Union Pacific 2002 Annual Report Download - page 45

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Agricultural – Revenue increased 4%, due to a 1% increase in carloads coupled with a 3% increase in average revenue per
car. Meals and oils carloads increased due to strong export demand and more shipments to Mexico. Corn shipments to
Mexico also increased. Revenue gains were also achieved through increased shipments of cottonseed, ethanol used as a fuel
additive and frozen french fries. Average revenue per car increased due to a higher average length of haul, resulting from
fewer short-haul empty storage moves and corn processor shipments combined with increased long-haul meals and oils and
animal feed shipments.
Automotive – Revenue increased 8%, as a result of a 7% increase in carloads and a 1% increase in average revenue per car.
Volume growth resulted from market share gains for finished vehicles, where carloads were up 11% despite a decline in U.S.
light vehicle sales. Materials shipments declined 1%, due primarily to reduced production in Mexico. Market share gains
partially offset the decline. Average revenue per car increased due to a shift in mix of carloads shipped, resulting from
increased higher average revenue per car vehicles shipments and a decline in lower average revenue per car materials
shipments. In addition, average length of haul for vehicle shipments increased.
Chemicals – Revenue increased 2%, as a result of a 3% increase in carloads and a 1% decrease in average revenue per car.
Volume increased for liquid and dry chemicals due to relatively higher economic demand from industrial manufacturers.
Plastics shipments rose as a result of increased demand for consumer durables. Revenue also increased due to higher
domestic demand for fertilizer and demand for domestic and export soda ash shipments. Average revenue per car declined
due to changes in customer contract terms.
Energy – Energy commodity revenue decreased 2% as average revenue per car declined 3%. Records were set for total
carloads and coal trains loaded per day in the Southern Powder River Basin in Wyoming. Results were achieved through
favorable weather conditions and improved cycle times. Offsetting the volume increase were reduced West Coast export
shipments originating from the Colorado and Utah mining regions. Average revenue per car declined due to the impact of
contract price negotiations on expiring long-term contracts with certain major customers.
Industrial Products – Revenue increased 3%, due to a slight increase in carloads coupled with a 3% increase in average
revenue per car. Increased lumber shipments were the primary growth driver, due to strong housing construction and
greater production in the Pacific Northwest region. Stone shipments increased due to strong building and road construction
activity in the South. Revenue also increased for paper and newsprint commodities due to higher general demand. Reduced
shipments of steel and metallic shipments in the first three quarters partially offset these increases. However, steel shipments
rebounded in the fourth quarter as new U.S. tariffs made domestic producers more price-competitive with foreign
producers. Average revenue per car increased due to price increases and a greater mix of longer average length of haul.
Intermodal – Revenue increased 5%, primarily due to a 4% increase in carloads. Volumes increased due to higher
international shipments, resulting from strong import demand and market share gains in some segments. These gains were
partially offset by the labor dispute between the International Longshoreman and Warehouse Union (ILWU) and the Pacific
Maritime Association, which had a significant impact on intermodal volumes during the fourth quarter, primarily in
October. Revenue declined for domestic shipments, due to soft market demand and the voluntary action of shedding low-
margin trailer business in favor of higher-margin containers. The slight increase in average revenue per car was the result of
price increases, offset by the mix impact of more lower revenue per car international shipments.
Mexico Business – In 2002 and 2001, respectively, UPRR generated $873 million and $860 million of revenues from rail traffic
with businesses located in Mexico, which is included in the rail commodity revenue reported above. Shipments increased
for agricultural products, chemicals, and industrial products commodity groups. Increased revenue for agricultural
products resulted from higher corn and meal exports as well as increased beer imports. Increased chemicals business
consisted of plastics exports, in addition to higher imports and exports of liquid and dry chemicals. The increase in
industrial products resulted from higher imports and exports of steel and scrap and exports of pulp and paper products.
Reduced automobile production partially offset these gains resulting in fewer shipments of parts and finished vehicles.
Operating Expenses – Operating expenses increased $51 million (1%) to $8.8 billion in 2002. The increase in expense is
primarily due to inflation, increased volume-related costs, contract services, casualty and depreciation expense, partially
offset by savings from lower employee force levels, cost control efforts and significantly lower fuel prices.