Union Pacific 2001 Annual Report Download - page 78

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The Corporation adopted the Executive Stock Purchase Incentive Plan (ESPIP) effective October 1, 1999, in order
to encourage and facilitate ownership of common stock by officers and other key executives of the Corporation and its
subsidiaries. Under the ESPIP, the participants purchased a total of 1,008,000 shares of the Corporation’s common stock
with the proceeds of 6.02% interest-bearing, full recourse loans from the Corporation. Loans totaled $47 million.
Deferred cash payments will be awarded to the participants to repay interest and the loan principal if certain performance
and retention criteria are met within a 40-month period ending January 31, 2003. Dividends paid on the purchased
shares were originally assigned to the Corporation to offset the accrued interest on the loan until certain performance
criteria are met. The first performance criterion was satisfied in March 2001 and, accordingly thereafter, the dividends
on the purchased shares are now paid directly to the participants, and a deferred cash payment equal to the net accrued
interest will be paid to the participants at the expiration of the 40-month period. The cost of the ESPIP is amortized to
expense over the 40-month period.
During the years ended December 31, 2001, 2000 and 1999, UPC expensed $18 million, $18 million and $5 million,
respectively, related to the other incentive plans described above.
11. Earnings Per Share
The following table provides a reconciliation between basic and diluted earnings per share for the years ended December
31, 2001, 2000 and 1999:
Millions, Except Per Share Amounts 2001 2000 1999
Income statement data:
Income from continuing operations ............................................................ $ 966 $ 842 $ 783
Gain on disposal of discontinued operations............................................... - - 27
Net income available to common shareholders - basic.................................... 966 842 810
Dilutive effect of interest associated with the CPS....................................... 58 58 58
Net income available to common shareholders - diluted ................................ $1,024 $ 900 $ 868
Weighted-average number of shares outstanding:
Basic................................................................................................................ 248.0 246.5 246.6
Dilutive effect of common stock equivalents ............................................... 23.9 23.0 23.2
Diluted ................................................................................................................ 271.9 269.5 269.8
Earnings per share - basic:
Income from continuing operations ............................................................ $ 3.90 $ 3.42 $ 3.17
Income from discontinued operations......................................................... - - 0.11
Net income ......................................................................................................... $ 3.90 $ 3.42 $ 3.28
Earnings per share - diluted:
Income from continuing operations ............................................................ $ 3.77 $ 3.34 $ 3.12
Income from discontinued operations......................................................... - - 0.10
Net income ......................................................................................................... $ 3.77 $ 3.34 $ 3.22
12. Commitments and Contingencies
Unasserted Claims – There are various claims and lawsuits pending against the Corporation and certain of its
subsidiaries. It is not possible at this time for the Corporation to determine fully the effect of all unasserted claims on
its consolidated financial condition, results of operations or liquidity; however, to the extent possible, where unasserted
claims can be estimated and where such claims are considered probable, the Corporation has recorded a liability. The
Corporation does not expect that any known lawsuits, claims, environmental costs, commitments, contingent liabilities
or guarantees will have a material adverse effect on its consolidated financial condition, results of operations or liquidity.
Environmental –The Corporation generates and transports hazardous and nonhazardous waste in its current and former
operations, and is subject to federal, state and local environmental laws and regulations. The Corporation has identified
approximately 370 active sites at which it is or may be liable for remediation costs associated with alleged contamination
or for violations of environmental requirements. This includes 48 sites that are the subject of actions taken by the U.S.
government, 28 of which are currently on the Superfund National Priorities List. Certain federal legislation imposes joint