Burlington Northern Santa Fe Corporation
  2001 Annual Report to Shareholders
Contents                            The BNSF Vision
     Message from the CEO           Our vision is to realize the treme...
Consolidated Financial Highlights
Burlington Northern Santa Fe Corporation and Subsidiaries
(Dollars in millions, except p...
To Our Shareholders,                                     operating ratio in the mid-70                        employees wh...
work hours, decreased about 6
percent compared with 2000.
We also saw a 5-percent reduc-
tion for the year in the rate of ...
emphasis on retraining as             635 highway-rail grade crossings        the lowest in our history and the
          ...
with many customers in 2001.        Capital Investment 1995-2001
                                    ($ in billions)
Some ...
EASE                         OF                  Some BNSF eBusiness tools attract new business. Other eBusiness tools
   ...
emphasis on developing Web-          Advisory Board about our                                   Division for the third yea...
Southern California and
                                                                               expansion of our gu...
Free Cash Flow 1995-2001                                                              Efficiency 1995-2001
(after dividend...
valued friend and mentor to
     year, the legislation modernizes     and guidance. Arnold Weber,
                        ...
A       TRIBUTE                           TO           ROBERT                        D.        KREBS

“BNSF Chairman Rober...
B       N    S       F’S               V    A      L    U      E          S     T     A     T      E     M         E   N  ...
Financial Contents
     Management’s Discussion and Analysis
13
     Report of Management
23
     Report of Independent Ac...
Agricultural Products revenues of $1,531 million for 2001               increase in the average all-in cost per gallon of ...
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
BNSF2001 annrpt
Upcoming SlideShare
Loading in …5
×

BNSF2001 annrpt

838 views
763 views

Published on

Published in: Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
838
On SlideShare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
8
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

BNSF2001 annrpt

  1. 1. Burlington Northern Santa Fe Corporation 2001 Annual Report to Shareholders
  2. 2. Contents The BNSF Vision Message from the CEO Our vision is to realize the tremendous potential of The Burlington 2 and President Northern and Santa Fe Railway Company by providing transportation A Tribute to Robert D. Krebs services that consistently meet our customers’ expectations. 11 BNSF’s Values 12 Financial Review We will know we have succeeded when: 13 Executive Officers 40 Our customers find it easy Our owners earn financial and Directors • • to do business with us, returns that exceed other receive 100-percent on-time, railroads and the general About The Cover damage-free service, accurate market as a result of BNSF’s A BNSF coal train, loaded with and timely information superior revenue growth, an coal from the Powder River regarding their shipment, operating ratio in the low Basin in Wyoming, crosses and the best value for their 70s, and a return on invested the Texas Panhandle north of transportation dollar. capital which is greater than Amarillo, bound for a coal-fired our cost of capital. utility near Houston, Texas. Our employees work in a safe • environment free of accidents The communities we serve • and injuries, are focused benefit from our sensitivity on continuous improvement, to their interests and to the share the opportunity for environment in general, personal and professional our adherence to the highest growth that is available to all legal and ethical standards, members of our diverse work and the participation of our force, and take pride in their company and our employees association with BNSF. in community activities.
  3. 3. Consolidated Financial Highlights Burlington Northern Santa Fe Corporation and Subsidiaries (Dollars in millions, except per share data) December 31, 2001 2000 1999 1998 1997 For The Year Ended: Revenues $ 9,208 $ 9,207 $ 9,195 $ 9,057 $ 8,489 Operating income $ 1,755 $ 2,108 $ 2,205 $ 2,158 $ 1,767 Net income $ 731 $ 980 $ 1,137 $ 1,155 $ 885 Basic earnings per share $ 1.89 $ 2.38 $ 2.46 $ 2.45 $ 1.91 Average shares (in millions) 387.3 412.1 463.2 470.5 464.4 Diluted earnings per share $ 1.87 $ 2.36 $ 2.44 $ 2.43 $ 1.88 Average shares (in millions) 390.7 415.2 466.8 476.2 471.1 Dividends declared per common share $ 0.48 $ 0.48 $ 0.48 $ 0.44 $ 0.40 At Year End: Total assets $24,721 $24,375 $23,700 $22,646 $21,266 Long-term debt and commercial paper, including current portion $ 6,651 $ 6,846 $ 5,813 $ 5,456 $ 5,289 Stockholders’ equity $ 7,849 $ 7,480 $ 8,172 $ 7,784 $ 6,822 Total debt to capital 45.9% 47.8% 41.6% 41.2% 43.7% For The Year Ended: Total capital expenditures $ 1,459 $ 1,399 $ 1,788 $ 2,147 $ 2,182 Depreciation and amortization $ 909 $ 895 $ 897 $ 832 $ 773 Certain prior period amounts have been reclassified for current presentation. Effective September 1, 1998, the Company split its common shares three-for-one through a stock dividend of two additional shares for each share outstanding or held in treasury. All share and per share data for periods prior to this date were adjusted for the stock split. Free cash flow of $443 million, after dividends 2001 RECORD Operating efficiency at 22.9 million gross ton miles per employee ACHIEVEMENTS Fuel efficiency of 762 gross ton miles per gallon In each of the following categories, Coal volume at 243 million tons BNSF had all-time record high Revenue for soybeans, taconite, petroleum, plastics, aggregates, achievements in 2001, compared cement/gypsum/lime, and government/military moves with previous years or comparable fourth quarters: Revenue for traffic in and out of Mexico On-time performance in the fourth quarter at 91.2 percent Car velocity in the fourth quarter of 190 miles per day Train size in the fourth quarter of 112 cars/units per train 1
  4. 4. To Our Shareholders, operating ratio in the mid-70 employees who, as reservists and percent range. We were not able members of National Guard units, Customers And Colleagues: to keep operating costs in line have been called to active duty to Throughout 2001, BNSF with lower-than-planned revenues, defend our nation and to provide remained committed to the but we were able to maintain our a level of homeland security not five strategic priorities that we high service standards. At the seen in America for decades. introduced in last year’s report same time, we achieved several and that will guide the Com- records in 2001 in service, rev- I have tremendous faith in all pany into the future. In this enue and efficiency, and in the of our employees to continue letter, I’ll discuss the progress fourth quarter, we operated the the commitment and resiliency we made on each priority: Peo- railroad at a record 91.2 percent shown in 2001. Our five strate- ple, Growth, Ease of Doing on-time performance and made gic initiatives focus our efforts as Business, Service and Efficiency. progress in getting our expenses we work toward our vision of in line with business levels. The providing transportation services We finished this economically dif- chart on page 1 provides some that consistently meet or exceed ficult year with freight revenues detail on these records. We remain customers’ expectations. and volumes essentially unchanged optimistic about BNSF’s per- from 2000. We outperformed formance in 2002 and beyond. People And Safety In all ways, our People initiatives many other Fortune 200 compa- As we reflect on the events of pull everything together. It is only nies during 2001, thanks to the 2001, we have to point to Sep- through our people that we can commitment of 39,000 BNSF tember 11 as a defining moment provide better service, which will in women and men, and the diver- for America. I am proud of how turn allow us to grow our revenues. sity of our customer base and rail BNSF people have pulled together network. In addition, improved We made considerable progress in to support each other and to pro- business processes and innovative 2001 linking our strategic initia- vide our customers with timely service offerings introduced in tives to the goals of each member information and safe, reliable 2001 position BNSF for prof- of our management team through service. I’m proud of our Com- itable growth as the industrial and our revised Performance Manage- munity for their unselfishness in retail economies begin to improve, ment Process. Every member of supporting blood drives and pro- which we may see later this year. the team has clear, annual per- viding donations at the local and formance objectives and measure- national level to help the victims Overall, we were disappointed ments that define expectations and their families during this try- with our financial performance for as well as a development plan ing time. I also want to say “thank 2001. We had hoped to increase recognizing strengths and areas you” to the dozens of BNSF our revenues and to maintain our for improvement. Our TEAM BNSF program, introduced in Safety Severity Ratio 1995-2001 December, recognizes and builds (lost workdays/200,000 hours worked) on our people’s outstanding ability to work together in cross- 100 functional teams focused on 78.9 80 meeting customers’ needs. 60 53.0 43.0 38.0 Safety is also a part of our People 36.7 34.7 32.9 40 initiative. Overall, our total num- 20 ber of injuries in 2001 was about 0 even with 2000 levels, while the 2001 1995 1996 1997 1998 1999 2000 severity of injuries, as measured The severity ratio measures workdays lost due to injury per 200,000 hours worked. Figures for each calendar in lost workdays per 200,000 year reflect data available as of January of the following year. 2
  5. 5. work hours, decreased about 6 percent compared with 2000. We also saw a 5-percent reduc- tion for the year in the rate of rail accidents per million train miles. Most of our safety progress was made during the second half of 2001, when we implemented our “WorkSafe” campaign. This cam- paign built on our emphasis on Safe Production by focusing on high-risk, high-frequency work activities—tasks that are performed hundreds or thousands of times each day across our network and pose the greatest potential hazards. Going forward, our safety focus will continue to be risk reduction through targeted workplace and P E O P L E Clear work practice assessment. In the fall of 2001, we piloted at Birm- In 2001, BNSF rolled out the rail ingham, Ala., a structured Risk industry’s first-ever network of loco- Reduction process that involves motive simulators by installing 15 craft people on the local safety NetSimulators at field locations for team observing work practices “distance learning” opportunities. and targeting programs for pat- BNSF has had locomotive simula- terns of high-risk behavior. Initial tors at its Technical Training Center results from this pilot project have near Kansas City since 1986, but NetSimulators bring hands-on loco- been promising, and we hope to Fog and Haze motive training to field locations extend a similar Risk Reduction where employees live and work. In process to other locations in 2002. fact, more than 14,000 BNSF peo- ple were trained in 2001 through We will also continue the progress BNSF’s NetSimulator, Intranet and made during an unprecedented other computer-based training (CBT). “safety summit” held in April NetSimulator training is often com- 2001, which brought together the bined with CBT for intensive training presidents of BNSF, the United on key topics. Locomotive engineers can dramatically improve their fuel Transportation Union and the efficiency, for instance, by complet- Brotherhood of Locomotive ing a CBT course on fuel conserva- Ice and Snow Engineers. We are working with tion and then practicing their fuel these groups on an agreement conservation techniques on a Net- that ensures the participation of Simulator. The NetSimulators also union leadership in the safety allow employees and trainers to process for about 18,000 train, customize simulations to reflect dif- engine and yard employees. This ferent train types, weather conditions, safety agreement will focus on terrain, track, and times of day, union involvement in the pre- so training can focus on conditions typically faced by local employees. vention of injuries and increased 3
  6. 6. emphasis on retraining as 635 highway-rail grade crossings the lowest in our history and the lowest in the industry. We believe as part of our grade crossing safety opposed to traditional discipline. that even one grade crossing colli- initiative. In 2001, this effort con- sion is too many, however, and we tinued very successfully, bringing In addition, we are implementing will continue to make grade cross- improvements in safety and effi- proven and cost-effective tech- ing safety and public education ciency. Our cross-functional team nologies that help engineer out a top priority as we go forward. risk, including a Global Posi- from safety, public projects and tioning System (GPS) and radio- field operations closed another based tracking system that ensures 515 grade crossings, working with Growth And Ease our on-track hy-rail vehicles stay the states and local communities Of Doing Business Although freight revenues were within their authority limits. to identify the best candidates essentially unchanged year-over- for closure. We have similarly year, BNSF added new cus- In last year’s report, we cited our aggressive goals for 2002. Today, tomers and increased business our grade-crossing collision rate is industry-leading program to close G R O W T H Pacific Railroad (UP) as a condi- business over 2000 levels, which tion of the UP’s merger with demonstrates our success in Southern Pacific in 1996. Since capturing additional freight off In 2001, BNSF inaugurated serv- early 1997, BNSF has increased the highways. Our Mexico busi- ice to a new American Soda its business levels on these track- ness also grew by about 10 per- plant at Parachute, Colo., to han- age rights to more than 434,000 cent over 2000 levels, and we dle soda ash produced at this 1- loads annually. set revenue records for soybeans, million ton capacity plant. BNSF taconite, petroleum, plastics, Other BNSF growth areas included aggregates, cement/gypsum/lime, reaches the plant via trackage a 10 percent increase in truckload and government/military traffic. rights granted on the Union 4
  7. 7. with many customers in 2001. Capital Investment 1995-2001 ($ in billions) Some of this growth is directly related to product and service 3.0 offerings introduced during 2.5 2.3 the year, as well as to our net- 2.3 2.5 2.3 work’s ability to provide more 2.0 1.8 1.8 1.6 consistent service. 1.5 1.0 Several areas of our business 0.5 did quite well in 2001. Bright 0.0 spots included our truckload 2001 1995 1996 1997 1998 1999 2000 business, which was up about BNSF spent more than $14 billion in capital investments since the beginning of 1995. After an aggressive expenditure program following the merger, BNSF has scaled back its capital investment. BNSF’s 2001 capital 10 percent over 2000 levels and investments of $1.6 billion represented a 36 percent decrease compared with the 1998 figure of $2.5 billion. demonstrates that we are cap- Chart includes operating leases for freight equipment obtained to expand business. turing additional freight off the highways. We also saw a 10 2001, including coast-to-coast transportation. In 2002, we percent growth for our Mexico premium intermodal and double- plan to add shuttle train service business, and Industrial Prod- stack services with CSX and for fertilizer shipments, while ucts revenue records were set in Norfolk Southern, a 48-hour continuing to expand our grain taconite, petroleum, plastics, service offering between Chicago shuttle network. aggregates, cement/gypsum/lime, and Los Angeles, and expanded and government/military moves. Ice Cold Express service for Our Coal group continues to be perishables from Southern Cali- successful in expanding the mar- We introduced a number of new fornia to New York and New ket for Powder River Basin (PRB) and expanded services that lay a Jersey markets via CSX. We also low-sulphur coal. BNSF won foundation for continued growth. expanded our guaranteed on- several major, long-term coal time intermodal service program contracts last year and renegoti- For Agricultural Products, we to include 12 lanes and interna- ated several expiring contracts. continue to expand our grain tional shippers. We were the We also introduced the industry’s shuttle network, which provides first railroad to offer a premium, first Internet monthly auction of dedicated locomotives and cov- money-back guarantee option. coal transportation option con- ered hopper cars for shippers As of the end of 2001, we moved tracts to help coal-burning utili- who have elevators capable more than 4,000 guaranteed ties, coal mines and others lock of loading 110-car trains in 15 loads with a 98 percent on-time in transportation capacity and hours or less. We now have service record. price months in advance. Our 73 origin and 30 destination successful roll-out of this online elevators in our shuttle network. To improve transit times and auction enabled us to test this This approach to grain trans- transborder shipments for cus- marketing concept, which we will portation dramatically improves tomers moving product in and refine in 2002. For the first time transit times and equipment out of Mexico, we introduced in a number of years, several util- utilization, and has enabled Mexi-Modal, a seamless inter- ities have proposed construction BNSF to build a domestic grain modal service in cooperation of new and expanded coal-fired franchise to complement our with Canadian National Rail- plants. BNSF is actively negoti- export grain business. Currently, way, CSX, Transportacion Fer- ating to serve several of these about 22 percent of our Agri- roviaria Mexicana and several proposed plants with PRB coal. cultural Products revenues Mexican trucking companies. are derived annually from shut- Introduced in July, Mexi-Modal For Consumer Products, BNSF tle train moves, providing ship- service grew from virtually no pers with efficient, lower cost launched several new services in business to 150 intermodal loads 5
  8. 8. EASE OF Some BNSF eBusiness tools attract new business. Other eBusiness tools improve “ease of doing business” by enabling customers to transact business DOING electronically. In 2001, BNSF continued to increase the percentage of major transactions completed electronically, as well as the percentage of freight BUSINESS payment dollars received electronically and through other automated processes. Electronic Transactions 1999-2001 (percent of total) 92.5% 87% 57% 38% 2001 2001 2001 2001 2000 91% 2000 77% 2000 50% 20% 2000 1999 1999 1999 1999 87% 30% 35% 15% Freight Payments Equipment Releases Shipping Instructions Equipment Requests BNSF was ranked as the leading U.S. railroad and one of the leaders in U.S. industry for its Website technology and eCommerce capabilities by the following publications in 2001: Magazine Rank Description BNSF ranked 13th out of 500 top companies for generating the most revenue from Web operations Interactive Week BNSF ranked as one of the top 100 companies cited as innovators in information technology InfoWorld BNSF ranked as one of the top 500 companies using its Website to connect with customers, suppliers and partners eWeek BNSF listed as one of the top 50 U.S. companies using the Internet to enhance and expand their business Smart Business we made a number of changes terminal at least once before per month in its first three to improve the focus on our they reach their final destina- months of operation, including customers, products and markets. tion. In 2001, we worked with loads from customers who had We reorganized this work team CSX, for instance, to reduce never shipped by rail before, into marketing and sales groups transit times for interline car- and it continues to establish to simplify our customer inter- load service through Chicago. new monthly loading records. actions. We also worked to streamline pricing administration BNSF’s Loading Origin Guar- We opened our Stockton inter- by moving toward public pric- antees (LOGS) program, an modal facility in April, which ing. This initiative reduced the online auction that allows cus- increases our intermodal capac- number of pricing documents tomers to secure boxcar and ity in northern California by 50 the group handles by 30 percent, centerbeam rail car capacity percent to more than 500,000 enabling the group to focus in advance, was expanded to lifts annually, and expedites more of their time on customer include refrigerated boxcars movement of all types of freight service and revenue growth. in 2001. More than 43,000 on our West Coast routes. On loads have now been handled the eastern end of our network, We are also exploring ways to through our LOGS program, construction started on our Joliet improve the interchange process with a success rate that exceeds Multimodal Facility, scheduled with other carriers and trans- 99.9 percent. to open this fall, which will offer portation providers to improve our fourth intermodal facility overall transit performance. in the Chicago area. Our Ease of Doing Business ini- This is important because about tiative is closely tied to revenue one-fourth of all carload ship- For Industrial Products, in addi- growth. To make it easier for ments moving on our network tion to achieving record high customers to transact business interchange at another railroad’s revenue for several commodities with us, we’ve put a tremendous 6
  9. 9. emphasis on developing Web- Advisory Board about our Division for the third year. We based products and on making Growth, Service and Ease-of- were also named Carrier of the our Website easier to access and Doing Business initiatives along Year by Wal-Mart Stores, Inc., navigate. As you’ll see in the with some excellent suggestions the nation’s largest retailer, for accompanying feature, more that we’ll incorporate into our the third consecutive year and a and more customers are using plans for 2002. Partner in Quality by intermodal these Web-based tools, and partner Schneider National, Inc. BNSF was recognized in 2001 Our focus on the customer is by a number of leading business bringing results. We were named Service And Efficiency and technology publications as a Premier Partner by American From a Service perspective, we an industry leader for the quality Honda Motor Co., Inc., for the had a number of successes. The of its eCommerce products. fourth year in a row, and Rail premium intermodal services Carrier of the Year by Toyota we initiated, including 48-hour At the same time, we realize North American Parts Logistics service between Chicago and that Web-enabled tools are not a substitute for personal cus- most service-sensitive segment of S E R V I C E tomer interactions. These tools the business performing at better are simply intended to free up than 92 percent on-time. Service Thanks to solid on-time performance a BNSF representative’s time design improvements include expe- and service design improvements, to focus on proactive customer dited run-through service with BNSF has increased its perishables CSX for transcontinental perishable contacts. To further improve business by 6 percent since 2000 shipments bound for East Coast these contacts, we are imple- and by 28 percent since 1999. Per- locations and use of existing capac- menting a customer relation- ishable commodities include fresh ity on expedited automotive and ship management program fruit and vegetables, frozen foods, intermodal trains for perishable designed to help our people cheese and other products that shipments on certain corridors. better respond to customer move in refrigerated boxcars and Significant service design improve- needs and concerns, and to trailers. On-time performance for ments also contributed to BNSF’s all perishables business averaged better understand our cus- 10 percent growth in Mexico busi- ness during 2001. in the high 80s in 2001, with the tomers’ business strategies and the role we can play in their supply chain. Vancouver Seattle Tacoma Spokane Havre The best way to understand our Portland Pasco Helena Dilworth customers’ needs and expecta- Billings Klamath Falls Minneapolis/St. Paul tions is to get their direct feed- Guernsey Alliance back and suggestions. This is Chicago Salt Lake City Galesburg Lincoln why we formed our Customer Denver San Francisco Kansas City St. Louis Advisory Board in 2000, made Barstow Springfield Los up of executives from 30 differ- Amarillo Angeles San Bernardino Oklahoma Memphis City Albuquerque ent companies that span all of San Diego Phoenix Birmingham Dallas/Ft. Worth our business groups. We meet El Paso Mobile with this board twice a year to Houston New Orleans Eagle Pass Galveston make sure we’re on the right Laredo track in our services, product Brownsville offerings, pricing strategies and relationship management. Over- all, we’ve received constructive BNSF Lines and Trackage Rights comments from our Customer Regional Connections 7
  10. 10. Southern California and expansion of our guaranteed service offerings, are industry firsts and have attracted busi- ness to rail that previously moved on the highway. We constantly strive to create value for our customers, and we realize that different customers have different needs. Some cus- tomers value speed of service, while others emphasize consis- tency over speed. In 2001, our average of 89 percent on-time performance met or exceeded customer expectations for most commodities, yet fell short for other customers. BNSF is com- mitted to providing consistent, reliable transportation services that meet each customer’s needs. We are working to ensure we clearly understand the unique service needs of each customer and we have the service prod- ucts and infrastructure to address those needs. Our Service and Efficiency initia- tives go hand-in-hand. As we advance our efficiency and streamline our processes, service improvements will continue to follow. One big opportunity to improve efficiency includes increasing our locomotive and car velocities, in terms of the business demands; reduced idle EFFICIENCY average miles these assets travel time; and other work practices each day. These asset utilization targeted to avoid unnecessary fuel BNSF achieved record fuel effi- consumption. Another efficiency measures improve as we elimi- ciency in 2001, handling 762 initiative focused on improving nate pinch points and network gross ton miles per gallon of fuel terminal and industry switching congestion. We also are making in 2001, a 2 percent increase operations, resulting in 8,500 strategic adjustments to our Ser- over 2000 and 8 percent better fewer train starts and substantial vice Scheduling programs and than 1996. This improvement in reductions in terminal “dwell Transportation Service Plan to fuel efficiency is due to BNSF’s time” for railcars. The reduction help ensure that the “right car” is fleet of newer, more fuel-efficient in train starts alone saved about on the “right train” every time to $10 million in 2001. locomotives, sized to match 8
  11. 11. Free Cash Flow 1995-2001 Efficiency 1995-2001 (after dividends, $ in millions) (gross ton miles/employee, in millions) 600 22.9 25 443 431 22.0 20.4 400 19.2 260 20 17.9 17.1 16.4 200 15 0 (200) (110) 10 (397) (400) (557) 5 (600) (700) (800) 0 2001 1995 1996 1997 1998 1999 2000 2001 1996 1997 1998 1999 2000 1995 A key efficiency measure is the number of gross ton miles (GTMs) of freight Negative free cash flow of $1.654 billion in the first three years after the merger handled per employee. In 2001, BNSF handled 22.9 million GTMs/employee, reflects the capital program undertaken to provide shippers with improved service. a 40 percent increase compared with 1995. Cash flow turned positive in 1999, and has continued to increase since then. meet customer expectations across revenue growth necessitated Our fuel initiatives were another our 33,000 route-mile network. these reductions. piece of good news, but they did not offset the very high cost Efficiency also involves control- In October, we announced a of fuel we encountered during ling operating costs and other reorganization that reduced the the first nine months of 2001. expenses. We made continued number of operating divisions We achieved record fuel effi- progress with efficiency initia- from 22 to 13 and removed ciency in 2001, as you’ll see in tives in our Strategic Sourcing two layers of management from the feature on page 8. When group, with savings of about field operations. These changes fuel prices dropped to their low- $100 million over the past improved the efficiency and est point in two years, we took two years. Our Mechanical accountability of our operation. advantage and hedged about 50 and Engineering groups also percent of our consumption for improved productivity through All of these improvements are the fourth quarter of 2001. As their Six Sigma, Lean and other reflected in our record level of of January 31, 2002, we had processes that remove quot;wastequot; efficiency, as expressed in gross hedged about 35 percent of our from maintenance procedures ton miles per employee, which 2002 consumption. associated with locomotives, increased to 22.9 million, and in freight cars, track, signals and our record free cash flow after One of the toughest decisions bridges. These savings amounted dividends of $443 million. These we faced in 2001 was having to well in excess of $100 mil- achievements are further proof to reduce our workforce. We lion in 2001. that even as the economy slowed, eliminated 400 non-union we were able to focus on some positions through a voluntary In 2001, we expanded customer key measures and improve on early retirement window for incentive programs designed to last year’s record performance. qualified employees and an improve car utilization, includ- involuntary separation program ing increasing demurrage collec- that included contractors. In Summary tions and reviewing our storage Finally, it is important to note addition, we reduced our sched- policies for privately-owned that the 60/30 Railroad Retire- uled workforce by more than railcars. We’ve made significant ment reform legislation was 1,000 positions. We had hoped progress. At the same time, overwhelmingly approved by that we would be able to weather we’ve raised standards for our- the House of Representatives the tough economic times selves, and have offered credits and the Senate, and was signed without having to make such to customers for service failures into law by President Bush in a cutback, but eventually the in certain cases. December 2001. Effective this stagnant economy and lack of 9
  12. 12. valued friend and mentor to year, the legislation modernizes and guidance. Arnold Weber, me, and he will be missed. a Board member since 1986, the investment policies of the will retire in March 2002. We Railroad Retirement system, At the same time, we can all extend our appreciation to him permitting enhanced benefits take what we have learned from for his counsel, wise insight for Railroad Retirement benefi- Rob and from our experiences and economic advice during his ciaries while decreasing the pay- of the past several years to many years of dedicated service roll tax burden on rail employers. make this very successful fran- on the Board. Benefits include reducing the chise even better. By focusing age at which employees with on the fundamentals of our I also want to say something 30 years of service can retire to business, we will become more about Rob Krebs’ intention age 60 from age 62, increasing competitive. It’s that simple, to retire from the Board of surviving spouses’ benefits, and and that’s where we need to be. Directors, effective with the reducing the vesting period for We have a lot of strengths and, annual meeting in April. Rob’s Railroad Retirement benefits. most of all, an outstanding influence on the rail industry, We expect Railroad Retirement workforce and Board of Direc- BNSF and its predecessor rail- reform to save BNSF about tors, whose daily support and road, the Santa Fe Railway, is $20 million in 2002 and this commitment give me confi- immeasurable. His rigor, his amount will continue to increase dence in our future success. intelligence and his uncompro- through 2005, when it could When the economic rebound mising attention to customer represent about an $80 million occurs, we will be in a position expectations and shareholder annual payroll tax savings. to make great progress. value have set a very high stan- dard for this company and a Legislation is now being con- legacy that will influence us for sidered that would phase out decades to come. Rob was also the 4.3-cent per gallon diesel the key driver and architect fuel tax, which only railroads behind the Vision and Values Matthew K. Rose and barges still pay for the statements that appear on page CEO and President nation’s deficit reduction pro- 12. Developed in 1997, they February 20, 2002 gram. This tax costs BNSF have shaped our corporate cul- about $50 million annually. ture and value system, and guide our decision-making In closing, I’d like to make a process. Rob has also been a couple of comments about changes to our Board of Directors. In September, we announced the addition of Alan L. Boeckmann, president and chief executive officer of Fluor Corporation, and Marc F. Racicot, a partner with the Bracewell & Patterson, L.L.P., law firm, and chairman of the Republican National Commit- tee, to our Board. Both Alan and Marc are excellent additions to our Board, and we look forward to their contributions 10
  13. 13. A TRIBUTE TO ROBERT D. KREBS “BNSF Chairman Robert D. Krebs “He is the best railroad top exec- will retire from the Burlington utive over the past five years when Northern Santa Fe Corporation you look at service to customers, Board of Directors in April 2002, cutting costs and improving share- after a distinguished career in the holder value.” rail industry. – NatWest Securities Corp. Analyst Michael Lloyd, “A native of Sacramento, California, quoted March 10, 1995, in Rob joined the Southern Pacific the Wall Street Journal Transportation Company (SP) in June 1966, after receiving his “He is probably the single best Master of Business Administration person in the industry to be in the at Harvard Business School. He role he is in. From a capability worked for SP in various operations standpoint, there is no one better positions and became vice presi- out there.” dent of operations in 1980. In – James Higgins, analyst with 1982, he was named president of Donaldson, Lufkin & Jenrette, as safety] for such a long time. He SP Transportation Company. In quoted July 21, 1995, in the would be out of the ordinary.” addition, in the following 20 years, Journal of Commerce, on – Jeff Lenn, professor of strate- he served as president, chief execu- Rob’s designation as president gic management and public tive officer or chairman of Santa of the planned Burlington policy, George Washington Fe Southern Pacific Corp., Santa Northern Santa Fe Corporation University, quoted Oct. 14, Fe Pacific Corp., and the Atchison, 1997, in the Washington Post Topeka and Santa Fe Railway. “He seems to be a shining star in on BNSF’s safety culture the industry. One thing I’ve found “When Santa Fe Pacific Corp. out about him from talking with “If you were to be employed by a merged with Burlington Northern his upper-echelon managers is railroad, invest in one, or ship over Inc. in September 1995 to form that he has a great capacity for one in the century now starting, the Burlington Northern Santa Fe handling information. He’s a just what sort of person would you Corporation, Rob was named tireless worker...” want leading that enterprise? Well, president and chief executive – James Hogan, general you’d want someone with vision, officer. In April 1997, he was chairman of the Brotherhood who can see beyond today and asked to serve also as chairman of Locomotive Engineers, imagine a different, and better, of BNSF, a role he has served quoted July 21, 1995, in the tomorrow.... You’d want someone ever since. Journal of Commerce who has been tested by adversity and grown both as a man and a “Throughout his career, Rob has “[Mr. Krebs is a] very straight leader. You’d want someone who been praised as a visionary leader shooter. He has one of the highest has his story straight and tells in the rail industry, as reflected in levels of integrity of any railroad everyone the same thing. In other the following quotes: CEO. He’s very good at setting words, you’d want someone at realistic expectations. You never least a bit like Rob Krebs.” “He’s savvy and smart. I think question where Rob Krebs stands – Fred Frailey, journalist and he’s the logical choice and a on an issue.” rail industry observer, in “Dawn good one.” – James Valentine, analyst for of a New Age,” for Trains – Jeff Stone, analyst for Salomon Brothers, quoted magazine, January 2001 Wertheim Schroeder & Co., July 21, 1995, in the quoted July 29, 1987, in the “For me, the excitement of the job Chicago Tribune, on Rob’s Journal of Commerce is when you see the success, promotion to president and “It is extraordinarily rare to have the renaissance of an industry.” chief executive of Santa Fe Southern Pacific a CEO who works an issue [such – Rob Krebs 11
  14. 14. B N S F’S V A L U E S T A T E M E N T In 1997, BNSF’s senior management team, led by Chairman Rob Krebs, developed a set of core values to complement BNSF’s vision. These values (see below) define and shape BNSF’s culture. A two-day workshop on Vision and Values was presented in 1998 to salaried employees. A follow-up class, “Values in Action,” offered in 2000 and 2001 demonstrated how these values shape BNSF’s leadership and management style. Vision and Values influences many aspects of BNSF, from transportation and marketing decisions to town hall meetings to recognition programs. Style Shared Values Equality As a Community, BNSF values: As a member of the BNSF As a Community, we are: • Listening to customers and Community, I can expect: • Tough-minded optimists doing what it takes to meet • To be treated with dignity • Decisive yet thorough their expectations and respect • Open and supportive, and • Empowering employees and • To be given equal access • Confident and proud of showing concern for their to tools, training and our success well-being, and respect for development opportunities their talent and achievements • To have equal opportunity to Liberty • Continuously improving by achieve my full potential As a member of the BNSF striving to do the right thing Community, each of us has the safely and efficiently Community right to: • Celebrating our rich heritage BNSF is a Community of about • A safe work environment— and building on our success as 39,000 mutually dependent for the sake of ourselves, our we shape our promising future members. Each one of us depends co-workers, our shippers and upon BNSF for our livelihood, the communities we serve Efficiency and through our collective efforts, Efficiency is the best collective appli- • Feel the satisfaction that comes BNSF depends upon us to cation of our resources to meet our from a job well done—by defend, sustain and strengthen customers’ expectations. Each of us using our talent, judgment and our Community. We are an contributes to efficiency when we: initiative, and by performing effective Community when each • Understand our customers’ to our fullest potential of us: expectations and priorities • Express our individualism, • Believes in our Vision and • Help develop business processes ideas and concerns—consistent embraces our Shared Values that best match BNSF resources with the Community’s Vision • Knows our own role and with our customers’ requirements and Shared Values, to anyone strives to fulfill it • Constantly monitor and in the Community without fear • Respects, trusts and openly measure our results in order of retribution communicates with other to continuously improve • Participate fully in life outside Community members • Manage our Community’s of work—by enjoying the fruits • Is proud of our heritage and resources as if they were of our own labor our own confident in our future 12
  15. 15. Financial Contents Management’s Discussion and Analysis 13 Report of Management 23 Report of Independent Accountants 23 Consolidated Statements of Income 24 Consolidated Balance Sheets 25 Consolidated Statements of Cash Flows 26 Consolidated Statements of Changes in Stockholders’ Equity 27 Notes to the Consolidated Financial Statements 28 Revenue Table The following table presents BNSF’s revenue information by commodity for the years ended December 31, 2001, 2000 and 1999, and includes certain reclassifications of prior year information to conform to current year presentation. Average Revenue Revenues Cars / Units Per Car / Unit 2001 2000 1999 2001 2000 1999 2001 2000 1999 (IN MILLIONS) (IN THOUSANDS) Consumer Products $3,356 $3,405 $3,197 3,752 3,850 3,597 $ 894 $ 884 $ 889 Coal 2,123 2,131 2,226 2,133 2,023 2,123 995 1,053 1,049 Industrial Products 2,080 2,114 2,108 1,442 1,501 1,508 1,442 1,408 1,398 Agricultural Products 1,531 1,462 1,543 828 793 836 1,849 1,844 1,846 Total Freight Revenues 9,090 9,112 9,074 8,155 8,167 8,064 $1,115 $1,116 $1,125 Other Revenues 118 95 121 Total Operating Revenues $9,208 $9,207 $9,195 hampered BNSF’s revenue growth; although, based on Management’s Discussion And Analysis reporting to the Association of American Railroads (AAR), Of Financial Condition And Results Of Operations BNSF’s share of the western United States rail traffic market remained essentially unchanged at approximately 43 percent. Management’s discussion and analysis relates to the finan- Consumer Products revenues of $3,356 million for 2001 cial condition and results of operations of Burlington were $49 million, or 1 percent, less than 2000 due to Northern Santa Fe Corporation and its majority-owned decreased loadings in the less-than-truckload (LTL) sector subsidiaries (collectively, BNSF or Company). The princi- and the loss in late 2000 of some automotive contract busi- pal subsidiary of BNSF is The Burlington Northern and ness as well as decreases in the automotive sector as a result Santa Fe Railway Company (BNSF Railway). All earnings of sluggish industry-wide sales. Additionally, a significant per share information is stated on a diluted basis. automotive contract was lost at the end of the third quarter Results Of Operations of 2001 and is expected to affect future automotive rev- enues. These declines were partially offset by a ten percent Year Ended December 31, 2001 growth in the intermodal truckload business, increased Compared With Year Ended December 31, 2000 international revenues, increases in dry boxcar business due BNSF recorded net income for 2001 of $731 million, or to strong beverage shipments, and a $32 million favorable $1.87 per share, after a first quarter extraordinary charge of transportation contract settlement in automotive revenues. $6 million, net of tax, related to the early extinguishment of a debt obligation, compared with net income for 2000 Coal revenues of $2,123 million for 2001 decreased $8 mil- of $980 million, or $2.36 per share. The decrease in net lion from 2000 revenues of $2,131 million. The decrease income and earnings per share is primarily due to a $353 in revenues was primarily a result of lower revenue per car million decrease in operating income and $75 million in on certain contract renewals, partially offset by a six percent losses related to non-rail investments. The decrease in operat- increase in coal tons shipped due to colder weather, tight ing income reflects increased compensation and benefits eastern coal supplies and high natural gas prices. costs, higher fuel expenses and higher materials and other costs, which included a $66 million fourth quarter charge Industrial Products revenues of $2,080 million for 2001 were for workforce reduction related costs. The favorable effect of $34 million, or 2 percent, lower than 2000, despite increased the common stock repurchase program on earnings per share revenue per car as a result of selected price increases and partially offset lower earnings in 2001 (see Liquidity and increased length of haul. Revenues for the year fell due Capital Resources: Common Stock Repurchase Program). to continued production cutbacks affecting most sectors. These decreases were partially offset by increases in the Revenues petroleum products sector resulting from increased liquified Total revenues of $9,208 million for 2001 were essentially petroleum gas (LPG) and asphalt shipments. flat compared with 2000. In 2001, the sluggish economy 13
  16. 16. Agricultural Products revenues of $1,531 million for 2001 increase in the average all-in cost per gallon of diesel fuel. were $69 million, or 5 percent, higher than revenues for Consumption in 2001 was 1,177 million gallons compared 2000 primarily due to an increased demand for corn, with 1,173 million gallons in 2000. However, GTM per soybean and oilseed/meals, partially offset by a decline in gallon increased to 762 from 746, or 2 percent, compared fertilizer shipments. Additionally, average revenue per car with 2000, attributable to newer locomotive fleet, fuel increased due to increases in length of haul. economy initiatives during the year, and commodity mix. The 3-cent increase in the average all-in cost per gallon of diesel fuel is net of a 6-cent decrease in the average pur- Expenses chase price more than offset by a 9-cent decrease in the Year Ended December 31, 2001 2000 1999 hedge benefit per gallon as compared with a 13-cent hedge (IN MILLIONS) benefit in 2000. Compensation and benefits $ 2,850 $2,729 $2,772 Purchased services 1,084 1,024 1,051 Materials and other expenses of $897 million for 2001 were Depreciation and amortization 909 895 897 $120 million, or 15 percent, higher than 2000 principally Equipment rents 740 742 752 reflecting: (i) workforce reduction costs of $66 million Fuel 973 932 700 incurred in the fourth quarter of 2001 for severance, pen- Materials and other 897 777 818 sion, medical, benefit and other related costs for approxi- Total operating expenses $ 7,453 $7,099 $6,990 mately 400 positions (see Other Matters: Employee Merger and Separation Costs); (ii) increases in environmental and Interest expense $ 463 $ 453 $ 387 casualty expenses compared with 2000; (iii) lower income Other expense (income), net $ 110 $ 70 $ (1) from easements; and (iv) increased costs caused by flooding Total operating expenses for 2001 were $7,453 million, an in the upper Midwest and higher utilities as a result of higher increase of $354 million, or 5 percent, over 2000 primarily rates and increased consumption due to more severe winter due to: (i) increased compensation and benefits of $121 weather conditions early in 2001. Additionally, during 2000 million related to higher wages and increased health and the Company incurred $42 million of charges due to employee welfare costs offset by efficiency gains as measured by gross related severance, medical and other benefit costs and the loss ton-miles (GTM) per employee and reduced headcounts; of previously earned state tax incentives. (ii) workforce reduction related costs of $66 million; (iii) Interest expense of $463 million for 2001 was $10 mil- higher fuel prices; and (iv) flooding in the upper Midwest lion, or 2 percent, higher than 2000 reflecting higher and more severe winter weather conditions early in 2001 average debt levels, partially offset by lower interest rates. which increased expenses compared to 2000. Other expense was $40 million higher compared with 2000 Compensation and benefits expenses of $2,850 million were primarily due to $75 million in losses recognized related $121 million, or 4 percent, higher than 2000 primarily due to non-rail investments and fewer land sales in 2001. The to wage rate increases and higher benefit rates. In addition, non-rail investments consisted of FreightWise, Inc., an Internet scheduled wages were significantly higher in the first and sec- transportation exchange; Pathnet Telecommunications, Inc., ond quarters as a result of more severe weather conditions a telecommunications venture; a portfolio of other non-core requiring increased maintenance and additional crews. These real-estate investments; and a decline in the cash surrender increases were partially offset by lower employment levels. value of company owned life insurance policies. Offsetting the above were $20 million of the 2000 expenses related to Purchased services of $1,084 million for 2001 were $60 mil- the termination of the proposed BNSF business combination lion, or 6 percent, higher than 2000 due to higher ramping with Canadian National Railway Company (CN). expenses incurred as a result of new services added which improve efficiency and safety at the intermodal ramp facili- Year Ended December 31, 2000 ties, decreased recoveries as compared with the prior year, Compared With Year Ended December 31, 1999 increased legal expense primarily related to coal rate dis- Net income in 2000 was $980 million, or $2.36 per share, putes, higher contract equipment maintenance costs due to compared with $1,137 million, or $2.44 per share, for more locomotives under maintenance contracts, increased 1999. The decrease in earnings per share is primarily due haulage expense, and increased other expenses as a result of to the effect on net income of a $232 million increase in flooding in the upper Midwest in the early part of the year. fuel expenses and recognition in 1999 of a gain of $50 million pretax in connection with prior period line sales, Depreciation and amortization expenses of $909 million less costs of $13 million pretax related to those sales, par- for 2001 were $14 million, or 2 percent, higher than tially offset by the favorable effect of the common stock 2000 primarily due to a higher capital base. repurchase program (see Liquidity and Capital Resources: Common Stock Repurchase Program). Equipment rents expenses for 2001 of $740 million were $2 million lower than 2000 reflecting reduced equipment levels, including cars, trailers, containers and automotive equipment. Revenues Total revenues for 2000 were $9,207 million or $12 million Fuel expenses of $973 million for 2001 were $41 million, or higher than 1999 revenues of $9,195 million. The $12 mil- 4 percent, higher than 2000 primarily as a result of a 3-cent lion increase primarily reflects increases in the Consumer 14

×