filing Submission
3	Table of Contents
4	Item 1. Business
"	Item 2. Properties
11	Item 3. Legal Proceedings
14	Item 4. Submission of Matters to a Vote of Security Holders
"	Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
"	Item 6. Selected Financial Data
15	Item 7. Management's Narrative Analysis of Results of Operations
"	Revenues
24	Item 8. Financial Statements and Supplementary Data
28	Notes to Consolidated Financial Statements
44	Report of Independent Accountants
45	Quarterly Financial Data-unaudited
46	Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
"	Items Ten,. Eleven, Twelve and Thirteen
"	Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

10-K 1st Page of 51 TOC ↑Top Previous Next ↓Bottom Just 1st
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

XX ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended December 31, 1994

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
(NO FEE REQUIRED)

For the transition period from to
__________ _________
Commission file number 1-6324
---------------------

BURLINGTON NORTHERN RAILROAD COMPANY
(Exact name of registrant as specified in its charter)

Delaware 41-6034000
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

3800 Continental Plaza, 777 Main St.
Fort Worth, Texas 76102-5384
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:
(817) 333-2000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
----------------------------------------------------------

The securities listed below are registered on the New York Stock Exchange.

Title of each class
-------------------

Burlington Northern Inc. Northern Pacific Railway Company
(Now Burlington Northern Railroad Company) Prior Lien Railway and Land
Consolidated Mortgage Bonds Grant 4% Bonds, due 1997
9 1/4 %, Series H, due 2006 General Lien Railway and Land
6.55%, Series K, due 2020 Grant 3% Bonds, due 2047
3.80%, Series L, due 2020
3.20%, Series M, due 2045 Great Northern Railway Company
8.15%, Series N, due 2020 General Mortgage Bonds
6.55%, Series O, due 2020 3 1/8%, Series O, due 2000
8.15%, Series P, due 2020 2 5/8%, Series Q, due 2010

St. Louis-San Francisco Railway
Company
First Mortgage Bonds, 4%,
Series A, due 1997
Income Debentures, 5%,
Series A, due 2006

10-K 2nd Page of 51 TOC 1st Previous Next ↓Bottom Just 2nd
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 requirements for the past 90 days. Yes X No
----- -----

Class Outstanding
----- -----------

Common Stock, without par value
as of January 31, 1995* 1,000 shares

*Burlington Northern Railroad Company is a wholly owned subsidiary of
Burlington Northern Inc. (BNI) and there is no market data with respect to
such shares.

DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------

None

REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1)(a) AND
(b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM 10-K WITH THE REDUCED
DISCLOSURE FORMAT PERMITTED BY GENERAL INSTRUCTION J.

Page 1 of 113 total pages.
Exhibit index is located on page 51.

10-K 3rd Page of 51 TOC 1st Previous Next ↓Bottom Just 3rd
Table of Contents
-----------------

[Download Table]

Item Page
---- ----

Part I 1. Business.......................................... 1

2. Properties........................................ 1

3. Legal Proceedings................................. 8

4. Submission of Matters to a Vote of Security
Holders......................................... 11

Part II 5. Market for Registrant's Common Equity and
Related Stockholder Matters..................... 11

6. Selected Financial Data........................... 11

7. Management's Narrative Analysis of Results of
Operations...................................... 12

8. Financial Statements and Supplementary Data....... 21

9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure............. 43

Part III 10. Directors and Executive Officers of the Registrant 43

11. Executive Compensation............................ 43

12. Security Ownership of Certain Beneficial Owners
and Management.................................. 43

13. Certain Relationships and Related Transactions.... 43

Part IV 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K............................. 43

NOTE: Part I, Item Four; Part II, Item Six; Part III, Items Ten, Eleven,
Twelve and Thirteen; and Part IV Exhibit 22 have been omitted
pursuant to General Instruction J(1)(a) and (b) of Form 10-K relating
to wholly owned subsidiaries.

10-K 4th Page of 51 TOC 1st Previous Next ↓Bottom Just 4th
PART I

Item 1. Business

and

Item 2. Properties

Burlington Northern Railroad Company's (Railroad) principal business
activity is railroad transportation. Railroad is the principal subsidiary of
Burlington Northern Inc. (BNI).

Railroad transportation

Railroad operates the largest railroad system in the United States based on
miles of road and second main track, with approximately 24,300 total miles at
December 31, 1994. The principal cities served include Billings, Birmingham,
Cheyenne, Chicago, Denver, Des Moines, Duluth/Superior, Fargo/Moorhead, Fort
Worth/Dallas, Galveston, Houston, Kansas City, Lincoln, Memphis, Mobile,
Omaha, Pensacola, Portland, St. Louis, St. Paul/Minneapolis, Seattle, Spokane,
Springfield (Missouri), Tacoma, Tulsa, Wichita, Vancouver (British Columbia)
and Winnipeg (Manitoba).

The following table presents Railroad's revenue information by business unit
and includes certain reclassifications of prior year information to conform to
current year presentation. Percent of revenues was calculated before
consideration of shortline payments and other miscellaneous revenues. The
principal contributors to rail transportation revenues were as follows
(revenues and revenue ton miles in millions, carloadings in thousands):

[Download Table]

Year ended December 31,
----------------------------------
1994 1993 1992
-------- -------- --------

Coal:
Revenues................................ $ 1,669 $ 1,532 $ 1,520
Percent of revenues..................... 33% 32% 32%
Revenue ton miles....................... 140,934 122,821 117,138
Revenues per revenue ton mile........... 1.18c 1.25c 1.30c
Carloadings............................. 1,624 1,467 1,448
Agricultural Commodities:
Revenues................................ $ 830 $ 784 $ 777
Percent of revenues..................... 16% 16% 16%
Revenue ton miles....................... 35,130 35,454 36,831
Revenues per revenue ton mile........... 2.36c 2.21c 2.11c
Carloadings............................. 436 423 454
Intermodal:
Revenues................................ $ 772 $ 730 $ 711
Percent of revenues..................... 15% 15% 15%
Revenue ton miles....................... 25,542 23,726 22,749
Revenues per revenue ton mile........... 3.02c 3.08c 3.13c
Carloadings............................. 1,026 1,003 1,017

10-K 5th Page of 51 TOC 1st Previous Next ↓Bottom Just 5th
[Download Table]

Year ended December 31
----------------------------------
1994 1993 1992
-------- -------- --------

Forest Products:
Revenues................................ $ 498 $ 483 $ 489
Percent of revenues..................... 10% 10% 10%
Revenue ton miles....................... 20,784 19,724 20,030
Revenues per revenue ton mile........... 2.40c 2.45c 2.44c
Carloadings............................. 284 280 283
Chemicals:
Revenues................................ $ 412 $ 406 $ 389
Percent of revenues..................... 8% 8% 8%
Revenue ton miles....................... 14,853 14,655 14,167
Revenues per revenue ton mile........... 2.77c 2.77c 2.75c
Carloadings............................. 291 263 244
Consumer Products:
Revenues................................ $ 267 $ 257 $ 258
Percent of revenues..................... 5% 5% 5%
Revenue ton miles....................... 9,477 9,049 9,098
Revenues per revenue ton mile........... 2.82c 2.84c 2.84c
Carloadings............................. 150 145 146
Minerals Processors:
Revenues................................ $ 208 $ 195 $ 180
Percent of revenues..................... 4% 4% 4%
Revenue ton miles....................... 8,399 7,984 7,409
Revenues per revenue ton mile........... 2.48c 2.44c 2.43c
Carloadings............................. 189 179 170
Vehicles & Machinery:
Revenues................................ $ 190 $ 185 $ 165
Percent of revenues..................... 4% 4% 4%
Revenue ton miles....................... 2,614 2,386 2,140
Revenues per revenue ton mile........... 7.27c 7.75c 7.71c
Carloadings............................. 134 122 101
Iron & Steel:
Revenues................................ $ 175 $ 173 $ 178
Percent of revenues..................... 3% 4% 4%
Revenue ton miles....................... 8,270 8,189 8,088
Revenues per revenue ton mile........... 2.12c 2.11c 2.20c
Carloadings............................. 230 225 244
Aluminum, Nonferrous Metals & Ores:
Revenues................................ $ 102 $ 103 $ 108
Percent of revenues..................... 2% 2% 2%
Revenue ton miles....................... 3,851 3,917 4,180
Revenues per revenue ton mile........... 2.65c 2.63c 2.58c
Carloadings............................. 65 68 71

Coal

The transportation of coal is Railroad's largest source of revenues,
accounting for approximately one-third of the total. Based on carloadings and
tons hauled, Railroad is the largest transporter of Western low-sulfur coal in
the United States. Over 90 percent of Railroad's coal traffic originated in
the Powder River Basin of Montana and Wyoming during the three years ended
December 31, 1994. 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.

Railroad 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

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10-K 6th Page of 51 TOC 1st Previous Next ↓Bottom Just 6th
abundant, inexpensive to mine and clean-burning. Since 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.

Agricultural Commodities

Based on carloadings and tons hauled, Railroad is the largest rail
transporter of grain in North America. Railroad's system is strategically
located to serve the Midwest and Great Plains grain producing regions where
Railroad serves most major terminal, storage, feeding and food-processing
locations. Additionally, Railroad has access to major export markets in the
Pacific Northwest, western Great Lakes and Texas Gulf regions.

Intermodal

Intermodal transportation consists of hauling freight containers or truck
trailers by a combination of water, rail and motor carriers. The intermodal
business has become highly service-driven, and in some cases motor carriers
and railroads have begun to jointly market intermodal service. Railroad's
intermodal transportation system integrates the movement of approximately 36
daily trains operating between 32 rail hubs and 27 satellite rail hubs
(Railroad-operated marshalling points for trailer/container movements). These
operations are strategically located across Railroad's rail network and also
serve major distribution centers outside Railroad's system. Strategic
alliances have been formed to enhance Railroad's market access both with other
railroads and with major truck transportation providers.

Forest Products

The Forest Products business unit is primarily comprised of lumber, plywood,
pulpmill feedstock, wood pulp and paper products. These products primarily
come from the Pacific Northwest, upper Midwest and Southeast areas of the
United States.

Chemicals

The Chemicals business unit is comprised of fertilizer, petroleum and
chemical commodities as well as Railroad's environmental logistics business.
Primary origin markets for Railroad include the Gulf Coast, the Pacific
Northwest, and various Canadian ports of entry. Environmental logistics is an
area of significant opportunity as municipalities exhaust their traditional
disposal sources and must increasingly transport their waste over longer
distances.

Consumer Products

Products included in Railroad's Consumer Products business unit represent a
wide variety of commodities. Some of the major products in this group are
food products, beverages, frozen foods, canned foods, appliances and
electronics. Because this business unit handles a wide variety of consumer
goods, the business unit performance typically mirrors the country's economy.

Minerals Processors

Commodities in this group include clays, cements, sands and other minerals
and aggregates. This group services both the oil and construction industries.

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10-K 7th Page of 51 TOC 1st Previous Next ↓Bottom Just 7th
Vehicles & Machinery

The Vehicles & Machinery business unit is responsible for both domestic and
international vehicle manufacturers as well as an assortment of primary and
secondary markets for heavy machinery and aerospace products. Through the
development and implementation of using containers to move motor vehicles,
Railroad is redefining transit time and ride quality. Heavy machinery
includes primary markets for aircraft, construction, farm and railroad
equipment and secondary markets for used equipment. The business unit is also
responsible for military and other miscellaneous traffic for the United States
government.

Iron & Steel

The Iron & Steel business unit handles 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 the
business unit's primary input products, while finished steel products range
from structural beams and steel coils to wire and nails.

Aluminum, Nonferrous Metals & Ores

The Aluminum, Nonferrous Metals & Ores business unit handles alumina and
aluminum products, petroleum coke and a variety of other metals and ores such
as zinc, copper and lead.

Operating factors

Certain significant operating statistics were as follows:

[Enlarge/Download Table]

Year ended December 31,
------------------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- --------

Carloadings (in thousands)..................... 4,429 4,175 4,178 4,149 4,335
Freight revenues per carload................... $1,101 $1,099 $1,080 $1,071 $1,052
Revenue ton miles (in millions)................ 260,574 237,339 232,799 232,441 234,291
Revenues per revenue ton mile.................. 1.92c 1.98c 1.99c 1.96c 1.99c
Revenue tons per carload....................... 86 83 82 82 79
Revenue tons per train......................... 3,397 3,315 3,193 3,188 3,141
Freight train miles (in millions).............. 77 72 73 73 75
Average length of haul (miles)................. 793 778 764 770 766
Gross ton miles, excluding locomotives
(in millions)................................ 443,440 409,808 400,917 402,527 409,991
Operating ratio (excluding the 1991 special
charge)...................................... 83% 86% 87% 90% 87%
Operating expense per gross ton mile (excluding
the 1991 special charge)..................... .93c .99c 1.01c 1.02c .99c
Gallons of fuel used (in millions)............. 631 588 560 562 593
Average fuel price per gallon.................. 58.4c 61.5c 62.2c 65.5c 69.5c
Gross ton miles per gallon of fuel used........ 703 697 716 716 691
Revenue ton miles per employee (in thousands).. 8,485 7,781 7,461 7,317 7,120
Revenues per employee (in thousands)........... $163 $154 $148 $144 $142

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10-K 8th Page of 51 TOC 1st Previous Next ↓Bottom Just 8th
Properties

In 1994, approximately 96 percent of the total ton miles, both revenue and
non-revenue generating, carried by Railroad were handled on its main lines.
At December 31, 1994, approximately 19,140 miles of Railroad's track consisted
of 112-lb. per yard or heavier rail, including approximately 10,738 track
miles of 132-lb. per yard or heavier rail. Additions and replacements to
properties were as follows:

[Enlarge/Download Table]

Year ended December 31,
----------------------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------

Track miles of rail additions and replacements:
New.......................................... 378 387 461 380 301
Used......................................... 253 356 299 281 299
Track miles surfaced or reballasted............ 8,183 7,854 7,610 7,710 7,119
Ties inserted (in thousands):
Wood......................................... 1,435 1,914 1,684 1,515 1,331
Concrete..................................... 260 195 500 527 691

Equipment

Railroad owned or leased, under both capital and operating leases, with an
initial lease term in excess of one year, the following units of railroad
rolling stock at December 31, 1994:

[Download Table]

Number of Units
--------------------------
Owned Leased Total
------ ------ -----

Locomotives:
Freight...................................... 583 1,419 2,002
Passenger.................................... - - -
Multi-purpose................................ 148 58 206
Switching.................................... 176 18 194
------ ----- -----
Total locomotives.......................... 907 1,495 2,402
====== ===== =====

Freight Cars:
Box-general purpose.......................... 238 2,753 2,991
Box-specially equipped....................... 5,021 901 5,922
Gondola...................................... 4,729 2,613 7,342
Hopper-open top.............................. 7,349 791 8,140
Hopper-covered............................... 16,326 15,702 32,028
Refrigerator................................. 3,293 9 3,302
Flat......................................... 3,123 1,135 4,258
Caboose...................................... 458 - 458
Other........................................ 549 37 586
------ ------ ------
Total freight cars......................... 41,086 23,941 65,027
====== ====== ======

Commuter passenger cars........................ - 141 141
====== ====== ======

In addition to the owned and leased locomotives identified above, Railroad
operates 197 freight locomotives under power purchase agreements.

The average age of locomotives and freight cars was 15.0 years and 18.6
years, respectively, at December 31, 1994, compared with 14.5 years and 18.6
years, respectively, at December 31, 1993.

The average percentage of Railroad's locomotives and freight cars awaiting
repairs during 1994 was 7.7 and 3.1, respectively, compared with 7.7 and 3.3,
respectively, in 1993. The average time between locomotive failures was 71.1
days in 1994 compared with 67.9 days in 1993.

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In 1993, Railroad entered into an agreement to acquire 350 alternating current
traction motor locomotives. In December 1994, the number of locomotives to be
acquired under this agreement was increased to 404. Railroad anticipates reduced
locomotive operating costs as well as an increase in both horsepower and
traction, meaning fewer locomotives will be needed for many freight operations.
As of January 31, 1995, Railroad had accepted delivery of 147 locomotives and
anticipates deliveries under this agreement of between approximately 60 and 140
each year from 1995 (including January 1995 deliveries) through 1997.

Employees

Railroad employed an average of 30,711 employees in 1994 compared with 30,502
in 1993 and 31,204 in 1992. Railroad's payroll and employee benefits costs,
including capitalized labor costs, were approximately $2.0 billion for the year
ended December 31, 1994 and $1.9 billion for each of the years ended December
31, 1993 and 1992. Almost 90 percent of Railroad's employees are covered by
collective bargaining agreements with 14 different labor organizations.

In December 1994, Railroad reached an agreement with the Railroad Yardmasters
Division (Yardmasters) of the United Transportation Union which is effective
through 1999 with respect to wages, work rules and all other matters except
health and welfare benefits. Any changes negotiated with the other unions
regarding health and welfare benefits on a national basis will also apply to the
Railroad Yardmasters. Approximately 250 Yardmasters were affected by this
agreement. Also during 1994, agreements were signed with all of the unions
establishing non-contributory 401(k) plans for union employees.

Labor agreements currently in effect for unions other than Yardmasters include
provisions which prohibited the parties from serving notices to change wages,
benefits, rules and working conditions prior to November 1, 1994. The next wage
adjustment stipulated by the existing agreements is scheduled for July 1995
unless new agreements are reached by the parties prior to that time. The
adjustment called for by the contract is a base wage increase dependent upon
changes in the Consumer Price Index not to exceed three percent. These cost of
living increases may be offset by increases in the cost of Railroad's payment
rate for health and welfare benefits costs. Railroad joined with the other
railroads to negotiate with the unions on a multi-employer basis on November 1,
1994. At that time, all unions were served proposals for productivity
improvements as well as other changes. The unions also served notices on the
railroads which proposed not only increasing wages and benefits but also
restoring many of the restrictive work rules and practices that were modified or
eliminated under the current agreements. A number of the unions are also
challenging the railroads' right to negotiate nationally on a multi-employer
basis and the issue is currently pending in Federal District Court in
Washington, D.C. At this time, negotiations on the proposals by both the
railroads and the unions are in preliminary stages and the ultimate outcome of
these negotiations cannot be predicted.

In July 1993, the American Train Dispatchers Association ratified an April
1993 agreement which will facilitate the consolidation of all dispatching
functions into a centralized train dispatching office in Fort Worth, Texas by
the end of 1995.

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10-K 10th Page of 51 TOC 1st Previous Next ↓Bottom Just 10th
Competition

The general environment in which Railroad operates remains highly competitive.
Depending on the specific market; deregulated motor carriers, other railroads
and river barges exert pressure on various price and service combinations. The
presence of advanced, high service truck lines with expedited delivery,
subsidized infrastructure and minimal empty mileage continues to impact the
market for non-bulk, time sensitive freight. The potential expansion of long
combination vehicles could further encroach upon markets traditionally served by
railroads. In order to remain competitive, Railroad and other railroads continue
to develop and implement technologically supported operating efficiencies to
improve productivity.

As railroads streamline, rationalize and otherwise enhance their franchises,
competition among rail carriers intensifies. Railroad's primary rail competitors
in the western region of the United States consist of The Atchison, Topeka &
Santa Fe Railway Company; Chicago & Northwestern Transportation Company (C&NW);
CP Rail System; Southern Pacific Transportation Company; and Union Pacific
Railroad Company (UP Rail).

Coal, one of Railroad's primary commodities, has experienced significant
pressure on rates due to competition from the joint effort of C&NW/UP Rail and
Railroad's efforts to penetrate into new markets. In addition to the railroads
discussed above, numerous regional railroads and motor carriers operate in parts
of the same territory served by Railroad.

Environmental

Railroad's operations, as well as those of its competitors, are subject to
extensive federal, state and local environmental regulation. In order to comply
with such regulation and to be consistent with Railroad's corporate
environmental policy, Railroad's operating procedures include practices to
protect the environment. Amounts expended relating to such practices are
inextricably contained in the normal day-to-day costs of Railroad's business
operations.

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10-K 11th Page of 51 TOC 1st Previous Next ↓Bottom Just 11th
Item 3. Legal Proceedings

Wheat and barley transportation rates

In September 1980 a class action lawsuit was filed against Railroad in United
States District Court for the District of Montana (District Court) challenging
the reasonableness of Railroad's export wheat and barley rates. The class
consists of Montana grain producers and elevators. The plaintiffs sought a
finding that Railroad's 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 District Court
referred the rate reasonableness issue to the Interstate Commerce Commission
(ICC). Subsequently, the State of Montana filed a complaint at the ICC
challenging Railroad'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 Railroad owed $9,685,918 in reparations plus interest. In
its last decision, dated November 26, 1991, the ICC found Railroad's total
reparations exposure to be $16,559,012 through July 1, 1991. The ICC also found
that Railroad's current rates were below a reasonable maximum and vacated its
earlier rate prescription order.

Railroad 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. Railroad'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 Railroad
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 Standards in assessing the
reasonableness of Railroad's 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 schedule. On October 28, 1994, plaintiffs
filed their opening evidence arguing that the revenue received by Railroad
exceeded the stand alone costs of transporting that traffic and that Railroad's
rates were unreasonably high. The ICC has issued a procedural schedule calling
for the receipt of Railroad's evidence on February 27, 1995. Railroad sought
reconsideration of that schedule and the ICC granted Railroad's request to
extend the filing date until March 29, 1995 in a decision served
February 13, 1995. On January 19, 1995, Railroad moved to dismiss the case
on the basis that complainants had failed to state a prima facie case. The ICC
denied the motion on February 13, 1995.

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Coal Transportation Contract Litigation

On April 26, 1991, an action was filed against Railroad 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 Railroad constituted unusual economic conditions giving rise
to a "gross inequity" because Railroad's costs of providing service have been
reduced over the contracts' terms. On August 2, 1994, plaintiff filed an
amendment to its complaint to further allege that Railroad had been unjustly
enriched by retaining differences between the rates actually charged and those
that should have been charged. SWEPCO sought both prospective rate relief and
recovery of alleged past overcharges.

Railroad's primary contention was that both parties anticipated productivity
gains in the rail industry when negotiating the contracts and agreed that
Railroad would retain most of its productivity gains. Railroad further contended
that there was no agreement that transportation rates paid by SWEPCO would be
based on Railroad's costs 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, Railroad 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. Railroad intends
to appeal the judgment. In the opinion of outside counsel, Railroad has a
substantial likelihood of prevailing on appeal, although no assurances can be
given due to the uncertainties inherent in litigation. Railroad plans to file
its Notice of Appeal in the case on February 17, 1995 and will post a bond to
stay enforcement of the judgment pending prosecution of all appeals. In the
event SWEPCO fails to file a motion for new trial on or before February 21,
1995, Railroad's appeal will be effective. If such a motion for new trial were
timely filed, the trial court's jurisdiction would extend 75 days from the date
of judgment to rule on SWEPCO's motion, and Railroad would refile its appeal at
the appropriate time.

Environmental Proceeding

On May 25, 1994, the United States Department of Justice (Department) filed
suit on behalf of the United States Environmental Protection Agency (EPA)
against Railroad in United States District Court for the Eastern District of
Wisconsin for the release of oil and hazardous substances into navigable waters
of the United States in the course of three derailments. Specifically referenced
are (1) the alleged release of hazardous substances into the Nemadji River and
its shoreline near Superior, Wisconsin, on June 30, 1992, (2) the alleged
release of oil into the North Platte River and its shoreline near Guernsey,
Wyoming, on January 9, 1993, and (3) the alleged release of oil into a tributary
of the Bighorn River near Worland, Wyoming, on May 6, 1993. The suit claims that
pursuant to 33 U.S.C. Section 1321(b)(7), Railroad is liable to the United
States for civil penalties of up to $25,000 per day of violation or $1,000 per
barrel of oil or per reportable quantity of each hazardous substance discharged.
The EPA initially calculated the statutory maximum penalty associated with these
three spills to be $10,137,000. Railroad has answered the complaint and opposed
the penalties sought by the EPA.

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On February 13, 1995, Railroad attended a settlement conference with the
Department. The settlement conference was called and conducted by the United
States Judge Magistrate for the Western District of Wisconsin. At the
conference, a settlement in principle was achieved. Pursuant to the
compromise, Railroad will pay $1,500,000 to satisfy all claims by the United
States for fines, penalties, response costs and natural resource damages.
Railroad will also make a $100,000 contribution to a study (jointly approved by
Railroad and the Department) regarding methods or procedures to improve rail
safety and prevent derailments. In return for these payments, the United States
will release Railroad from all claims arising out of the three derailments and
provide Railroad contribution protection against claims by other responsible
parties who may later be pursued by the government for their liability arising
from the derailments.

The settlement is subject to documentation, formal sign-off by various
government officials and court approval. Railroad anticipates that the
settlement will be executed, approved and implemented by March 30, 1995. There
is no reason to believe that formal government and court approval will not be
forthcoming.

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Item 4. Submission of Matters to a Vote of Security Holders

Not applicable - see Table of Contents note.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

All of Railroad's outstanding common stock is owned of record by BNI and
therefore not traded on any market.

Item 6. Selected Financial Data

Not applicable - see Table of Contents note.

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Item 7. Management's Narrative Analysis of Results of Operations

Results of operations

Year ended December 31, 1994 compared with year ended December 31, 1993

Railroad had net income of $459 million for the year ended December 31, 1994
compared with net income of $332 million for 1993. Results for 1994 included the
cumulative effect of the implementation of Statement of Financial Accounting
Standards (SFAS) No. 112 "Employers' Accounting for Postemployment Benefits"
which decreased 1994 net income by $10 million. Results for 1993 included the
effects of severe flooding in the Midwest, most notably in the third quarter.
The floods slowed and often halted operations, forced extensive detours,
increased car, locomotive and crew costs and resulted in extensive rebuilding of
damaged track and bridges. Railroad estimated that the third quarter flooding
reduced revenues during 1993 by $44 million and increased operating expenses by
$35 million, for a combined reduction of $79 million. Net income for 1993 also
included the retroactive effects of the Omnibus Budget Reconciliation Act of
1993 (the Act), which was passed into law during August 1993. The Act increased
the corporate federal income tax rate by one percent, effective January 1, 1993,
which reduced Railroad's net income by $28 million through the date of
enactment. This included the recognition of a one-time, non-cash charge of $27
million to income tax expense to adjust deferred taxes as of the enactment date
and a charge of $1 million to current income tax expense.

Revenues

The following table presents Railroad's revenue information by business unit and
includes certain reclassifications of 1993 information to conform to the 1994
presentation:

[Enlarge/Download Table]

Revenues Per
Revenues Revenue Ton Miles Revenue Ton Mile
--------------- ----------------- -------------------
Year ended December 31, 1994 1993 1994 1993 1994 1993
--------------------------------------------------------------------------------------------------
(In millions) (In millions) (In cents)

Coal.............................. $1,669 $1,532 140,934 122,821 1.18 1.25
Agricultural Commodities.......... 830 784 35,130 35,454 2.36 2.21
Intermodal........................ 772 730 25,542 23,726 3.02 3.08
Forest Products................... 498 483 20,784 19,724 2.40 2.45
Chemicals......................... 412 406 14,853 14,655 2.77 2.77
Consumer Products................. 267 257 9,477 9,049 2.82 2.84
Minerals Processors............... 208 195 8,399 7,984 2.48 2.44
Vehicles & Machinery.............. 190 185 2,614 2,386 7.27 7.75
Iron & Steel...................... 175 173 8,270 8,189 2.12 2.11
Aluminum, Nonferrous Metals & Ores 102 103 3,851 3,917 2.65 2.63
Shortlines and other.............. (128) (149) (9,280) (10,566) - -
------ ------ ------- -------
Total........................... $4,995 $4,699 260,574 237,339 1.92 1.98
====== ====== ======= =======

Total revenues for 1994 were $4,995 million compared with revenues of $4,699
million for 1993. The $296 million improvement was primarily attributable to
improvements in Coal ($137 million), Agricultural Commodities ($46 million) and
Intermodal ($42 million) revenues.

Coal revenues improved $137 million during 1994 as a result of increased
traffic. This increase was primarily caused by a rise in the demand for
electricity as well as the need for utilities to replenish coal stockpiles
during the first half of 1994, which were partially depleted during the 1993
summer flooding. Railroad estimated lost coal revenues of approximately $35

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million during 1993 as a result of this flooding. Partially offsetting the
increase in 1994 traffic was a decline in revenues per revenue ton mile.
These lower yields were largely due to the transportation in 1994 of greater
volumes above contractual minimum tonnage requirements on which customers
received lower rates. Continuing competitive pricing pressures in contract
renegotiations also contributed to lower yields.

Revenues from the transportation of Agricultural Commodities during 1994 were
$46 million higher than 1993. This increase was principally caused by a $31
million improvement in barley revenues, higher wheat revenues and improved feeds
and minor oilseeds revenues. Barley revenues benefited from strong domestic and
export demand caused by favorable market conditions during 1994. Higher wheat
revenues resulted from an increase in yield, which is a product of commodity
mix, price and length of haul. Feeds and minor oilseeds revenues were favorably
impacted by increased domestic feed demand. Partially offsetting these increases
was an early 1994 decrease in corn revenues largely attributable to reduced crop
production and lower export demand.

Intermodal revenues increased $42 million during 1994 when compared with 1993.
Intermodal-international revenues accounted for the majority of the increase
with a $37 million improvement over 1993 caused by both new business and growth
in existing business. Additionally, BN AMERICA revenues increased due to
Railroad's focus on traffic in its key intermodal lanes which resulted in
improved yields. The traffic increases in Railroad's key intermodal lanes more
than offset Railroad's withdrawal from the Texas market in April 1994.

Forest Products, Consumer Products and Minerals Processors revenues for 1994
increased $15 million, $10 million and $13 million, respectively compared with
1993. The improvement in Forest Products revenues was largely due to increased
housing starts during the year, while Consumer Products revenues were higher as
a result of increased export demand. Minerals Processors revenues rose as a
result of stronger clays and aggregates traffic caused by increases in both
domestic and export demands.

Revenues for Chemicals and Vehicles & Machinery increased $6 million and $5
million, respectively. Increased volumes for environmental logistics, chemicals
and fertilizers contributed to higher Chemicals revenues, offset partially by a
decline in petroleum products revenues. The increase in Vehicles & Machinery
revenues resulted from increased volume in automotive-international traffic.

Current year revenues for Iron & Steel and Aluminum, Nonferrous Metals & Ores
were relatively flat compared with 1993.

Shortlines and other, which are a net reduction of revenue, dropped $21
million compared with 1993 primarily due to additional haulage agreement
revenues and increased miscellaneous revenues.

Expenses

Total operating expenses for 1994 were $4,164 million compared with $4,049
million for 1993. However, the operating ratio improved three percentage points
to 83 percent from 86 percent, as increased revenues more than offset increased
operating expenses.

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Compensation and benefits expenses for 1994 were $68 million greater than for
the prior year. Higher traffic volumes during 1994 as well as basic wage
increases for union represented employees, three percent effective July 1993 and
four percent effective July 1994, caused an increase in excess of $50 million to
wages and related payroll taxes. Increased salaries and a higher pension
expense, due to a reduction in the discount rate used in determining the net
pension cost, also contributed to additional compensation and benefits expenses.

Fuel expenses were $7 million higher during 1994 as compared with 1993. The
average price paid for diesel fuel decreased 3.1 cents per gallon in 1994 to
58.4 cents despite the 4.3 cents per gallon increase in the federal fuel tax,
effective October 1, 1993, enacted as part of the Omnibus Budget Reconciliation
Act of 1993. These price savings were more than offset by a $30 million increase
in consumption due to higher traffic volumes.

Materials expenses were $5 million higher during 1994 as compared with 1993.
Track and locomotive repair materials costs increased due to higher maintenance
levels and a larger fleet size in 1994. Partially offsetting these increases
were greater scrap sales due to the higher maintenance levels and a reduction in
expenditures for safety and protective equipment deployed in 1993.

Equipment rents expenses were $53 million higher than 1993. This increase was
primarily attributable to higher lease expenses due to a larger fleet of leased
rail cars as well as leasing locomotives to meet power requirements. Increased
equipment rentals from an affiliate and payments for failure to achieve service
commitments in the first half of 1994 under various transportation agreements
also contributed to this increase. These increases were partially offset by
decreased car hire expenses in 1994 compared with 1993, due to the adverse
effects of the Midwest flooding in 1993.

Purchased services expenses increased $14 million compared with 1993. Higher
intermodal-related costs, due to increased volumes, and higher third party
locomotive maintenance and repair costs were the most significant contributing
factors to this increase. These increases were partially offset by haulage
agreement-related reimbursements from The Atchison, Topeka and Santa Fe Railway
Company and Southern Pacific Transportation Company for operating services
provided by Railroad.

Depreciation expense for 1994 was $1 million higher than 1993, primarily due
to an increase in the asset base and higher traffic levels.

Other operating expenses were $33 million less when compared with 1993. A $43
million decrease in costs associated with personal injury claims, excluding wage
continuation payments, and the absence in 1994 of costs associated with the 1993
third quarter floods were partially offset by increases in derailment-related
expenses and property taxes.

Interest expense for the year decreased $7 million compared with 1993,
primarily due to a lower average outstanding debt balance in 1994.

Other income, net was $5 million higher in 1994 compared with 1993, due
primarily to a reduction in other miscellaneous expenses.

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The effective tax rate was 39.0 percent for 1994 compared with 42.4 percent
for 1993. The higher effective tax rate for 1993 resulted from the retroactive
increase, effective January 1, 1993, in tax rates pursuant to the provisions of
the Omnibus Budget Reconciliation Act of 1993 and the related impact on the
deferred tax liability at January 1, 1993.

Other matters

Casualty and environmental

Personal injury claims, including work-related injuries to employees, are a
significant expense for the railroad industry. Employees of Railroad are
compensated for work-related injuries according to the provisions of the Federal
Employers' Liability Act (FELA). FELA's system of requiring finding of fault,
coupled with unscheduled awards and reliance on the jury system, resulted in
significant increases in expense. For several years prior to 1992, the trend of
significant increases in Railroad's personal injury expense reflected the
combined effects of increasing frequency of claims, rising medical expenses,
legal judgments and settlements. To improve worker safety and counter increasing
costs, Railroad implemented a number of programs to reduce the number of
personal injury claims and the dollar amount of claim settlements, and reverse
the trend of rising expense. If these efforts continue to be successful, future
expenses could be further reduced. The total amount of personal injury costs
(including wage continuation payments) were $170 million, $216 million and $253
million in 1994, 1993 and 1992, respectively. Railroad is also working with
others, through the Association of American Railroads, to seek changes in
legislation to provide a more equitable program for injury compensation in the
railroad industry.

Under the requirements of the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (Superfund) and certain other laws,
Railroad is potentially liable for the cost of clean-up of various contaminated
sites identified by the United States Environmental Protection Agency and other
agencies. Railroad has been notified that it is a potentially responsible party
(PRP) for study and clean-up costs at approximately 75 sites (the PRP sites)
and, in many instances, is one of several PRPs. Railroad generally participates
in the clean-up of these sites through cost-sharing agreements with terms that
vary from site to site. Costs are typically allocated based on relative
volumetric contribution of material, the amount of time the site was owned or
operated, and/or the portion of the total site owned or operated by each PRP.
However, under Superfund and certain other laws, as a PRP, Railroad can be held
jointly and severally liable for all environmental costs associated with a site.

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as necessary based upon additional information developed in subsequent periods.
Railroad conducts an ongoing environmental contingency analysis, which considers
a combination of factors, including independent consulting reports, site visits,
legal reviews, analysis of the likelihood of participation in and ability to pay
for clean-up by other PRPs and historical trend analyses.

Railroad is involved in a number of administrative and judicial proceedings
and other mandatory clean-up efforts at approximately 160 sites, including the
PRP sites, for which it is being asked to participate in the clean-up of sites
contaminated by material discharged into the environment. Railroad paid
approximately $21 million, $27 million and $20 million during 1994, 1993 and
1992, respectively, relating to mandatory clean-up efforts, including amounts
expended under federal and state voluntary clean-up programs. At this time,
Railroad expects to spend approximately $110 million in future years to
remediate and restore all known sites, including $105 million pertaining to
mandated sites, of which approximately $70 million relates to the PRP sites. Of
the $110 million, Railroad expects to spend $33 million during 1995. Also,
Railroad anticipates that the majority of the $110 million will be paid out over
a period of less than seven years; however, some costs will be paid out over a
longer period, in some cases up to 40 years. At December 31, 1994, 23 sites
accounted for approximately $75 million of the accrual and no individual site
was considered to be material.

Liabilities for environmental costs represent Railroad's best estimates for
remediation and restoration of these sites and include asserted and unasserted
claims. At December 31, 1994, Railroad had accrued approximately $110 million
for estimated future environmental costs and believes it is reasonably possible,
although not probable, that actual environmental costs could be lower than the
recorded reserve or as much as 50 percent higher. Railroad's best estimate of
unasserted claims was approximately $5 million as of December 31, 1994. Although
recorded liabilities include Railroad's best estimates of all costs, without
reduction for anticipated recovery from insurance, Railroad's total clean-up
costs at these sites cannot be predicted with certainty due to various factors
such as the extent of corrective actions that may be required, evolving
environmental laws and regulations, advances in environmental technology, the
extent of other PRPs' participation in clean-up efforts, developments in ongoing
environmental analyses related to sites determined to be contaminated, and
developments in environmental surveys and studies of potentially contaminated
sites. As a result, charges to income for environmental liabilities could
possibly have a significant effect on results of operations in a particular
quarter or fiscal year as individual site studies and remediation and
restoration efforts proceed or as new sites arise. However, expenditures
associated with such liabilities are typically paid out over a long period, in
some cases up to 40 years, and are therefore not expected to have a material
adverse effect on Railroad's consolidated financial position, cash flow or
liquidity.

Hedging activities

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obtained by taking physical delivery directly from such suppliers at a future
date. The average price of the approximately 79 million gallons which Railroad
had committed to purchase was approximately 52 cents per gallon, exclusive of
taxes, certain transportation costs and other charges. In addition, Railroad
held petroleum futures contracts representing approximately 53 million gallons
at an average price of approximately 49 cents per gallon. These contracts have
expiration dates ranging from January to October 1995.

Railroad's current fuel hedging program is designed to cover no more than 50
percent of projected fuel requirements for the subsequent 12-month period;
therefore, hedge positions will not exceed actual fuel requirements. The current
and future fuel delivery prices are monitored continuously and hedge positions
are adjusted accordingly. In order to reduce risk associated with market
movements, fuel hedging transactions do not extend beyond a 12-month period.
Railroad purchases petroleum futures contracts only through regulated exchanges
(e.g. New York Mercantile Exchange). In order to effectively monitor the fuel
hedging activities, results of the program are summarized and reported to senior
management on a regular basis.

In the second quarter of 1994, Railroad entered into a three year interest
rate swap on a notional amount of $50 million to hedge against interest rate
exposure on one of its debt issuances. Railroad's position in this swap was
subsequently closed during the fourth quarter of the year. Under the terms of
this swap, Railroad received semiannual fixed-rate payments of 6.33 percent from
a AA-rated counterparty and made semiannual floating rate payments tied to the
six-month LIBOR. The swap was accounted for as a hedge with realized gains or
losses being recognized as a component of interest expense. During 1994, the
resulting decrease in interest expense was not significant.

Proposed merger

As of June 29, 1994, BNI and Santa Fe entered into an Agreement and Plan of
Merger (the Original Agreement) pursuant to which, on the terms and conditions
set forth in the Original Agreement, Santa Fe would merge (the Merger) with and
into BNI, and BNI would be the surviving corporation and each share of Santa Fe
common stock would be converted into 0.27 of a share of BNI common stock. The
Original Agreement was subsequently amended as of October 26, 1994, December 18,
1994 and January 24, 1995. The Original Agreement, as so amended, is referred to
as the Merger Agreement. Pursuant to the Merger Agreement, Santa Fe is to merge
with and into BNI with each share of Santa Fe common stock to be exchanged for
not less than 0.40 and not more than 0.4347 shares of BNI common stock. The
exchange ratio will vary based on the number of shares of Santa Fe common stock
repurchased by Santa Fe in the repurchase program referred to below (the
Repurchase Program). Stockholders of BNI and Santa Fe approved the Merger
Agreement at special stockholders' meetings held on February 7, 1995.

Also pursuant to the Merger Agreement, on December 23, 1994, BNI and Santa Fe
commenced tender offers (together, the Tender Offer) to acquire up to 63 million
shares of Santa Fe common stock in the aggregate at $20 per share in cash (with
Santa Fe severally obligated to purchase up to 38 million shares of Santa Fe
common stock in the Tender Offer and BNI severally obligated to purchase up to
25 million shares of Santa Fe common stock in the Tender Offer). The Tender
Offer expired at midnight, Eastern Standard Time, on February 8, 1995, with
approximately 112.6 million shares of Santa Fe common stock tendered (based on a
preliminary count). As 63 million shares of Santa Fe common stock have been
accepted for payment by BNI and Santa Fe, tenders by

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Santa Fe stockholders are subject to proration. Payment for tendered shares will
be made promptly after the final proration factor is determined, which
determination is expected to be made on or about February 17, 1995. Santa Fe
will purchase 38 million shares of Santa Fe common stock in the Tender Offer,
and BNI will purchase the remaining 25 million shares accepted for payment.

On February 6,1995, BNI entered into a five-year $500 million unsecured bank
credit facility (the Tender Offer Facility), whereby a group of banks will
finance BNI's obligations to purchase shares of Santa Fe common stock in the
Tender Offer. At BNI's option, borrowings can be obtained either through a
competitive bid or a standby procedure. Rates for borrowing under the standby
procedure are, at BNI's option, based upon the selected term of LIBOR or
certificate of deposit rate, plus in either case, a spread based upon BNI's
senior unsecured debt ratings and the amount borrowed under the Tender Offer
Facility, or an alternative base rate. Santa Fe anticipates borrowing up to
$1,110 million (of which approximately $200 million will be used to replace
existing Santa Fe debt) in connection with the Santa Fe tender offer and related
matters from a syndicate of financial institutions under a new Santa Fe credit
agreement. Santa Fe may also borrow an additional $200 million under its new
credit agreement to retire $200 million of existing Santa Fe debt.

Under the Repurchase Program as set forth in the Merger Agreement, Santa Fe is
permitted, at its discretion and subject to certain financial and performance
criteria of Santa Fe set forth in its credit agreements and the Merger Agreement
(including minimum cash flows, cash capital expenditures and maximum total
debt), to repurchase up to 10 million shares of Santa Fe common stock prior to
consummation of the Merger. The number of shares of BNI common stock to be
issued in the Merger will not be affected by the number of shares of Santa Fe
common stock repurchased by Santa Fe under the Repurchase Program. Accordingly,
the exchange ratio of BNI common shares to be offered for each share of
outstanding Santa Fe common stock upon consummation of the Merger would be set
at not less than 0.40 and not more than 0.4347 shares.

Pursuant to the Merger Agreement, two possible structures are available to
complete the Merger. Using the current structure, each issued and outstanding
share of Santa Fe common stock (other than shares of Santa Fe common stock held
by Santa Fe as treasury stock or shares held by BNI, all of which will be
cancelled) will be exchanged for not less than 0.40 and not more than 0.4347
shares of BNI common stock depending upon the number of additional shares of
Santa Fe common stock repurchased by Santa Fe under the Repurchase Program. BNI
will be the surviving corporation. The Merger Agreement provides that either BNI
or Santa Fe may elect to effect the Merger through the use of a holding company
(the Alternative Transaction Structure) as described below. BNI and Santa Fe
have established BNSF Corporation (BNSF), a Delaware corporation, for such
purpose. Under the Alternative Transaction Structure, BNSF would create two
subsidiaries and one subsidiary would merge into BNI and one into Santa Fe. Each
holder of BNI common stock would receive one share of BNSF common stock and each
holder of Santa Fe common stock, excluding the Santa Fe common stock acquired by
BNI in the Tender Offer and the Santa Fe common stock held by Santa Fe as
treasury stock, would receive not less than 0.40 and not more than 0.4347 shares
of BNSF common stock depending upon the number of shares of Santa Fe common
stock repurchased by Santa Fe under the Repurchase Program. The Santa Fe common
stock acquired by BNI in the Tender Offer would remain outstanding and the Santa
Fe common stock held by Santa Fe as treasury stock would be cancelled. The
rights of each stockholder of BNSF would be substantially identical to the
rights of a stockholder of BNI, and the Alternative Transaction Structure would
have the same economic effect with respect to the stockholders of BNI and Santa
Fe as the Merger in its current structure. The Merger will be accounted for
under the purchase method of accounting upon consummation, and BNI's $500
million investment will be included in the purchase price.

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As is typical in the context of a merger, certain benefits of officers and
employees vested upon approval of the Merger by the stockholders of BNI and
Santa Fe. In particular, on February 7, 1995, restrictions previously placed
upon certain BNI stock grants lapsed and the previously unearned compensation
relating to such restricted stock, included in BNI stockholders' equity, was
charged to compensation and benefits expense. As of December 31, 1994, such
unearned compensation relating to restricted stock was approximately $23
million. BNI expects to incur other costs related to the Merger some of which
will be included in the determination of the total purchase price.

Consummation of the Merger is subject to approval by the Interstate Commerce
Commission (ICC), approval under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, and other customary conditions. In connection with the ICC
proceedings, on January 27, 1995, BNI and Santa Fe requested the ICC to adopt an
expedited procedural schedule for reviewing the merger, based on a timetable the
ICC has recently proposed to adopt for all major railroad mergers, and on
February 3, 1995, the ICC issued a notice requesting comments on the proposed
schedule by February 21, 1995. That schedule calls for the ICC to issue its
decision on the merger within 165 days from the date on which the ICC publishes
a notice formally advising parties that the BNI and Santa Fe stockholders have
voted to approve the transaction. The ICC has not yet issued a notice regarding
stockholder approval nor taken any further action on the proposed schedule.

On October 5, 1994, Union Pacific Corporation (UP) submitted a proposal to
Santa Fe pursuant to which UP would acquire Santa Fe. UP modified its proposal
on several occasions and, on January 31, 1995, withdrew its acquisition proposal
for Santa Fe.

Other

Since 1935, Railroad has participated in the national railroad retirement
system which is separate from the national social security system. Under this
system, an independent Railroad Retirement Board administers the determination
and payment of benefits to all railroad workers. Both Railroad and its employees
are subject to a tax on employee earnings which is above the normal social
security rate assessed to those who are employed outside the railroad industry.

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Railroad joined with the other railroads to negotiate with the unions on a
multi-employer basis on November 1, 1994. At that time, all unions were served
proposals for productivity improvements as well as other changes. The unions
also served notices on the railroads which proposed not only increasing wages
and benefits but also restoring many of the restrictive work rules and practices
that were modified or eliminated under the current agreements. A number of the
unions are also challenging the railroads' right to negotiate nationally on a
multi-employer basis and the issue is currently pending in Federal District
Court in Washington, D.C. At this time, negotiations on the proposals by both
the railroads and the unions are in preliminary stages and the ultimate outcome
of these negotiations cannot be predicted.

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Item 8. Financial Statements and Supplementary Data

Consolidated Statements of Income
Burlington Northern Railroad Company and Subsidiaries
(Dollars in millions)

[Download Table]

Year ended December 31, 1994 1993 1992
------------------------------------------------------------------------------

Revenues........................................... $4,995 $4,699 $4,630

Costs and expenses:
Compensation and benefits........................ 1,769 1,701 1,704
Fuel............................................. 369 362 348
Materials........................................ 305 300 295
Equipment rents.................................. 478 425 410
Purchased services............................... 478 464 457
Depreciation..................................... 335 334 324
Other............................................ 430 463 505
------ ------ ------
Total costs and expenses....................... 4,164 4,049 4,043
------ ------ ------
Operating income................................... 831 650 587
Interest expense................................... 79 86 103
Other income, net.................................. 17 12 57
------ ------ ------
Income before income taxes and cumulative effect
of changes in accounting methods................. 769 576 541
Income tax expense................................. 300 244 186
------ ------ ------
Income before cumulative effect of changes in
accounting methods............................... 469 332 355
Cumulative effect of changes in accounting methods,
net of tax....................................... (10) - (21)
------ ------ ------
Net income................................... $ 459 $ 332 $ 334
====== ====== ======

See accompanying notes to consolidated financial statements.

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Consolidated Balance Sheets
Burlington Northern Railroad Company and Subsidiaries
(Dollars in millions)

[Download Table]

December 31, 1994 1993
-----------------------------------------------------------------------------

Assets

Current assets:
Cash and cash equivalents....................... $ 27 $ 17
Accounts receivable, net........................ 702 591
Materials and supplies.......................... 100 91
Current portion of deferred income taxes........ 157 167
Other current assets............................ 27 23
------ ------
Total current assets.......................... 1,013 889

Property and equipment, net....................... 5,848 5,488
Investments in and advances to affiliates......... 94 104
Other assets...................................... 133 130
------ ------
Total assets.............................. $7,088 $6,611
------ ------
Liabilities and Stockholder's Equity

Current liabilities:
Accounts payable................................ $ 539 $ 498
Compensation and benefits payable............... 263 269
Casualty and environmental reserves............. 248 286
Taxes payable................................... 130 131
Accrued interest................................ 19 22
Other current liabilities....................... 64 69
Commercial paper................................ 90 26
Current portion of long-term debt............... 25 177
------ ------
Total current liabilities..................... 1,378 1,478

Long-term debt.................................... 719 702
Deferred income taxes............................. 1,421 1,329
Casualty and environmental reserves............... 415 426
Other liabilities................................. 202 182
------ ------
Total liabilities............................. 4,135 4,117
------ ------
Common stockholder's equity:
Common stock, without par value (1,000 shares
authorized, issued and outstanding)........... 1,191 1,191
Retained earnings............................... 1,762 1,303
------ ------
Total common stockholder's equity............. 2,953 2,494
------ ------
Total liabilities and stockholder's equity $7,088 $6,611
====== ======

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Cash Flows
Burlington Northern Railroad Company and Subsidiaries
(Dollars in millions)

[Download Table]

Year ended December 31, 1994 1993 1992
------------------------------------------------------------------------------

Cash flows from operating activities:
Net income..................................... $ 459 $ 332 $ 334
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of changes in accounting
methods.................................... 10 - 21
Depreciation................................. 335 334 324
Deferred income taxes........................ 109 128 25
Changes in current assets and liabilities:
Accounts receivable, net................... (111) (117) (30)
Materials and supplies..................... (13) 6 2
Other current assets....................... (4) (1) 1
Accounts payable........................... 41 19 19
Compensation and benefits payable.......... (8) (50) 16
Casualty and environmental reserves........ (38) 37 2
Taxes payable.............................. (1) 7 4
Accrued interest........................... (3) (2) (9)
Other current liabilities.................. (5) (2) 3
Changes in long-term casualty and
environmental reserves..................... (11) (56) 16
Other, net................................... (13) (60) (22)
------ ------ ------
Net cash provided by operating activities.. 747 575 706
------ ------ ------
Cash flows from investing activities:
Additions to property and equipment............ (626) (530) (469)
Collections from affiliates, net............... 10 29 266
Proceeds from property and equipment
dispositions................................. 35 35 33
Other, net..................................... (31) (16) (19)
------ ------ ------
Net cash used in investing activities...... (612) (482) (189)
------ ------ ------
Cash flows from financing activities:
Net increase (decrease) in commercial paper.... 64 26 (353)
Proceeds from issuance of long-term debt 150 - -
Payments on long-term debt..................... (336) (83) (71)
Dividends paid................................. - (75) (50)
Other, net..................................... (3) (1) (2)
------ ------ ------
Net cash used in financing activities...... (125) (133) (476)
------ ------ ------
Increase (decrease) in cash and cash
equivalents.............................. 10 (40) 41
Cash and cash equivalents:
Beginning of year.............................. 17 57 16
------ ------ ------
End of year.................................... $ 27 $ 17 $ 57
====== ====== ======
Supplemental cash flow information:
Interest paid, net of amounts capitalized...... $ 78 $ 92 $ 110
Income taxes paid, net of refunds.............. 192 109 163

Supplemental noncash investing and financing
activities information:
Assets financed through a capital lease
obligation................................... $ 50 - -

See accompanying notes to consolidated financial statements.

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10-K 27th Page of 51 TOC 1st Previous Next ↓Bottom Just 27th
Consolidated Statements of Changes in Common Stockholder's Equity
Burlington Northern Railroad Company and Subsidiaries
(Dollars in millions)

[Enlarge/Download Table]

Amount
Number of ---------------------------------------
Common Common Retained
Three years ended December 31, 1994 Shares Stock Earnings Total
---------------------------------------------------------------------------------------------------

Balance at December 31, 1991....... 1,000 $1,190 $ 762 $1,952

Net income......................... 334 334
Dividends.......................... (50) (50)
------ ------ ------ ------
Balance at December 31, 1992....... 1,000 1,190 1,046 2,236

Net income......................... 332 332
Dividends.......................... (75) (75)
Capital contribution from parent... 1 1
------ ------ ------ ------
Balance at December 31, 1993....... 1,000 1,191 1,303 2,494

Net income......................... 459 459
------ ------ ------ ------
Balance at December 31, 1994....... 1,000 $1,191 $1,762 $2,953
====== ====== ====== ======

See accompanying notes to consolidated financial statements.

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10-K 28th Page of 51 TOC 1st Previous Next ↓Bottom Just 28th
Notes to Consolidated Financial Statements
Burlington Northern Railroad Company and Subsidiaries

1. Accounting policies

Principles of consolidation

Burlington Northern Railroad Company (Railroad) is a wholly owned subsidiary
of Burlington Northern Inc. (BNI). The consolidated financial statements include
the accounts of Railroad and its majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.

Cash and cash equivalents

All short-term investments with original maturities of less than 90 days are
considered cash equivalents for purposes of disclosure in the consolidated
balance sheets and consolidated statements of cash flows. Cash equivalents are
stated at cost, which approximates market value.

Property and equipment

Main line track is depreciated on a group basis using a units-of-production
method. All other property and equipment are depreciated on a straight-line
basis over their estimated useful lives. Interstate Commerce Commission (ICC)
regulations require periodic formal studies of ultimate service lives for all
railroad assets. Resulting service life estimates are subject to review and
approval by the ICC. An annual review of rates and accumulated depreciation is
performed and appropriate adjustments are recorded. Significant premature
retirements, which would include major casualty losses, abandonments, sales and
obsolescence of assets; are recorded as gains or losses at the time of their
occurrence. Expenditures which significantly increase asset values or extend
useful lives are capitalized. Repair and maintenance expenditures are charged to
operating expense when the work is performed. All properties are stated at cost.

Materials and supplies

Materials and supplies consist mainly of diesel fuel, repair parts for
equipment and other railroad property and are valued at average cost.

Revenue recognition

Transportation revenues are recognized proportionately as a shipment moves
from origin to destination.

Income taxes

Railroad's operations are included in the consolidated federal income tax
return of BNI. Income tax expense is provided based on earnings reported as if
Railroad filed a separate income tax return. In addition, the provision for
income taxes includes deferred tax expense determined by the change in the net
deferred tax liability, which is computed based on the differences between the
financial statement and tax basis of assets and liabilities as measured by
applying enacted tax laws and rates. Investment tax credits were accounted for
under the "flow-through" method.

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2. Accounts receivable, net

Railroad's agreement to sell, on a revolving basis, an undivided percentage
ownership interest in a designated pool of accounts receivable with limited
recourse expired in December 1994. At December 31, 1993, accounts receivable
were net of $100 million, representing receivables sold. Average monthly
proceeds from the sale of accounts receivable were $162 million, $182 million
and $190 million in 1994, 1993 and 1992, respectively. Included in other income,
net were expenses of $9 million in 1994 and 1993 and $11 million in 1992,
relating to the sale. Railroad maintains an allowance for doubtful accounts
based upon the expected collectibility of all accounts receivable, which at
December 31, 1993 included receivables sold with recourse. Allowances for
doubtful accounts of $20 million and $17 million have been recorded at December
31, 1994 and 1993, respectively.

3. Property and equipment, net

Property and equipment, net was as follows (in millions):

[Download Table]

December 31, 1994 1993
----------------------------------------------------------------------------

Road, roadway structures and real estate.......... $7,690 $7,342
Equipment......................................... 1,913 1,784
------ ------
Total cost..................................... 9,603 9,126
Less accumulated depreciation..................... 3,755 3,638
------ ------
Property and equipment, net.................. $5,848 $5,488
====== ======

The consolidated balance sheets at December 31, 1994 and 1993 included $86
million and $36 million, respectively, of property and equipment under capital
leases. The related depreciation was included in depreciation expense.
Accumulated depreciation for property and equipment under capital leases was $34
million and $31 million at December 31, 1994 and 1993, respectively.

Main line track is depreciated on a group basis using a units-of-production
method. The accumulated depreciation and annual depreciation accrual rates for
railroad assets other than main line track are calculated using a straight-line
method and statistical group measurement techniques. The group techniques
project depreciation expense and estimated accumulated depreciation utilizing
historical experience and expected future conditions relating to the timing of
asset retirements, cost of removal, salvage proceeds, maintenance practices and
technological changes. The net book value of reported assets reflects estimated
remaining asset utility on a historical cost basis.

Due to the imprecision of annual reviews using statistical group measurement
techniques for long-term asset retirement, replacement and deterioration
patterns, Railroad adjusts accumulated depreciation for significant differences
between recorded accumulated depreciation and computed requirements. Differences
between recorded accumulated depreciation and computed requirements are
recognized prospectively on a straight-line basis. Under ICC regulations,
Railroad conducts service life studies on a periodic basis. Results of service
life studies are recorded over the remaining life

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of the asset group studied. No service life studies were scheduled for 1994. In
future periods, service life studies will be conducted as required. However, the
impact of such studies is not determinable at this time.

Capitalization of certain software development costs has increased as a
result of new strategic initiatives. Capitalization of software development
costs begins upon establishment of technological feasibility. The establishment
of technological feasibility is based upon completion of planning, design and
other technical performance requirements.

Capitalized software development costs are amortized over a seven-year
estimated useful life using the straight-line method. Amortization expense was
$2 million for the year ended December 31, 1994 and no amortization was recorded
for the year ended December 31, 1993. Unamortized capitalized software costs
were $20 million and $6 million as of December 31, 1994 and 1993, respectively.

4. Debt

Debt outstanding was as follows (in millions):

[Download Table]

December 31, 1994 1993
-----------------------------------------------------------------------------

Consolidated mortgage bonds, 3 1/5% to 9 1/4%,
due serially to 2045................................. 321 622
Variable rate term loan facility, weighted average rate
of 6.32%, due 1997................................... 150 -
Equipment and other obligations, weighted
average rate of 8.94% and 9.30%, respectively, due
serially to 2009..................................... 91 113
General mortgage bonds, 3 1/8% and 2 5/8%, due 2000
and 2010, respectively............................... 62 62
Prior lien railway and land grant bonds, 4%, due 1997 57 57
General lien railway and land grant bonds, 3%,
due 2047............................................. 35 35
First mortgage bonds, series A, 4%, due 1997........... 22 24
Capitalized lease obligations, weighted average
rate of 7.27% and 8.01%, respectively, expiring 1996
and 2008............................................. 46 10
Income debentures, series A, 5%, due 2006.............. 8 8
Commercial paper....................................... 90 26
Unamortized discount..................................... (48) (52)
---- ----
Total................................................ 834 905
Less:
Commercial paper....................................... 90 26
Current portion of long-term debt...................... 25 177
---- ----
Long-term debt..................................... $719 $702
==== ====

Railroad maintains an effective program for the issuance, from time to time,
of commercial paper. These borrowings are supported by Railroad's bank revolving
credit agreements. Outstanding commercial paper balances are considered as
reducing available borrowings under these agreements. The bank revolving credit
agreements allow borrowings of up to $300 million on a short-term basis and $500
million on a long-term basis. Annual facility fees are currently 0.125 and
0.1875 percent, respectively, and are subject to change based upon changes in
Railroad's senior secured debt ratings. At

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Railroad's option, borrowings can be obtained through either a competitive bid
or a standby procedure. Rates for borrowings under the standby procedure are, at
Railroad's option, based upon the London Interbank Offered Rate (LIBOR) or
certificate of deposit rate, plus in either case, a spread based upon Railroad's
senior secured debt ratings, or an alternate base rate. The agreements are
currently scheduled to expire on May 5, 1995 and May 6, 1999, respectively. The
maturity value of commercial paper outstanding at December 31, 1994 was $91
million, leaving a total of $209 million of the short-term revolving credit
agreement available and $500 million of the long-term revolving credit agreement
available. The maturity value of commercial paper outstanding at December 31,
1993 was $27 million.

In November 1994, Railroad entered into a $150 million three year term loan
facility agreement with a group of commercial banks and used the proceeds to
redeem $150 million aggregate principal amount of Railroad Consolidated Mortgage
Bonds, 10 percent, Series J, due November 1, 1997. Under the terms of the
indenture, the 10 percent mortgage bonds were redeemable at par, commencing
November 1, 1994. The difference between Railroad's redemption price and the net
carrying value resulted in an insignificant loss. The three year term loans bear
interest at rates equal to the selected LIBOR, which may vary during the term of
the loans, plus each lender's interest rate margin.

The financial covenants of the two bank revolving credit agreements and the
three year term loan facility agreement require that Railroad's consolidated
tangible net worth, as defined in the agreements, be at least $1.7 billion, and
that its debt, as defined in the agreements, cannot exceed the lesser of 140
percent of its consolidated tangible net worth and $3 billion. Each of the
agreements contain an event of default arising out of the occurrence and
continuance of a "Change in Control." A "Change in Control" is generally defined
as the acquisition of more than 50 percent of the voting securities of BNI which
has not been approved by the BNI Board of Directors, a change in the control
relationship between BNI and Railroad, and finally, a "Change in Control" is
deemed to occur when a majority of the seats on the BNI Board of Directors is
occupied by persons who are neither nominated by the BNI Board of Directors nor
appointed by directors so nominated. The proposed merger between BNI and Santa
Fe Pacific Corporation (Santa Fe) will not constitute a "Change in Control"
under such agreements.

In April 1994, Railroad completed a $50 million cross-border leveraged lease
of equipment which is recorded as a capital lease obligation. The transaction
included the issuance of $40 million of equipment secured debt at a weighted
average yield of 7.27 percent and the receipt of an up front cash benefit. The
up front benefit reduces the effective interest rate on the debt to 6.64
percent.

The commercial paper program is further summarized as follows (dollars in
millions):

[Download Table]

December 31, 1994 1993
-----------------------------------------------------------------------------

Balance at year end................................. $ 90 $ 26
Weighted average interest rate...................... 6.43% 3.55%
Maximum outstanding during the year................. $ 243 $ 179
Average daily amount outstanding during the year.... $ 97 $ 41
Weighted daily average interest rate during the year 4.29% 3.27%

Maturities of commercial paper averaged 7 days and 4 days in 1994 and 1993,
respectively.

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Aggregate long-term debt scheduled maturities for 1995 through 1999 and
thereafter are $25 million, $21 million, $240 million, $14 million, $10 million
and $482 million, respectively.

Substantially all Railroad properties and certain other assets are pledged as
collateral to or are otherwise restricted under the various Railroad long-term
debt agreements.

5. Disclosures about fair value of financial instruments

The estimated fair values of Railroad's financial instruments at December 31,
1994 and 1993 and the methods and assumptions used to estimate the fair value of
each class of financial instruments held by Railroad, were as follows:

Cash and cash equivalents
The carrying amount approximated fair value because of the short maturity of
these instruments.

Notes receivable
The fair value of notes receivable was estimated by discounting the
anticipated cash flows. Discount rates of 10.8 percent and 8.7 percent at
December 31, 1994 and 1993, respectively, were determined to be appropriate when
considering current United States Treasury rates and the credit risk associated
with these notes.

Accrued interest payable
The carrying amount approximated fair value as the majority of interest
payments are made semiannually.

Long-term debt and commercial paper
The fair value of Railroad's long-term debt, excluding unamortized discount,
was primarily based on secondary market indicators. For those issues not
actively quoted, estimates were based on each obligation's characteristics.
Among the factors considered were the maturity, interest rate, credit rating,
collateral, amortization schedule, liquidity and option features such as
optional redemption or optional sinking funds. These features were compared to
other similar outstanding obligations to determine an appropriate increment or
spread, above United States Treasury rates, at which the cash flows were
discounted to determine the fair value. The carrying amount of commercial paper
approximated fair value because of the short maturity of these instruments.

Recourse liability from sale of receivables
Railroad's agreement to sell, on a revolving basis, an undivided percentage
interest in a designated pool of accounts receivable with limited recourse
expired in December 1994. At December 31, 1993, the carrying value of the
allowance for doubtful accounts on receivables sold approximated the fair value
of the recourse liability related to those receivables.

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The carrying amount and estimated fair values of Railroad's financial
instruments were as follows (in millions):

[Download Table]

December 31, 1994 1993
-------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----

Assets:
Cash and cash equivalents.......... $ 27 $ 27 $ 17 $ 17
Notes receivable................... 5 5 9 11

Liabilities:
Accrued interest payable........... 19 19 22 22
Long-term debt and commercial paper 882 811 957 978
Recourse liability from sale of
receivables...................... - - 4 4

Railroad also holds investments in, and has advances to, several
unconsolidated transportation affiliates. It was not practicable to estimate the
fair value of these financial instruments, which were carried at their original
cost of $17 million in the December 31, 1994 and 1993 consolidated balance
sheets. There were no quoted market prices available for the shares held in the
affiliated entities, and the cost of obtaining an independent valuation would
have been excessive considering the materiality of these investments to
Railroad.

In addition, Railroad has a note receivable, from a shortline railroad, that
has principal payments which are based on traffic volume over a segment of line.
The carrying value of the note was $5 million at December 31, 1994 and 1993. As
it is not practicable to forecast the traffic volume over the remaining life of
the note, it was not included in the notes receivable amount shown above.

6. Hedging activities

Railroad has a program to hedge against fluctuations in the price of its
diesel fuel purchases. This program includes forward purchases for delivery at
fueling facilities and exchange-traded petroleum futures contracts. The futures
contracts are accounted for as hedges which are marked to market with any gains
or losses associated with changes in market value being deferred and recognized
as a component of fuel expense in the period in which the designated fuel is
purchased and used. At December 31, 1994, Railroad had entered into agreements
with fuel suppliers setting the price of fuel to be obtained by taking physical
delivery directly from such suppliers at a future date. The average price of the
approximately 79 million gallons which Railroad had committed to purchase was
approximately 52 cents per gallon, exclusive of taxes, certain transportation
costs and other charges. In addition, Railroad held petroleum futures contracts
representing approximately 53 million gallons at an average price of
approximately 49 cents per gallon. These contracts have expiration dates ranging
from January to October 1995.

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10-K 34th Page of 51 TOC 1st Previous Next ↓Bottom Just 34th
exchanges (e.g. New York Mercantile Exchange). In order to effectively monitor
the fuel hedging activities, results of the program are summarized and reported
to senior management on a regular basis.

7. Income Taxes

Effective January 1, 1993, Railroad adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS No. 109 modifies
SFAS No. 96, which established the liability method of accounting for income
taxes, and had been adopted by Railroad effective January 1, 1986. Railroad
adopted SFAS No. 109 consistent with the transitional guidelines of SFAS No.
109. The effect of the adoption was to increase the current portion of the
deferred income tax asset with a corresponding increase in the noncurrent
deferred income tax liability of $26 million at January 1, 1993. There was no
effect on net income, stockholder's equity or cash flows.

Income tax expense, excluding the cumulative effect of changes in accounting
methods, was as follows (in millions):

[Download Table]

Year ended December 31, 1994 1993 1992
-----------------------------------------------------------------------------

Current:
Federal ................................... $ 167 $102 $138
State ..................................... 24 14 23
----- ---- ----
191 116 161
----- ---- ----
Deferred:
Federal ................................... 93 111 24
State ..................................... 16 17 1
----- ---- ----
109 128 25
----- ---- ----
Total.................................... $ 300 $244 $186
===== ==== ====

Reconciliation of the federal statutory income tax rate to the effective tax
rate, excluding the cumulative effect of changes in accounting methods, was as
follows:

[Download Table]

Year ended December 31, 1994 1993 1992
-----------------------------------------------------------------------------

Federal statutory income tax rate................. 35.0% 35.0% 34.0%
State income taxes, net of federal tax benefit.... 3.4 3.5 3.3
Effect of one percent federal tax rate increase on
deferred tax balances at January 1, 1993....... - 4.5 -
Internal Revenue Service settlement............... - - (3.1)
Other, net........................................ .6 (.6) .2
---- ---- ----
Effective tax rate................................ 39.0% 42.4% 34.4%
==== ==== ====

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The components of deferred tax assets and liabilities were as follows (in
millions):

[Download Table]

December 31, 1994 1993
-----------------------------------------------------------------------------

Deferred tax liabilities:
Accelerated depreciation and amortization...... $(1,716) $(1,616)
Other.......................................... (98) (89)
------- -------
Total deferred tax liabilities............... (1,814) (1,705)
------- -------

Deferred tax assets:
Casualty and environmental reserves............ 257 267
Pensions....................................... 39 29
Other.......................................... 254 247
------- -------
Total deferred tax assets.................... 550 543
------- -------

Valuation allowance............................ - -
------- -------

Net deferred tax liability................. $(1,264) $(1,162)
======= =======
Noncurrent deferred income tax liability........ $(1,421) $(1,329)
Current deferred income tax asset............... 157 167
------- -------

Net deferred tax liability................. $(1,264) $(1,162)
======= =======

In August 1993, the Omnibus Budget Reconciliation Act of 1993 (the Act) was
signed into law. The Act increased the corporate federal income tax rate by one
percent, effective January 1, 1993, which reduced net income by $28 million
through the date of enactment. A one-time, non-cash charge of $27 million to
income tax expense was recorded as an adjustment to deferred taxes as of the
enactment date and a charge of $1 million to income tax expense was recorded as
an adjustment to current income taxes.

In December 1992, Railroad received notification that an Appeals Division
settlement of the Internal Revenue Service audits for the years 1981 through
1985 had been approved by the Joint Committee on Taxation. This action
settled all unagreed issues for those years. The tax effect of the settlement
was included in the 1992 tax provision as shown below (in millions):

[Download Table]

Current tax expense........................... $ 2
Deferred tax benefit.......................... (19)
----
Total tax benefit........................... $(17)
====

8. Retirement plans

Railroad participates in BNI's pension plans, which are non-contributory
defined benefit plans covering substantially all non-union employees. The
benefits are based on years of credited service and the highest five-year
average compensation levels. Contributions to the plans are determined by BNI
and are limited to amounts that are currently deductible for tax purposes.
Railroad's pension expense was $36 million, $26 million and $31 million in
1994, 1993 and 1992, respectively. The following data relates to BNI's plans
in which Railroad is the principal participant.

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The funded status of BNI's plans and the net accrued pension cost reflected
in BNI's consolidated balance sheets were as follows (in millions):

[Enlarge/Download Table]

December 31, 1994 1993
--------------------------------------------------------------------------------------------

Actuarial present value of benefit obligations:
Vested benefit obligation.................................................. $ 481 $ 539
===== =====

Accumulated benefit obligation............................................. $ 553 $ 604
===== =====

Projected benefit obligation............................................... $ 628 $ 740

Plan assets, primarily marketable equity and debt securities, at fair value (467) (490)
----- -----
Projected benefit obligation in excess of plan assets...................... 161 250
Unrecognized net loss...................................................... (41) (153)
Unrecognized prior service cost............................................ (5) (6)
Unamortized net transition obligation...................................... (29) (33)
Adjustment required to recognize minimum liability......................... 12 56
----- -----
Net accrued pension cost................................................. $ 98 $ 114
===== =====

The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the benefit obligations were 9
percent and 5.5 percent at December 31, 1994 and 7 percent and 5.5 percent at
December 31, 1993. The expected long-term rate of return on assets was 9.5
percent for 1994 and 1993 and 10 percent for 1992.

Components of the net pension cost were as follows (in millions):

[Enlarge/Download Table]

Year ended December 31, 1994 1993 1992
---------------------------------------------------------------------------------------------------

Service cost, benefits earned during the period.............................. $ 12 $ 9 $ 10
Interest cost on projected benefit obligation................................ 50 50 52
Actual return on plan assets................................................. (25) (57) (36)
Net amortization and deferred amounts........................................ (1) 24 5
---- ---- ----
Net pension cost........................................................... $ 36 $ 26 $ 31
---- ---- ----

Net pension cost, which is based upon a discount rate as of January 1, was
higher for 1994 than 1993 primarily due to a decrease in the discount rate from
8.5 percent at January 1, 1993 to 7 percent at January 1, 1994. The decrease in
net pension cost for 1993 as compared with 1992 was primarily due to a decrease
in the rate of future compensation growth from 6 percent at January 1, 1993 to
5.5 percent at January 1, 1994.

Railroad participates in a 401(k) thrift and profit sharing plan, sponsored
by BNI, which covers substantially all non-union employees. BNI matches 35
percent of the first 6 percent of the employees' contributions, which is subject
to certain percentage limits of the employees' earnings, at the end of each
quarter. Depending on BNI's consolidated performance, an additional matching
contribution of 20 or 40 percent can be made at the end of the year. Railroad's
expense was $8 million, $6 million and $4 million in 1994, 1993 and 1992,
respectively. Effective January 1, 1994, Railroad also sponsors a non-
contributory 401(k) retirement savings plan covering substantially all union
employees.

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9. Other benefit plans

Postretirement benefits

Effective January 1, 1992, Railroad adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." BNI provides
certain postretirement health care benefits, payable until age 65, for a small
number of retirees who were at least 55 years of age and who retired on or
before March 1986. BNI also provides life insurance benefits for eligible non-
union employees. Railroad participates in these plans and adopted accrual
accounting for the expense of these plans in 1992 by taking a $16 million
cumulative effect charge to income in order to establish a liability for those
benefits. Railroad pays benefits as claims are processed. The following data
relates to BNI's plans in which Railroad is the principal participant.

The status of BNI's plans and the accrued postretirement benefit cost
reflected in the consolidated balance sheets of BNI are as follows (in
millions):

[Download Table]

December 31, 1994 1993
------------------------------------------------------------------------------
Health Life Health Life
------ ---- ------ ----

Accumulated postretirement
benefit obligation:
Retirees....................... $- $11 $1 $13
Fully eligible active
participants................. - 1 - 2
Other active participants...... - 2 - 1
-- --- -- ---
- 14 1 16
Unrecognized net gain.............. - 4 - -
-- --- -- ---
Accrued postretirement benefit cost $- $18 $1 $16
== === == ===

Components of the postretirement benefit cost were as follows (in
millions):

[Download Table]

Year ended December 31, 1994 1993 1992
-------------------------------------------------------------------------------
Health Life Health Life Health Life
------ ---- ------ ---- ------ ----

Service cost....................... $- $- $- $- $- $-
Interest cost...................... - 1 - 1 - 1
-- -- -- -- -- --
Net postretirement benefit cost $- $1 $- $1 $- $1
== == == == == ==

The discount rate used in determining the benefit obligation was 9 percent
at December 31, 1994 and 7 percent at December 31, 1993. The health care cost
trend rate is assumed to decrease gradually from 14 percent in 1995 to 6 percent
in 2003 and thereafter. Increasing the assumed health care cost trend rate by
one percentage point in each year would have an insignificant effect on the
accumulated postretirement benefit obligation at December 31, 1994 and 1993 as
well as the aggregate of the service and interest cost components for the three
years ended December 31, 1994.

Under collective bargaining agreements, Railroad participates in multi-
employer benefit plans which provide certain postretirement health care and life
insurance benefits for eligible union employees. Insurance premiums attributable
to retirees, which are expensed as incurred, were $10 million in both 1994 and
1993 and $11 million in 1992.

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10. Commitments and contingencies

Casualty and environmental reserves

Casualty reserves consist primarily of personal injury claims, including
work-related injuries to employees. Employees of Railroad are compensated for
work-related injuries according to the provisions of the Federal Employers'
Liability Act. Liabilities for personal injury claims are estimated through an
actuarial model that considers historical data and trends and is designed to
record those costs in the period of occurrence. Railroad conducts an ongoing
review and analysis of claims and other information to ensure the continued
adequacy of casualty reserves. To the extent costs may exceed recorded accruals,
they are not anticipated to materially affect Railroad's financial condition,
results of operations or liquidity.

Environmental costs include initial site surveys and environmental studies
of potentially contaminated sites as well as costs for remediation and
restoration of sites determined to be contaminated. Liabilities for
environmental clean-up costs are initially recorded when Railroad's liability
for environmental clean-up is both probable and a reasonable estimate of
associated costs can be made. Adjustments to initial estimates are recorded as
necessary based upon additional information developed in subsequent periods.
Railroad conducts an ongoing environmental contingency analysis, which considers
a combination of factors, including independent consulting reports, site visits,
legal reviews, analysis of the likelihood of participation in and ability to pay
for clean-up by other PRPs, and historical trend analyses.

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including amounts expended under federal and state voluntary clean-up programs.
At this time, Railroad expects to spend approximately $110 million in future
years to remediate and restore all known sites, including $105 million
pertaining to mandated sites, of which approximately $70 million relates to the
PRP sites. Of the $110 million, Railroad expects to spend $33 million during
1995. Also, Railroad anticipates that the majority of the $110 million will be
paid out over a period of less than seven years; however, some costs will be
paid out over a longer period, in some cases up to 40 years. At December 31,
1994, 23 sites accounted for approximately $75 million of the accrual and no
individual site was considered to be material.

Lease commitments

Railroad has substantial lease commitments for railroad, highway equipment,
office buildings and a taconite dock facility. Most of these leases provide the
option to purchase the equipment at fair market value at the end of the lease.
However, some provide fixed price purchase options.

Lease rental expense for operating leases was $286 million, $233 million and
$222 million for the years ended December 31, 1994, 1993 and 1992, respectively.

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Minimum annual rental commitments were as follows (in millions):

[Download Table]

Capital Operating
Year ended December 31, Leases Leases
-------------------------------------------------------------------------

1995....................................... $ 9 $ 223
1996....................................... 7 210
1997....................................... 5 184
1998....................................... 5 169
1999....................................... 5 154
Thereafter................................. 37 1,230
--- ------
Total.................................. 68 $2,170
--- ======
Less amount representing interest.......... 22
Present value of minimum lease payments $46
===

In addition to the above, Railroad also receives and pays rents for railroad
equipment on a per diem basis, which is included in equipment rents.

Other commitments and contingencies

In 1993, Railroad entered into an agreement to acquire 350 alternating
current traction motor locomotives. In December 1994, the number of locomotives
to be acquired under this agreement was increased to 404. As of January 31,
1995, Railroad had accepted delivery of 147 locomotives and anticipates
deliveries under this agreement of between approximately 60 and 140 each year
from 1995, (including January 1995 deliveries) through 1997.

Railroad has two locomotive electrical power purchase agreements, expiring
in 1998 and 2001, that currently involve 197 locomotives. Payments required by
the agreements are based upon the number of megawatt hours of energy consumed,
subject to specified take-or-pay minimums. The rates specified in the two
agreements are renegotiable every two years. Railroad's 1995 minimum commitment
obligation is $53 million. Based on projected locomotive power requirements,
Railroad's payments in 1995 are expected to be in excess of the minimum.
Payments under the agreements totaled $47 million, $53 million and $56 million
in 1994, 1993 and 1992, respectively. In 1990, Railroad entered into a letter of
credit for the benefit of a vendor. This letter of credit is a performance
guarantee for up to $15 million in major overhauls to be performed on the power
purchase equipment.

In connection with its program to transfer certain rail lines to independent
operators, Railroad has agreed to make certain payments for services performed
by the operators in connection with traffic that involves the shortlines and
Railroad as carriers. These payments will vary with such factors as traffic
volumes and shortline costs and are not expected to exceed normal business
requirements for services received. These payments are reflected as reductions
to revenue to conform with reporting to the ICC. Revenues for these joint moves,
including amounts applicable to the independent operator portion of the line
haul, are reflected by Railroad as revenue from operations.

Railroad is party to various claims and lawsuits, some of which are for
substantial amounts. While these claims and actions are being contested, the
outcome of individual matters is not certain. Although actual liability on an
aggregate basis is similarly not determinable with certainty, as of December 31,
1994, Railroad believes that any liability resulting from these matters, after
taking into consideration Railroad's insurance coverages and amounts already
provided for, should not have a material adverse effect on Railroad's financial
position.

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There are no other commitments or contingent liabilities which Railroad
believes would have a material adverse effect on the consolidated financial
position, results of operations or liquidity.

11. Other income, net

Other income, net includes the following (in millions):

[Download Table]

Year ended December 31, 1994 1993 1992
-----------------------------------------------------------------------------

Gain on property dispositions..................... $17 $19 $ 9
Interest income................................... 10 9 11
Loss on sale of receivables....................... (9) (9) (11)
Litigation settlement agreement................... - - 47
Miscellaneous, net................................ (1) (7) 1
--- --- ----
Total......................................... $17 $12 $ 57
=== === ====

In the first quarter of 1992, both Railroad and BNI were parties to a
settlement agreement relating to the reimbursement of attorneys' fees and costs
incurred by Railroad in connection with litigation filed by Energy
Transportation Systems, Inc., and others, and reimbursement of a portion of the
amount paid in prior years by Railroad in settlement of that action. Under the
terms of the settlement, Railroad received approximately $50 million before
legal fees.

12. Accounting changes

Effective January 1, 1994, Railroad adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." The cumulative effect, net of $7
million income tax benefit, of this change in accounting attributable to years
prior to 1994, at the time of adoption, was to decrease 1994 net income by $10
million.

Effective January 1, 1993, Railroad adopted SFAS No. 109, "Accounting for
Income Taxes." SFAS No. 109 modifies SFAS No. 96, which established the
liability method of accounting for income taxes, and had been adopted by
Railroad effective January 1, 1986. Railroad adopted SFAS No. 109 consistent
with the transitional guidelines of SFAS No. 109. The effect of the adoption was
to increase the current portion of the deferred income tax asset with a
corresponding increase in the noncurrent deferred income tax liability of $26
million at January 1, 1993. There was no effect on net income, stockholder's
equity or cash flows.

In January 1992, the Emerging Issues Task Force of the Financial Accounting
Standards Board reached a consensus that origination of service revenue
recognition was not an acceptable accounting method beginning in 1992 for the
freight services industry. Accordingly, effective January 1, 1992, Railroad
changed its method of revenue recognition from one which recognized
transportation revenue at the origination point, to a method whereby
transportation revenue is recognized proportionately as a shipment moves from
origin to destination. The cumulative effect, net of a $7 million income tax
benefit, of the change on the prior year's revenue, at the time of adoption,
decreased 1992 net income by $11 million.

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In the fourth quarter of 1992, effective January 1, 1992, Railroad adopted
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," and elected immediate recognition of the $16 million transition
obligation. The cumulative effect, net of a $6 million income tax benefit, of
the change on prior years', at the time of adoption, decreased 1992 net income
by $10 million.

13. Related party transactions

In addition to various corporate-related transactions with its parent, BNI,
Railroad also rents, under operating leases, rolling stock and other property
from BN Leasing Corporation (BNLC), a wholly owned subsidiary of BNI. The
following is a summary of balances representing the result of transactions with
related parties (in millions):

[Download Table]

December 31, 1994 1993
----------------------------------------------------------------------------

Short-term:
Payable to BNLC for rent associated
with property and equipment....................... $10 $ 8
Payable to BNI, representing net settlement account
for dividends, taxes and other.................... 3 -
--- ----
Total short-term payables to related parties...... $13 $ 8
=== ====
Receivable from BNLC for accrued interest associated
with the notes receivable for hub centers and rail
facilities........................................ $ 2 $ 2
=== ====

Long-term:
Receivable from BNI, representing net settlement
account for dividends, taxes and other............ $ - $ 9
Notes receivable from BNLC for hub centers.......... 28 28
Note receivable from BNLC for rail facilities....... 41 41
Investments in non-consolidated subsidiaries........ 6 7
Receivables from non-consolidated subsidiaries
and other affiliates.............................. 19 19
--- ----
Total long-term investments in and advances to
related parties................................. $94 $104
=== ====

Railroad recorded the following amounts for transactions with related
parties (in millions):

[Download Table]

Year ended December 31, 1994 1993 1992
-----------------------------------------------------------------------------

Rental expense.......................... $ 57 $ 39 $ 32
Interest income......................... 7 7 8

In prior years, Railroad transferred the Denver and Houston hub centers to
Burlington Northern Railroad Holdings, Inc. (BNRRHI), a wholly owned subsidiary
of Railroad. BNRRHI subsequently sold the hub centers to BNLC. The hub centers,
with a combined book value of $22 million, were sold for the fair market value
of $28 million. BNRRHI received two promissory notes due October 31, 2000, with
interest at 10.05 percent from BNLC for the total sale price. The notes will be
paid off using proceeds generated from rental payments from Railroad to BNLC for
use of the facilities at the rate of $3 million per year. No gain was recorded
on the sale of the property.

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In prior years, Railroad purchased certain rail facilities at and between
Ortonville, Minnesota and Terry, Montana from the South Dakota Rail Authority.
These properties were subsequently sold to BNLC for the recorded net book value
of the property. Railroad received a promissory note from BNLC for the purchase
price of $41 million. Interest at a rate of 10.0 percent is due annually.
Principal is due at maturity on August 31, 2001. Railroad will make rental
payments of $5 million per year until 2001 for use of these facilities. No gain
or loss was recorded on the sale of the property.

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10-K 44th Page of 51 TOC 1st Previous Next ↓Bottom Just 44th
Report of Independent Accountants

To the Stockholder and Directors of
Burlington Northern Railroad Company and Subsidiaries

We have audited the consolidated financial statements and financial statement
schedule of Burlington Northern Railroad Company and Subsidiaries listed in Item
14 of this Form 10-K. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Burlington Northern Railroad Company and Subsidiaries as of December 31, 1994
and 1993, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1994 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 12 to the consolidated financial statements, the Company
changed its method of accounting for postemployment benefits in 1994, for income
taxes in 1993 and for revenue recognition and postretirement benefits other than
pensions in 1992.

COOPERS & LYBRAND L.L.P.

Fort Worth, Texas
January 16, 1995

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Quarterly Financial Data-unaudited

[Enlarge/Download Table]

(Dollars in millions) QUARTER
---------------------------------------------------------------------------------------------------
Fourth Third Second First
------ ----- ------ -----

1994
Revenues................................. $1,344 $1,249 $1,192 $1,210
Operating income......................... 259 220 174 178
Income before cumulative effect of change
in accounting method................... 152 125 95 97
Cumulative effect of change in accounting
method, net of tax (1)................. - - - (10)
------ ------ ------ ------
Net income............................... $ 152 $ 125 $ 95 $ 87
====== ====== ====== ======

1993
Revenues................................. $1,246 $1,141 $1,142 $1,170
Operating income......................... 220 118 146 166
Net income (2)........................... 125 34 81 92

(1) Effective January 1, 1994, Railroad adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits." The cumulative effect, net of $7 million income tax benefit, of
this change in accounting attributable to years prior to 1994, at the time
of adoption, was to decrease 1994 net income by $10 million.

(2) Results for the third quarter of 1993 included the effects of the Omnibus
Budget Reconciliation Act of 1993 (the Act) which was signed into law in
August 1993. The Act increased the corporate federal income tax rate by one
percent, effective January 1, 1993, which reduced net income by $28 million
through the date of enactment. Results for the third quarter of 1993 also
included the effects of the severe flooding in the Midwest. Railroad
estimated that the flooding reduced revenues and operating income during
the quarter by $44 million and $79 million, respectively, and reduced net
income by $49 million.

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Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

None

PART III

Items Ten, Eleven, Twelve and Thirteen

Directors and Executive Officers of the Registrant; Executive Compensation;
Security Ownership of Certain Beneficial Owners and Management; and Certain
Relationships and Related Transactions

Not applicable - see Table of Contents note.

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

[Download Table]

Page
----

Financial Statements:
Consolidated Statements of Income for the three years
ended December 31, 1994................................ 21
Consolidated Balance Sheets at December 31, 1994 and 1993 22
Consolidated Statements of Cash Flows for the three years
ended December 31, 1994................................ 23
Consolidated Statements of Changes in Common
Stockholder's Equity for the three years ended
December 31, 1994.................................... 24
Notes to Consolidated Financial Statements............... 25
Report of Independent Accountants.......................... 41
Quarterly Financial Data-unaudited......................... 42
Consolidated Financial Statement Schedule for the three
years ended December 31, 1994:
Schedule II-Valuation and Qualifying Accounts............ 47

Schedules other than those listed above are omitted because they are not
required or not applicable, or the required information is included in the
consolidated financial statements or related notes.

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Exhibit Index

The following exhibits are filed as part of this report.

[Download Table]

Exhibit Page
Number Description Number
------- ----------- ------

3.1 Certificate of Incorporation of Burlington Northern *
Railroad Company as amended through July 20, 1987.
3.2 By-Laws of Burlington Northern Railroad Company *
as amended through July 17, 1991.
4.1 The Company has either previously filed with the *
Securities and Exchange Commission or upon request will
furnish a copy of any instrument with respect to the
long-term debt of the Company (1989 Form 10-K, filed
March 1990).
10.1 364-Day Competitive Advance and Revolving Credit *
Facility Agreement, dated as of May 6, 1994, between
Burlington Northern Railroad Company and a consortium
of lenders (Form 10-Q for the quarter ended June 30,
1994, filed August 1994).
10.2 5-Year Competitive Advance and Revolving Credit *
Facility Agreement, dated as of May 6, 1994, between
Burlington Northern Railroad Company and a consortium
of lenders (Form 10-Q for the quarter ended June 30,
1994, filed August 1994).
10.3 3-Year Term Loan Facility Agreement, dated as of **
November 14, 1994, between Burlington Northern
Railroad Company and a consortium of lenders.
10.4 Employment Agreement, dated September 4, 1990, *
by and between Burlington Northern Railroad Company
and Mr. John T. Chain (1990 Form 10-K, filed
March 1991).
10.5 Employment Agreement, dated September 18, 1991, *
by and between Burlington Northern Railroad Company
and Mr. Richard A. Russack (1991 Form 10-K, filed
February 1992).
10.6 Employment Agreement, dated April 18, 1994, between *
Burlington Northern Railroad Company and
Mr. Greg Swienton (Form 10-Q for the quarter ended
June 30, 1994, filed August 1994).
10.7 Employment Agreement, dated April 22, 1994, between *
Burlington Northern Railroad Company and
Mr. Ronald A. Rittenmeyer (Form 10-Q for the quarter
ended June 30, 1994, filed August 1994).
27 Financial Data Schedule. **

* Exhibit is incorporated by reference as indicated.
** Exhibit is filed with Form 10-K for the year ended December 31, 1994.

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REPORTS ON FORM 8-K

During the period, a report on Form 8-K, dated October 26, 1994, was filed
attaching an Amendment dated as of October 26, 1994 to the Agreement and Plan of
Merger dated as of June 29, 1994 between Burlington Northern Inc. (BNI) and
Santa Fe Pacific Corporation (Santa Fe) and further attaching the press release
of BNI dated October 27, 1994 announcing the execution of said Amendment.

During the period, a report on Form 8-K, dated November 18, 1994, was filed
concerning a litigation development related to a coal transportation contract.

During the period, a report on Form 8-K, dated December 18, 1994, was filed
attaching Amendment No. 2 dated as of December 18, 1994 to the Agreement and
Plan of Merger dated as of June 29, 1994 between BNI and Santa Fe and further
attaching the press release of BNI dated December 18, 1994 announcing the
execution of said Amendment No. 2.

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SIGNATURES

Pursuant to the requirements of 13 or 15(d) of the Securities Exchange Act
of 1934, Burlington Northern Railroad Company has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on
this 17th day of February, 1995.

BURLINGTON NORTHERN RAILROAD COMPANY

By /s/ GERALD GRINSTEIN
------------------------------------------
Gerald Grinstein,
Chairman, Chief Executive Officer and
Director

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 Railroad Company and in the capacities and on the dates indicated.

/s/ GERALD GRINSTEIN Chairman,
----------------------- Chief Executive Officer and
Gerald Grinstein Director February 17, 1995

/s/ DAVID C. ANDERSON Executive Vice President,
----------------------- Chief Financial Officer and
David C. Anderson Director February 17, 1995

/s/ DON S. SNYDER Vice President, Controller and
----------------------- Chief Accounting Officer
Don S. Snyder February 17, 1995

/s/ EDMUND W. BURKE Director
-----------------------
Edmund W. Burke February 17, 1995

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Schedule II

Burlington Northern Railroad Company and Subsidiaries
Valuation and Qualifying Accounts
For the years ended December 31, 1994, 1993 and 1992
(In millions)

[Enlarge/Download Table]

Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Balance at Additions Charged Balance at
Description Beginning of Period to Income Deductions(1) End of Period(2)
----------- ------------------- ----------------- ---------- -------------

December 31, 1994:
Casualty and environmental reserves.. $712 $223 $272 $663
==== ==== ==== ====
December 31, 1993:
Casualty and environmental reserves.. $731 $261 $280 $712
==== ==== ==== ====
December 31, 1992:
Casualty and environmental reserves.. $713 $312 $294 $731
==== ==== ==== ====

Notes:

(1) Principally represents cash payments.

(2) Classified in the consolidated balance sheets as follows:

[Download Table]

1994 1993 1992
---- ---- ----

Casualty and environmental reserves
(current liabilities)............ $248 $286 $249
Casualty and environmental reserves
(noncurrent liabilities)......... 415 426 482
--- --- ---
$663 $712 $731
==== ==== ====

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Exhibit Index

Sequentially
Exhibit Numbered
Number Description Page
------- ----------- ------------

10.3 3-Year Term Loan Facility Agreement, dated
as of November 14, 1994, between Burlington
Northern Railroad Company and a consortium
of lenders.

27 Financial Data Schedule.

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-K’ Filing	Date	First	Last	Other Filings

	8/31/01	43
	10/31/00	42
	5/6/99	31
	11/1/97	31
	5/5/95	31
	3/30/95	13
	3/29/95	11
	2/27/95	11
	2/21/95	12	22
Filed on:	2/17/95	12	49
	2/13/95	11	13
	2/8/95	20
	2/7/95	20	22
	2/3/95	22
	1/31/95	2	40
	1/27/95	22
	1/24/95	20		8-K, 8-K/A
	1/20/95	12		8-K
	1/19/95	11		8-K
	1/16/95	44
For Period End:	12/31/94	1	50
	12/23/94	20
	12/18/94	20	48	8-K
	11/18/94	12	48	8-K
	11/14/94	47	51
	11/1/94	9	31
	10/28/94	11
	10/27/94	48
	10/26/94	20	48	8-K
	10/5/94	22		10-K/A, 10-Q/A
	8/2/94	12
	6/30/94	47		10-Q, 10-Q/A
	6/29/94	20	48	8-K
	5/25/94	12
	5/6/94	47
	4/22/94	47
	4/18/94	47
	1/1/94	36	45
	12/31/93	8	50	10-K, 10-K/A
	10/1/93	17
	7/22/93	11
	5/6/93	12
	2/9/93	11
	1/9/93	12
	1/1/93	15	45
	12/31/92	9	50
	6/30/92	12
	3/24/92	11
	1/1/92	37	42
				List all Filings

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Filing Submission 0000950109-95-000405 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

BNSF Railway Co – ‘10-K’ for 12/31/94

As of: Friday, 2/17/95 · For: 12/31/94 · Accession #: 950109-95-405 · File #: 1-06324

Previous ‘10-K’: ‘10-K/A’ on 10/5/94 for 12/31/93 · Next: ‘10-K’ on 4/1/96 for 12/31/95 · Latest: ‘10-K’ on 2/26/18 for 12/31/17

Annual Report — Form 10-KFiling Table of Contents

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Dates Referenced Herein and Documents Incorporated by Reference

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