Union Pacific 2001 Annual Report Download - page 69

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43
Millions, Except Percentages and Average Commodity Prices 2001 2000
Trucking fuel hedging:
Number of gallons hedged for 2001................................................................................... - -
Average price of 2001 hedges outstanding (per gallon)[b]................................................ - -
Number of gallons hedged for 2002................................................................................... 9-
Average price of 2002 hedges outstanding (per gallon)[b]................................................ $0.58 -
Number of gallons hedged for 2003................................................................................... 3-
Average price of 2003 fuel consumption hedged (per gallon)[b]...................................... $0.58 -
[a] Rail fuel hedges which were in effect during 2001. Rail fuel hedges include the swap portion of a swaption with a base term within
2001, and they exclude the option portion of the swaption to extend the swap past 2001.
[b] Excluded taxes, transportation costs and regional pricing spreads.
[c] Rail fuel hedges which are in effect during 2002. These hedges expire December 31, 2002. Rail fuel hedges include the swap portions of the
swaptions with base terms within 2002, and they exclude the option portions of the swaptions to extend the swaps past 2002.
[d] Rail fuel hedges which are in effect during 2003. These hedges expire December 31, 2003.
The fair value asset and liability positions of the Corporation’s outstanding derivative financial instruments at
December 31, 2001 and 2000 were as follows:
Millions of Dollars 2001 2000
Interest rate hedging:
Gross fair value asset position ............................................................................................ $ 13 $-
Gross fair value (liability) position..................................................................................... - -
Rail fuel hedging:
Gross fair value asset position ............................................................................................ - 2
Gross fair value (liability) position..................................................................................... (11) -
Rail fuel swaptions:
Gross fair value asset position ............................................................................................ - -
Gross fair value (liability) position..................................................................................... (24) -
Trucking fuel hedging: -
Gross fair value asset position ............................................................................................ - -
Gross fair value (liability) position..................................................................................... - -
Total net fair value asset (liability) position, net................................................................... $(22) $2
Rail fuel hedging positions will be reclassified from accumulated other comprehensive income to fuel expense over
the life of the hedge as fuel is consumed. During 2002, the Corporation expects fuel expense to increase $11 million from
this reclassification. Rail fuel swaption positions will be reflected in the Consolidated Statements of Income as fuel
expense over the life of the swap and as other income as the fair value of the outstanding option fluctuates.
The Corporation’s use of derivative financial instruments had the following impact on pre-tax income for the years
ended December 31, 2001, 2000 and 1999:
Millions of Dollars 2001 2000 1999
Decrease (increase) in interest expense from interest rate hedging ............... $ 4 $ - $(1)
Decrease (increase) in fuel expense from rail fuel hedging ............................ (14) 52 53
Decrease (increase) in fuel expense from rail fuel swaptions ......................... (6) - -
Decrease (increase) in fuel expense from trucking fuel hedging.................... - 2 1
Decrease (increase) in operating expenses ...................................................... (16) 54 53
Increase (decrease) in other income, net from rail fuel swaptions................. (18) - -
Increase (decrease) in pre-tax income ............................................................. $(34) $54 $53
Fair Value of Debt Instruments – The fair value of the Corporation’s long- and short-term debt has been estimated using
quoted market prices or current borrowing rates. At December 31, 2001 and 2000, the fair value of total debt exceeded
the carrying value by approximately $254 million and $56 million, respectively. At December 31, 2001 and December
31, 2000, approximately $850 million and $1.3 billion, respectively, of fixed-rate debt securities contain call provisions