Union Pacific 2001 Annual Report Download - page 47

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excluding taxes, transportation costs and regional pricing spreads (see note 4 to the Consolidated Financial Statements,
Item 8).
Materials and Supplies – Expenses increased $6 million (1%), reflecting volume-related increases in car and locomotive
repairs, partially offset by productivity improvements and cost control measures.
Casualty Costs – Costs decreased $15 million (4%) compared to 1999, primarily as a result of lower settlement costs.
Other Costs – Expenses decreased $31 million (4%) compared to 1999. Cost control, productivity gains, and lower
contract services expenses more than offset volume-related cost increases and higher state and local taxes.
Operating Income – Operating income increased $81 million (4%) to $1.9 billion. Excluding the work force reduction
charge, operating income increased $196 million (11%) to a record $2.0 billion. The operating ratio for 2000 was 82.3%.
Excluding the work force reduction charge, the operating ratio was 81.2%, 0.8 percentage points better than 1999’s 82.0%
operating ratio.
Non-Operating Items – Other income increased $11 million (10%), primarily the result of higher real estate sales.
Interest expense decreased $26 million (4%) primarily as a result of lower average debt levels compared to 1999.
Excluding the effect of the work force reduction charge, income taxes increased $89 million (19%) for the year, reflecting
higher income levels and 1999 settlements related to prior tax years.
Trucking Segment
Operating Revenues – In 2000, trucking revenues rose $51 million (5%) to over $1.1 billion. The growth resulted
primarily from yield initiatives, new services and the impact of a fuel surcharge assessed due to higher fuel prices. Partially
offsetting this growth was a 4% decline in tonnage compared to 1999.
Operating Expenses – Trucking operating expenses rose $18 million (2%) to $1.1 billion in 2000. Salaries, wages and
employee benefits decreased $1 million as lower volume, lower employment levels and productivity gains offset wage and
benefit inflation. Fuel and utilities costs increased $23 million (47%), primarily as a result of significantly higher fuel
prices (90 cents per gallon average in 2000 compared to 54 cents per gallon average in 1999, including transportation costs
and regional pricing spreads, and excluding taxes). Overnite hedged 9% of 2000 fuel consumption at an average price
of 39 cents per gallon excluding taxes, transportation costs, and regional pricing spreads, which decreased costs by $2
million. As of December 31, 2000, Overnite had not hedged any of its expected 2001 fuel consumption. Equipment and
other rents increased $2 million (2%) primarily due to an increase in purchased transportation costs in response to the
ongoing Teamsters' activity. Casualty costs and other costs decreased $7 million (5%), primarily due to lower expenses
related to the Teamsters' activity and also lower cargo loss and damage expenses.
Operating Income – Trucking operations generated operating income of $53 million in 2000, compared to $20 million
for 1999. The operating ratio improved to 95.2%, compared to 98.1% in 1999.
Other Product Lines
Other – Operating losses increased by $15 million in 2000 compared to 1999. Operating revenues declined $1 million
year over year. Operating expenses increased $14 million, primarily due to increased spending at Fenix as part of its
overall strategy of developing new products and services.
LIQUIDITY AND CAPITAL RESOURCES
Financial Condition
Cash from operations was $2.0 billion, $2.1 billion and $1.9 billion in 2001, 2000 and 1999, respectively. The decrease
from 2000 to 2001 is primarily due to the timing of large cash payments, including the payments for the work force