Union Pacific 2005 Annual Report Download - page 35

Average Train Speed – Average train speed is calculated by dividing train miles by hours operated on our main
lines between terminals. In 2005, the West Coast storm, disruptions on the SPRB Joint Line, business
interruptions caused by Hurricane Rita, and the Kansas washouts in October hampered efforts to improve our
average train speed. In 2004, unprecedented demand for our services and crew and locomotive shortages
negatively impacted operational efficiency and average train speed.
Average Terminal Dwell Time – Average terminal dwell time is the average time that a rail car spends at our
terminals. Lower average terminal dwell time is favorable. The 6% improvement in dwell time in 2005 resulted
from strategic network management initiatives and efforts to more timely deliver rail cars to our interchange
partners and customers. Record demand levels and operational challenges experienced in 2004 affected network
performance including average terminal dwell time.
Gross and Revenue Ton-Miles – Gross ton-miles are calculated by multiplying the weight of loaded or empty
freight cars by the number of miles hauled. Revenue ton-miles are based on tariff miles and do not include the
weight of freight cars. In 2005, gross and revenue ton-miles grew 1% and 0.5%, in relation to a 1% increase of
carloadings. Gross and revenue ton-miles increased 2% and 3% respectively in 2004, with 2% growth of
carloadings during the same period. The increase in gross and revenue ton-miles was also positively impacted by
volume growth experienced in the higher density commodity groups of industrial products and chemicals,
combined with a minimal increase in automotive carloads, which is a lower density commodity.
Average Full-Time Equivalent Employees – The 2005 increase includes the addition of employees needed to
complete increased track repair and replacement programs, more train crew personnel both to handle the
increased demand and to improve service, and the hiring of operations management personnel, including an
expanded management training program. The 2004 average number of full-time equivalent employees increased
as we added train crew personnel, who were hired to handle increased customer demand and improve service.
These additions were partially offset by increased productivity in the non-transportation functions, employee
attrition, and fewer employees at our technology subsidiaries.
Other Financial Statistics
2005 2004 Change
Debt to capital ....................................................... 35.1% 39.1% (4.0) pt
Lease adjusted debt to capital ............................................ 43.6% 45.1% (1.5) pt
Debt to Capital/Lease Adjusted Debt to Capital – Debt to capital is computed by dividing total debt by total debt
plus equity. Lease adjusted debt to capital is derived by dividing total debt plus the net present value of operating
leases by total debt plus equity plus the net present value of operating leases. We believe these measures are
important in managing our capital structure to allow efficient access to the debt market while minimizing our cost
of capital. In 2005, our debt to capital ratio improved due to a $715 million reduction in our debt level and an
increase in equity resulting from earnings. Our lease adjusted debt to capital improved to a lesser extent due to an
increase in the present value of operating leases, which were approximately $3.2 billion and $2.3 billion at
December 31, 2005 and 2004, respectively, using a discount rate of 8%.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2005, our principal sources of liquidity included cash, cash equivalents, the sale of receivables,
and our revolving credit facilities, as well as the availability of commercial paper and other sources of financing
through the capital markets. We had $2 billion of credit facilities available, of which there were no borrowings
outstanding as of December 31, 2005. The sale of receivables program is subject to certain requirements, including
the maintenance of an investment grade bond rating. If our bond rating were to deteriorate, it could have an
adverse impact on our liquidity. The value of the outstanding undivided interest held by investors under the
29