Union Pacific 2001 Annual Report Download - page 43

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Materials and Supplies – Expenses decreased $71 million (13%), reflecting locomotive overhaul reductions and
productivity improvements and cost control measures. Locomotive overhauls decreased due to acquisition of new, more-
reliable locomotives during the year and the sale of older units, which required higher maintenance. Materials and
supplies expenses related to car maintenance also declined due to lower business levels in the industrial products and
automotive commodity groups. The cars utilized in these commodity groups normally require more maintenance than
the cars utilized within the other commodity groups.
Casualty Costs – Costs increased $9 million (3%) compared to 2000, as higher insurance, bad debt and environmental
expenses were partially offset by lower personal injury costs and lower costs for damaged freight cars.
Other Costs – Expenses increased $3 million (flat) compared to 2000 primarily due to higher state and local taxes.
Operating Income – Operating income increased $178 million (9%) to $2.1 billion. Excluding the $115 million work
force reduction charge in 2000, operating income increased $63 million (3%) in 2001. The operating ratio for 2001 was
80.7%, compared to 82.3% in 2000. Excluding the work force reduction charge, the operating ratio for 2000 was 81.2%.
Non-Operating Items – Non-operating expense decreased $56 million (12%) compared to 2000. Real estate sales and
net other income increased $48 million (38%). Interest expense decreased $8 million (1%) as a result of lower weighted-
average debt levels and weighted-average interest rates in 2001. Income taxes increased $102 million (20%) in 2001
compared to 2000. Excluding the work force reduction charge in 2000, income tax expense increased $59 million (11%).
The increase was a result of higher pre-tax income levels in 2001 and an increase in the effective tax rate from 35.6% in
2000 to 36.7% in 2001.
Trucking Segment
Operating Revenues – In 2001, trucking revenues rose $30 million (3%) to $1,143 million. The growth resulted from
rate increases, new services and $10 million in incremental revenue due to the acquisition of Motor Cargo. Tonnage for
the year was flat compared to 2000.
Operating Expenses – Trucking operating expenses rose $29 million (3%) to $1,089 million in 2001. Salaries, wages and
employee benefits increased $40 million (6%) due to a 4% increase in employees as well as wage and benefit inflation and
enhancements. Fuel and utilities costs decreased $5 million (7%), as a result of lower fuel prices during the year (82 cents
per gallon average in 2001 compared to 90 cents per gallon average in 2000, including transportation costs and regional
pricing spreads, and excluding taxes), partially offset by a 1% increase in gallons consumed. Overnite did not hedge any
fuel volume for the year ended December 31, 2001. However, as of December 31, 2001, Overnite had hedged
approximately 16% of its expected fuel consumption for 2002 at an average of 58 cents per gallon, excluding taxes,
transportation costs and regional pricing spreads and had hedged approximately 5% of its expected fuel consumption
for 2003 at an average of 58 cents per gallon excluding taxes, transportation costs and regional pricing spreads. Equipment
and other rents decreased $4 million (4%) due to decreased use of contract transportation during the year. High
utilization of contract transportation in 2000 was necessary due to Teamsters related work stoppage. Casualty costs
increased $7 million (18%) due to higher bad debt, insurance and cargo loss and damage expenses. Other costs decreased
$11 million (10%) due to lower expenses related to decreased security (related to Teamsters' matters), legal and employee
travel expenses in 2001.
Operating Income – Trucking operations generated operating income of $54 million in 2001, compared to $53 million
for 2000. The operating ratio increased to 95.3%, compared to 95.2% in 2000.
Other Product Lines
Other – Operating losses increased $10 million in 2001 compared to 2000. Operating revenues declined $4 million year
over year. Operating expenses increased $6 million due to increased spending at Fenix to develop new products and
services.