PROPERTY AND EQUIPMENT AND LEASES:

Property and Equipment

Major classifications of property and equipment as of December 31, 2016 and 2015 were as follows (dollars in thousands):



	2016
	Gross Book Value		Accumulated Depreciation			Net Book Value
Property:
Land and land improvements	$	735,054	$	—		$	735,054
Buildings and leasehold improvements	214,980		(43,431		)	171,549
Bridges/tunnels/culverts	692,324		(103,521		)	588,803
Track property	2,639,961		(477,366		)	2,162,595
Total property	4,282,319		(624,318		)	3,658,001
Equipment:
Computer equipment	20,449		(14,927		)	5,522
Locomotives and railcars	893,911		(217,704		)	676,207
Vehicles and mobile equipment	72,388		(41,257		)	31,131
Signals and crossing equipment	72,210		(37,632		)	34,578
Track equipment	48,931		(15,663		)	33,268
Other equipment	57,547		(24,845		)	32,702
Total equipment	1,165,436		(352,028		)	813,408
Construction-in-process	31,910		—			31,910
Total property and equipment	$	5,479,665	$	(976,346	)	$	4,503,319



	2015
	Gross Book Value		Accumulated Depreciation			Net Book Value
Property:
Land and land improvements	$	648,498	$	—		$	648,498
Buildings and leasehold improvements	238,272		(32,624		)	205,648
Bridges/tunnels/culverts	662,287		(85,040		)	577,247
Track property	2,508,100		(403,778		)	2,104,322
Total property	4,057,157		(521,442		)	3,535,715
Equipment:
Computer equipment	18,633		(11,709		)	6,924
Locomotives and railcars	653,077		(173,214		)	479,863
Vehicles and mobile equipment	65,241		(34,656		)	30,585
Signals and crossing equipment	69,315		(30,754		)	38,561
Track equipment	28,440		(11,628		)	16,812
Other equipment	73,405		(13,846		)	59,559
Total equipment	908,111		(275,807		)	632,304
Construction-in-process	47,044		—			47,044
Total property and equipment	$	5,012,312	$	(797,249	)	$	4,215,063

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, 2016 and 2015 were as follows (dollars in thousands):



	2016		2015
Property:
Buildings and leasehold improvements	$	85	$	2,097
Bridges/tunnels/culverts	1,600		39
Track property	12,302		24,962
Equipment:
Locomotives and railcars	11,786		12,875
Other equipment	6,137		7,071
Total construction-in-process	$	31,910	$	47,044

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 railcars typically include rebuilding of car body structures and/or converting to an alternative type of railcar.

The Company depreciates its property and equipment using the straight-line method over the useful lives of the property and equipment. The following table sets forth the estimated useful lives of the Company's major classes of property and equipment:



	Estimated Useful Life (in Years)
	Minimum	Maximum
Property:
Buildings and leasehold improvements (subject to term of lease)	2	40
Bridges/tunnels/culverts	20	50
Track property	3	50

Equipment:
Computer equipment	2	10
Locomotives and railcars	2	30
Vehicles and mobile equipment	2	15
Signals and crossing equipment	2	20
Track equipment	2	20
Other equipment	2	20

Depreciation expense for the years ended December 31, 2016, 2015 and 2014 totaled $172.3 million, $159.1 million and $135.0 million, respectively.

The Company's Credit Agreement is collateralized by a substantial portion of the Company's real and personal property assets of its domestic subsidiaries that have guaranteed the United States obligations under the Credit Agreement and a substantial portion of the personal property assets of its foreign subsidiaries that have guaranteed the foreign obligations under the Credit Agreement. See Note 8, Long-Term Debt, for more information on the Company's Credit Agreement.

Leases

The Company enters into operating leases for railcars, locomotives and other equipment as well as real property. The Company also enters into agreements with other railroads and other third parties to operate over certain sections of their track and pays a per car fee to use the track or makes an annual lease payment. The costs associated with operating leases are expensed as incurred and are not included in the property and equipment table above.

The number of railcars and locomotives leased by the Company as of December 31, 2016, 2015 and 2014 was as follows:



	2016	2015	2014
Railcars	20,738	21,819	18,583
Locomotives	309	333	162

The Company's operating lease expense for equipment and real property leases and expense for the use of other railroad and other third parties' track for the years ended December 31, 2016, 2015 and 2014 was as follows (dollars in thousands):



	2016		2015		2014
Equipment	$	91,537	$	91,919	$	32,433
Real property	$	14,291	$	12,136	$	8,670
Trackage rights	$	87,194	$	78,140	$	53,783

For the year ended December 31, 2016, the Company incurred $10.5 million of charges associated with leased coal railcars in the U.K. that exceed the Company's expected ongoing needs and are therefore considered permanently taken out of service. See Note 3, Changes in Operations, for additional information regarding the U.K. coal business.

The Company is a party to several lease agreements with Class I carriers and other third parties to operate over various rail lines in North America, with varied expirations. 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 as well as the trackage rights expense in the table above. Revenues from railroads that the Company leases from Class I carriers and other third parties accounted for approximately 7.5% of the Company's 2016 total operating revenues. Leases from Class I railroads and other third parties that are subject to expiration in each of the next 10 years represent less than 2% of the Company's annual revenues in the year of expiration based on the Company's operating revenues for the year ended December 31, 2016. For example, the Company's revenues associated with leases from Class I railroads and other third parties subject to expiration in each of the next five years (2017 - 2021) would represent approximately 1.1%, 1.4%, 0.0%, 0.0% and 0.6% of the Company's operating revenues in each of those years, respectively, based on the Company's operating revenues for the year ended December 31, 2016.

The Company's capital leased assets primarily consist of locomotives and railcars. The amortization of capital leased assets is included within the Company's depreciation expense. The following is a summary of future minimum lease payments under capital leases and operating leases as of December 31, 2016 (dollars in thousands):



	Capital		Operating		Total
2017	$	17,438	$	84,266	$	101,704
2018	8,861		68,261		77,122
2019	8,388		51,618		60,006
2020	14,614		42,246		56,860
2021	6,677		33,100		39,777
Thereafter	30,417		266,358		296,775
Total minimum payments	$	86,395	$	545,849	$	632,244