Property and Equipment and Leases Property and Equipment and Leases

12 Months Ended

Dec. 31, 2012

PROPERTY AND EQUIPMENT AND LEASES [Abstract]

Property, Plant and Equipment Disclosure

PROPERTY AND EQUIPMENT AND LEASES:

Property and Equipment

Major classifications of property and equipment as of December 31, 2012 and 2011 were as follows (dollars in thousands):

	2012			2011
Property:
Land and land improvements	$	562,432		$	147,176
Buildings and leasehold improvements	90,149			60,362
Bridges/tunnels/culverts	531,388			224,227
Track property	2,010,511			1,148,331
Total property	3,194,480			1,580,096
Equipment:
Computer equipment	9,235			5,381
Locomotives and rail cars	458,404			265,167
Vehicles and mobile equipment	38,226			31,460
Signals and crossing equipment	30,564			27,813
Track equipment	17,853			9,868
Other equipment	22,673			20,206
Total equipment	576,955			359,895
Construction-in-process	69,505			68,188
Total property and equipment	3,840,940			2,008,179
Less: accumulated depreciation	(444,645		)	(364,590		)
Property and equipment, net	$	3,396,295		$	1,643,589

Construction-in-process consisted primarily of costs associated with equipment purchases and track and equipment upgrades. Major classifications of construction-in-process as of December 31, 2012 and 2011 were as follows (dollars in thousands):

	2012		2011
Property:
Buildings and leasehold improvements	$	93	$	19
Bridges/tunnels/culverts	3,500		841
Track property	24,252		4,158
Equipment:
Locomotives and rail cars	39,291		62,340
Other equipment	2,369		830
Total construction-in-process	$	69,505	$	68,188

Track property upgrades typically involve the substantial replacement of rail, ties and/or other track material. Locomotive upgrades generally consist of major mechanical enhancements to the Company’s existing locomotive fleet. Upgrades to the Company’s rail cars typically include rebuilding of car body structures and/or converting to an alternative type of freight car.

Depreciation expense for the years ended December 31, 2012, 2011 and 2010 totaled $66.6 million, $59.7 million and $44.6 million, respectively.

Leases

The Company enters into operating leases for rail cars, locomotives and other equipment. As of December 31, 2012, not including the leases acquired from the RailAmerica acquisition, the Company leased 10,307 rail cars and seven locomotives. Related operating lease expense for the years ended December 31, 2012, 2011 and 2010 was $13.4 million, $19.0 million and $13.1 million, respectively. The RailAmerica acquisition added an additional 8,004 leased rail cars and 175 leased locomotives. The Company leases certain real property, which resulted in operating lease expense for the years ended December 31, 2012, 2011 and 2010 of $4.9 million, $4.6 million and $5.0 million, respectively. The costs associated with operating leases are expensed as incurred and are not included in the property and equipment table above.

The Company is a party to several lease agreements with Class I carriers to operate over various rail lines in North America. Certain of these lease agreements have annual lease payments, which are included in the operating lease section of the schedule of future minimum lease payments shown below. Under certain other of these leases, no payments to the lessors are required as long as certain operating conditions are met. No material payments were required under these lease arrangements in 2012.

The following is a summary of future minimum lease payments under capital leases and operating leases as of December 31, 2012 (dollars in thousands):

	Capital		Operating		Total
2013	$	1,313	$	43,482	$	44,795
2014	1,313		27,787		29,100
2015	1,314		20,877		22,191
2016	1,315		18,019		19,334
2017	5,029		14,577		19,606
Thereafter	225		172,878		173,103
Total minimum payments	$	10,509	$	297,620	$	308,129