Union Pacific 2002 Annual Report Download - page 33

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allegations or findings to the effect that it has violated, or is strictly liable under, these laws or regulations. The Corporation
could incur significant costs as a result of any of the foregoing and may be required to incur significant expenses to
investigate and remediate environmental contamination.
Fuel Costs – Fuel costs constitute a significant portion of transportation expenses. Diesel fuel prices are subject to dramatic
fluctuations. Significant price increases may have a material adverse effect on the Corporation’s operating results.
Additionally, fuel prices and supplies are influenced significantly by international political and economic circumstances. If a
fuel supply shortage were to arise from OPEC production curtailments, a disruption of oil imports or otherwise, higher fuel
prices and any subsequent price increases would materially affect the Corporation’s results of operations, financial condition
and liquidity.
Labor Unions – The Corporation is a party to collective bargaining agreements and ongoing negotiations with various labor
unions in the United States. Disputes with regard to the terms of these agreements or the Corporation’s potential inability
to negotiate acceptable contracts with these unions could result in, among other things, strikes, work stoppages or other
slowdowns by the affected workers. If the unionized workers were to engage in a strike, work stoppage or other slowdown,
or other employees were to become unionized or the terms and conditions in future labor agreements were renegotiated, the
Corporation could experience a significant disruption of its operations and higher ongoing labor costs.
General Economic Conditions – Several of the commodities transported by both the Railroad and trucking segments come
from industries with cyclical business operations. As a result, prolonged negative changes in domestic and global economic
conditions affecting the producers and consumers of the commodities carried by the Corporation may have an adverse effect
on the results of operations, financial condition and liquidity.
Weather – Severe weather conditions and other natural phenomena, including earthquakes and floods, may cause significant
business interruptions and result in increased costs and liabilities and decreased revenues, which could have an adverse effect
on the results of operations, financial condition and liquidity.
Supplier Risk – The Corporation is dependent on two key suppliers of locomotives. Due to the capital intensive nature and
sophistication of this equipment, there are strong barriers of entry to new suppliers. Therefore, if one of these suppliers
would no longer produce locomotives, the Corporation could realize a significant increase in the cost and the potential for
reduced availability of the locomotives that are necessary to its operations.
Claims and Lawsuits – The nature of the Corporation’s business exposes it to the potential for various claims and litigation
related to labor and employment, personal injury and occupational illness, property damage, environmental and other
matters. Therefore, the Corporation may be subject to claims or litigation that could involve significant expenditures.
Future Acts of Terrorism or War or Risk of War – Terrorist attacks, such as those that occurred on September 11, 2001, any
government response thereto and war or risk of war may adversely affect the Corporation’s results of operations, financial
condition, the ability to raise capital or the Corporation’s future growth. The Corporation’s rail lines and facilities could be
direct targets or indirect casualties of an act or acts of terror, which could cause significant business interruption and result
in increased costs and liabilities and decreased revenues, which could have an adverse effect on the operating results and
financial condition. Any act of terror, retaliatory strike, sustained military campaign or war or risk of war may have an
adverse impact on the operating results and financial condition by causing or resulting in unpredictable operating or
financial conditions, including disruptions of rail lines, volatility or sustained increase of fuel prices, fuel shortages, general
economic decline and instability or weakness of financial markets which could restrict the Corporation’s ability to raise
capital. In addition, insurance premiums charged for some or all of the coverages currently maintained by the Corporation
could increase dramatically or certain coverages may not be available in the future.
Item 2. Properties
The Corporation’s primary real estate, equipment and other property (properties) are owned or leased to support its rail and
trucking operations. The Corporation believes that its properties are in good condition and adequate for current operations.
The rail and trucking segments operate facilities and equipment designated for both the maintenance and repair of their
respective property, including locomotives, rail cars, tractors and trailers and other equipment, and for monitoring such
maintenance and repair work. The facilities include rail yards, intermodal ramps and maintenance shops throughout the
rail system and service centers operated by the trucking segment. Additionally, the Corporation had approximately $1.9