BURLINGTON NORTHERN SANTA FE CORP - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-11535

BURLINGTON NORTHERN SANTA FE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

41-1804964

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2650 Lou Menk Drive

Fort Worth, Texas

(Address of principal executive offices)

76131

(Zip Code)

(800) 795-2673

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Shares Outstanding at April 22, 2005
Common stock, $.01 par value		376,548,744 shares

Table of Contents


		PAGE
*PART I*

Item 1. Financial Statements		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3. Quantitative and Qualitative Disclosures About Market Risk		33
Item 4. Controls and Procedures		35

*PART II*

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 4. Submission of Matters to a Vote of Security Holders		36
Item 6. Exhibits		37
Signatures		S-1
Exhibits		E-1

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

BURLINGTON NORTHERN SANTA FE CORPORATION and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in millions, except per share data)

(Unaudited)


Three Months Ended March 31,	2005		2004
Revenues	$	2,982	$	2,490

Operating expenses:
Compensation and benefits		853		787
Purchased services		417		340
Depreciation and amortization		263		249
Equipment rents		213		187
Fuel		392		280
Materials and other		210		237

Total operating expenses		2,348		2,080

Operating income		634		410
Interest expense		109		102
Other expense (income), net		7		(3	)

Income before income taxes		518		311
Income tax expense		197		118

Net income	$	321	$	193

Earnings per share:
Basic earnings per share	$	0.86	$	0.52

Diluted earnings per share	$	0.83	$	0.52

Average shares (in millions):
Basic		374.0		369.4
Dilutive effect of stock awards		10.6		4.6

Diluted		384.6		374.0

Dividends declared per share	$	0.17	$	0.15

See accompanying Notes to Consolidated Financial Statements.

BURLINGTON NORTHERN SANTA FE CORPORATION and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in millions, shares in thousands)

(Unaudited)


	March 31, 2005			December 31, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	115		$	322
Accounts receivable, net		240			181
Materials and supplies		414			339
Current portion of deferred income taxes		124			308
Other current assets		688			465

Total current assets		1,581			1,615

Property and equipment, net		25,915			25,814
Other assets		1,851			1,496

Total assets	$	29,347		$	28,925

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other current liabilities	$	2,338		$	2,251
Long-term debt due within one year		476			465

Total current liabilities		2,814			2,716

Long-term debt and commercial paper		6,003			6,051
Deferred income taxes		7,808			7,820
Casualty and environmental liabilities		920			941
Minimum pension liability		353			353
Employee separation costs		121			124
Other liabilities		1,671			1,609

Total liabilities		19,690			19,614

Commitments and contingencies (see Notes 2, 4, and 5) Stockholders’ equity:
Common stock, $.01 par value, 600,000 shares authorized; 521,762 shares and 517,275 shares issued, respectively		5			5
Additional paid-in capital		6,472			6,299
Retained earnings		7,049			6,792
Treasury stock, at cost, 145,154 shares and 140,463 shares, respectively		(3,983	)		(3,741	)
Unearned compensation		(45	)		(43	)
Accumulated other comprehensive income (loss)		159			(1	)

Total stockholders’ equity		9,657			9,311

Total liabilities and stockholders’ equity	$	29,347		$	28,925

See accompanying Notes to Consolidated Financial Statements.

BURLINGTON NORTHERN SANTA FE CORPORATION and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)

(Unaudited)


Three Months Ended March 31,	2005			2004
OPERATING ACTIVITIES
Net income	$	321		$	193
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		263			249
Deferred income taxes		72			82
Employee separation costs paid		(8	)		(8	)
Long-term casualty and environmental liabilities, net		(34	)		9
Other, net		(21	)		(22	)
Changes in current assets and liabilities:
Accounts receivable, net		(50	)		(73	)
Materials and supplies		(49	)		(16	)
Other current assets		(21	)		(59	)
Accounts payable and other current liabilities		92			(114	)

Net cash provided by operating activities		565			241

INVESTING ACTIVITIES
Capital expenditures		(326	)		(306	)
Other, net		(215	)		(172	)

Net cash used for investing activities		(541	)		(478	)

FINANCING ACTIVITIES
Net increase in commercial paper and bank borrowings		—			406
Payments on long-term debt		(43	)		(33	)
Dividends paid		(64	)		(56	)
Proceeds from stock options exercised		101			56
Purchase of BNSF common stock		(225	)		(82	)
Other, net		—			1

Net cash (used for) provided by financing activities		(231	)		292

(Decrease) increase in cash and cash equivalents		(207	)		55
Cash and cash equivalents:
Beginning of period		322			18

End of period	$	115		$	73

SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid, net of amounts capitalized	$	93		$	114
Income taxes paid, net	$	55		$	3
Non-cash asset financing	$	19		$	2

See accompanying Notes to Consolidated Financial Statements.

BURLINGTON NORTHERN SANTA FE CORPORATION and SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Shares in thousands, dollars in millions, except per share data)

(Unaudited)


	Common Shares	Treasury Shares		Common Stock and Paid-in Capital		Retained Earnings			Treasury Stock			Unearned Compensation			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balance at December 31, 2004	517,275	(140,463	)	$	6,304	$	6,792		$	(3,741	)	$	(43	)	$	(1	)	$	9,311
Common stock dividends, $0.17 per share					—		(64	)		—			—			—			(64	)
Adjustments associated with unearned compensation, restricted stock	637	(6	)		31		—			—			(2	)		—			29
Exercise of stock options and related tax benefit of $29	3,850	(329	)		142		—			(17	)		—			—			125
Purchase of BNSF common stock (a)	—	(4,356	)		—		—			(225	)		—			—			(225	)
Comprehensive income:
Net income					—		321			—			—			—			321
Gain on derivative instruments, net of tax expense of $100					—		—			—			—			160			160