FINANCIAL INFORMATION

On June 30, 1974, BN reported deferred maintenance-road of $45.7 million, deferred maintenance-equipment of $18.2 million, delayed capital improvements-road of $244.3 million, and delayed capital improvements-equipment of $160.3 million. As of December 31, 1978, it reported declines in all of these accounts with reported amounts of deferred maintenance-road of $14.6 million, deferred maintenance-equipment of $0.7 million, delayed capital improvements-road of $227.8 million, and delayed capital improvements-equipment of $129.7 million. Total railway operating revenues increased yearly, from $800 million in 1968 to $2 billion in 1978. During the 10-year period 1968-77 costs were controlled rather well, with an almost constant operating ratio of 82 percent. The average net railway operating income since 1968 was $56.7 million. BN reported net incomes in all those years, with the exception of 1971 due to an extraordinary item of $67.5 million. While net railway operating income has been substantial, other income has been greater than $50 million annually since 1973.

The carrier has had positive working capital each year during the period under study. The working capital ratio ranged from a high of 1.68 to a low of 1.15. In 4 of the 11 years, BN did not have sufficient working capital to meet the monthly average working capital requirement. However, the average yearly working capital for the 11 years was greater than the average of the monthly average working capital requirement.

After the Northern Lines Merger the net investment remained stable for several years, then began to gradually rise. The rate of return average 2.24 percent for the period 1968-78, reflecting a low of 1.67 percent in 1970 and a high of 2.92 percent in 1978.

Net income, with no consideration of noncash items, was sufficient to cover longterm debt due within 1 year for only 5 of the past 11 years. Long-term debt due after 1 year increased annually from 1971-77, with exception of a slight decline in 1976. The debt-equity ratio remained relatively stable from 1970 to 1975. The ratio declined slightly in the following 2 years. If the 1978 ratio is adjusted for comparability with prior years, it would be 33.5.

Fixed charges have steadily increased since 1970 and have averaged $51.5 million per year. Income available for fixed charges has been more than sufficient in each year. Fixed charges coverage ratio averaged 2.14 for the period 1970 to 1978 and was 2.52 for 1978.

Net rents have increased in each year since 1968, with the exception of 1977. The decrease in 1977 is explained by the effect of least capitalizations as required by FASB No. 13.

BN's total fleet decreased by 15.64 percent from 1971-78, while its aggregate capacity decreased by 1.97 percent.

360 I.C.C.

TABLE D-10

BK--rate of return on net investment in transportation property 1968-78

$3,265,632 $3,246,842 $3,273,441 $3,251,097 $3,310,373

29,115
(1,425)
160,726
96,948
1,068,711 1,031,493 1,016,336
2,595,499 2,473,793 2,400,061

11,294
128,018

1,007,627 1,044,204
2,329,436 2,298,102
48,714

Net railway operating in-
come as a percent of net
investment----

2.92

2.18

2.40

2.11

2.90

1.81

2.07

2.12

1.67

2.05

2.36

Long-term debt due after 1 year for 1978 is not comparable to prior years.

TABLE D-12

BN average miles of road operated, number of locomotives and freight cars
owned and leased, and freight car capacity, 1970-78