Item
1. Business........................................................ 1 2. Properties...................................................... 11 3. Legal Proceedings............................................... 13 4. Submission of Matters to a Vote of Security Holders............. 13 Executive Officers of the Registrant............................ 14
PART II
5. Market for the Registrant's Common Equity and Related Stockholder Matters......................................................... 16 6. Selected Financial Data......................................... 17 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................... 19 8. Financial Statements and Supplementary Data..................... 28 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................................ 50
PART III
10. Directors and Executive Officers of the Registrant.............. 50 11. Executive Compensation.......................................... 50 12. Security Ownership of Certain Beneficial Owners and Management.. 50 13. Certain Relationships and Related Transactions.................. 50
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................................................ 51
DISCLAIMER REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain statements that are "forward-looking", within the meaning of Section 21E of the Securities Exchange Act of 1934, including statements regarding, among other matters, the belief, expectations, plans, and estimates of the Company with respect to certain future events, the impact of governmental regulation, the cost of compliance with environmental regulations and the actions to be taken by others and similar expressions concerning matters that are not historical facts. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that could cause actual events to differ materially from those expressed in those statements.
PART I
ITEM 1. BUSINESS
Wisconsin Central Transportation Corporation ("WCTC") is incorporated under the laws of the State of Delaware. The principal offices of WCTC are located at One O'Hare Centre, Suite 9000, 6250 N. River Road, Rosemont, Illinois 60018, telephone (847) 318-4600. All dollar amounts in this report are stated in U.S. dollars unless otherwise indicated.
WCTC is a holding company doing business through its wholly owned consolidated subsidiaries, Wisconsin Central Ltd. ("WCL"), Fox Valley & Western Ltd. ("FV&W"), WCL Railcars, Inc., Sault Ste. Marie Bridge Company ("SSM"), Wisconsin Central International, Inc. ("WCI"), WC Canada Holdings, Inc. and Algoma Central Railway Inc. ("ACRI"). WCTC and its subsidiaries are referred to together as the "Company".
The Company operates the largest regional railroad in the United States and the largest railroad in the State of Wisconsin. In addition to Wisconsin, the Company provides service to the Upper Peninsula of Michigan, northeastern Illinois, eastern Minnesota and Ontario. The Company's operations utilize approximately 3,000 route miles of track and trackage rights, 235 locomotives and approximately 12,800 railcars. The railroad's principal gateways are Chicago, Duluth/Superior, Green Bay, Milwaukee, Minneapolis/St. Paul and Sault Ste. Marie, Ontario. These gateways permit the Company to connect with other railroads serving these locations.
The Company, through WCL, acquired its original 2,015 route mile railroad system from the Soo Line Railroad Company ("Soo") in October 1987 (the "Original Acquisition"). In December 1991, the Company purchased from Soo an additional line of railroad running approximately 102 route miles from Superior to Ladysmith, Wisconsin (the "Ladysmith Line"). In July 1992, the Company purchased from the Chicago and North Western Transportation Company ("CNW") a line of railroad that runs generally parallel to the Ladysmith Line and extends approximately 98 route miles from Superior to Cameron, Wisconsin (the "Cameron Line"). The Company combined the best portions of these lines into a single line and upgraded the resulting line. The acquisition of the Ladysmith Line and the Cameron Line are collectively referred to as the "Head of the Lakes Acquisitions". WCL's current operations utilize 2,021 route miles of track and trackage rights.
In August 1993, the Company, through FV&W, purchased the rail assets of three railroads in Wisconsin including Fox River Valley Railroad Corporation, Green Bay and Western Railroad Company and The Ahnapee & Western Railway Company. These acquisitions are collectively referred to as the "FV&W Acquisition". FV&W's rail assets currently consist of approximately 456 route miles of track and trackage rights.
The Company, through WCI, has an equity interest in Tranz Rail Holdings Limited ("Tranz Rail"), formerly named New Zealand Rail Limited, which is discussed in detail below under "Investment in Tranz Rail Holdings Limited".
On January 31, 1995, the Company consummated the acquisition of the railway assets of Algoma Central Corporation ("ACC") through the Company's ACRI subsidiary. This acquisition is referred to as the "ACRI Acquisition" and is described in detail below under "ACRI Acquisition". ACRI's rail assets currently consist of approximately 322 route miles of track and trackage rights.
In 1995 and early 1996, the Company, through WCI, was part of a consortium that acquired various rail assets of British Rail. This investment is discussed in detail below under "Investments in English Welsh & Scottish Railway Holdings Limited".
RECENT DEVELOPMENT - DUCK CREEK NORTH ACQUISITION
On January 27, 1997, SSM completed the purchase of 207 route miles of railroad track and trackage rights in Wisconsin and the Upper Peninsula of Michigan from the Union Pacific Railroad Company ("Union Pacific"). The rail lines, commonly known as the "Duck Creek North" lines, extend from North Green Bay, Wisconsin to Ishpeming, Michigan; from Powers to Antoine, Michigan; from Quinnesec, Michigan to Niagara, Wisconsin; and from Cascade to Palmer, Michigan. Freight shipments over the lines consist of materials for the paper industry and high volumes of iron ore used in steel-making which are shipped from the Marquette ore range to Escanaba, Michigan for transshipment to vessels. The rail lines, together with contiguous property and associated facilities, were purchased for approximately $85.0 million of cash. The purchase was funded through borrowings under existing revolving credit facilities. This acquisition is referred to herein as the "Duck Creek North Acquisition."
INVESTMENTS IN ENGLISH WELSH & SCOTTISH RAILWAY HOLDINGS LIMITED
In the fourth quarter of 1995, a consortium of investors, including WCI and an affiliate of Berkshire Partners, an American private equity firm ("Berkshire") of which one of the Company's directors is an executive officer, director and beneficial owner of shares, established a holding company, North and South Railways Limited, now named English Welsh & Scottish Railway Holdings Limited ("EW&S"), to acquire various rail assets of British Rail from the British government as a part of its privatization of British Rail. On December 9, 1995, EW&S acquired Rail express systems Limited ("Res"). The principal activity of Res is the carriage of letters for the Royal Mail, a division of the British Post Office. On February 24, 1996, EW&S acquired British Rail's three trainload freight companies ("TLFs"), Loadhaul Limited, Mainline Freight Limited and Transrail Freight Limited. EW&S employs approximately 6,600 staff utilizing 910 locomotives and 19,300 freight cars to haul primarily bulk commodities such as coal, ore, steel and aggregates throughout Great Britain.
WCI had invested approximately $45.0 million in EW&S for a 31% ownership interest as of December 31, 1996. The Company has been granted performance-based options to acquire additional shares in EW&S to compensate it for its leadership of the consortium, and has entered into a management service agreement with EW&S, under which the Company earned compensation of $1.6 million in 1996. In addition, EW&S has issued options to certain of its officers and directors, and warrants to the investment banking firm that facilitated the acquisition of EW&S. On February 21, 1997, the Company invested an additional $8.4 million to exercise a portion of these options, increasing its equity ownership position to approximately 34%.
The Company accounts for its investment in EW&S under U.S. generally accepted accounting principles ("GAAP") utilizing the equity method of accounting. The Company's 1996 results included equity in the net income of EW&S of $22.8 million.
EW&S has entered into an agreement with British Rail to purchase an additional freight operating company, Railfreight Distribution, the primary business of which is the operation of freight trains through the English Channel tunnel. Railfreight Distribution has not been profitable, and the consideration for the purchase will be nominal. The transaction will be consummated following regulatory clearance from the European Union, which is expected in April 1997.
ACRI ACQUISITION
On January 31, 1995, the Company consummated the acquisition of the railway assets of ACC that are operated by ACRI. ACRI consists of approximately 322 route miles of track and trackage rights between Sault Ste. Marie, Ontario and Hearst, Ontario. The rail lines were purchased for approximately $8.2 million, financed in part by the Province of Ontario, through the Northern Ontario Heritage Fund Corporation. In related transactions, the Company acquired 879 railcars and 23 locomotives from ACC for approximately $11.1 million and ACC's communications system, maintenance and shop equipment, inventory and miscellaneous assets for $5.0 million.
The principal commodities shipped over ACRI lines are iron ore, paper, forest products and steel products. Principal customers include Algoma Steel Inc. and St. Marys Paper Ltd. ACRI has connections with Canadian Pacific Rail System, Canadian National Railways ("CN"), Ontario Northland Railway and WCL in Sault Ste. Marie, Ontario. ACRI also provides passenger services between Sault Ste. Marie and Hearst, Ontario and operates the Agawa Canyon tour trains.
In 1996, ACRI operated with an average of approximately 229 employees compared with the approximately 450 employees previously used by ACC in running the rail operations. Most of the ACRI employees work in train operations and maintenance. Although operating as a separate company, ACRI has contracted with WCL for certain administrative functions such as marketing and customer service. WCL's data system has been extended to link all ACRI customers with WCL and the North American rail computer network.
METRA
In 1995, the Company reached agreement with the commuter rail division of the Regional Transportation Authority ("Metra"), the commuter rail system for northeastern Illinois, to permit Metra's use of WCL's tracks between Chicago and Antioch, Illinois for commuter service, which commenced in August 1996. The commuter service is operated by Metra using its own equipment and personnel. Metra currently operates ten trains per day over the route, which is approximately 40 miles long. The trackage rights agreement that permits Metra access to WCL's tracks provides that Metra may operate up to 20 trains per day over the route, after additional capital improvements are made by Metra. WCL receives $2.5 million annually as compensation for permitting use of the route. In addition, performance incentives could increase WCL's annual compensation by $0.5 million per year. Metra has agreed to indemnify the Company with respect to personal injury and property damages incurred in connection with Metra's operations, except in certain limited circumstances.
As part of the arrangement, Metra has funded the capital improvements necessary to upgrade WCL's line between Chicago and Antioch to speeds of over 50 m.p.h. In addition, four additional passing sidings and other capital improvements were funded by Metra, increasing the overall capacity of the line. Through 1996, track improvements funded by Metra in this corridor included 65,600 ties, 5.8 miles of continuous welded rail, 89,800 tons of ballast and resurfacing the line.
INVESTMENT IN TRANZ RAIL HOLDINGS LIMITED
On July 20, 1993, a consortium of investors, including WCI, entered into a purchase agreement with the government of New Zealand to acquire all the stock of Tranz Rail. WCI's equity investment approximated $16.0 million for approximately 27% of the common stock of Tranz Rail. In 1994 and 1995, the Company paid $3.3 million and $2.9 million, respectively, to exercise options that increased its equity ownership to approximately 30%. On June 26, 1995, Tranz Rail returned capital to shareholders through a pro rata repurchase of shares. WCTC's share of the capital returned was $21.0 million, which the Company has used to retire debt. The capital returned was derived primarily from proceeds of the 1994 sale of Tranz Rail's investment in a telecommunications company.
Tranz Rail is a 2,500 route mile railroad which operates the only commercial rail service in New Zealand. Prior to July 20, 1993, it was a state-owned enterprise operating under a special charter from the New Zealand
government. As of December 31, 1996, the railroad had 4,506 full-time employees, 341 locomotives and approximately 7,000 freight cars. In addition to freight and passenger rail service, Tranz Rail also operates regularly scheduled general commercial ferry service linking New Zealand's north and south islands.
Tranz Rail completed an initial public offering of its common stock on June 18, 1996 and is listed on the NASDAQ stock market in the United States and on the New Zealand stock exchange in New Zealand. As a result of this offering, the Company's ownership position declined to 23% from 30%. As of December 31, 1996, the Company owned the equivalent of 9,561,639 American Depository Shares ("ADS") of Tranz Rail with a quoted closing price on NASDAQ of $17.69 per ADS. Each ADS represents three issued and fully paid ordinary shares of Tranz Rail. Total market value of the Company's holdings in Tranz Rail as of December 31, 1996 was approximately $169.1 million.
In connection with becoming a public company, Tranz Rail adopted a general policy of paying cash dividends, initially at the rate of NZ$0.17 per ordinary share per year. The Company received its first dividend on March 11, 1997 in the amount of U.S.$3.4 million.
The Company accounts for its investment in Tranz Rail under U.S. GAAP utilizing the equity method of accounting. The Company's 1996 results included equity in the net income of Tranz Rail of $9.9 million.
Tranz Rail is subject to the reporting requirements of the Securities Exchange Act of 1934 applicable to a foreign private issuer, and accordingly, files certain reports and other information with the Securities and Exchange Commission.
WEYAUWEGA ACCIDENT
On March 4, 1996, the Company had a derailment in Weyauwega, Wisconsin involving thirty-five cars, fourteen of which contained propane or liquified petroleum gas and two of which contained sodium hydroxide solution. Although no one was injured in the derailment, all residents within two miles of the site were evacuated for approximately sixteen days. In addition, many structures received water damage as a result of frozen pipes. The total cost for the derailment is currently estimated at $27.3 million. The Company believes that its insurance policies will cover substantially all these costs, in excess of the $2.5 million of deductibles, due to the derailment. Through December 31, 1996, the Company had funded $24.8 million in costs incurred as a result of this derailment and received $17.4 million in reimbursements from insurance companies. The Company's Consolidated Balance Sheet includes an insurance receivable of $7.4 million as of December 31, 1996. During the first quarter of 1996, the Company recorded a pretax provision of $2.5 million for the combined deductibles under its property damage and liability insurance policies. The Company has been successful in resolving the vast majority of claims directly with the claimants. Through December 31, 1996, approximately 98% of affected residents and 97% of affected businesses had resolved their claims against the Company. See also "Legal Proceedings".
BOCT ARBITRATION
On June 10, 1996, an arbitration panel ruled against the Company in a dispute with the Baltimore and Ohio Chicago Terminal Railroad Company ("BOCT") regarding intermediate switching and car hire reclaim charges allegedly incurred from July 1988 through February 1993. The arbitration panel awarded BOCT $16.8 million plus $2.5 million of interest. Based upon the arbitration panel's ruling, the Company recorded pretax provisions of $15.8 million, representing amounts awarded in excess of previously recorded accruals. For a discussion of the history and status of this arbitration proceeding, see "Legal Proceedings".
OPERATIONS
Prior to 1991, the Company operated over the 2,015 route miles of track acquired by WCL at the inception of the Company in 1987. In December 1991 and 1992, the Company's system and opportunities were expanded when it added approximately 100 miles of trackage in the Head of the Lakes Acquisitions, which created better access to Canadian markets. In August 1993, the Company acquired trackage in Wisconsin in the FV&W Acquisition that currently consists of 456 miles. In January 1995, the Company acquired the 322 miles of trackage involved in the ACRI Acquisition. In January 1997, the Company acquired the 207 miles of trackage involved in the Duck Creek North Acquisition.
These acquisitions have contributed to the Company's growth over the past five years as is shown in the following table.
The Company's operating philosophy emphasizes rapid movement of traffic and high productivity from its employees. The Company uses primarily two and three person train crews, with an average crew size of 2.2 persons. Employees are paid on a salaried basis. The Company has structured its operations so that it can assign its employees to tasks on an as-needed basis without regard to traditional rail industry crafts, which increases productivity. The Company follows a program of cross-training its employees to perform a number of related functions.
The following table sets forth various measurements of the Company's productivity over the past five years:
The following table summarizes the work force by function:
The Company serves a competitive market area which dictates the need for consistent, high quality train service. The Company's rail network is divided into 14 main lines and 17 secondary lines. Main lines are those with the heaviest use, while secondary lines provide service to on-line customers. Train service is provided seven days per week on main lines and five or six days per week on secondary lines. The Company's train service is designed to provide a flow of cars from key origination points at least once every 24 hours. This flow moves on scheduled trains between specified locations, exchanging or adding cars at each stop.
Under the current regulatory framework, shipments by rail can move either under a tariff or under a transportation contract. Shipments performed under contract, generally one year in duration, make up approximately two-thirds of the Company's business. These contracts generally have cost escalation clauses based on various indices that are representative of the related costs. The Company's transportation contracts also typically provide that a specified percentage of a customer's particular commodity must be shipped pursuant to the contract. Payments are due from customers upon receipt of billing. In general, where a shipment involves more than one railroad, the carrier delivering to the final destination receives and then distributes payment for all of the participating carriers. Payments due to and from other railroads are netted on a monthly basis.
CUSTOMERS AND TRAFFIC
Volume, as measured by carloads handled (including as a carload each loaded trailer or container), was 464,149 carloads in 1996 generating $273.8 million in gross revenues. Of these carloads, 78.3% were generated by originating or terminating business (i.e., business to or from a point on the Company's lines) or local business (i.e., business which both originates and terminates on the Company's lines). The Company's volume in 1995 and 1994 was similar, with 76.5% and 79.2%, respectively, of the carloads being generated by originating, terminating and local business. The Company believes that this high percentage of originating, terminating and local business gives its volume added stability, due to the Company's marketing-oriented approach and its ability to customize service for customers within its territory. The remainder of the Company's business was overhead. Overhead business is received from other railroads at interchange points in the Company's territory and moved to another point in the territory for interchange to another railroad. The Company's ability to handle certain overhead business is restricted by contract. See Item 2.

ITEM 2. PROPERTIES
The Company's principal properties are 2,798 route miles of operating rail lines (1,856 route miles of main lines and 942 route miles of secondary lines), 208 route miles of trackage rights (contractual rights to operate over lines of railroad owned by others), associated yards, terminals, repair facilities and contiguous real estate. The following table sets forth the Company's operating rail lines:
Owned --------------------------- Main Secondary Total Trackage Total Lines Lines Owned Rights Operated ----- ----- ----- ------ --------
WCL .................... 1,074 758 1,832 189 2,021 FV&W ................... 338 102 440 16 456 ACRI ................... 295 26 321 1 322 SSM .................... 149 56 205 2 207 ----- --- ----- --- ----- Total ............. 1,856 942 2,798 208 3,006 ===== === ===== === =====
The Company also owns 34 route miles of abandoned rail lines and rail lines not currently operated.
The majority of the Company's main line from Chicago to Stevens Point, Wisconsin (238.3 route miles) is in FRA Class IV condition, permitting up to 50 m.p.h. speeds for freight trains. The Company's other main lines are primarily FRA Class III lines, permitting up to 40 m.p.h. speeds, and the Company considers them appropriate to handle current and expected traffic on those lines. Secondary lines are primarily FRA Class II lines, permitting up to 25 m.p.h. speeds, which the Company also considers appropriate for current and expected traffic volume. Class designations of rail lines are made or revised based on annual track inspections. Additionally, all of the main lines have been inspected with an electronic rail defect detector car at least once annually over the last five years. The Company's maintenance and track improvement plans are designed to preserve class designations at least at their present levels.
The Company has trackage rights that provide the Company access into Chicago, Duluth/Superior, Milwaukee and Minneapolis/St. Paul. The Company's trackage rights over Soo include restrictions on the use of Soo's rail lines into Milwaukee and Minneapolis/St. Paul. The effect of these restrictions is that the Company cannot use Soo's lines to access those locations to handle most overhead business (i.e., business routed through the Company's system for delivery from one carrier to another).
The Company owns and operates car and locomotive repair facilities located in Fond du Lac, Stevens Point and Green Bay, Wisconsin, Gladstone and Escanaba, Michigan and Sault Ste. Marie, Ontario. These facilities service the Company's locomotives and railcars and offer equipment repair services to other carriers and the Company's customers.
The Company also owns a large iron ore dock and storage facility in Escanaba, Michigan. The ore dock site includes a pier approximately 2,800 feet long used to transport iron ore to and from cargo ships which are docked at the pier. The pier is capable of docking four ships at a time.
The Company also has rights under various leases, joint facility agreements and transportation contracts. The Company is lessee of locomotives, railcars and maintenance equipment. The Company's joint facility agreements include various operating and maintenance
agreements with other railroads under which certain railroad properties (such as track, switches, crossings, interchanges and bridges) are jointly used and maintained.
The Company owns various parcels of non-operating real estate that are contiguous to its rail lines. Some of this real estate is leased to third parties, on varying terms, generating lease income of $2.0 million, $1.3 million and $1.2 million in 1996, 1995 and 1994, respectively.
In addition, the Company has sold certain of its excess assets since inception. The proceeds and pre-tax gains recognized with respect to these sales from 1992 through 1996 are as follows:
The Company's strategy is to sell excess assets, but there can be no assurance as to the Company's ability to sell its remaining excess assets or as to the prices the Company will receive if and when it sells excess assets.
At December 31, 1996, the Company's equipment fleet consisted of 235 locomotives (169 owned and 66 leased) and 12,831 freight cars (4,734 owned and 8,097 leased). The average age of the locomotives and freight cars in the Company's fleet is 31 years and 21 years, respectively. Despite their age, the Company's locomotives and freight cars have achieved good availability, primarily as a result of the Company's preventive maintenance program. Of the Company's current fleet of locomotives and freight cars, 50% and 52%, respectively, were acquired new or have been rebuilt or received a major overhaul since 1987. The Company's availability rates with respect to its locomotive and railcar fleet were 89.7% and 98.1%, respectively, in 1996.
The quality of the Company's title to its owned rights-of-way varies. The Company's properties were acquired by its predecessors over extended periods of time and by different companies. Accordingly, the original conveyancing documents were not standardized and are subject to judicial interpretation as to the interest conveyed to the original acquiring railroad. In cases involving other railroads, deeds have sometimes been construed to create either an easement for railroad purposes or an ownership interest that terminated upon the cessation of use for railroad purposes. At the time of the Original Acquisition, the Company obtained both a representation from Soo and title insurance to the effect that the Company would have sufficient interest in its properties to operate a railroad. The Company received similar assurances with respect to properties acquired in subsequent acquisitions. However, if the Company ceases to operate its railroad over a parcel, the Company's interest in the parcel could revert to adjacent landowners or to others holding a reversionary interest. In Wisconsin, the Company's right to dispose of property is limited by a Wisconsin statute that gives the state the right of first refusal with respect to any property to be sold by a railroad. Because of their age, buildings and structures on the Company's rail properties are also often subject to historical preservation review prior to disposition.
As part of the Original Acquisition, Soo retained the rights to all gross revenues from fiber optic cables and equipment which, under agreements existing at the time of the Original Acquisition, were located on the properties acquired by the Company. Soo also retained the rights to 50% of net revenues derived under easements, licenses or leases pertaining to fiber optic cables and equipment which may be located on those properties under agreements entered into after the Original Acquisition. Soo retained similar rights as to the Ladysmith Line, and CNW retained similar rights as to the Cameron Line. The Company's share of the revenues from fiber optic easement agreements has been insignificant. In addition, Soo, CNW and Union Pacific retained mineral rights with respect to the Ladysmith Line, the Cameron Line and Duck Creek North, respectively.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
The Company's employees are covered by the Federal Employers' Liability Act ("FELA"), as opposed to state workers' compensation systems. Under FELA, damage awards for injuries and deaths of railroad employees are settled by negotiation or litigation based on the comparative negligence of the employee and the employer and are not subject to limitations on the amount of recovery (as recoveries are under workers' compensation systems).
The Company is currently subject to a number of claims and legal actions that arose in the ordinary course of business, including FELA claims by its employees and personal injury claims (including wrongful death claims) by third parties. The Company believes these claims, taking into account reserves and applicable insurance, will not have a material adverse effect on the Company. Adverse judgments in these claims, individually or in the aggregate, in excess of related reserves and applicable insurance, could have a material adverse effect on the Company's financial position.
In connection with the March 4, 1996 derailment in Weyauwega, Wisconsin, a complaint was filed against the Company on March 26, 1996 by nine individuals seeking to represent the class of persons who suffered damages as a result of this derailment. The complaint seeks punitive and treble damages. Any punitive damages and treble damages may not be covered by the Company's insurance. The Company does not believe there is any basis for an award of such damages. On July 9, 1996, the court declined to certify a class action lawsuit against the Company. The court did, however, indicate it would appoint a guardian ad litem to review all settlements made on behalf of affected minors and would notify all claimants who had not settled their claims of the existence of the action so that these claimants would have the option of joining the lawsuit should they desire. Since that date, the court has decided not to appoint a guardian ad litem. All potential claimants were notified, and thirteen families and two businesses joined the lawsuit. Discovery is ongoing. In addition, one business has filed a separate suit for damages in the District Court of Waupaca County. It is the opinion of management that the resolution of these matters will not have a material adverse effect on the Company's financial position.
On June 4, 1993, WCL was served with a complaint filed by the BOCT in the United States District Court for the Northern District of Illinois, Eastern Division. In its complaint, the BOCT claimed that WCL owed BOCT for intermediate switching and car hire reclaim charges allegedly incurred from July 1988 through February 1993. Arbitration hearings were held in Chicago from October 24, 1995 to November 9, 1995. On June 10, 1996, the arbitration panel ruled in favor of BOCT. The arbitration panel's ruling awarded BOCT $16.8 million of disputed switching and car hire reclaim charges, and $2.5 million of interest relating to such charges. Based upon the arbitration panel's ruling, the Company recorded pretax provisions of $15.8 million, representing amounts awarded in excess of previously recorded accruals. The litigation between BOCT and the Company continues. The U.S. District Court has affirmed the arbitration award and also authorized WCL to pursue the defenses that were not subject to arbitration, including claims to be brought before the STB.
In October 1995, the Circuit Court of Dane County ruled in favor of a Wisconsin Department of Revenue ("WDR") retroactive assessment of personal property taxes for the tax years 1990 through 1993 against all Wisconsin railroads, including WCL and FV&W. WCTC and the other railroads involved are considering an appeal of the statutory law rulings. As a result of the ruling, the Company recognized the $3.0 million retroactive assessment, as well as accrued interest of $727,000, in its 1995 consolidated statement of income. The railroads, including WCL and FV&W, have also filed suits in state courts which allege discrimination in the assessment of taxes. WCL and FV&W have separately filed suit challenging other WDR tax valuation practices with respect to their 1994, 1995 and 1996 tax bills.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information about each person who serves as one of the Company's executive officers:
Mr. Burkhardt has served as a director, President and Chief Executive Officer of the Company since its formation in 1987. He was elected to the additional position of Chairman in January 1996. He serves as a director and the President and Chief Executive Officer of each of the Company's subsidiaries. Mr. Burkhardt is also a director and Chairman of the Board of Tranz Rail and a director and Chairman and Chief Executive Officer of EW&S. From 1967 to 1987, Mr. Burkhardt was employed by CNW, most recently as Vice President, Transportation. Mr. Burkhardt has 36 years of railroad management experience.
Mr. Power has served as a director, Executive Vice President and Chief Financial Officer of the Company since its formation in 1987. He serves as Executive Vice President and Chief Financial Officer of each of the Company's subsidiaries and as a director of each of the Company's subsidiaries other than ACRI. Mr. Power is also a director of Tranz Rail and EW&S. From 1985 to 1987, Mr. Power was a private consultant. From 1970 to 1985, Mr. Power was employed by the Chicago, Milwaukee, St. Paul and Pacific Railroad Company, most recently as Chief Financial Officer. Mr. Power has over 29 years of railroad management experience.
Mr. McCarren has served as Executive Vice President and Chief Operating Officer of the Company's operating subsidiaries since July 8, 1996. From 1990 to 1996, Mr. McCarren served as President of Gateway Western Railway Company. From 1988 to 1990, Mr. McCarren served as the General Superintendent - Transportation for the Chicago, Missouri and Western Railway. From 1978 to 1988, Mr. McCarren held various operating positions with Conrail. Mr. McCarren has 18 years of railroad management experience.
Mr. Kelly has served as Vice President, Finance, of WCTC since September 1988. He serves in the same capacity with each of the Company's subsidiaries. Prior to joining the Company, Mr. Kelly served as Corporate Controller for Spiegel, Inc. (a catalog retailer) from 1987 to 1988, as an independent consultant during 1986, and as Vice President, Finance for Wilton Enterprises, Inc. (a distributor of housewares) during 1985. From 1969 to 1985, Mr. Kelly held various positions with Arthur Andersen & Co., United Stationers, Inc. (a wholesaler of office products) and McKesson Corporation (a supplier of drug and health care products).
Mr. Kerbs has served as Vice President, Engineering, of the Company's operating subsidiaries since 1987. From 1974 until 1987, Mr. Kerbs was employed by CNW, most recently as Director of Maintenance Operations. Mr. Kerbs has 32 years of railroad management experience.
Mr. Schauer has served as Vice President, Marketing, of the Company's operating subsidiaries since October 1988, and served as Assistant Vice President, Marketing, of WCL from the Original Acquisition until October 1988. From 1986 until
1987, Mr. Schauer was employed by CNW as General Marketing Manager. From 1963 to 1985, Mr. Schauer was employed by the Chicago, Milwaukee, St. Paul and Pacific Railroad Company in various positions, most recently as Director of Marketing and Pricing. Mr. Schauer has 22 years of railroad management experience.
Mr. Terbell has been employed as Vice President and General Manager of the Company's operating subsidiaries since November 1993. Prior to that time, Mr. Terbell served as WCL's Eastern Division Transportation Manager since the Original Acquisition. From 1973 until 1987, Mr. Terbell was employed by CNW, most recently as Assistant Division Manager - Engineering. Mr. Terbell has 22 years of railroad management experience.
Mr. Nadrowski has been employed as Vice President, Mechanical, of the Company's operating subsidiaries since 1987. From 1985 until 1987, Mr. Nadrowski was involved in the ownership and operation of a marina and a motel in Wisconsin. From 1966 to 1985, Mr. Nadrowski was employed by the Chicago, Milwaukee, St. Paul and Pacific Railroad Company, most recently as Assistant Vice President and Chief Mechanical Officer. Mr. Nadrowski has 26 years of railroad management experience.
Mr. Currie has served as Vice President, Planning of WCTC since May 1, 1996. From 1989 to 1995, Mr. Currie served as Vice President - Engineering and Vice President and Chief Transportation Officer at CSX Transportation. From 1985 to 1989, Mr. Currie served as Executive Vice President - Operations for Soo. Prior thereto, Mr. Currie was employed by the Burlington Northern Railroad Company (now Burlington Northern Sante Fe) and its predecessor companies from 1961 to 1985, most recently as Senior Vice President - Maintenance and Transportation. Mr. Currie has 36 years of railroad management experience.
Mr. White has served as Vice President, Human Resources, of WCTC and its operating subsidiaries since March 4, 1996. Prior to joining the Company, Mr. White held a variety of positions with Tranz Rail and its predecessors from 1962-1996, most recently as Executive Manager, Personnel.
Mr. Mickey has served as Treasurer of WCTC and its subsidiaries since May 1996. Prior to that time, Mr. Mickey served as Assistant Controller of WCL from 1990-1996. From 1984 to 1990, Mr. Mickey was employed by Arthur Andersen & Co., most recently as audit manager.
The executive officers of the Company are elected annually by and serve at the discretion of the Company's Board of Directors.
PART II
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is available for quotation through the NASDAQ National Market System under the symbol "WCLX". On March 19, 1997, there were approximately 1,450 record holders of the Company's Common Stock. The following table sets forth, for the periods indicated, the high and low sales prices per share, after adjusting for a three-for-one stock split effective May 31, 1996, of the Company's Common Stock as quoted through the NASDAQ National Market System:
Price Per Share --------------- Calendar Period High Low --------------- ---- ---
1995: First Quarter........................................ $ 17.00 $ 13.17 Second Quarter....................................... 19.13 15.63 Third Quarter........................................ 22.92 16.08 Fourth Quarter....................................... 22.50 18.58
1996: First Quarter........................................ $ 27.58 $ 20.46 Second Quarter....................................... 38.75 21.83 Third Quarter........................................ 40.00 29.25 Fourth Quarter....................................... 42.50 34.50
The Company has not paid and has no current plans to pay dividends on its Common Stock. The Company currently intends to retain all earnings for use in the Company's business. The payment of any future dividends will be determined by the Board of Directors in light of the future prevailing conditions, including the Company's earnings, financial condition and requirements, restrictions in financing agreements, business conditions and other factors.
ITEM 6.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's consolidated financial statements, related notes and other financial information included elsewhere in Item 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AND SCHEDULES
PAGE ----
INDEPENDENT AUDITORS' REPORT ............................... 29
FINANCIAL STATEMENTS
Consolidated Balance Sheets .............................. 30-31 Consolidated Statements of Income ........................ 32 Consolidated Statements of Changes in Stockholders' Equity 33 Consolidated Statements of Cash Flows .................... 34 Notes to Consolidated Financial Statements ............... 35-49
Independent Auditors' Report
The Board of Directors and Stockholders Wisconsin Central Transportation Corporation:
We have audited the consolidated balance sheets of Wisconsin Central Transportation Corporation and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wisconsin Central Transportation Corporation and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois January 27, 1997
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Basis of Presentation - Stock Split
On May 16, 1996, the Company's Board of Directors announced a three-for-one split of the Company's common stock in the form of a common stock dividend payable on May 31, 1996 to shareholders of record as of May 17, 1996. The stated par value of each share was not changed from $.01. All share and per share amounts have been restated to reflect this common stock split.
(2) Summary of Significant Accounting Policies
Nature of Business
Wisconsin Central Transportation Corporation ("WCTC") operates approximately 3,000 route miles of railway serving Wisconsin, Illinois, Minnesota, Michigan's Upper Peninsula and Ontario through its principal operating subsidiaries, Wisconsin Central Ltd. ("WCL"), Fox Valley & Western Ltd. ("FV&W"), Sault Ste. Marie Bridge Company ("SSM") and Algoma Central Railway Inc. ("ACRI"). WCTC, through its Wisconsin Central International, Inc. ("WCI") subsidiary, also holds a 23% equity interest in Tranz Rail Holdings Limited ("Tranz Rail"), which operates 2,500 route miles of railway nationwide in New Zealand, and a 31% equity interest in English Welsh and Scottish Railway Holdings Limited ("EW&S"), whose subsidiaries operate railways in Great Britain.
Principles of Consolidation
The consolidated financial statements presented herein include the results of operations of WCTC and its wholly owned subsidiaries. Wisconsin Central Transportation Corporation and its subsidiaries are hereinafter referred to as the Company. All intercompany balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
Cash equivalents consist of investments in money market instruments with original maturities of less than 30 days and are stated at cost which equals redemption value. Checks that have been issued but haven't cleared the bank are included in accounts payable.
Materials and Supplies
Materials and supplies consist mainly of fuel oil and items for improvement and maintenance of roadway, structures and equipment, and are stated at the lower of cost or market utilizing average costs which approximate FIFO. As of December 31, 1996, the Company had entered into hedging positions for approximately 34% of its expected fuel consumption through the first half of 1997 and approximately 19% of its expected fuel consumption for the balance of 1997. Gains and losses on such transactions are deferred and matched to specific fuel purchases.
Investment in Affiliates/Currency Translation
The Company's 23% ownership of Tranz Rail and 31% ownership of EW&S (See Note 13 - Investment in Affiliates) are accounted for under U.S. generally accepted accounting principles utilizing the equity method of accounting. Under this method, the Company's share of the net income of these investments is reflected in the Company's financial statements when earned and dividends are credited against the investment in affiliates when received.
The translation of the applicable foreign currencies into U.S. dollars is performed for balance sheet accounts using period end exchange rates and for revenue and expense accounts using an average exchange rate during the period. Gains or losses resulting from translation are included in stockholders' equity. All dollar amounts included herein are stated in U.S. dollars.
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Properties
Properties are recorded at cost. Depreciation is principally computed using composite group straight-line rates. Average depreciable lives utilized by the Company are summarized as follows:
Asset Class Years ----------- -----
Roadway Properties.......................................... 40 Bridges..................................................... 51 Signals and Communication Systems........................... 24 Locomotives and Freight Cars................................ 33
Additions and improvements to track structures are capitalized. Repair and maintenance costs are charged to expense. When roadway property other than land is sold, the costs of the assets less the sales proceeds are charged to accumulated depreciation. Gains or losses resulting from sales of land not required for railroad operations are included in "other income" in the consolidated statements of income. Overhead costs related to track additions and improvements are also capitalized. During 1996, 1995 and 1994, approximately $763 thousand, $870 thousand and $684 thousand, respectively, of interest was capitalized on construction-in-progress.
Revenues
Revenues are recognized as shipments progress. Other revenues consist primarily of demurrage, switching and passenger revenues.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications
Certain amounts in the prior year financial statements have been reclassified to conform with the 1996 presentation.
(3) Extraordinary Items
As discussed in Note 5 - Long-term Debt, the Company prepaid $20.0 million of 10.20% fixed-rate senior term notes using a combination of increased borrowings under its revolving credit agreement (the "Revolver") and cash on hand in 1996. In connection therewith, the Company paid a prepayment penalty of $2.7 million. This resulted in an extraordinary charge of $1.6 million, net of income taxes, in the fourth quarter of 1996.
In 1995, the Company prepaid $40.0 million of 11.625% fixed-rate senior term notes using a combination of increased borrowings under its Revolver and cash on hand. In connection therewith, the Company paid a prepayment penalty of $3.5 million. This resulted in an extraordinary charge of $2.1 million, net of income taxes, in the third quarter of 1995.
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In 1994, the Company paid prepayment penalties and incurred other costs of $316 thousand, and wrote off $2.3 million of non-cash deferred financing costs in connection with a debt refinancing, resulting in an extraordinary charge of $1.6 million, net of income taxes, in the fourth quarter of 1994.
(4) Related Party Transactions
Legal Services
Oppenheimer, Wolff & Donnelly ("OW&D") provides the Company with legal services in connection with various labor matters, litigation, regulatory issues and corporate matters. The amounts paid OW&D by the Company for services during 1996, 1995 and 1994 were $1.2 million, $1.0 million and $0.7 million, respectively. A director and stockholder of WCTC was a member of OW&D until August 1994 and presently is of counsel to OW&D.
McLachlan, Rissman & Doll ("MR&D") provides the Company with legal services in connection with various corporate and financing matters. The amounts paid MR&D by the Company for services during 1996, 1995 and 1994 were $61 thousand, $320 thousand and $319 thousand, respectively. One member of MR&D is a director and stockholder of WCTC.
Consulting Services
In 1995 and 1994, the Company used the services of Railroad Financial Corporation ("RFC") to assist in the negotiation of various purchases, sales and leases of freight cars. In 1995 and 1994, the cost of such services amounted to $196 thousand and $237 thousand, respectively, and is included in the payments under the long-term operating leases RFC helped negotiate. Two directors of the Company are stockholders and directors of RFC.
Investment in Affiliates
Information regarding other related party transactions appears in Note 13 - Investment in Affiliates.
(5) Long-term Debt
Long-term debt consists of the following:
December 31, ------------------------ 1996 1995 ------- ------ (in thousands)
10.20% senior term notes .............. $ -- $ 20,000 WCTC revolving credit agreement ....... 146,500 94,787 Other ................................. 17,803 8,934 -------- -------- Total long-term debt .................. $164,303 $123,721 ======== ========
The Company maintains an unsecured Revolver with a syndicate of banks with a capacity of $325.0 million, increased in 1996 from $200.0 million. The Revolver allows the Company to choose various floating rate options and is scheduled to expire at the end of 2000. The Company pays commitment fees on the unused amount of the Revolver and a facility fee based on the Revolver's total capacity. Such fees vary based on the Company's stock rating and leverage ratio. Principal reductions are not required under the Revolver prior to its expiration date. The effective interest rate on outstanding borrowings under the Revolver at December 31, 1996 was 5.9%.
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Other long-term debt consists of $8.8 million in borrowings under a separate Canadian dollar revolving credit agreement held by ACRI (the "ACRI Revolver") plus $9.0 million in government-financed interest free loans supporting railroad infrastructure improvements which promote economic development in the jurisdictions served by such government entities. The ACRI Revolver has a capacity of $8.8 million with terms, covenants and margins similar to the WCTC Revolver.
In 1996, the Company prepaid $20.0 million in 10.20% fixed-rate senior term notes outstanding using a combination of increased borrowings under the Revolver and cash on hand. In connection with the note prepayment, the Company paid a prepayment penalty of $2.7 million (See Note 3 - Extraordinary Items).
In December 1995, the Company borrowed $13.2 million under its Revolver to specifically fund the note receivable described in Note 13 - Investment in Affiliates. This borrowing, which was repaid in the first quarter of 1996, was included with short-term debt in the consolidated balance sheet as of December 31, 1995.
Maturities of debt at December 31, 1996 for each of the years 1997 through 2001 and thereafter were as follows:
Year Amount ---- ------ (in thousands)
1997............................................... $ 731 1998............................................... 731 1999............................................... 731 2000............................................... 155,987 2001............................................... 731 Thereafter......................................... 6,123 ------------ Total.............................................. $ 165,034 ============
The financing arrangements of the Company limit its ability to pay dividends on its capital stock, incur additional indebtedness, create liens on its assets, repurchase shares of its capital stock, and make certain loans, investments or guarantees.
(6) Fair Value of Financial Instruments
At December 31, 1996, the Company's financial instruments consist of cash, receivables, other current assets, fuel hedging positions, current liabilities and debt. The carrying amounts of these financial instruments approximate their fair values at December 31, 1996.
(7) Income Taxes
The Company files consolidated federal income tax returns which include all of its U.S. subsidiaries and a provincial Canadian income tax return for ACRI.
Deferred income taxes are accounted for in accordance with the asset and liability method by applying current statutory tax rates to temporary differences between the financial statement carrying amount and the tax bases of assets and liabilities. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period of the enactment date.
No provision is made for U.S. income taxes applicable to undistributed earnings of ACRI and the foreign affiliates that are indefinitely reinvested. However, when dividends are received, applicable U.S. income taxes are accrued.
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The provision for income taxes consists of the following:
Year ended December 31, --------------------------- 1996 1995 1994 ---- ---- ---- (in thousands) Current: Federal ........... $ (1,148) $ 3,115 $ 5,539 State ............. 129 811 109 -------- -------- -------- Total current (1,019) 3,926 5,648 -------- -------- --------
Deferred: Federal ........... 10,746 15,494 11,169 State ............. 1,651 2,750 2,251 -------- -------- -------- Total deferred 12,397 18,244 13,420 -------- -------- -------- Total ................. $ 11,378 $ 22,170 $ 19,068 ======== ======== ========
The components of deferred income tax expense were as follows:
Year ended December 31, ---------------------------- 1996 1995 1994 ---- ---- ---- (in thousands)
Depreciation and amortization .. $ 17,077 $ 18,749 $ 15,284 Sale-leaseback transactions .... 613 (731) (2,620) Alternative minimum tax ........ 2,234 (1,643) (5,816) Net operating loss carryforwards (7,534) 1,707 5,587 Provisions for bad debts, casualties, claims and other expenses ................... 7 162 985 -------- -------- -------- Total .......................... $ 12,397 $ 18,244 $ 13,420 ======== ======== ========
The tax effects of temporary differences that give rise to significant portions of the deferred tax liabilities (assets) are presented below:
December 31, ----------------- 1996 1995 ---- ---- (in thousands) Deferred tax liabilities principally due to differences in depreciation on properties .. $ 103,195 $ 86,118
Deferred tax assets: Net operating loss carryforwards ........... (15,195) (7,661) Alternative minimum tax credit carryforwards (8,869) (11,103) Sale-leaseback transactions ................ (5,378) (5,991) Accruals and allowances for bad debts, casualties, claims and other expenses .............................. (1,984) (1,991) --------- --------- Total deferred tax assets ............. (31,426) (26,746) --------- ---------
Net deferred tax liability ............ $ 71,769 $ 59,372 ========= =========
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The net deferred tax liability is classified in the consolidated balance sheets as follows:
December 31, -------------------- 1996 1995 ---- ---- (in thousands)
Non-current deferred tax liability........ $ 73,244 $ 60,772 Current deferred tax asset................ (1,475) (1,400) ---------- ----------
Net deferred tax liability............ $ 71,769 $ 59,372 ========== ==========
The reconciliation of the statutory tax rate to the effective income tax rate is as follows:
Year ended December 31, ---------------------- 1996 1995 1994 ---- ---- ----
Statutory rate ................... 35.0% 35.0% 35.0% State income taxes, net of federal tax benefit ................... 4.0 4.1 4.3 Other ............................ 0.6 0.4 0.6 ---- ---- ---- Effective rate ................... 39.6% 39.5% 39.9% ==== ==== ====
As a result of temporary differences, the Company had net operating loss carryforwards ("NOLs") at December 31, 1996 for income tax purposes totaling $39.7 million, which will begin to expire in 2004. The Company expects to be able to utilize these NOLs to offset future tax liabilities.
(8) Benefit Plans
The Company has profit-based incentive plans for all employees. Amounts accrued under these plans were based primarily upon targeted operating results set at the beginning of the plan year. During 1996, 1995 and 1994, $3.3 million, $3.3 million and $6.3 million, respectively, were accrued under provisions of these incentive plans.
In 1991, the Company adopted a Key Management Stock Option Plan ("Key Option Plan") under which certain key management employees may be granted options to purchase shares of the Company's common stock. Options may have a duration of up to 10 years and an exercise price not less than the fair market value of the common stock at the time of the grant. The exercise prices for options granted through 1996 under the Key Option Plan were equal to fair market value as of the grant date. Information regarding the Key Option Plan is summarized below:
Average Number Option of Price Shares ----- ------
Options outstanding at December 31, 1993 $ 2.84 512,280 Granted in 1994 .................... 13.42 1,140,000 Exercised in 1994 .................. 2.80 (176,085) -------- Options outstanding at December 31, 1994 11.02 1,476,195 Exercised in 1995 .................. 6.22 (436,083) -------- Options outstanding at December 31, 1995 13.02 1,040,112 Granted in 1996 .................... 29.68 150,000 Exercised in 1996 .................. 11.69 (238,412) -------- Options outstanding at December 31, 1996 15.98 951,700 ======== Options available for grant at December 31, 1996 ................... -- 79,560 ======== Total options exercised through December 31, 1996 ................... $ 6.86 888,740 ========
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Of the options outstanding at December 31, 1996 under the Key Option Plan, 763,480 were vested and fully exercisable, 68,220 will vest in 1997, 30,000 will vest in 1998 and 90,000 will vest in 1999. At December 31, 1996, the range of exercise prices and the weighted-average remaining contractual life of outstanding options under the Key Option Plan was $13.42 to $31.50 and 7.9 years, respectively.
In 1991, the Company also adopted an Employee Stock Purchase Plan ("Purchase Plan"). Under the Purchase Plan, all eligible employees who elect to participate are granted an option to purchase, one year following the date of grant, a number of common stock shares not to exceed 7.5% of their annual base salary divided by the purchase price per share. The purchase price per share under the Purchase Plan is the lesser of 85% of the market value of the common stock as of the grant date or 85% of the market value on the exercise date. In December 1995, the Company established a plan similar to the Purchase Plan for ACRI (collectively, the two plans are referred to as the "Purchase Plans"). Information regarding the Purchase Plans is summarized below:
Average Number Option of Price Shares ----- ------
Shares authorized for purchase .......... 2,625,000 Purchased through December 31, 1993.. $ 3.08 (338,142) Purchased in 1994 ................... 5.67 (118,998) Purchased in 1995 ................... 9.17 (108,924) Purchased in 1996 ................... 13.88 (93,824) ---------- Total shares available to be purchased... 1,965,112 ==========
At December 31, 1996, participating employees have accumulated $1.2 million under the Purchase Plans through payroll deductions that can be used to purchase shares of common stock in 1997.
In 1994, the Company adopted a Director Stock Option Plan ("Director Plan") which provides for the automatic annual grant to members of the Board of Directors of options to purchase a specified number of shares of common stock at a price equal to the fair market value of those shares as of the date of the grant. Options to acquire up to an aggregate of 900,000 shares of common stock may be granted under the Director Plan, of which 138,000 have been granted and were fully vested at December 31, 1996. Options granted under the Director Plan vest and become fully exercisable after six months from the date of the grant. Information regarding the Director Plan is summarized below:
Average Number Option of Price Shares ----- ------
Options outstanding at December 31, 1993......... $ --- --- Granted in 1994.............................. 12.00 60,000 -------- Options outstanding at December 31, 1994......... 12.00 60,000 Granted in 1995.............................. 17.09 42,000 -------- Options outstanding at December 31, 1995......... 14.10 102,000 Granted in 1996.............................. 30.84 36,000 -------- Options outstanding at December 31, 1996......... 18.46 138,000 ======== Options available for grant at December 31, 1996.............................. --- 762,000 ========
At December 31, 1996, the range of exercise prices and the weighted-average remaining contractual life of outstanding options under the Director Plan was $12.00 to $30.84 and 6.6 years, respectively.
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In October 1995, the Financial Accounting Standard Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123 establishes financial accounting and reporting standards for stock-based compensation plans. SFAS 123 defines a fair value based method of accounting for an employee stock option or similar equity instrument, and gives entities a choice of recognizing related compensation expense by adopting the new fair value method or continuing to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," ("APBO 25"). The Company has elected to continue to account for stock-based compensation using the method prescribed in APBO 25. Accordingly, no compensation cost has been recognized for the Company's stock-based employee compensation plans. Had compensation cost for the Company's stock-based employee compensation plans been recorded based on the fair value method prescribed by SFAS 123, the Company's net income and earnings per common share would have been reduced to the pro forma amounts indicated below:
1996 1995 --------- ---------
Net income - as reported (in thousands)... $ 48,432 $ 42,509 Net income - pro forma (in thousands) .... 47,044 42,249 Earnings per common share - as reported... 0.96 0.85 Earnings per common share - pro forma .... 0.93 0.84
For purposes of the above pro-forma calculations, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for various grants: expected volatility of 33% for options granted in 1995 and ranging from 34% to 36% for options granted in 1996; risk-free interest rate ranging from 5.4% to 6.7% based upon the date of the option grant; and expected lives of four years. Pro forma net income reflects only options granted in 1996 and 1995. Therefore, the full impact of calculating compensation cost for stock options under SFAS 123 is not reflected in the pro forma net income amounts presented above because compensation cost for options granted prior to January 1, 1995 is not considered.
All U.S. employees of the Company are covered under the Railroad Retirement Act. All Canadian employees are covered under the government-sponsored Canadian Pension Plan and the ACRI Employee Retirement Savings Plan ("Savings Plan"). Under the Savings Plan, employees may elect to contribute up to 5% of their income on a pre-tax basis to the Savings Plan. The Company matches twice the amount contributed by each employee up to a maximum of 10%. In 1996 and 1995, such matching contributions by the Company amounted to $882 thousand and $552 thousand, respectively.
(9) Sale-Leaseback Transactions
During 1995 and 1994, the Company entered into sale-leaseback transactions predominantly relating to equipment with third-party financing institutions which resulted in net gains of $110 thousand and $7.5 million, respectively. For accounting purposes these amounts, as well as similar deferred gains from prior years, have been reflected as deferred income on the consolidated balance sheets. The gains on sale-leaseback transactions are amortized over the terms of the related operating leases.
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table indicates the future amortization of these deferred gains on sale-leaseback transactions:
Year Amount ---- ------ (in thousands)
1997............................................... $ 1,121 1998............................................... 1,121 1999............................................... 1,121 2000............................................... 1,121 2001............................................... 1,121 Thereafter......................................... 5,346 --------- Total.............................................. $ 10,951 =========
(10) Leases
Total operating lease expense (predominantly relating to equipment) amounted to $30.4 million, $28.1 million and $20.8 million in 1996, 1995 and 1994, respectively.
Minimum future lease payments under operating leases that have remaining noncancelable lease terms in excess of one year are as follows:
Year Amount ---- ------ (in thousands)
1997............................................... $ 27,423 1998............................................... 26,623 1999............................................... 25,293 2000............................................... 24,095 2001............................................... 24,275 Thereafter......................................... 196,256 ------------ Total.............................................. $ 323,965 ============
(11) Other Income
The components of other income include the following:
Year ended December 31, ----------------------------- 1996 1995 1994 ---- ---- ---- (in thousands)
Management fees from affiliates...... $ 2,285 $ 700 $ 700 Rental income........................ 2,039 1,323 1,241 Gains on property sales.............. 1,015 794 1,036 Financing and organization cost amortization................ (459) (512) (1,069) Rentals of non-operating equipment... --- 237 1,501 Other, net........................... (109) (43) (361) --------- --------- --------- Total............................ $ 4,771 $ 2,499 $ 3,048 ========= ========= =========
Information regarding management fees from affiliates is discussed in Note 13 - Investment in Affiliates.
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(12) Significant Customers
In 1996, 1995 and 1994, freight transportation services provided by the Company to two customers accounted for 14.6%, 14.4% and 15.0%, respectively, of the Company's gross freight revenues.
(13) Investment in Affiliates
Tranz Rail Holdings Limited
On July 20, 1993, a consortium of investors, including WCI, entered into a purchase agreement with the government of New Zealand to acquire all the stock of Tranz Rail, a 2,500 route mile railroad which provides the only rail service in New Zealand. WCI's equity investment approximated $16.0 million for approximately 27% of the common stock of Tranz Rail. In 1994 and 1995, the Company paid $3.3 million and $2.9 million, respectively, to exercise options that increased its equity ownership position to approximately 30%.
On June 26, 1995, Tranz Rail returned capital to shareholders through a pro rata repurchase of shares. WCTC's share of the capital returned was $21.0 million which the Company used to retire debt. The capital returned was derived primarily from proceeds of the 1994 sale of Tranz Rail's investment in a telecommunications company.
Tranz Rail completed an initial public offering of its common stock on June 18, 1996 and is listed on the NASDAQ stock market in the United States and on the New Zealand stock exchange in New Zealand. As a result of this offering, the Company's ownership position declined to 23% from 30%. As of December 31, 1996, the Company owned the equivalent of 9,561,639 American Depository Shares ("ADS") of Tranz Rail with a quoted closing price on NASDAQ of $17.69 per ADS. Each ADS represents three issued and fully paid ordinary shares of Tranz Rail. Total market value of the Company's holdings in Tranz Rail as of December 31, 1996 was approximately $169.1 million.
The Company is party to a Management Services Agreement with Tranz Rail under which the Company provides management services to Tranz Rail, including principally making available the services of two Company executives for full time employment by Tranz Rail, training of Tranz Rail personnel by the Company and making available the expertise and consulting services of the President of the Company. Amounts earned by the Company from Tranz Rail for services under the Management Services Agreement (not including the services of the two Company executives who are paid directly by Tranz Rail) were $0.7 million for each of the years in the three-year period ended December 31, 1996. The Management Services Agreement has a current term ending December 31, 1997, subject to extensions by agreement on a year to year basis.
Six of the directors of the Company are directors of, and hold shares or options (or both) of Tranz Rail.
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
English Welsh & Scottish Railway Holdings Limited
In the fourth quarter of 1995, a consortium of investors, including the Company and an affiliate of Berkshire Partners, an American private equity firm ("Berkshire") of which one of the Company's directors is an executive office, director and beneficial owner of shares, established a holding company, EW&S, to acquire various rail assets of British Rail from the British government as a part of its privatization of British Rail. On December 9, 1995, EW&S acquired Rail express systems Limited ("Res"). The principal activity of Res is the carriage of letters for the Royal Mail, a division of the British Post Office. On February 24, 1996, EW&S acquired British Rail's three trainload freight companies ("TLFs"), Loadhaul Limited, Mainline Freight Limited and Transrail Freight Limited, the principal activity of which is the hauling of bulk commodities such as coal, iron, steel and aggregates throughout Great Britain.
The Company invested approximately $45 million for an approximate 32% ownership interest in EW&S. Of this amount, WCI had invested approximately $13.2 million through December 31, 1995 in connection with EW&S's acquisition of Res. During 1996, EW&S sold shares to certain of its officers and directors (including certain officers and directors of the Company), with the effect of reducing the Company's equity interest to approximately 31% as of December 31, 1996. The Company has been granted performance-based options to acquire additional shares in EW&S to compensate it for its leadership of the consortium. In addition, EW&S has issued options to certain of its officers and directors, and warrants to the investment banking firm that facilitated the acquisition of EW&S. Assuming that all options and warrants are exercised, the Company's equity interest in EW&S will be approximately 34%.
In connection with the EW&S investment, the Company loaned $13.2 million to Berkshire in December 1995 to temporarily finance its portion of the purchase price. This loan earned interest at approximately 9.0% and was repaid on February 22, 1996, prior to the consummation of the purchase of the three TLFs.
The Company is party to a Management Services Agreement with EW&S under which the Company provides management services to EW&S, including principally making available the services of three Company executives for full time employment by EW&S, training of EW&S personnel by the Company and making available the expertise and consulting services of the President of the Company. Amounts earned by the Company from EW&S for services under the Management Services Agreement (not including the services of the three Company executives who are paid directly by EW&S) were $1.6 million in 1996. The Management Services Agreement has a current term ending February 23, 1998, subject to extensions by agreement on a year to year basis.
Four of the directors of the Company are directors of, and hold shares and options of, EW&S.
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Summary Financial Information
The results of operations and financial position of Tranz Rail and EW&S prepared in conformity with U.S. generally accepted accounting principles are summarized below for the year ended December 31, 1996 (except for the TLFs which are for the period from February 24, 1996 through December 31, 1996):
Tranz Rail EW&S ---------- ---- (in thousands) Condensed Income Statement Information: Operating revenues................... $ 395,690 $ 742,440 Operating income..................... 76,279 135,051 Net income........................... 37,384 71,810
Condensed Balance Sheet Information: Current assets....................... $ 98,076 $ 272,639 Total assets......................... 455,475 1,012,794 Current liabilities.................. 58,506 242,459 Total liabilities.................... 182,303 772,499 Total equity......................... 273,172 240,295
EW&S's borrowing arrangements contain provisions which substantially restrict its ability to transfer funds to the Company in the form of cash dividends, loans and advances. Tranz Rail's net assets are not similarly restricted.
The following table presents the Company's investment in affiliates at December 31, 1996 and its equity in net income of affiliates for the year ended December 31, 1996 (except for the TLFs which are for the period from February 24, 1996 through December 31, 1996):
Tranz Rail EW&S ---------- ---- (in thousands)
Equity in net income of affiliates...... $ 9,850 $ 22,827 Investment in affiliates................ $ 39,991 $ 74,661
The Company's retained earnings included undistributed earnings of affiliates of $54.4 million and $21.7 million at December 31, 1996 and 1995, respectively.
(14) Acquisitions
Algoma Central
On January 31, 1995, the Company consummated the acquisition of the railway assets of Algoma Central Corporation ("ACC") which are operated by ACRI. ACRI consists of approximately 322 route miles of track between Sault Ste. Marie, Ontario and Hearst, Ontario. The rail lines were purchased for approximately $8.2 million, financed in part by the Province of Ontario, through the Northern Ontario Heritage Fund Corporation ("Heritage Fund"). The Heritage Fund's financing included a $0.7 million non-voting preferred stock investment in ACRI. The Heritage Fund is not entitled to any dividends for at least 10 years. In related transactions, the Company acquired 879 railcars and 23 locomotives from ACC for approximately $11.1 million, and ACC's existing communications system, maintenance and shop equipment, inventory and miscellaneous assets for $5.0 million. In connection with this acquisition, the Company incurred $0.9 million and $0.6 million of acquisition and organization costs, respectively. The pro forma effects on the Company's reported results assuming the ACRI acquisition was consummated at the beginning of 1995 are not material.
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Duck Creek North
On January 27, 1997, SSM completed the purchase of 207 route miles of railroad track and trackage rights in Wisconsin and the Upper Peninsula of Michigan from the Union Pacific Railroad Company. The rail lines, commonly known as the "Duck Creek North" lines, include contiguous property and associated facilities from North Green Bay, Wisconsin to Ishpeming, Michigan; from Powers to Antoine, Michigan; from Quinnesec, Michigan to Niagara, Wisconsin; and from Cascade to Palmer, Michigan. Freight shipments over the lines consist of materials for the paper industry and high volumes of iron ore used in steel-making which are shipped from the Marquette ore range to Escanaba, Michigan for transshipment to vessels. SSM will continue such operations in the future. The purchase price of the rail lines, subject to certain final adjustments, was approximately $85.0 million, which was funded through borrowings under the Revolver.
(15) Contingencies
Weyauwega Derailment
On March 4, 1996, the Company had a derailment in Weyauwega, Wisconsin involving thirty-five cars, fourteen of which contained propane or liquified petroleum gas and two of which contained sodium hydroxide solution. The total cost for the derailment is currently estimated at $27.3 million. The Company believes that its insurance policies will cover substantially all these costs, in excess of the $2.5 million of deductibles, due to the derailment. Through December 31, 1996, the Company had funded $24.8 million in costs incurred as a result of this derailment and received $17.4 million in reimbursements from insurance companies. The Company's consolidated balance sheet includes an insurance receivable of $7.4 million as of December 31, 1996. During the first quarter of 1996, the Company recorded a pretax provision of $2.5 million for the combined deductibles under its property damage and liability insurance policies. A complaint was filed against the Company on March 26, 1996 by nine individuals seeking to represent the class of persons who suffered damages as a result of this derailment. The complaint seeks punitive and treble damages. Any punitive damages and treble damages may not be covered by the Company's insurance. The Company does not believe there is any basis for an award of such damages. All potential claimants were notified, and thirteen families and two businesses joined the lawsuit. Discovery is ongoing. In addition, one business has filed a separate suit for damages in the District Court of Waupaca County. It is the opinion of management that the resolution of these matters will not have a material adverse effect on the Company's financial position.
BOCT Complaint
On June 4, 1993, WCL was served with a complaint filed by the Baltimore and Ohio Chicago Terminal Railroad Company ("BOCT") in the United States District Court for the Northern District of Illinois, Eastern Division. In its complaint, the BOCT claimed that WCL owed BOCT for intermediate switching and car hire reclaim charges allegedly incurred from July 1988 through February 1993. Arbitration hearings were held in Chicago from October 24, 1995 to November 9, 1995. On June 10, 1996, the arbitration panel ruled in favor of BOCT. The arbitration panel's ruling awarded BOCT $16.8 million of disputed switching and car hire reclaim charges, and $2.5 million of interest relating to such charges.
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Based upon the arbitration panel's ruling, the Company recorded pretax provisions of $15.8 million in 1996, representing amounts awarded in excess of previously recorded accruals. Additional interest through December 31, 1996 of $417 thousand has been accrued on the unpaid award amount and is included in other interest expense in the 1996 consolidated statement of income.
The litigation between BOCT and the Company continues. The U.S. District Court has affirmed the arbitration award and also authorized WCL to pursue the defenses that were not subject to arbitration, including claims to be brought before the Surface Transportation Board.
Waukesha
On April 2, 1996, WCL received a request for documents from the U.S. Department of Justice ("DOJ") requesting documents relating to the demolition of a foundry and roundhouse on the Company's property in Waukesha, Wisconsin, performed by contractors for WCL in 1993. A request for additional documents was received on November 21, 1996. WCL has complied with the requests. Previously, in March 1994, WCL had received a notice of violation of the Clean Air Act (the "Act") and the National Emission Standard for Asbestos (the "Asbestos NESHAP") promulgated thereunder from the U.S. Environmental Protection Agency ("USEPA") in connection with the demolition. The USEPA held a conference with WCL on April 11, 1994 to discuss the notice prior to a determination of any enforcement action to be taken under section 113 of the Act. If the DOJ or the USEPA determines that an action should be brought against the Company, the Company will vigorously defend itself. If it were to be determined that WCL violated the Asbestos NESHAP, WCL could be subject to criminal prosecution with fines of up to $500 thousand per violation or civil enforcement with fines of up to $25 thousand per day for each violation.
Property Tax Dispute
In October 1995, the Circuit Court of Dane County ruled in favor of a Wisconsin Department of Revenue ("WDR") retroactive assessment of personal property taxes for the tax years 1990 through 1993 against all Wisconsin railroads, including WCL and FV&W. WCTC and the other railroads involved are pursuing the remaining issues in the case and intend to appeal the statutory law rulings. As a result of the ruling, the Company recognized the $3.0 million retroactive assessment, as well as accrued interest of $0.7 million, in its 1995 consolidated statement of income. The railroads, including WCL and FV&W, have also filed suits in state courts which allege discrimination in the assessment of taxes. WCL and FV&W have separately filed suit challenging other WDR tax valuation practices with respect to their 1994, 1995 and 1996 tax bills.
Other
The Company is involved in various other legal actions, including personal injury, property damage and environmental clean up matters. The Company has also been identified as a potentially responsible party by various Federal and state authorities for remediation of various waste disposal sites. While the final outcome with respect to these matters cannot be predicted with certainty, it is the opinion of management that their resolution will not have a material adverse effect on the Company's financial position.
WISCONSIN CENTRAL TRANSPORTATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(16) Unaudited Quarterly Financial Data
ITEM 9.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See "Executive Officers of the Registrant" in Part I above for information regarding executive officers of the Company. The remainder of the information required by Item 10 is incorporated by reference to the Company's proxy statement to be filed pursuant to Regulation 14A.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to the Company's proxy statement to be filed pursuant to Regulation 14A.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the Company's proxy statement to be filed pursuant to Regulation 14A.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the Company's proxy statement to be filed pursuant to Regulation 14A.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as a part of this Report:
Location -------- (a) (1) Financial Statements
Consolidated Balance Sheets................................. 30-31 Consolidated Statements of Income........................... 32 Consolidated Statements of Changes in Stockholders' Equity.. 33 Consolidated Statements of Cash Flows....................... 34 Notes to Consolidated Financial Statements.................. 35-49
(2) Schedules
All schedules have been omitted as not applicable or not required or because the information required to be shown therein is included in the financial statements or notes thereto.
(3) Exhibits
The exhibits set forth in the accompanying Index to Exhibits are filed as a part of this report.
(b) Reports on Form 8-K filed during the quarter ended December 31, 1996.
The Company filed no reports on Form 8-K during the quarter ended December 31, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
WISCONSIN CENTRAL TRANSPORTATION CORPORATION (Registrant)
By: /s/ Edward A. Burkhardt Edward A. Burkhardt, President and Chief Executive Officer
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title
By: /s/ Edward A. Burkhardt President, Chief Executive Officer (Edward A. Burkhardt) and Director (Principal Executive Officer)
Date: March 21, 1997
By: /s/ Thomas F. Power, Jr. Executive Vice President, (Thomas F. Power, Jr.) Chief Financial Officer and Director (Principal Financial Officer)
Date: March 21, 1997
By: /s/ Walter C. Kelly Vice President, Finance (Walter C. Kelly) (Principal Accounting Officer)
Date: March 21, 1997
By: /s/ Thomas W. Rissman Director (Thomas W. Rissman)
Date: March 21, 1997
By: /s/ Carl Ferenbach Director (Carl Ferenbach)
Date: March 21, 1997
INDEX TO EXHIBITS
Exhibit No. Description ----------- -----------
3 ARTICLES OF INCORPORATION AND BY-LAWS
3(a) Restated Certificate of Incorporation of the registrant, as amended (Incorporated by reference to Exhibit 3 to registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996)
3(b) By-laws of the registrant, as amended to date (Incorporated by reference to Exhibit 3(a) to registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991)
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
4(a) Credit Agreement dated as of November 21, 1994 among registrant, Bank of America National Trust and Savings Association and the Banks signatory thereto (Incorporated by reference to Exhibit 4(a) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994) (see Exhibits 4(b) and (c) for subsequent amendment)
4(b) Amendment No. 1, dated as of October 23, 1995, to the Credit Agreement filed as Exhibit 4(a) (Incorporated by reference to Exhibit 4(c) to registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995)
4(c) Second Amendment, dated as of December 17, 1996, to the Credit Agreement filed as Exhibit 4(a)
Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, registrant is not filing any instrument with respect to long-term debt in cases in which the amount of debt securities authorized under the instrument does not exceed 10 percent of the total assets of registrant. Registrant agrees to furnish a copy of each such instrument to the Commission upon request.
10 MATERIAL CONTRACTS
10(a) Director Stock Option Plan (compensatory plan or arrangement identified as such pursuant to Item 14(a)(3) of Form 10-K) (Incorporated by reference to Exhibit 4.1 to registrant's Registration Statement on Form S-8 (Registration No. 33-84088) filed under the Securities Act on September 19, 1994)
10(b) Supplement to Director Stock Option Plan (compensatory plan or arrangement identified as such pursuant to Item 14(a)(3) of Form 10-K) (Incorporated by reference to Exhibit 4.2 to registrant's Registration Statement on Form S-8 (Registration No. 33-84088) filed under the Securities Act on September 19, 1994)
10(c) Long Term Deferred Compensation Plan of the registrant dated December 9, 1993 (compensatory plan or arrangement identified as such pursuant to Item 14(a)(3) of Form 10-K) (Incorporated by reference to Exhibit 10(jj) to registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993)
10(d) Key Management Stock Option Plan of the registrant (compensatory plan or arrangement identified as such pursuant to Item 14(a)(3) of Form 10-K) (Incorporated by reference to Exhibit 10(s) to registrant's Registration Statement on Form S-1 (Registration No. 33-39939) filed under the Securities Act and declared effective by the Securities and Exchange Commission on May 21, 1991) (see Exhibit 10 (e) for subsequent amendment)
10(e) Amendment No. 1, dated May 20, 1993, to Key Management Stock Option Plan (amending Key Management Stock Option Plan filed as Exhibit 10(d)) (compensatory plan or arrangement identified as such pursuant to Item 14(a)(3) of Form 10-K) (Incorporated by reference to Exhibit 10(ii) to registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993)
10(f) Management Incentive Compensation Plan of the registrant (compensatory plan or arrangement identified as such pursuant to Item 14(a)(3) of Form 10-K) (Incorporated by reference to Exhibit 10(t) to registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993)
Exhibit No. Description ----------- -----------
10(g) Stockholders Agreement of the registrant dated October 11, 1987 as amended April 1, 1991 (Incorporated by reference to Exhibit 10(q) to registrant's Registration Statement on Form S-1 (Registration No. 33-39939) filed under the Securities Act and declared effective by the Securities and Exchange Commission on May 21, 1991)(see Exhibit 10(h) for subsequent amendment)
10(h) Amendment No. 2 to Stockholders Agreement dated as of April 1, 1992 (amending Stockholders Agreement filed as Exhibit 10(g)) (Incorporated by reference to Exhibit 10(aa) to registrant's Registration Statement on Form S-1 (Registration No. 33-52022) filed under the Securities Act and declared effective by the Commission on December 14, 1992)
10(i) Asset Purchase Agreement dated as of November 30, 1996 between Union Pacific Railroad Company and Sault Ste. Marie Bridge Company
11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
11 Statement re Computation of per Share Earnings
21 SUBSIDIARIES OF THE REGISTRANT
21 Subsidiaries of Wisconsin Central Transportation Corporation (Incorporated by reference to Exhibit 21 to registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995)
23 CONSENTS OF EXPERTS AND COUNSEL
23 Consent of KPMG Peat Marwick LLP
27 FINANCIAL DATA SCHEDULE
27 Financial Data Schedule