Union Pacific 2005 Annual Report Download - page 34

Other Income – Other income increased in 2005 largely as a result of higher gains from real estate sales partially
offset by higher expenses due to rising interest rates associated with our sale of receivables program. In addition,
other income in 2004 included income recognized from the sale of a technology subsidiary’s assets.
Other income improved in 2004 due to higher costs in 2003 associated with premium payments for early
retirement of $1.5 billion of Convertible Preferred Securities (CPS) and income recognized in 2004 from the sale
of assets of a technology subsidiary. These were partially offset by lower gains from real estate sales in 2004
compared to 2003.
Interest Expense – Lower interest expense in 2005 and 2004 was primarily due to declining weighted-average debt
levels of $7.8 billion, $8.1 billion, and $8.9 billion in 2005, 2004, and 2003, respectively. Our effective interest rate
was 6.5% in both 2005 and 2004, compared to 6.4% in 2003.
Income Taxes – Income taxes were greater in 2005 due to higher 2005 pre-tax income, which was partially offset
by a previously reported reduction in income tax expense. In our quarterly report on Form 10-Q for the quarter
ended June 30, 2005, we reported that the Corporation had undertaken an analysis of the impact that final
settlements of tax liabilities for pre-1995 tax years with the Internal Revenue Service (IRS) had on previously
recorded estimates of deferred tax assets and liabilities. The completed analysis of the final settlements for
pre-1995 tax years, along with IRS Examination Reports for tax years 1995 through 2002 were considered, among
other things, in a review and re-evaluation of the Corporation’s estimated deferred tax assets and liabilities as of
September 30, 2005, resulting in an income tax expense reduction of $118 million in 2005.
Income tax expense decreased in 2004, driven by lower pre-tax income, a reduction in the deferred state
income tax liability primarily attributable to relocating support operations to Omaha, Nebraska, state income tax
credits earned in connection with the new headquarters building in Omaha, and an increase in foreign tax credits
resulting from the passage of the American Jobs Creation Act of 2004.
DISCONTINUED OPERATIONS
On November 5, 2003, we completed the sale of our entire trucking interest. In 2003, revenue and income from
discontinued operations were $1.2 billion and $255 million, respectively. Income from discontinued operations in
2003 included the net gain from the sale of our trucking interest of $211 million, including an income tax benefit
of $126 million.
OPERATING AND FINANCIAL STATISTICS
Railroad Performance Measures
We report key Railroad performance measures weekly to the American Association of Railroads, including
carloads, average daily inventory of rail cars on our system, average train speed, and average terminal dwell time.
This operating data is available on our website at www.up.com/investors/reports/index.shtml.
Operating Statistics
2005 2004 2003
% Change
2005 v 2004
% Change
2004 v 2003
Average train speed (miles per hour) ............ 21.1 21.4 23.6 (1)% (9)%
Average terminal dwell time (hours) ............ 28.7 30.5 26.8 (6) 14
Gross ton-miles (billions) ..................... 1,043.9 1,037.5 1,018.9 1 2
Revenue ton-miles (billions) .................. 548.8 546.3 532.9 - 3
Average full-time equivalent employees .......... 49,747 48,329 46,371 3 4
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