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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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
