ITEM 3. LEGAL PROCEEDINGS
Set forth below is a description of certain legal proceedings involving SFP and its subsidiaries.
On January 30, 1987, New TC Holding Corporation ("New TC") and Ticor, Inc. ("Ticor") filed suit in the Superior Court of the State of California for the County of Los Angeles against SFP Properties, Inc. (formerly known as Southern Pacific Company), a wholly owned subsidiary of SFP (the "New TC Lawsuit"). In the complaint, New TC, which purchased all of the outstanding common stock of Ticor from SFP Properties, Inc. pursuant to a Share Purchase Agreement dated September 30, 1983, sought an order declaring that SFP Properties, Inc. is obligated by the terms of the Share Purchase Agreement to defend and hold harmless New TC and certain of its subsidiaries from losses which may exceed $100 million. On February 24, 1993, this case was dismissed by the court for lack of prosecution. SFP Properties, Inc. has reached an agreement in principle to pay New TC and Ticor $1.2 million in settlement of all claims made in the New TC Lawsuit and the third-party action filed in the Great American Lawsuit (described below).
In another lawsuit, Great American Insurance Company ("Great American") seeks indemnity from Ticor for various claims and losses pursuant to the indemnity provisions of the 1977 Share Purchase Agreement in which Ticor purchased Constellation Reinsurance Company ("Con Re") from Great American (the "Great American Lawsuit"). Great American alleges that Con Re breached certain agreements with Great American, and that Ticor is required to indemnify and hold Great American harmless with respect to all losses incurred in connection therewith. In turn, Ticor seeks indemnity from SFP Properties, Inc. under the 1983 Share Purchase Agreement between New TC and SFP Properties, Inc. referred to above.
Ticor's third-party complaint against SFP Properties, Inc., filed on December 22, 1989, alleges not only that SFP Properties, Inc. is responsible to indemnify Ticor under the 1983 Share Purchase Agreement between New TC and SFP Properties, Inc., but that SFP Properties, Inc.'s failure to infuse funds into Con Re and to implement less onerous tax allocation arrangements prior to Con Re's liquidation was the proximate cause of Con Re's failure to satisfy the claims now made against Great American. Ticor alleges that SFP Properties, Inc. had an implied contractual duty to Ticor to refrain from such conduct.
On or about December 14, 1990, Ticor filed a petition for reorganization pursuant to Chapter 11 of the Bankruptcy Code, and both Great American's action against Ticor and Ticor's third-party action against against SFP Properties, Inc. were stayed. The Bankruptcy Court thereafter entered an order disallowing Great American's claim in its entirety, and the action brought by Great American against Ticor was dismissed, with prejudice. Subsequently, as described above, SFP Properties, Inc. reached an agreement in principle to pay New TC and Ticor $1.2 million in settlement of all claims made in the third- party action filed in the Great American Lawsuit and the New TC Lawsuit.
On December 17, 1992, an amended complaint was filed in an action entitled David Rodriguez, derivatively on behalf of Santa Fe Pacific Corporation v. John S. Reed, Robert D. Krebs, W. John Swartz, John J. Schmidt, Joseph F. Alibrandi, Richard J. Flamson III, George B. Munroe, Jack S. Parker, Jean Head Sisco, Arthur W. Woelfle, Robert E. Gilmore, Michael A. Morphy, Edward F. Swift, Kathryn D. Wriston, John S. Runnells, II, Robert H. West, Alan C. Furth, Arjay Miller, and
Benjamin F. Biaggini, Defendants, and Santa Fe Pacific Corporation, a Delaware corporation, Nominal Defendant, in the Circuit Court of Cook County, Illinois, County Department, Chancery Division, No. 92 CH 06618. The amended complaint asserts purported derivative claims on behalf of SFP against present and former directors of SFP and alleges that the defendant directors caused SFP to incur liability in connection with the action brought against SFP in 1985 by Energy Transportation Systems, Inc. and ETSI Pipeline Project (the "ETSI Litigation"). The four counts of the amended complaint allege breach of fiduciary duty and waste of corporate assets for intentional antitrust violations, negligent failure to stop antitrust violations, failure to timely settle the ETSI Litigation, and failure to take appropriate action against persons who committed antitrust violations. The amended complaint seeks damages from the individual defendants in an amount "not less than $342 million." On December 7, 1993, the Board appointed a Litigation Committee consisting of Directors Lindig and Roberts to consider and determine whether or not prosecution of such claims and action is in the best interest of SFP and its stockholders.
In August 1991, the EPA issued an order to SFP Pipelines and nine additional parties regarding investigation and cleanup of contamination in the vicinity of the Partnership's storage facilities and truck loading terminal at Sparks, Nevada. The investigation and remediation at the Sparks terminal is also the subject of a lawsuit filed January 1, 1991, entitled Nevada Division of Environmental Protection v. Santa Fe Pacific Pipelines, Inc., Southern Pacific Transportation Company, Shell Oil Company, Time Oil Company, Berry-Hinkley Terminal, Inc., Chevron U.S.A., Inc., Texaco Refining and Marketing, Inc., Air BP, a division of BP Oil, Unocal Corporation, and Golden Gate Petroleum Company, Case No. CV91-546, in the Second Judicial District Court of the State of Nevada in and for the County of Washoe, seeking remediation of contamination allegedly due to operations of SFP Pipelines and other defendants and which involves potential monetary sanctions that could exceed $100,000. This lawsuit was subsequently joined by the County of Washoe Health District and the City of Sparks. Several lawsuits also have been brought against the ten respondents for alleged property value diminishment. Pursuant to the EPA order, a report on a detailed site investigation, along with a proposed remediation plan, was submitted to the EPA on March 6, 1992. In September 1992, the EPA approved the respondents' remediation plan and an estimate of remediation costs was made in accordance with that plan. During the quarter ended September 30, 1992, the Partnership recorded a $10 million provision for environmental remediation costs at Sparks, Nevada, and two sites in California.
Effective December 10, 1993, Santa Fe Railway entered into an agreement with the South Coast Air Quality Management District ("District"), a political subdivision of the State of California, with respect to alleged violations of air emission regulations dating from January 1991. The agreement covers 48 Notices of Violation concerning smoke emissions from 71 locomotives operating in California's South Coast Air Basin. Under the agreement, Santa Fe Railway contributed $173,500 to the District to support its Locomotive Propulsion Systems Task Force Account or other locomotive emissions research or demonstration projects mutually agreed upon by the District and Santa Fe Railway, and contributed $4,000 to be used for certain audit expenses. In addition, Santa Fe Railway has agreed to purchase and install measuring meters and to implement a compliance reporting program to monitor locomotive emissions for an approximate total cost of $300,000.
During the quarter ended June 30, 1993, the EPA issued a Notice of Violations to the Partnership associated with an oxygenate blending equipment malfunction at the Partnership's Phoenix terminal. It is possible that the Partnership will be required to pay in excess of $100,000 in fines arising from this Notice of Violations.
SFP and its subsidiaries also are parties to a number of other legal actions arising in the ordinary course of business, including various governmental proceedings and private civil suits concerning environmental matters. While the final outcome of these and other legal actions cannot be predicted with certainty, considering the meritorious legal defenses available, it is the opinion of
SFP management that none of these legal actions, when finally resolved, will have a material adverse effect on the consolidated financial position of SFP.
Reference is made to Note 8 to the consolidated financial statements on page 26 of SFP's 1993 Annual Report to Shareholders for information concerning certain pending administrative appeals between SFP and the Internal Revenue Service.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted by SFP to a vote of its securities holders during the fourth quarter of 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
Listed below are the names, ages, and positions of all executive officers of SFP (excluding executive officers who are also directors of SFP) and their business experience during the past five years. Unless otherwise indicated, each executive officer listed below has served in his or her present occupation for at least five years. Executive officers hold office until their successors are elected or appointed, or until their earlier death, resignation, or removal.
CAROL R. BEERBAUM, 50
Vice President--Human Resources since June 1992. Formerly, Senior Vice President, Human Resources, PHH Homequity, Inc. (relocation and real estate management services) from May 1990, and Vice President, Human Resources of PHH Homequity, Inc. from January 1987.
JEROME F. DONOHOE, 55
Vice President--Law since July 1984. Also, partner with Mayer, Brown & Platt (law firm) since September 1990.
RUSSELL E. HAGBERG, 43
Senior Vice President and Chief of Staff of Santa Fe Railway since January 1994. Prior to that, Vice President--Transportation of Santa Fe Railway from June 1991, Vice President--Human Resources of SFP from June 1990, and Vice President--Human Resources and Administration of Santa Fe Railway from March 1989.
THOMAS N. HUND, 40
Vice President and Controller since July 1990. Formerly, Assistant Vice President and Controller of Santa Fe Railway from August 1989. Prior to that, Assistant Controller of SFP.
STEVEN F. MARLIER, 48
Senior Vice President and Chief Marketing Officer of Santa Fe Railway since January 1994. Prior to that, Senior Vice President--Carload Business Unit of Santa Fe Railway since January 1992. Formerly, Regional Manager/General Manager, IBM Corporation (computers and data processing).
DONALD G. MCINNES, 53
Senior Vice President and Chief Operating Officer of Santa Fe Railway since January 1994. Prior to that, Senior Vice President--Intermodal Business Unit of Santa Fe Railway since January 1992, Vice President--Intermodal of Santa Fe Railway from July 1989, Vice President--Administration of Santa Fe Railway from January 1989, and General Manager of Eastern Region of Santa Fe Railway from July 1987.
JEFFREY R. MORELAND, 49
Vice President--Law and General Counsel of Santa Fe Railway since June 1989. Prior to that, General Counsel of SFP from April 1988.
MARSHA K. MORGAN, 46
Corporate Secretary since December 1990. Prior to that, Treasurer from March 1988, and Assistant Treasurer from 1983.
PATRICK J. OTTENSMEYER, 38
Vice President--Finance of SFP since September 1993. Previously, held a senior credit position with First Empire State Corporation (banking) from September 1992, was Senior Vice President of Security Pacific National Bank (banking) from October 1989 (which merged with Bank of America National Trust and Savings Association (banking) in April 1992), and held other positions with Security Pacific National Bank from 1984.
DENIS E. SPRINGER, 48
Senior Vice President and Chief Financial Officer since October 1993. Prior to that, Senior Vice President, Treasurer and Chief Financial Officer from January 1992, Vice President, Treasurer and Chief Financial Officer from January 1991, Vice President--Finance from April 1988, and Assistant Vice President--Finance from October 1984.
IRVIN TOOLE, JR., 52
Chairman, President and Chief Executive Officer, SFP Pipelines and SFP Pipeline Holdings, Inc. since September 1991. Formerly, Senior Vice President, Treasurer and Chief Financial Officer, SFP Pipelines from December 1988, and Vice President--Administration and Treasurer, SFP Pipelines from February 1986.
DANIEL J. WESTERBECK, 50
Vice President and Tax Counsel since April 1988. Formerly, Assistant Vice President and Tax Counsel from October 1984.
CATHERINE A. WESTPHAL, 45
Vice President--Corporate Communications since January 1994. Prior to that, Assistant Vice President--Public Relations from January 1992, Director--Public Relations from January 1991, and Manager--Public Affairs at Santa Fe Railway from January 1989.
RICHARD T. ZITTING, 64
Chairman and Chief Executive Officer, SFP Gold, a subsidiary of SFP, since January 1994. Prior to that, President, SFP Gold or its predecessors from November 1978.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information as to the principal markets on which the Common Stock of SFP is traded, the high and low sales prices of such stock for the two years ending December 31, 1993, the frequency and
amount of dividends declared on such stock during such period and the approximate number of record holders of the Common Stock is set forth below the heading "Common Stock Market Prices and Dividends" on page 18 of SFP's 1993 Annual Report to Shareholders and is hereby incorporated by reference. A statement regarding a limitation of dividends on SFP Common Stock is set forth in Note 11 to the consolidated financial statements on page 27 of SFP's 1993 Annual Report to Shareholders and is hereby incorporated by reference.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
There is disclosed on page 1 of SFP's 1993 Annual Report to Shareholders selected financial data of SFP for each of the last five fiscal years. Such data with respect to the following topics are incorporated by reference: Revenues; Income (Loss) from Continuing Operations; Income (Loss) from Continuing Operations Per Common Share; Total Assets; Total Debt; and Cash Dividends Per Common Share.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS
Management's Discussion and Analysis of Results of Operations and Financial Condition appearing on pages 14 through 18 of SFP's 1993 Annual Report to Shareholders is hereby incorporated by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of SFP and subsidiary companies, together with the report thereon of Price Waterhouse dated February 4, 1994, appearing on pages 19 through 32 of SFP's 1993 Annual Report to Shareholders, are hereby incorporated by reference.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the directors of SFP is provided on pages 2 through 4 and on pages 5 and 6 ("Legal Proceedings") of SFP's proxy statement dated March 9, 1994, and is hereby incorporated by reference. Pursuant to the retirement policy of the Board, one current director, Mr. George B. Munroe, age 72, will not stand for re-election at the 1994 Annual Meeting. Mr. Munroe, a director since 1972, retired in February 1987, from his position as Chairman of the Board and Chief Executive Officer of Phelps Dodge Corporation (copper mining, manufacturing, and specialty chemicals). He is a director of New York Life Insurance Company, The New York Times Company, and Phelps Dodge Corporation.
Information concerning the executive officers of SFP (excluding one executive officer who is also a director of SFP) is included in Part I of this Report.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning the compensation of directors and executive officers of SFP is provided on pages 4 through 5 ("Directors' Compensation") and pages 8 through 13 (excluding the portion
of page 13 containing the "Compensation and Benefits Committee Report on Executive Compensation") of SFP's proxy statement dated March 9, 1994, and is hereby incorporated by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning the ownership of SFP equity securities by certain beneficial owners and management is provided on pages 2 through 4, and 6 through 7 of SFP's proxy statement dated March 9, 1994, and is hereby incorporated by reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is provided on page 4 ("Certain Relationships and Related Transactions") of SFP's proxy statement dated March 9, 1994, and is hereby incorporated by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) The following documents are filed as a part of this report:
All other schedules have been omitted because they are not applicable or the required information is presented in the financial statements or the notes to the consolidated financial statements.
3. Exhibits:
See Index to Exhibits on pages E-1-E-4 for a description of the exhibits filed as a part of this Report.
(B) Reports on Form 8-K
SFP filed no Reports on Form 8-K during the quarter ended December 31, 1993. - -------- * Incorporated by reference from the indicated pages of SFP's Annual Report to Shareholders for the fiscal year ended December 31, 1993.
REPORT OF INDEPENDENT ACCOUNTANTS ON
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
To the Shareholders, Chairman and Board of Directors of Santa Fe Pacific Corporation
Our audits of the consolidated financial statements referred to in our report dated February 4, 1994 appearing on page 19 of the 1993 Annual Report to Shareholders of Santa Fe Pacific Corporation and subsidiary companies (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Consolidated Financial Statement Schedules listed in Item 14(a)(2) of this Form 10-K. In our opinion, these Consolidated Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
PRICE WATERHOUSE
Kansas City, Missouri February 4, 1994
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT FOR YEARS 1993, 1992 AND 1991 (IN MILLIONS)
- -------- (1) Represents excess of fair value of gold assets received over coal and aggregate assets given up in exchange with Hanson Natural Resources Company ("HNRC"). See Note 3 to Financial Statements on page 24 in the 1993 Santa Fe Pacific Corporation Annual Report to Shareholders (Gain on Exchange of Mineral Assets).
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Rates used for computing annual depreciation and amortization provisions for properties are as follows (in percent):
- -------- (1) See Note 1 to Financial Statements on page 24 in the 1993 Santa Fe Pacific Corporation Annual Report to Shareholders (Summary of Significant Accounting Policies: Properties, and Exploration and Development Costs).
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTIES FOR YEARS 1993, 1992 AND 1991 (IN MILLIONS)
- -------- (1) Transfer of excess reserves from Other Road Properties to Track Structure as a result of depreciation studies filed with the Interstate Commerce Commission.
(2) Represents accumulated depreciation on coal and aggregate assets acquired by HNRC in the asset exchange. See Note 3 to Financial Statements on page 24 in the 1993 Santa Fe Pacific Corporation Annual Report to Shareholders (Gain on Exchange of Mineral Assets).
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE VII--GUARANTEES OF SECURITIES OF OTHER ISSUERS
DECEMBER 31, 1993
- -------- (a) None of the securities were owned by the Registrant, none were held in the treasury of the issuer, and none were in default.
(b) SFPP, L.P. is the operating partnership of Santa Fe Pacific Pipeline Partners, L.P. ("Pipeline Partnership"). A subsidiary of Santa Fe Pacific Corporation, the general partner of the Pipeline Partnership, is contingently liable for this amount.
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS 1993, 1992 AND 1991
SANTA FE PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR YEARS 1993, 1992 AND 1991
The following amounts have been charged to operating expenses:
Other supplementary income statement items have been omitted from this schedule either because the required information is disclosed elsewhere in the consolidated financial statements or the notes to consolidated financial statements or the amounts charged to operating expenses do not exceed one percent of total consolidated revenues.
SIGNATURES
SANTA FE PACIFIC CORPORATION, PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
SANTA FE PACIFIC CORPORATION
/s/ Robert D. Krebs By: _________________________________ Robert D. Krebs Chairman, President and Chief Executive Officer
Dated: March 30, 1994
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF SANTA FE PACIFIC CORPORATION AND IN THE CAPACITIES AND ON THE DATE INDICATED.
S-1
/s/ Jeffrey R. Moreland *By__________________________________ Vice President--Law and General Counsel, The Atchison, Topeka and Santa Fe Railway Company Attorney in Fact
Dated: March 30, 1994
S-2
SANTA FE PACIFIC CORPORATION
INDEX OF EXHIBITS
- -------- * Management contract or compensatory plan or arrangement.
E-1
- -------- * Management contract or compensatory plan or arrangement.
E-2
- -------- * Management contract or compensatory plan or arrangement.
E-3
GRAPHICS APPENDIX
Page 13 consists of a map depicting areas of minerals rights controlled by Santa Fe Pacific Gold Corporation in the western United States as well as the location of exploration offices, company mines, and company headquarters.