Union Pacific 2001 Annual Report Download - page 64

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Personal Injury – The cost of injuries to employees and others on Union Pacific Railroad Company (UPRR) property
or in accidents involving the trucking segment is charged to expense based on actuarial estimates of the ultimate cost and
number of incidents each year.
Environmental – When environmental issues have been identified with respect to the property owned, leased or
otherwise used in the conduct of the Corporation's business, the Corporation and its consultants perform environmental
assessments on such property. The Corporation expenses the cost of the assessments as incurred. The Corporation
accrues the cost of remediation where its obligation is probable and such costs can be reasonably estimated.
Change in Presentation – Certain prior year amounts have been reclassified to conform to the 2001 Consolidated
Financial Statement presentation. These reclassifications had no effect on previously reported operating income or net
income.
1. Operations and Segmentation
Union Pacific Corporation consists of two reportable segments, rail and trucking, as well as UPC’s other product lines
(Other). The rail segment includes the operations of the Corporation’s indirect wholly owned subsidiary, UPRR and
UPRR’s subsidiaries and rail affiliates (collectively, the Railroad). The trucking segment includes the operations of the
Corporation's indirect wholly owned subsidiaries, Overnite Transportation Company (Overnite) and, subsequent to
November 30, 2001, Motor Cargo Industries, Inc. (Motor Cargo). The Corporation's other product lines are comprised
of the corporate holding company (which largely supports the Railroad), Fenix LLC and affiliated technology companies
(Fenix), self-insurance activities and all appropriate consolidating entries.
Rail Segment
Operations – The Railroad is a Class I railroad that operates in the United States. As of October 1, 1996, the Railroad
included Southern Pacific Rail Corporation (Southern Pacific or SP). In addition, during 1997, the Railroad and a
consortium of partners were granted a 50-year concession to operate the Pacific-North and Chihuahua Pacific lines in
Mexico. The Railroad made an additional investment in the consortium in 1999. During 2001, UPC completed its
integration of Southern Pacific's rail operations.
The Railroad has over 33,000 route miles linking Pacific Coast and Gulf Coast ports to the Midwest and eastern United
States gateways and providing several north/south corridors to key Mexican gateways. The Railroad serves the western
two-thirds of the country and maintains coordinated schedules with other carriers for the handling of freight to and from
the Atlantic Coast, the Pacific Coast, the Southeast, the Southwest, Canada and Mexico. Export and import traffic is
moved through Gulf Coast and Pacific Coast ports and across the Mexican and Canadian borders. Railroad freight is
comprised of six commodity lines: agricultural, automotive, chemicals, energy, industrial products and intermodal. The
Railroad continues to focus on utilization of its capital asset base to meet current operating needs and to introduce
innovative rail services across every commodity line.
The Railroad is subject to price and service competition from other railroads, motor carriers and barge operators. The
Railroad's main competitor is Burlington Northern Santa Fe Corporation. Its rail subsidiary, The Burlington Northern
and Santa Fe Railway Company, operates parallel routes in many of the Railroad's main traffic corridors. In addition,
the Railroad's operations are conducted in corridors served by other competing railroads and by motor carriers. Motor
carrier competition is particularly strong for intermodal traffic. Because of the proximity of the Railroad's routes to major
inland and Gulf Coast waterways, barge competition can be particularly pronounced, especially for grain and bulk
commodities.
Employees – Approximately 87% of the Railroad's nearly 48,000 employees are represented by 14 major rail unions.
National negotiations under the Railway Labor Act to revise the national labor agreements for all crafts began in late 1999.
In May 2001, the Brotherhood of Maintenance of Way Employees (BMWE) ratified a five-year agreement, which included
provisions for an annual wage increase (based on the consumer price index) and progressive health and welfare cost
sharing. The health and welfare cost sharing was a milestone as the BMWE is the first union to make significant cost