Item 1. Business
BACKGROUND
Illinois Central Corporation (the "Company") was incorporated under the laws of Delaware on January 27, 1989. The Company, through its wholly- owned subsidiary, Illinois Central Railroad Company (the "Railroad"), traces its origin to 1851, when the Railroad was incorporated as the nation's first land grant railroad. Today, the Railroad operates 2,700 miles of main line track between Chicago and the Gulf of Mexico, primarily carrying chemicals, coal and paper north, with coal, grain and milled grain products moving south along its lines. The Railroad has been significantly downsized and restructured from its peak of nearly 10,000 miles of track operated in 13 states, rebuilding its main line and converting to a single-track main line with a centralized traffic control system and divesting major east-west segments. In addition to the Railroad, the Company's other direct subsidiary conducts railroad related financing operations.
In 1989, the Company was acquired by The Prospect Group, Inc. ("Prospect") by means of a public tender offer that resulted in the Company becoming highly leveraged. Prospect distributed the stock of the Company to Prospect's stockholders in 1990, and the Company again became publicly owned. Improved operating performance, combined with sales of non-operating assets and proceeds from equity and lower-cost debt financings since 1990 have resulted in a substantial reduction in the Company's leverage. Between December 31, 1989 and December 31, 1993, the Company reduced its debt to capitalization ratio from 89% to approximately 50%.
The principal executive office of the Company is located at 455 North Cityfront Plaza Drive, Chicago, Illinois 60611-5504 and its telephone number is (312) 755-7500.
GENERAL
The Company is in the midst of a four year plan designed to increase its revenues and lower its operating ratio and interest costs. The plan is in sharp contrast to the Company's primary focus for the four years ended December 31, 1992 of significantly reducing costs and improving service offerings.
With 1992 as its base, the plan will focus on capitalizing on the Company's leading operating ratio among Class I railroads (operating expenses divided by operating revenues) which was 68.2% at December 31, 1993. The components of the plan are:
- increase annual revenues by $100 million by the end of 1996 - reduce the operating ratio by one percentage point per year for a total of four (4) points below the 1992 base - reduce annual interest expense by $10 million
To accomplish this plan, revenues must grow at a compounded rate of 4.3% per year while operating expenses must not exceed a compounded annual growth rate of 2.5% per year.
Management has identified the sources of planned revenue growth as economic expansion, new and expanded plants on line and market share growth. Economic expansion is the combination of industrial production improvement and freight rate increases. Market share growth is volume gained from competition, (i.e., other railroads, trucklines and barges) facilitated by being a low cost producer. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of the progress made in 1993.
To foster achievement of these goals, the Railroad reorganized its marketing and sales effort (see below), restructured its safety and claims group into a Risk Management Group and streamlined the operating organization. The latter effectively created teams of engineering, maintenance and transportation experts who share the common goal of moving trains safely and efficiently. As a result of these changes, decision-making authority and accountability are now at lower and more localized levels, in line with the Company's systematic efforts to examine and refine all aspects of its service offering to customers.
COMMODITIES AND CUSTOMERS
The Railroad's customers are engaged in a wide variety of businesses and ship a number of different products that can be classified into commodity groups: chemicals, coal, grain, paper, grain mill and food products and other commodities. In 1993, two customers accounted for approximately 7% and 6%, respectively, of revenues (no other customer exceeded 5%) and the ten largest customers accounted for approximately 37% of revenues.
In order to address more effectively the diversity of the Company's customer base and move toward attainment of the four year growth plan, the Railroad's marketing department was re-organized in 1993 along major commodity groups. The new business units are chemicals and bulk, grain and grain mill, forest products, coal and coke and metals, and intermodal. The formation of separate units enables a fully integrated sales and marketing effort. Specialization allows employees to anticipate and respond to customer needs more quickly, to attract customers who previously used trucks or barges for their service needs, and to establish business relationships with new shippers. These new units work with current and prospective customers to develop customized shipping solutions. Management believes that this commitment to improved customer service has enhanced relations with shippers.
The formation of the Intermodal Business Unit underscores the Company's commitment to intermodal through long-term relationships with major participants in this strategic market. By forming a separate business unit, the Railroad has fully integrated its intermodal hub operation with sales and marketing for unmatched control of this highly specialized, customer-oriented service.
In 1993, the Railroad invested in 800 new trailers and upgraded facilities to position itself for intermodal growth, dedicated its newest, state- of-the-art terminal, just south of Chicago at the intersections of major expressways, and initiated a major expansion at the Memphis facility with completion anticipated for the first quarter of 1994.
To enhance service within its corridor, the Railroad entered into several joint operating agreements in 1992 and 1993 with trucklines and other intermodal carriers. Management anticipates that these relationships will provide better service to customers and seamless transportation of goods for shippers and customers.
In 1993, approximately 75% of the Railroad's freight traffic originated on its own lines, of which approximately 29% was forwarded to other carriers. Approximately 20% of the Railroad's freight traffic was received from other carriers for final delivery by the Railroad, and the balance of approximately 5% represented bridge or through traffic.
The respective percentage contributions by principal commodity group to the Railroad's freight revenues and revenue ton miles during the past five years are set forth below:
CONTRIBUTION TO REVENUE TON MILES BY COMMODITY GROUP(1)
COMMODITY GROUP 1993 1992 1991 Chemicals...................... 15.9% 15.1% 16.0% Coal........................... 15.1 18.2 17.0 Grain.......................... 27.9 27.3 27.7 Paper.......................... 9.6 9.0 8.4 Grain mill & food products .... 9.9 9.0 8.3 Intermodal..................... 3.7 3.1 2.9 All other ..................... 17.9 18.3 19.7 ------ ------ ------ Total.......................... 100.0% 100.0% 100.0% ====== ====== ====== - -------------------
(1) A new car tracking system installed in late 1990 affects the comparability of 1993's, 1992's and 1991's ton mile data with that of the prior years, thus prior years are not presented.
Some of the elements contained in these commodity groupings are as follows:
CHEMICALS ................... A wide variety of chemicals and related products such as chlorine, caustic soda, potash, soda ash, vinyl chloride monomer, carbon dioxide, synthetic resins, alcohols, glycols, styrene monomer, plastics, sulfuric acid, muriatic acid, anhydrous ammonia, phosphates, mixed fertilizer compounds and carbon blacks.
COAL......................... Bituminous and metallurgical coal.
GRAIN ....................... Corn, wheat, soybeans, sorghum, barley and oats.
PAPER........................ Pulpboard, fiberboard, woodpulp, printing paper, newsprint and scrap or waste paper.
GRAIN MILL & FOOD PRODUCTS .. Products obtained by processing grain and other farm products such as feed, soybean meal, corn syrup, flour and middlings, animal packinghouse by-products (tallow), canned food, corn oil, soybean oil, vegetable oils, malt liquors, sugar and molasses.
INTERMODAL................... A wide variety of products shipped either in containers or trailers on specially designed cars.
OTHER........................ Pulpwood and chips, lumber and other wood products; sand, gravel and stone, coke and petroleum products, metallic ores and other bulk commodities; primary and scrap metals, machinery and metal products, appliances, automobiles and parts, transportation equipment and farm machinery; glass and clay products, ordnance and explosives, rubber and plastic products, and general commodities.
- ----------------------
(1) Ton mile data for years subsequent to December 31, 1990, are not comparable with prior years because of the installation of a new car tracking system in late 1990. As a result, this information is not meaningful (NM) for 1990 and 1989. (2) Freight train miles equals the total number of miles traveled by the Railroad's trains in the movement of freight. (3) Revenue ton miles of freight traffic equals the product of the weight in tons of freight carried for hire and the distance in miles between origin and destination. (4) Revenue per ton mile equals net freight revenue divided by revenue ton miles of freight traffic. (5) Gallons per ton mile equals the amount of fuel required to move one ton of freight one mile.
The following tables summarize operating expense-to-revenue ratios of the Company for each of the past four years, excluding the effect of the $8.9 million pretax special charge in 1992. The ratios for 1989 are not comparable to subsequent years because of the March 17, 1989, change in control and are not presented. The first table analyzes the various components of operating expenses based on the line items appearing on the income statements, whereas the second table is based on functional groupings.
- ---------------------------
(1) Operating ratio means the ratio of operating expenses before special charge over operating revenues. (2) Transportation ratio means the ratio of transportation expenses (such as expenses of operating, servicing, inspecting, weighing, assembling and switching trains) over operating revenues. (3) Maintenance of way ratio means the ratio of maintenance of way expenses (such as the expense of repairing, maintaining, leasing, depreciating and retiring right- of-way and trackage structures, buildings and facilities) over operating revenues. (4) Maintenance of equipment ratio means the ratio of maintenance of equipment expenses (such as the expense of repairing, maintaining, leasing, depreciating and retiring transportation and other operating equipment) over operating revenues.
EMPLOYEES; LABOR RELATIONS
Railroad industry personnel are covered by the Railroad Retirement System instead of Social Security. Employer contribution rates under the Railroad Retirement System are currently more than double those in other industries, and may rise further because of the increasing proportion of retired employees receiving benefits relative to the shrinking number of working employees.
Labor relations in the railroad industry are subject to extensive governmental regulation under the Railway Labor Act. Railroad industry personnel are also covered by the Federal Employer's Liability Act ("FELA") rather than by state no- fault workmen's compensation systems. FELA is a fault-based system, with compensation for injuries determined by individual negotiation or litigation.
The Railroad is a party to several national collective bargaining agreements which establish the wages and benefits of its union workers -- 90% of all Railroad employees. These agreements are subject to renegotiation beginning November 1, 1994, however, cost of living allowance provisions and other terms in each agreement continue until new agreements are reached. Despite being part of a national bargaining group, the Railroad has expressed a desire to negotiate separate distinct agreements with each of its unions on a local basis. Management has been exploring that position and has held several discussions with representatives from most of its unions. It is too early to determine if separate agreements will be reached. Thus, the Railroad has not taken steps to withdraw formally from the national bargaining group. The following table shows the average annual employment levels of the Railroad:
1993 1992 1991 1990 1989 Total employees.. 3,306 3,421 3,611 3,688 3,942
A significant portion of the decline from the 1992 level is the result of a separate agreement between the Railroad and the United Transportation Union, reached in November 1991. This agreement permits the Railroad to reduce the size of all crews on all trains operated. In accordance with this agreement, 158 crew members were severed at a cost of $9.6 million to date. No further dramatic reductions in the current crew size of approximately 2.75 at December 31, 1993 is anticipated.
Management believes that additional jobs in all areas may be eliminated over the next several years primarily through attrition and retirements though additional severances are possible.
REGULATORY MATTERS; FREIGHT RATES; ENVIRONMENTAL Considerations
The Railroad is subject to significant governmental regulation by the ICC and other federal, state and local regulatory authorities with respect to rates, service, safety and operations.
The jurisdiction of the ICC encompasses, among other things, rates charged for certain transportation services, issuance of securities, assumption of certain liabilities by railroads, mergers or the acquisition of control of one carrier by another carrier and extension or abandonment of rail lines or services.
The Federal Railroad Administration, the Occupational Safety and Health Administration and certain state transportation agencies have jurisdiction over railroad safety matters. These agencies prescribe and enforce regulations concerning car and locomotive safety equipment, track safety standards, employee work conditions and other operating practices.
The amount of coal transported by the Railroad is expected to decline somewhat as the Clean Air Act is fully implemented. Much of the coal from mines currently served by the Railroad will not meet the environmental standards of the Clean Air Act without blending or installation of air scrubbers. On the other hand, the Railroad expects to participate in additional movements of Western coal. Overall, management believes that implementation of the Clean Air Act is unlikely to have a material adverse effect on the results of the Company.
The Company is and will continue to be subject to extensive regulation under environmental laws and regulations concerning, among other things, discharges into the environment and the handling, storage, transportation and disposal of waste and hazardous materials. Inherent in the operations and real estate activities of the Railroad and other railroads is the risk of environmental liabilities. As discussed in Item 3. "Legal Proceedings," several properties on which the Railroad currently or formerly conducted operations are subject to governmental action in connection with environmental degradation. Additional expenditures by the Railroad may be required in order to comply with existing and future environmental and health and safety laws and regulations or to address other sites which may be discovered.
Environmental regulations and remediation processes are subject to future change and cannot be determined at this time. Based on present information, in the opinion of management, the Company has adequate reserves for the costs of environmental investigation and remediation. However, there can be no assurance that environmental conditions will not be discovered which might individually or in the aggregate have a material adverse effect on the Company's financial condition.
COMPETITION
The Railroad faces intense competition for freight traffic from motor, water, and pipeline carriers and, to a lesser degree, from other railroads. Competition with other railroads and other modes of transportation is generally based on the quality and reliability of the service provided and the rates charged. Declining fuel prices disproportionately benefit trucking operations over railroad operations. The trucking industry frequently is more cost and transit-time competitive than railroads, particularly for distances of less than 500 miles. While deregulation of freight rates under the Staggers Act has greatly increased the ability of railroads to compete with each other and alternate forms of transportation, changes in governmental regulations (particularly changes to the Staggers Act) could significantly affect the Company's competitive position.
To a greater degree than other rail carriers the Railroad is vulnerable to barge competition because its main routes are parallel to the Mississippi River system. The use of barges for some commodities, particularly coal and grain, sometimes represents a lower cost mode of transportation. As a result, the Railroad's revenue per ton-mile has generally been lower than industry averages for these commodities. Barge competition and barge rates are affected by navigational interruptions from ice, floods and droughts. These interruptions cause widely fluctuating rates. The Railroad's ability to maintain its market share of the available freight has traditionally been affected by its response to the navigational conditions on the river.
Most of the Railroad's operations are conducted between points served by one or more competing carriers. The consolidation in recent years of major midwestern and eastern rail systems has resulted in strong competition in the service territory of the Railroad.
LIENS ON PROPERTIES
Most of the locomotives and rail cars owned by the Company's financing/leasing subsidiaries are subject to liens. See Note 8 of Notes to Consolidated Financial Statements.
LIABILITY INSURANCE
The Company is self-insured for the first $5 million of each loss. The Company carries $295 million of liability insurance per occurrence, subject to an annual cap of $370 million in the aggregate for all losses. This coverage is considered by the Company's management to be adequate in light of the Company's safety record and claims experience.
ITEM 2.
ITEM 2. PROPERTIES - -------------------
PHYSICAL PLANT AND EQUIPMENT
System. As of December 31, 1993, the Railroad's total system consisted of approximately 4,700 miles of track comprised of 2,700 miles of main line, 300 miles of secondary main line and 1,700 miles of passing, yard and switching track. The Railroad owns all of the track except for 190 miles operated by agreements over track owned by other railroads.
Track Structures. During the five years ended December 31, 1993, the Railroad has spent $305.3 million on track structure to maintain its rail lines, as follows ($ in millions):
Capital Expenditures Maintenance Total
1993 ......... $ 50.3 $ 25.1 $ 75.4 1992 ......... 46.4 23.0 69.4 1991 ......... 36.3 20.7 57.0 1990 ......... 34.6 20.0 54.6 1989 ......... 19.1 29.8 48.9 ------ ------ ------
Total......... $186.7 $118.6 $305.3 ====== ====== ======
These expenditures concentrated primarily on track roadway and bridge rehabilitation in 1993 and 1992. Approximately 1,300 miles and 1,400 miles of road were resurfaced in 1993 and 1992, respectively. Over the last two years, a total of $8.4 million was spent to construct new or expanded intermodal facilities in Chicago and Memphis. Expenditures in 1991 and 1990 benefited from the use of reclaimed rail, cross ties, ballast and other track materials from the second main line when the Railroad's double-track mainline was converted to a single-track mainline with centralized traffic control. Most reclaimed material has now been used and future expenditures will reflect the purchase of new materials. The reduced number of miles of track and the general good condition of the track structure should result in future expenditures approximately equal to the average of 1993 and 1992.
Fleet. The Railroad's fleet has undergone significant rationalization and upgrading from its peak in 1985 of 862 locomotives and 28,616 freight cars. Over the last two years older, less efficient locomotives were replaced with newer larger horsepower and more efficient equipment. In 1993, the Company implemented a program to increase ownership of freight cars and locomotives and become less dependent on the leasing market as a source of equipment.
Over the last three years the Company, through wholly-owned financing/leasing subsidiaries, has acquired a total of sixty-one (61) 15 to 16 year- old SD-40-2 locomotives and 1,522 freight cars. The 61 locomotives are leased to the Railroad for seven and one-half years. Approximately 650 of the cars acquired are leased to the Railroad as well. The remaining cars are leased to other non- affiliated railroads. When those leases expire, the Railroad has first right of refusal to lease the equipment. As these cars are leased to the Railroad other leased equipment will be returned to the independent, third-party lessors or short-term car hire agreements will be terminated. In 1993, the Railroad acquired 4 SD-40-2 locomotives and also upgraded its highway trailer fleet with 800 newly built trailers which replaced 880 older leased trailers.
The following is the overall fleet at December 31:
Total Units: 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- Locomotives(1) 468 449 470 471 516 Freight cars.. 16,634 15,877 16,381 16,526 17,141 Work equipment. 745 902 881 934 1,000 Highway trailers .898 203 124 67 70 (2)
- -----------------------
(1) Approximately 100 locomotives need repair before they can be returned to service. This equipment is repaired if needed on an ongoing basis or sold. In 1993 and 1992, the Railroad sold 23 and 66 surplus locomotives, respectively. The active fleet is 322 as of December 31, 1993.
(2) Excludes trailers being accumulated for return to lessors.
The components of the fleet by subsidiary and in total for 1993 and in total for 1992 are shown below:
(1) In addition, approximately 2,735 freight cars and 696 highway trailers were being used by the Railroad under short-term car hire agreements.
(2) May be subject to Conditional Sales Agreements.
(3) Excludes equipment listed under Leasing Subsidiaries.
(4) Excludes trailers being accumulated for return to lessor.
Item 3.
Item 3. Legal Proceedings - --------------------------
State of Alabama, et al. v. Alabama Wood Treating Corporation, Inc., et al., S.D. Ala. No. 85-0642-C
The State of Alabama and Alabama State Docks ("ASD") filed suit in 1985 seeking damages for alleged pollution of land in Mobile, Alabama, stemming from creosoting operations over several decades. Defendants include the Railroad, which owned the land until 1976, Alabama Wood Treating Corporation, Inc., and Reilly Industries, Inc. ("RII"), which leased the land from the Railroad and conducted creosote operations on the site. In December 1976, the Railroad sold the premises to ASD. The complaint sought payment for the clean-up cost together with punitive and other damages.
In 1986, ASD, RII and the Railroad agreed to form a joint technical committee to clean the site sharing equally the cost of clean-up, and in October 1986, the court stayed further proceedings in the suit. Under the agreement the joint technical committee has spent approximately $6.6 million and has been authorized to expend up to a total of $6.9 million. The Railroad has contributed $2.2 million and has agreed to increase its contribution to a total of $2.3 million. Further clean-up activities are anticipated.
Under the agreement, if any party disagrees with the amount determined by the joint technical committee to be expended or otherwise disagrees with any aspect of the clean-up, such party may decline further participation and recommence legal proceedings. However, amounts already contributed by any party will be credited against that party's eventual liability and may not be recovered from any other party.
Iselin Yard, Jackson, Tennessee
In 1991, the Iselin Rail Yard in Jackson, Tennessee was placed on the Tennessee Superfund list. In May 1993, the United States Environmental Protection Agency ("EPA") proposed to add a number of sites, including Iselin Rail Yard to the National Priorities List. The Railroad operated a rail yard and locomotive repair facility at the site. The shop facility was sold in 1986 and the rail yard was sold in 1988. Trichloroethylene ("TCE") has been found in several municipal water wells near the site. TCE is a common component of solvents similar to those believed to have been used at the Iselin shop. In addition, concentrations of metals and organic chemicals have been identified on the surface of the site. No order has been issued by any regulatory agency but the State of Tennessee is monitoring work at the site. The Railroad expects to cooperate with the agencies and other Potentially Responsible Parties to conduct any necessary studies and clean-up activities. The Railroad has commenced a remedial investigation and feasibility study of the site.
McComb, Mississippi
Elevated levels of lead and other soil contamination has been discovered at the Railroad's facility in McComb, Mississippi. The site was used for many years for sandblasting lead-based paint off freight cars. The Railroad has commenced a formal site investigation under the supervision of the Mississippi Department of Environmental Quality. The Remedial Investigation has disclosed the presence of lead in the soil and further testing of the surface and subsurface soil and groundwater is underway to assess the scope of the contamination. No order has been issued by any regulatory agency. The Railroad expects to cooperate with the State of Mississippi to conduct any necessary studies and clean-up activities.
Waste Oil Generation
The Railroad was notified in September 1992 that it had been identified as a Potentially Responsible Party at a federal superfund site in West Memphis, Arkansas. The Railroad is alleged to have generated waste oil which was collected by a waste oil refiner who in turn disposed of sludge at the West Memphis landfill. In December 1992, the successor to the refiner initiated legal proceedings to preserve testimony in anticipation of a future contribution action against multiple Potentially Responsible Parties including the Railroad. Similar actions have been taken by the EPA or third parties with respect to waste oil allegedly generated by the Railroad and disposed of in landfills at Livingston, LA, Griffith, IN and Nashville, TN.
Based on information currently available, the Railroad believes it has substantial defenses to liability for any contamination at these sites, and that any contribution to the contamination by the Railroad was de minimis.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders ----------------------------------
No matters were submitted to a vote of security holders during the Company's fourth quarter.
Item 4A. Executive Officers of the Registrant - ----------------------------------------------
The executive officers of the Company are identified in the table below. Each executive officer of the Company currently holds an identical position with the Railroad. Executive officers of the Company and the Railroad serve at the pleasure of the respective Boards of Directors.
Name Age Position(s) ---- --- -----------
Gilbert H. Lamphere 41 Chairman of the Board of Directors E. Hunter Harrison 49 President and Chief Executive Officer, Director Gerald F. Mohan 53 Senior Vice President - Marketing John D. McPherson 47 Vice President - Operations James M. Harrell 41 Vice President - Human Resources David C. Kelly 49 Vice President - Maintenance Ronald A. Lane 43 Vice President and General Counsel and Secretary Dale W. Phillips 39 Vice President and Chief Financial Officer John V. Mulvaney 43 Controller
BIOGRAPHICAL INFORMATION
The following sets forth the periods during which the executive officers of the Company and the Railroad have served as such and a brief account of the business experience of such persons during the past five years.
Mr. Lamphere was elected Chairman of the Board of Directors of the Company and the Railroad in February 1993. He has been a director of the Company and the Railroad since 1989 and Chairman of the Executive Committee of the Board since July 1990. Mr. Lamphere has been Co-Chairman and Chief Executive Officer of The Noel Group, Inc. ("Noel"), a diversified operating company since 1991, and a director of Noel since March 1990. Mr. Lamphere also is the Chairman, Chief Executive Officer and a director of Prospect, for which he has served in various capacities since becoming a director in 1983.
Mr. Harrison was appointed President, Chief Executive Officer and a Director of the Company and the Railroad in February 1993. He joined the Company and the Railroad as Vice President and Chief Transportation Officer in 1989. In November 1991 he was appointed Senior Vice President - Transportation and was named Senior Vice President - - Operations in July 1992. He was employed by Burlington Northern Railway in various vice presidential positions from 1985 to 1989.
Mr. Mohan was appointed Senior Vice President - - Marketing of the Railroad in 1986. In April 1993 he was elected a Director of the Railroad. He was appointed to his present position with the Company in December 1989.
Mr. McPherson joined the Company and the Railroad in his current position in July 1993. Prior to joining the Company and the Railroad, he held various positions with the Atchison, Topeka and Santa Fe Railway Company from 1966 to 1993, most recently as Assistant Vice President - Safety.
Mr. Harrell joined the Company and the Railroad in his current position in 1992. He served as Director of Labor Relations for The Atchison, Topeka and Santa Fe Railway Company from 1989 to 1992. From 1974 to 1989 he held various positions with The Atchison, Topeka and Santa Fe Railway Company.
Mr. Kelly joined the Company and the Railroad as Vice President and Chief Engineer in 1989. In January 1994, he was appointed Vice President - Maintenance. He served as Assistant Chief Engineer - - Systems of CSX Transportation from 1987 to 1989.
Mr. Lane joined the Company and the Railroad as Vice President and General Counsel and Secretary in 1990. In April 1993 he was elected a Director of the Railroad. He was previously employed by The Atchison, Topeka and Santa Fe Railway Company and Santa Fe Pacific Corporation serving as Assistant Vice President - Personnel and Labor Relations, 1987 to 1990.
Mr. Phillips has been employed by the Railroad since February 1988, serving as Director of Taxes & Property Accounting from February to October 1988, as Assistant Controller from October 1988 to April 1989, and Controller from April 1989 to April 1990. He was appointed to his present position in the Company and the Railroad in April 1990. In April 1993 he was elected a Director of the Railroad. Mr. Phillips also serves as a director of Rail Association Insurance, Ltd.
Mr. Mulvaney joined the Company and the Railroad as Controller in June 1990. He was previously employed by Navistar International Transportation Corp., serving as Director of Accounting, 1987 to 1990.
No family relationship exists among the officers of the Company or the Railroad.
PART II -------
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - --------------------------------------------------
The following table sets forth, for the periods indicated, (i) the high and low sale prices of the Common Stock as reported on the New York Stock Exchange Composite Tape, adjusted for the February 1992 3-for-2 stock split, and (ii) the per share amount of dividends paid.
STOCK PRICE DIVIDENDS HIGH LOW PER SHARE
First Quarter.. $25.500 $21.083 $ - Second Quarter. 24.875 20.250 .10 Third Quarter.. 22.375 16.500 .10 Fourth Quarter. 25.625 18.250 .15
First Quarter.. $27.250 $23.625 $ .15 Second Quarter. 30.125 25.375 .15 Third Quarter.. 32.750 26.625 .17 Fourth Quarter. 36.000 29.250 .17
First Quarter $38.625 $33.500 $ .21 (through March 1)
As of March 1, 1994, there were approximately 11,000 stockholders based on estimates of beneficial ownership. The closing price of the Common Stock as reported on the New York Stock Exchange Composite Tape on March 1, 1994 was $35.75 per share.
On February 10, 1994, the Board declared a dividend of $.21 per share payable April 7, 1994, to stockholders of record on March 24, 1994.
Prior to April 1992, the Company had not previously paid cash dividends on its Common Stock. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources," for a discussion of the restrictions on the Railroad's ability to transfer funds as dividends to the Company.
The Common Stock is listed on the New York Stock Exchange, Inc. under the symbol "IC."
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA - --------------------------------
The following table sets forth selected historical consolidated financial data of the Company for the four years ended December 31, 1993, and for the period January 27, 1989 the date on which the Company was incorporated, through December 31, 1989, and selected historical consolidated financial data of the Railroad as predecessor of the Company for the period January 1, 1989, through March 16, 1989, all derived from the consolidated financial statements of the Company which were audited by Arthur Andersen & Co. This summary should be read in conjunction with the consolidated financial statements included elsewhere in this Report and the schedules and notes thereto.
The purchase method of accounting was used to record the assets acquired and liabilities assumed by the Company in 1989.
The following notes are an integral part of the consolidated financial statements.
The following notes are an integral part of the consolidated financial statements.
The following notes are an integral part of the consolidated financial statements.
The following notes are an integral part of the consolidated financial statements.
1. THE COMPANY
Illinois Central Corporation, a holding company, (hereinafter, the "Company") was incorporated under the laws of Delaware. The Company was formed originally for the purpose of acquiring, through a wholly-owned subsidiary, the outstanding common stock of Illinois Central Transportation Company ("ICTC"). Following a tender offer and several mergers, the Illinois Central Railroad Company ("Railroad") is the surviving corporation and the successor to ICTC and now a wholly-owned subsidiary of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant investments in affiliated companies are accounted for by the equity method. Transactions between consolidated companies have been eliminated in the accompanying consolidated financial statements.
PROPERTIES
Depreciation is computed by the straight-line method and includes depreciation on properties under capital leases. The depreciation rates for the equipment owned by the Company's finance subsidiary are based on estimated useful life and anticipated salvage value. Lives used range from 18 to 20 years. At the Railroad, depreciation for track structure, other road property, and equipment is calculated using the composite method. In the case of routine retirements, removal cost less salvage recovery is charged to accumulated depreciation. Expenditures for maintenance and repairs are charged to operating expense.
The Interstate Commerce Commission ("ICC") approves the depreciation rates used by the Railroad. In 1991, the Railroad completed a study which resulted in revised depreciation rates for road properties (excluding track properties) and equipment. The revised rates did not and will not have a significant effect on operating results. The approximate ranges of annual depreciation rates for major property classifications are as follows:
Road properties .................1% - 8% Transportation equipment ........1% - 7%
In 1989, the Company initiated a program to convert approximately 500 miles of double track main line to a single track main line, with a centralized traffic control system. This program was completed successfully in 1991.
REVENUES
Revenues are recognized based on services performed and include estimated amounts relating to movements in progress for which the settlement process is not complete. Estimated revenue amounts for movements in progress are not significant.
INCOME TAXES
Effective January 1, 1992, the Company adopted the Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). Under SFAS No. 109, deferred income taxes are accounted for on the asset and liability method by applying enacted statutory tax rates to differences ("temporary differences") between the financial statement carrying amounts and the tax bases of assets and liabilities. The resulting deferred tax assets and liabilities represent taxes to be collected or paid in the future when the related assets and liabilities are recovered and settled, respectively. See Note 10 for discussion of the 1992 impact of adopting SFAS No. 109.
CASH AND TEMPORARY CASH INVESTMENTS
Cash in excess of operating requirements is invested in certain funds having original maturities of three months or less. These investments are stated at cost, which approximates market value.
INCOME PER SHARE
Income per common share of the Company is based on the weighted average number of shares of common stock and common stock equivalents outstanding for the period. Dilution, which could result if all outstanding common stock equivalents were exercised, is not significant.
FUTURES, OPTIONS, CAPS, FLOORS AND FORWARD CONTRACTS
In March 1990, the FASB issued Statement of Financial Accounting Standards No. 105 "Disclosure of Information about Financial Instruments with Off Balance Sheet Risk and Financial Instruments with Concentration of Credit Risk" ("SFAS 105"). Disclosures required by SFAS 105 are found in various notes where the financial instruments or related risks are discussed. See specifically Notes 6, 7, 8, and 13.
CASUALTY AND FREIGHT CLAIMS
The Company accrues for injury and damage claims outstanding based on actual claims filed and estimates of claims incurred but not filed. Estimated amounts expected to be settled within one year are classified as current liabilities in the accompanying Consolidated Balance Sheets.
EMPLOYEE BENEFIT PLANS
All employees of the Railroad are covered under the Railroad Retirement Act. In addition, management employees of the Railroad are covered under a defined contribution plan. Contribution costs of the plan are funded currently.
Mr. E. L. Moyers, former Chairman, President and Chief Executive Officer ("Mr. Moyers") is covered by a supplemental plan which is discussed in Note 9.
Effective January 1, 1993, the Company adopted both the Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" ("SFAS No. 106") and the Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS No. 112"). SFAS No. 106 requires that future costs associated with providing postretirement benefits be recognized as expense over the employees' requisite service period. The pay-as-you-go method used prior to 1993 recognized the expense on a cash basis. SFAS No. 112 establishes accounting standards for employers who provide postemployment benefits and clarifies when the expense is to be recognized. In accordance with the provisions of these standards, years prior to 1993 have not been restated. See Note 9 for discussion of the impact of adopting SFAS No. 106 and SFAS No. 112.
RECLASSIFICATIONS
Certain items relating to prior years have been reclassified to conform to the presentation in the current year.
3. EXTRAORDINARY ITEM AND REFINANCING
The 1993 extraordinary loss resulted from the retirement of the Railroad's 14-1/8% Senior Subordinated Debentures (the "Debentures") and refinancing the Permanent Facility. The loss was $23.4 million, net of tax benefits of $12.6 million. The loss resulted from the premium paid, the write-off of unamortized financing fees and debt discount and costs associated with the calling of the $10.3 million of Debentures not tendered. The net proceeds of the 6.75% Notes (see Note 8), borrowings under the $180 million Revolving Credit Facility and other available cash were used to fund the retirement of the Debentures.
4. OTHER INCOME, NET
Other Income, Net consisted of the following ($ in millions):
Years Ended December 31, 1993 1992 1991 Income, net.............. $ 3.9 $ 3.8 $ 3.0 Net gains on real estate sales................... .8 .4 .7 Net gain (loss) on disposal of rolling stock........ (2.3) - - Equity in undistributed earnings of affiliates.. .5 .3 .4 Net gain on Series K..... - - 3.6 Other, net............... (1.2) (2.5) (2.0) ------ ------ ------ Other Income, Net....... $ 1.7 $ 2.0 $ 5.7
5. SUPPLEMENTAL CASH FLOW INFORMATION
Cash changes in components of working capital, exclusive of Current Maturities of Long-Term Debt, included in the Consolidated Statements of Cash Flows were as follows ($ in millions):
Years Ended December 31, 1993 1992 1991
Receivables, net.... $ (3.9) $ 4.7 $ (2.6) Materials and supplies (1.4) (3.2) (.6) Other current assets.. (1.5) .3 1.0 Accounts payable... 1.1 (5.7) (5.0) Income taxes payable 13.6 .5 (5.4) Accrued redundancy reserves............ (2.6) (11.0) (11.7) Other current liabilities......... (6.1) (1.4) (.4) ------- -------- -------- $ (.8) $ (15.8) $ (24.7)
Included in changes in Other Liabilities and Reserves is approximately $6.3 million and $23.4 million for the years ended December 31, 1993 and 1992, respectively, reflecting proceeds from the settlement of casualty claims with numerous insurance carriers.
In 1993, the Railroad entered into a capital lease for 200 covered hoppers. The lease expires in 2003. See Note 7 for a recap of the present value of the minimum lease payments.
In 1991, the Railroad retired several Long- Term Debt obligations, most significantly its $150 million 15.5% Series K First Mortgage Bonds ("Series K"). These retirements resulted in non- cash reductions of debt balances of $4.6 million. Also, in 1991 the balance of a long term investment was reduced by $2.5 million.
6. MATERIALS AND SUPPLIES
Materials and Supplies, valued using the average cost method, consist of track material, switches, car and locomotive parts and fuel. The Railroad entered into various hedge agreements designed to mitigate significant changes in fuel prices. As a result, approximately 93% of the short-term diesel fuel requirements through March 1995 and 46% through June 1995 are protected against significant price changes based on the average near-by contract for Heating Oil #2 traded on the New York Mercantile Exchange.
7. LEASES
As of December 31, 1993, the Company leased 6,709 of its cars and 166 of its locomotives. The majority of these leases have original terms of 15 years and expire between 1994 and 2001. Under the terms of the majority of its leases, the Company has the right of first refusal to purchase, at the end of the lease terms, certain cars and locomotives at fair market value. Other leases include office and computer equipment, vehicles and office facilities.
Net obligations under capital leases at December 31, 1993 and 1992, included in the Consolidated Balance Sheets are $5.4 million and $.2 million, respectively.
At December 31, 1993, minimum rental payments under capital and operating leases that have initial or remaining noncancellable terms in excess of one year were as follows ($ in millions):
Capital Operating Leases Leases
1994 ............................$ .9 $ 34.6 1995 ............................ .9 28.4 1996 ............................ .8 19.3 1997 ............................ .8 7.8 1998 ............................ .8 4.2 Thereafter ...................... 3.1 17.4 ---- ------ Total minimum lease payments... 7.3 $111.7
Less: Imputed interest .......... 1.9 Present value of minimum ---- payments..................... $5.4
Total rent expense applicable to noncancellable operating leases amounted to $45.2 million in 1993, $46.2 million for 1992 and $48.5 million for 1991. Most of the leases provide that the Company pay taxes, maintenance, insurance and certain other operating expenses.
8. LONG-TERM DEBT AND INTEREST EXPENSE
Long-Term Debt at December 31, consisted of the following ($ in millions):
At December 31, 1993, the aggregate annual maturities and sinking fund requirements for debt payments for 1994 through 1999 and thereafter are $24.3 million (includes bridge financing of $21.7 million (see below)), $2.3 million, $80.6 million, $2.7 million, $57.6 million, $61.2 million and $155.9 million, respectively. The weighted- average interest rate for 1993 and 1992 on total debt excluding the effect of discounts, premiums and related amortization was 9.1% and 10.8%, respectively.
In November 1993, the Railroad initiated a public commercial paper program. The commercial paper is rated A2 by S&P, by Fitch and P3 by Moody's and is supported by a new $100 million Revolver with the Railroad's bank lending group. The Railroad views this program as a significant long-term funding source and intends to issue replacement notes as maturities occur. Therefore, the $38.1 million outstanding at December 31, 1993 has been classified as long-term.
In connection with the commercial paper program, the bank lending group agreed to replace the $180 million Revolving Credit Facility (see below) with (i) a new $100 million Revolver, due 1996 and (ii) a $50 million 364-day facility due October 1994 ("Bank Line"). The new Revolver will be used primarily for backup for the commercial paper but can be used for general corporate purposes. The available amount is reduced by the outstanding amount of commercial paper borrowings and any letters of credit issued on behalf of the Railroad under the facility. No amounts have been drawn under the Revolver. The $100 million was limited to $57.9 million because $38.1 million in commercial paper was outstanding and $4.0 million in letters of credit had been issued. The Bank Line was structured as a 364-day renewable instrument and the Company intends to renew it on an on-going basis. The $40 million outstanding at December 31, 1993, has therefore been classified as long-term.
The Company's financing/leasing subsidiaries have approximately $13.0 million in long-term borrowing agreements which were used to acquire a total of 61 locomotives during 1993 and 1991. Such borrowings are secured by equipment which is leased to the Railroad. These agreements mature in 1999 and 2000. One subsidiary used a short- term bridge financing of $21.7 million to acquire 1,522 box cars in December 1993. The bridge financing must be repaid or refinanced prior to March 3, 1994. The Company expects to refinance this debt with either a seven year floating or fixed rate term loan or a combination revolving facility and term loan also with a floating or fixed rate. During April 1993, the Company and the Railroad reached an agreement with its bank lending group and the holders of the privately placed $160 million Senior Secured Notes ("Senior Notes") for a release of all collateral and those instruments are now unsecured. The bank agreed to replace the Permanent Facility with a $180 million Revolving Credit Facility. This was done in connection with the tender offer made by the Railroad for all of the Debentures.
The tender offer was funded by issuance of new $100 million 6.75% Notes, due 2003 (the "Notes"), borrowing under a $180 million Revolving Credit Facility negotiated with the banks which replaced the Permanent Facility and cash on hand. See Note 3 for discussion of the extraordinary loss incurred upon tender for the Debentures. The Railroad irrevocably placed $12.6 million on deposit with a trustee to cover principal, a 6% premium and interest through the first call date of October 1, 1994, for the untendered Debentures.
The Notes (issued at a slight discount 1.071%) pay interest semiannually in May and November and are covered by an Indenture. Of the Senior Notes, $109.8 million bears interest at a rate of 10.02% and $50 million at 10.4%. Principal payments of $55 million are due in each of 1998 and 1999, and $25 million in each of 2000 and 2001. The Senior Notes are governed by a Note Purchase Agreement.
Various borrowings of the Company's subsidiaries are governed by agreements which contain certain affirmative and negative covenants customary for facilities of this nature including restrictions on additional indebtedness, investments, guarantees, liens, distributions, sales and leasebacks, and sales of assets and capital stock. Some also require the Railroad to satisfy certain financial tests, including a leverage ratio, an earnings before interest and taxes to interest charges ratio, debt service coverage, and minimum consolidated tangible net worth requirements. The Railroad may be required to apply 100% of net after-tax proceeds of sales aggregating $2.5 million or greater of certain assets to reduce Revolver commitments. The holders of the Senior Notes can elect to receive a pro-rata share of after-tax proceeds.
Interest Expense, Net consisted of the following ($ in millions):
Years Ended December 31, 1993 1992 1991 ---- ---- ---- Interest expense........ $35.2 $46.2 $59.7 Less: Interest capitalized..... .8 .6 .4 Interest income..... 1.3 2.0 4.2 ----- ----- ----- Interest Expense, Net... $33.1 $43.6 $55.1
9. EMPLOYEE BENEFIT PLANS
Retirement Plans. All employees of the Railroad are covered under the Railroad Retirement Act. In addition, management employees of the Railroad are covered under a defined contribution plan. Contributions under the plan vest immediately. Expenses relating to the defined contribution plan were $.4 million for each of the years ended December 31, 1993, 1992 and 1991.
Mr. Moyers is covered by a non-qualified, unfunded supplemental retirement benefit agreement which provides for a defined benefit payable annually, commencing upon death, permanent disability or retirement (with benefits arising from retirement commencing upon his attaining age 65 and compliance with certain non-competition agreements), in the amount of $250,000 per year for a maximum of 15 years. In accordance with the term of the agreement, no payments will be made while Mr. Moyers is employed by another Class I railroad. The present value of this agreement was included in the 1992 special charge. See Note 15.
Postretirement Plans. In addition to the Company's defined contribution plan for management employees, the Company has three benefit plans which provide some postretirement benefits to most former full-time salaried employees and selected former union represented employees. The medical plan for salaried retirees is contributory, with retiree contributions adjusted annually if expected inflation rate exceeds 9.5%, and contains other cost sharing features such as deductibles and co-payments. The Company's contribution will be fixed at the 1999 year end rate for all subsequent years. Salaried retirees are covered by a life insurance plan which provides a nominal death benefit and is non-contributory. The medical plan for locomotive engineers who retired under a special early retirement program in 1987 provides non-contributory coverage until age 65. All benefits under this plan terminate in 1998.
There are no plan assets and the Company will continue to fund these benefits as claims are paid as was done in prior years.
Postemployment Benefit Plans. The Company provides certain postemployment benefits such as long-term salary continuation and waiver of medical and life insurance co-payments while on long-term disability.
SFAS No. 106 and SFAS No.112. As described in Note 2 effective January 1, 1993 the Company adopted SFAS No. 106 and SFAS No. 112. With respect to SFAS No. 106, the Company elected to immediately recognize the transition asset associated with adoption which resulted because the Company had previously recorded an amount under purchase accounting to reflect the estimated liability for such benefits as of the acquisition date of ICTC.
As a result of adopting these two standards, the Company recorded a decrease to net income of $84,000 (net of taxes of $46,000) as a cumulative effect of changes in accounting principles ($ in millions):
Postretirement Benefits (SFAS No. 106): APBO at January 1, 1993: Medical......................... $36.5 Life............................ 2.3 ----- Total APB................. 38.8 Liability previously recorded..... (40.3) ----- Transition Asset.......... 1.5 Postemployment Benefits Obligation at January 1, 1993 (SFAS 112)..... (1.6) ----- Pre-tax Cumulative Effect of Changes in Accounting Principles.......... (.1) Related tax benefit.................. - ----- Cumulative Effect of Changes in Accounting Principles.......... $ (.1) =====
Per Share Impact..................... $ - =====
In accordance with each standard, years prior to 1993 have not been restated. For 1993, the adoption of these two standards had no significant effect on income before cumulative effect of changes in accounting principles as compared to the Company's prior pay-as-you-go method of accounting for such benefits.
The accumulated postretirement benefit obligations ("APBO") of the postretirement plans were as follows ($ in millions):
January December 31, 1993 1, 1993 Medical Life Total Total Accumulated post- retirement benefit obligation: Retirees....... $26.4 $ 2.4 $28.8 $33.4 Fully eligible active plan participants.. .7 - .7 .7 Other active plan participants.. 4.7 - 4.7 4.7 ----- ----- ----- ----- Total APBO.... $31.8 $ 2.4 34.2 38.8
Unrecognized net gain.......... 5.0 - Accrued liability for post- retirement benefits....... $39.2 $38.8 ===== =====
The weighted-average discount rate used in determining the accumulated post-retirement benefit obligation was 8.0% at January 1, 1993. As a result of the Company's improved financial condition and recognizing the overall shift in the financial community, the Company lowered the weighted-average discount rate to 7.25% as of December 31, 1993. The change in rates resulted in approximately $2.0 million actuarial loss. The loss was offset by actual experience gains, primarily fewer claims and lower medical rate inflation, which resulted in a $5.0 million unrecognized net gain as of December 31, 1993.
The components of the net periodic postretirement benefits cost for 1993 were as follows ($ in millions):
Service costs........................ $ .1 Interest costs....................... 3.0 Net amortization of Corridor excess.. - -----
Net periodic postretirement benefit costs...................... $ 3.1
The weighted-average annual assumed rate of increase in the per capital cost of covered benefits (e.g., health care cost trend rate) for the medical plans is 14.0% for 1993 and is assumed to decrease gradually to 6.25% by 2001 and remain at that level thereafter. The health care cost trend rate assumption normally has a significant effect on the amounts reported; however, as discussed, the plan limits annual inflation for the Company's portion of such costs to 9.5% each year. Therefore, an increase in the assumed health care cost trend rates by one percentage point in each year would have no impact on the Company's accumulated postretirement benefit obligation for the medical plans as of December 31, 1993, or the aggregate of the service and interest cost components of net periodic postretirement benefit expense in future years.
10. PROVISION FOR INCOME TAXES
Effective January 1, 1992, the Company adopted the Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). As a result, the Company recorded a $23.4 million ($.55 per share) reduction in its accrued net deferred income tax liability as of January 1, 1992. The gain recorded upon adoption could not be recognized previously in accordance with SFAS No. 96 which the Company had adopted in 1988.
The Company elected to report this change as the cumulative effect of a change of accounting principle. Therefore, prior year amounts were not restated.
On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993, which contains a deficit reduction package, became law. Certain aspects of the Act directly affect the Company. Most significantly, the new law increased the maximum corporate federal income tax rate from 34% to 35% retroactive to January 1, 1993. This change required the Company to record additional deferred income tax expense of approximately $3.1 million to reflect the new tax rate's impact on net deferred income tax liability as of January 1, 1993. The higher corporate rate is not anticipated to significantly affect the Company's cash flow.
The Provision for Income Taxes for continuing operations consisted of the following ($ in millions):
Years Ended December 31, 1993 1992 1991 ---- ---- ----
Current income tax: Federal............. $23.6 $14.4 $ 9.4 State............... .9 1.6 1.0 Deferred income taxes. 31.9 21.4 20.4 ----- ----- ----- Provision for Income Taxes............... $56.4 $37.4 $30.8
The effective income tax rates for the years ended December 31, 1993, 1992 and 1991, were 38%, 34% and 32%, respectively. See Note 3 for the tax benefits associated with the extraordinary loss.
The items which gave rise to differences between the income taxes provided for continuing operations in the Consolidated Statements of Income and the income taxes computed at the statutory rate are summarized below ($ in millions):
Temporary differences between book and tax income arise because the tax effects of transactions are recorded in the year in which they enter into the determination of taxable income. As a result, the book provisions for taxes differ from the actual taxes reported on the income tax returns. The net results of such differences are included in Deferred Income Taxes in the Consolidated Balance Sheets.
The Company has an Alternative Minimum Tax ("AMT") carryforward credit of $.1 million at December 31, 1993. This excess of AMT over regular tax can be carried forward indefinitely to reduce future U.S. Federal income tax liabilities. At December 31, 1993, this credit was used to reduce the recorded deferred tax liability.
At December 31, 1993, the Company, for tax or financial statement reporting purposes, had no net operating loss carryovers.
Deferred Income Taxes consisted of the following ($ in millions):
December 31, ----------------------- 1993 1992
Deferred tax assets... $ 82.2 $ 114.4
Less: Valuation allowance. (2.2) (3.3)
Deferred tax assets, net of valuation allowance 80.0 111.1
Deferred tax liabilities. (259.5) (258.2) --------- --------- - - Deferred Income Taxes.... $ (179.5) $ (147.1)
The valuation allowance is comprised of the portion of state tax net operating loss carryforwards expected to expire before they are utilized and non-deductible expenses incurred with the previous merger of wholly-owned subsidiaries.
Major types of deferred tax assets are: reserves not yet deducted for tax purposes ($64.0 million) and safe harbor leases ($11.8 million). Major types of deferred tax liabilities are: accelerated depreciation ($206.2 million), land basis differences ($10.3 million) and debt marked to market ($2.1 million).
The Company and the Railroad have a tax sharing agreement whereby the Railroad's federal tax liability and combined state tax liabilities (if any) are the lesser of (i) the Railroad's separate consolidated liability as if it were not a member of the Company's consolidated group or (ii) the Company's consolidated liability computed without regard to any other subsidiaries of the Company. The Company and its financing/leasing subsidiaries have a tax sharing agreement whereby the subsidiary's federal income tax and state income tax liabilities are determined on a consolidated, or combined state income tax basis as if it were not a member of the Company's consolidated group, with no benefit for prior net operating losses or credit carryovers from prior years.
11. COMMON STOCK AND DIVIDENDS
The Company is authorized to issue 65,000,000 shares of Common Stock, par value $.001. At December 31, 1993, there were 42,614,566 shares of Common Stock outstanding. Each holder of Common Stock is entitled to one vote per share in the election of directors and on all matters submitted to a vote of stockholders. Subject to the rights and preferences of redeemable preferred stock, if any, each share of Common Stock is entitled to receive dividends as may be declared by the Board of Directors out of funds legally available and to share ratably in all assets available for distribution to stockholders upon dissolution or liquidation. No holder of Common Stock has any preemptive right to subscribe for any securities of the Company. No shares of preferred stock were outstanding at December 31, 1993 and 1992.
On February 4, 1992, the Board of Directors authorized a three-for-two stock split on Common Stock. The split was in the form of a stock dividend and was paid on February 28, 1992. Fractional shares were settled for cash. A total of 14,132,058 shares were issued from authorized but unissued shares. In 1992, the Board of Directors initiated a policy of quarterly dividends on the Common Stock of the Company. Future dividends may be dependent on the ability of the Railroad to pay dividends to the Company. Certain covenants of the Railroad's debt restrict the level of dividends it may pay to the Company. At December 31, 1993, approximately $76 million was free of such restrictions.
The Company awarded 25,000 shares and 150,000 shares of restricted stock to eligible employees of the Railroad in 1993 and 1992, respectively. No cash payments are required by the individuals. Shares awarded under the plans may not be sold, transferred, or used as collateral by the holders until the shares awarded become free of the restrictions. Restrictions lapse over a four-year period. All shares still subject to restrictions will be forfeited and returned to the plan if the employee's relationship with the Railroad is terminated. A total of 13,500 shares were forfeited in 1993. If the employee becomes disabled, or dies, or a change in control occurs during the vesting period, the restrictions will lapse at that time. The compensation expense resulting from the award of restricted stock is valued at the closing market price of the Company's Common Stock on the date of the award, recorded as a reduction of Stockholders' Equity, and charged to expense evenly over the service period. Compensation expense was $.8 million and $.5 million in 1993 and 1992, respectively.
In 1992, the Company awarded 200,000 shares to Mr. Moyers as well. Of this amount, 133,000 were vested upon his retirement in 1993. The remaining 67,000 were forfeited in 1993 when Mr. Moyers was employed by another Class I railroad. See Note 15.
12. COMPENSATION AND STOCK OPTIONS
Stock Purchase Plan. Under the Company's 1990 Stock Purchase Plan (the "Stock Plan"), 736,380 shares (post split) of Common Stock were made available from shares held by Prospect for sale to key employees and officers of the Company other than Mr. Moyers, as determined by the Company's Board of Directors. Shares so awarded were sold at a price of $.10 per share (post split)(which was Prospect's approximate original per share cost for such stock as adjusted for the 3 for 2 stock split in February 1992). In general, shares awarded pursuant to the Stock Purchase Plan are restricted for a period of four years and vest at a rate of 25% per year. At December 31, 1993, only 130,313 shares are restricted. All shares will vest prior to June 30, 1994, with 126,563 vesting on or before April 1, 1994. Unvested shares are subject to repurchase by the Company at a price of $.267 per share upon the termination of the participant's employment, other than as a result of death or permanent disability. The unawarded shares (63,270) and those repurchased in 1991 are now classified as Treasury Stock.
Long-Term Incentive Plan. Under the Company's 1990 Long-Term Incentive Plan (the "Long-Term Incentive Plan") shares of Common Stock are available for issuance upon the exercise of incentive options that may be awarded by the Compensation Committee to directors and selected salaried employees of the Company and its affiliates and to certain other individuals who possess the potential to contribute to the future success of the Company. The Compensation Committee also has the authority under the Long- Term Incentive Plan to award stock appreciation rights, restricted stock and restricted stock units, dividend equivalents and other stock-based awards, and to determine the consideration to be paid by the participant for any awards, any limits on transfer of awards, and, within certain limits, other terms of awards. In the case of options (other than options granted to directors who are not full-time employees of the Company ("Outside Directors"), as described below) granted under the Long-Term Incentive Plan, the Committee has the power to determine the exercise price of the option (which cannot be less than 50% of the fair market value on the date of grant of the shares subject to the option), the term of the option, the time and method of exercise and whether the options are intended to qualify as "incentive stock options" pursuant to Section 422A of the Internal Revenue Code.
Outside Directors of the Company also participate in the Long-Term Incentive Plan and are granted an option to purchase 15,000 shares of Common Stock upon initial appointment or election. In addition, Outside Directors as of November 1990 were granted options to purchase an additional 10,000 shares, which grants were approved at the 1991 Annual Meeting of Stockholders. Also on the date of each Annual Meeting, each Outside Director of IC who serves immediately prior to such date and who will continue to serve after such date (whether as a result of such director's re- election or by reason of the continuation of such director's term), will be granted an option to purchase 1,500 shares of Common Stock. Options granted to Outside Directors entitle such persons to purchase Common Stock at the fair market value of such Common Stock on the date the option was granted. Options held by Outside Directors expire 10 years from the date of grant, or, if earlier, one year following termination of service as a director for any reason other than death or disability. Such options become exercisable in full six months after their date of grant.
At the 1993 Annual Meeting, the stockholders authorized an additional one million shares to be available for issuance under the Long-Term Incentive Plan.
The following table summarizes the shares available for award under the Incentive Plan for the year ended December 31, 1993:
Reserved shares at beginning of year........... 904,000 Options exercised............ (49,500) Restricted stock awarded..... (25,000) (74,500) -------- -------- Subtotal.................. 829,500 Increase in authorized shares. 1,000,000 Shares of restricted stock forfeited.................... 80,500 Change in options outstanding during year.................. (482,500) --------- Shares available for award at end of year............... 1,427,500
The following table summarizes changes in shares under option for the year ended December 31, 1993:
Last Date Exercisable 4-21-2003 11-23-2003
The Compensation Committee awarded stock options to employees under the Long-Term Incentive Plan for the first time in 1993. Awards, all at fair market value, vest ratably over four years and expire 10 years from date of grant.
In 1993, Outside Directors exercised 7,500 options at $12.00 per share when the market price was $25.625 per share, 7,500 options at $12.00 per share when the market price was $27.875 per share and a total of 34,500 options at prices ranging from $8.000 per share to $27.750 per share when the market price was approximately $33.00 per share.
See Notes 11 and 15 for a discussion of the restricted stock issued under the Long-Term Incentive Plan.
13. CONTINGENCIES, COMMITMENTS AND CONCENTRATION OF RISKS
The Company has unconditionally guaranteed its finance subsidiary's $32.1 million obligations.
The Company is self-insured for the first $5 million of each loss. The Company carries $295 million of liability insurance per occurrence, subject to an annual cap of $370 million in the aggregate for all losses. This coverage is considered by the Company's management to be adequate in light of the Company's safety record and claims experience.
As of December 31, 1993, the Company had $4.0 million of letters of credit outstanding as collateral primarily for surety bonds executed on behalf of the Company. Such letters of credit expire in 1994 and are automatically renewable for one year. The letters of credit reduced the maximum amount that could be borrowed under the Revolver (see Note 8).
The Company has guaranteed repayment of certain indebtedness of a jointly owned company aggregating $7.8 million. The Company's primary share is $1.0 million; the remainder is a primary obligation of other unrelated owner companies.
There are various regulatory proceedings, claims and litigation pending against the Company. While the ultimate amount of liability that may result cannot be determined, in the opinion of the Company's management, based on present information, adequate provisions for liabilities have been recorded. See "Management's Discussion and Analysis - Other" for a discussion of environmental matters.
14. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and temporary cash investments. The carrying amount approximates fair value because of the short maturity of those instruments.
Investments. The Company has investments of $10.3 million in 1993 and $11.1 million in 1992 for which there are no quoted market prices. These investments are in joint railroad facilities, railroad terminal associations, switching railroads and other transportation companies. For these investments, the carrying amount is a reasonable estimate of fair value. The Company's remaining investments ($5.4 million in 1993 and $3.9 million in 1992) are accounted for by the equity method.
Long-term debt. The fair value of the Company's long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities.
Fuel hedge agreements. The fair value of fuel hedging agreements is the estimated amount that the Company would receive or pay to terminate the agreements as of year end, taking into account the current credit worthiness of the agreement counterparties. At December 31, 1993 and 1992, the fair value was a liability of $4.6 million and less than $.1 million, respectively.
The estimated fair values of the Company's financial instruments at December 31, are as follows ($ in millions):
15. SPECIAL CHARGE
In 1992, the Company recorded a pretax special charge of $8.9 million as part of operating expense. The special charge reduced Net Income by $5.9 million or $.13 per share.
The special charge consisted of $7 million for various costs associated with the retirement of Mr. Moyers and the related organizational changes. The costs associated with Mr. Moyers' retirement include the present value of his pension, accelerated vesting of a portion of his restricted stock award and certain costs of a non- competition agreement. The remaining $1.9 million was for the disposition costs of railcars and a building and its adjacent land.
16. SELECTED QUARTERLY FINANCIAL DATA - (UNAUDITED)($ IN MILLIONS, EXCEPT SHARES DATA:
Per share amounts in 1991 have been restated to reflect the 3-for-2 stock split that occurred in February 1992.
- -----------------------
(a) Includes the special charge recorded in the fourth quarter of 1992, see Note 15.
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
--------------------
-----------------------------
F O R M 10-K
FINANCIAL STATEMENT SCHEDULES
SUBMITTED IN RESPONSE TO ITEM 14(a)
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
------------- -------------
I N D E X
T O FINANCIAL STATEMENT SCHEDULES SUBMITTED IN RESPONSE TO ITEM 14(a)
Schedules for the three years ended December 31, 1993:
II-Amounts receivable from related parties, and underwriters, promoters and employees other than related parties...
III-Condensed financial information........
V-Property, plant and equipment..........
VI-Accumulated depreciation and amortization of property, plant and equipment.......
VII-Guarantees of securities of other issuers...............................
VIII-Valuation and qualifying accounts......
Pursuant to Rule 5.04 of General Rules of Regulation S-X, all other schedules are omitted because they are not required or because the required information is set forth in the financial statements or related notes thereto.
------------- -------------
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES, AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES ($ in millions)
Balance at end of year Balance ----------- at begin- Non- Name of ning of Addi- Deduc- Curr- Curr- Debtor year tions tions ent ent - ------ --------- ----- ------ ---- ----- E. L. Moyers $.7 - - $.2 $.5
- -----------------
Pursuant to a four-year note dated May 15, 1992, bearing interest at the rate of 7.1%, Mr. Moyers became indebted to the Company in the principal amount of $1,000,000. In connection with Mr. Moyers' decision to retire and resign from the Board, Mr. Moyers repaid $238,500 of principal and interest and the Compensation Committee forgave an additional $200,000 principal amount of the loan. The May 15, 1992 note was cancelled in favor of a new note (the "Note") to be repaid in four annual installments of principal and interest, commencing on February 18, 1994. The Note provides that unpaid principal, including any accrued interest thereon, is to be accelerated in the event of a breach of the non-competition covenant contained in Mr. Moyers' consulting and non-competition agreement with the Company. The Note bears interest at a rate of 6.22% per annum and is prepayable in whole or in part at any time. Any unpaid principal, including any accrued interest thereon, is to be forgiven in the event of Mr. Moyers' death or disability.
The Notes to Consolidated Financial Statements beginning on page are an integral part of this schedule.
(a) Reflects 3-for-2 stock split in February 1992.
The Notes to Consolidated Financial Statements beginning on page are an integral part of this schedule.
(a) Reflects 3-for-2 stock split in February 1992.
The Notes to Consolidated Financial Statements beginning on page are an integral part of this schedule.
(1) Reclassification of properties from "Other Assets." (2) Reclassification of properties from "Assets Held For Disposition."
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
SCHEDULE VII--GUARANTEES OF SECURITIES OF OTHER ISSUERS
AS OF DECEMBER 31, 1993, 1992 AND 1991 ($ IN MILLIONS)
Column A Column B Column C Column D - -------- -------- -------- --------
Name of Title of Total Amount Nature of Issuer of Issue of Guaranteed Guarantee Securities Class of and Guaranteed Securities Outstanding by Person Guaranteed for Which Statement is Filed - ----------- ---------- ------------ --------
Terminal Refunding $7.8 Principal Railroad and and Association Improvement annual of St. Mortgage 4% interest Louis Bonds, St. Louis Series "C", due 7/1/2019
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential No. Descriptions Page No. - ------- ------------ ----------
3.1 Articles of Incorporation of Illinois Central Railroad Company, as amended. (Incorporated by reference to Exhibit 3.1 to the Registration Statement of Illinois Central Railroad Company on Form S-1. (SEC File No. 33-29269))
3.2 By-Laws of Illinois Central Railroad Company, as amended. (Incorporated by reference to Exhibit 3.2 to the Registration Statement of Illinois Central Railroad Company on Form S-1. (SEC File No. 33-29269))
3.3 Restated Articles of Incorporation of Illinois Central Corporation. (Incorporated by reference to Exhibit 3.1 to the Quarterly Report of the Illinois Central Corporation on Form 10-Q for the three months ended September 30, 1991. (SEC File No. 1-10720))
3.4 By-Laws of Illinois Central Corporation, as amended. (Incorporated by reference to Exhibit 3.4 to the Registration Statement of Illinois Central Corporation and Illinois Central Railroad Company on Form S-1. (SEC File Nos. 33-36321 and 33-36321- 01))
3.5 Certificate of Retirement of Illinois Central Corporation (Incorporated by reference to Exhibit 3.3 to the Registration Statement of Illinois Central Corporation and Illinois Central Railroad Company on Form S-1, as amended. (SEC File No. 33- 40696 and Post-Effective Amendments to Registration Statement Nos. 33-36321 and 33-36321-01))
3.6 Certificate of Elimination of Illinois Central Corporation. (Incorporated by reference to Exhibit 3.2 to the Quarterly Report of the Illinois Central Corporation on Form 10-Q for the three months ended September 30, 1991. (SEC File No. 1-10720))
- --------------------
* Used herein to identify management contracts or compensation plans or arrangements as required by Item 14 of Form 10-K.
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX Exhibit Sequential No. Descriptions Page No. - ------- ------------ ----------
4.1 Form of 14-1/8% Senior Subordinated Debenture Indenture dated as of September 15, 1989 (the "Senior Subordinated Debenture Indenture") between Illinois Central Railroad Company and United States Trust Company of New York, Trustee (including the form of 14-1/8% Senior Subordinated Debenture included as Exhibit A therein). (Incorporated by reference to Exhibit 4.1 to the Registration Statement of Illinois Central Railroad Company on Form S-1, as amended. (SEC File No. 33- 29269))
4.2 Restated Articles of Incorporation of Illinois Central Corporation (included in Exhibit 3.3)
4.3 Form of the Amended and Restated Revolving Credit and Term Loan Agreement dated as of September 22, 1989, and amended and restated as of July 23, 1991, among Illinois Central Railroad Company and the Banks named therein (including the Form of the Restated Revolving Credit Note, the Form of the Restated Term Note, the Form of the Intercreditor Agreement, the Form of the Security Agreement and the Form of the Bond Pledge Agreement included as Exhibits A, B, G, H and I, respectively, therein). (Incorporated by reference to Exhibit 4.1 to the Quarterly Report of Illinois Central Railroad Company on Form 10-Q for the three months ended September 30, 1991. (SEC File No. 1-7092))
4.4 Amendment No. 1 dated as of February 28, 1992, to the Amended and Restated Revolving Credit and Term Loan Agreement dated as of September 22, 1989, and amended and restated as of July 23, 1991, among Illinois Central Railroad Company and the Banks named therein. (Incorporated by reference to Exhibit 4.3 to the Annual Report on Form 10-K for the year ended December 31, 1991, for the Illinois Central Railroad Company filed March 12, 1992. (SEC File No. 1-7092))
4.5 Form of Guaranty dated as of September 22, 1989, and amended and restated as of July 23, 1991, among Illinois Central Corporation and the Banks named therein that are or may become parties to the Amended and Restated Revolving Credit and Term Loan Agreement dated as of September 22, 1989, and amended and restated as of July 23, 1991, among the Illinois Central Railroad Company and the Banks named therein. (Incorporated by reference to Exhibit 4.3 to the Quarterly Report of Illinois Central Corporation on Form 10-Q for the three months ended September 30, 1991. (SEC File No. 1-10720))
4.6 Form of Pledge Agreement dated as of September 22, 1989, and amended and restated as of July 23, 1991, among Illinois Central Corporation and the Banks named therein that are or may become parties to the Amended and Restated Revolving Credit and Term Loan Agreement dated as of amended and restated as of July 23, 1991, among the Illinois Central Railroad Company and the Banks named therein and the Senior Note Purchasers that are parties to the Note Purchase Agreement dated as of July 23, 1991. (Incorporated by reference to Exhibit 4.4 to the Quarterly Report of Illinois Central Corporation on Form 10-Q for the three months ended September 30, 1991. (SEC File No. 1-10720))
4.7 Form Supplemental Indenture dated July 23, 1991, between Illinois Central Railroad Company and Morgan Guaranty Trust Company of New York relating to First Mortgage Adjustable Rate Bonds, Series M. (Incorporated by reference to Exhibit 4.2 to the Quarterly Report of Illinois Central Railroad Company on Form 10-Q for the three months ended September 30, 1991. (SEC File No. 1-7092))
4.8 Form of Note Purchase Agreement dated as of July 23, 1991, among Illinois Central Railroad Company, as issuer, and Illinois Central Corporation, as guarantor, for 10.02% Guaranteed Senior Secured Series A Notes due 1999 and for 10.4% Guaranteed Senior Secured Series B Notes due 2001 (including the Form of Series A Note and Series B Note included as Exhibits A-1 and A-2, respectively, therein). (Incorporated by reference to Exhibit 4.3 to the Quarterly Report of the Illinois Central Railroad Company on Form 10-Q for the three months ended September 30, 1991. (SEC File No. 1-7092))
4.9 Form of the Loan and Security Agreement dated as of December 6, 1991, between IC Leasing Corporation I and Hitachi Credit America Corp. (including the Form of the Initial Funding Credit Note, the Form of the Refurbishing Credit Note, the Form of Assignment of Lease and Agreement, the Form of the Pledge Agreement between IC Financial Services Corporation and Hitachi Credit America Corp. and the Form of the Guaranty Agreement between Illinois Central Corporation and Hitachi Credit America Corp. included as Exhibits D, E, F, G and H, respectively, therein). (Incorporated by reference to Exhibit 4.9 to the Annual Report on Form 10-K for the year ended December 31, 1991, for the Illinois Central Corporation filed March 12, 1992. (SEC File No. 1-10720))
4.10 Form of the Trust Agreement dated as of March 30, 1993, between IC Leasing Corporation II and Wilmington Trust Company. (Incorporated by reference to Exhibit 4.10 to the Current Report of Illinois Central Corporation on Form 8- K dated May 7, 1993. (SEC File No. 1-10720))
4.11 Form of the Security Agreement and Mortgage dated as of March 30, 1993, between IC Leasing Trust II and UNUM Life Insurance Company of America (Including the Form of the Promissory Note between IC Leasing Trust II and UNUM Life Insurance Company of America included as Exhibit A, therein). (Incorporated by reference to Exhibit 4.11 to the Current Report of Illinois Central Corporation on Form 8- K dated May 7, 1993. (SEC File No. 1-10720))
4.12 Assignment of Lease and Conveyance dated March 30, 1993, between IC Leasing Corporation II and IC Leasing Trust II. (Incorporated by reference to Exhibit 4.12 to the Current Report of Illinois Central Corporation on Form 8- K dated May 7, 1993. (SEC File No. 1-10720))
4.13 Assignment of Lease and Conveyance dated March 30, 1993, between IC Leasing Trust II and UNUM Life Insurance Company of America. (Incorporated by reference to Exhibit 4.13 to the Current Report of Illinois Central Corporation on Form 8-K dated May 7, 1993. (SEC File No. 1- 10720))
4.14 Form of the Amended and Restated Demand Promissory Note between IC Leasing Corporation III and The First National Bank of Boston dated December 3, 1993, and amended and restated as of January 3, 1994.
4.15 Form of the Guaranty dated as of December 3, 1993, between Illinois Central Corporation and The First National Bank of Boston.
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential No. Descriptions Page No. - ------- ------------ ----------
4.16 Security Agreement dated as of December 3, 1993, between IC Leasing Corporation III and The First National Bank of Boston and Amendment No. 1 to the Security Agreement dated as of January 3, 1994.
4.17 Form of the Revolving Credit Agreement dated as of October 27, 1993, among Illinois Central Railroad Company and the Banks named therein (including the Form of the Note, the Form of the Competitive Bid Request, Form of the Notice of Competitive Bid Request, Form of the Competitive Bid and Form of the Competitive Bid Accept/Reject Letter included as Exhibits A, B-1, B-2, B-3 and B-4, respectively, therein). (Incorporated by reference to Exhibit 4.8 to the Annual Report on Form 10-K for the year ended December 31, 1993, for Illinois Central Railroad Company filed March 16, 1994. (SEC File No. 1-7092))
4.18 Form of the Amended and Restated Revolving Credit Agreement dated as of October 27, 1993, among Illinois Central Railroad Company and the Banks named therein (including the Form of the Note, the Form of the Competitive Bid Request, Form of the Notice of Competitive Bid Request, Form of the Competitive Bid and Form of the Competitive Bid Accept/Reject Letter included as Exhibits A, B-1, B-2, B-3 and B-4, respectively, therein). (Incorporated by reference to Exhibit 4.8 to the Annual Report on Form 10-K for the year ended December 31, 1993, for Illinois Central Railroad Company filed March 16, 1994. (SEC File No. 1-7092))
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential No. Descriptions Page No. - ------- ------------ ----------
4.19 Form of Commercial Paper Dealer Agreement between Illinois Central Railroad Company and Lehman Commercial Paper, Inc. dated as of November 19, 1993. (Incorporated by reference to Exhibit 4.10 to the Annual Report on Form 10-K for the year ended December 31, 1993 for Illinois Central Railroad Company filed March 16, 1994. (SEC File No. 1-7092))
4.20 Form of Issuing and Paying Agency Agreement of the Illinois Central Railroad Company related to the Commercial Paper Program between Illinois Central Railroad Company and Bank America National Trust Company dated as of November 19, 1993, (including Exhibit A the Form of Certificated Commercial Paper Note included therein). (Incorporated by reference to Exhibit 4.11 to the Annual Report on Form 10-K for the year ended December 31, 1993 for Illinois Central Railroad Company filed March 16, 1994. (SEC File No. 1-7092))
10.1 * Form of supplemental retirement and savings plan. (Incorporated by reference to Exhibit 10C to the Registration Statement of Illinois Central Transportation Co. on Form 10 filed on October 7, 1988, as amended. (SEC File No. 1- 10085))
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential No. Descriptions Page No. - ------- ------------ ----------
10.2 * Form of management incentive compensation plan. (Incorporated by reference to Exhibit 10D to the Registration Statement of Illinois Central Transportation Co. on Form 10 filed on October 7, 1988, as amended. (SEC File No. 1- 10085))
10.3 Consolidated Mortgage dated November 1, 1949 between Illinois Central Railroad Company and Guaranty Trust Company of New York, Trustee, as amended. (Incorporated by reference to Exhibit 10.8 to the Registration Statement of Illinois Central Railroad Company on Form S-1, as amended. (SEC File No. 33- 29269))
10.4 Form of indemnification agreement dated as of January 29, 1991, between Illinois Central Corporation and certain officers and directors. (Incorporated by reference to Exhibit 10.9 to the Annual Report on Form 10-K for the year ended December 31, 1990, for the Illinois Central Corporation filed on April 1, 1991. (SEC File No. 1-10720))
10.5 * Form of IC 1990 Stock Purchase Plan. (Incorporated by reference to Exhibit 10.6 to the Registration Statement of Illinois Central Corporation on Form 10 filed on January 5, 1990, as amended. (SEC File No. 1-10720))
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential No. Descriptions Page No. - ------- ------------ ----------
10.6 * Form of IC Long-Term Incentive Option Plan. (Incorporated by reference to Exhibit 10.17 to the Registration Statement of Illinois Central Corporation and Illinois Central Railroad Company on Form S-1. (SEC File Nos. 33-36321 and 33- 36321-01))
10.7 * Amendments No. 1 and No. 2 to the IC Long-Term Incentive Plan. (Incorporated by reference to the Proxy Statement of Illinois Central Corporation in connection with its 1992 Annual Meeting of Stockholders. (SEC File No. 1- 10720))
10.8 Railroad Locomotive Lease Agreement between IC Leasing Corporation I and Illinois Central Railroad Company dated as of September 5, 1991. (Incorporated by reference to Exhibit 10.9 to the Annual Report on Form 10-K for the year ended December 31, 1991 for the Illinois Central Railroad Company filed March 12, 1992. (SEC File No. 1- 7092))
10.9 Railroad Locomotive Lease Agreement between IC Leasing Corporation II and Illinois Central Railroad Company dated as of January 14, 1993. (Incorporated by reference to Exhibit 10.6 to the Annual Report on Form 10-K for the year ended December 31, 1992, for the Illinois Central Railroad Company filed March 5, 1993. (SEC File No. 1- 7092))
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential No. Descriptions Page No. - ------- ------------ ----------
10.10 * Form of Consulting and Non- Competition Agreement between Illinois Central Corporation and Edward L. Moyers dated as of February 18, 1993. (Incorporated by reference to Exhibit 10.10 to Annual Report on Form 10-K for the year ended December 31, 1992, for the Illinois Central Corporation filed March 5, 1993. (SEC File No. 1-10720))
10.11 * Form of the Note Agreement between the Illinois Central Corporation and Edward L. Moyers dated February 18, 1993. (Incorporated by reference to Exhibit 10.11 to Annual Report on Form 10-K for the year ended December 31, 1992, for the Illinois Central Corporation filed March 5, 1993. (SEC File No. 1- 10720))
10.12 * Form of a Supplemental Retirement Benefit Agreement dated as of August 20, 1992 between Illinois Central Corporation and Edward L. Moyers. (Incorporated by reference to Exhibit 10.3 to the Quarterly Report of the Illinois Central Corporation on Form 10-Q for the three month ended September 30, 1992. (SEC File No. 1-10720))
10.13 The Asset Sale Agreement between Allied Railcar Company and IC Leasing Corporation III dated December 3, 1993, (including the Bill of Sale Agreement and Assumption of Liabilities included as Exhibits C and D, respectively, therein).
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential No. Descriptions Page No. - ------- ------------ ----------
10.15 The Purchase Agreement between IC Leasing Corporation III and The First National Bank of Maryland dated December 29, 1993.
11 Computation of Income Per Common Share (Included at E-9) 21 Subsidiaries of Registrant (Included at E-10)
24.1 Consent of Arthur Andersen & Co. (A)
---------------------
(A) Included herein but not reproduced.
(1) Shares for 1991 restated to reflect February 1992 3 for 2 stock split. (2) Such items are included in primary calculation. Additional shares represent difference between average price of Common Stock for the period and the end of period price.