Union Pacific 2002 Annual Report Download - page 47

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21
Trucking Segment
Operating Revenues – In 2002, trucking revenues rose $189 million (17%) to $1.33 billion. Excluding Motor Cargo in 2002
and 2001, revenue increased $57 million (5%) due to an increase in volume of 5%, yield improvements, and higher revenue
for special services, partially offset by lower fuel surcharge revenue as a result of lower fuel prices in 2002. Included in the
volume improvement was additional business realized as a result of the forced closure of Consolidated Freightways in
September 2002.
Operating Expenses – Trucking operating expenses rose $172 million (16%) to $1.26 billion in 2002. Excluding Motor
Cargo in 2002 and 2001, expenses increased $50 million (5%). Salaries, wages and employee benefits increased $117 million
(17%). Excluding Motor Cargo in 2002 and 2001, expenses increased $48 million (7%) due to wage and benefit inflation
and increased volume costs partially offset by productivity improvements and a 2% reduction in the number of employees.
Productivity is measured as total costs related to local, dock, and linehaul operations relative to the total volume shipped.
Equipment and other rents increased $33 million (35%). Excluding Motor Cargo in 2002 and 2001, expenses increased $18
million (20%) due primarily to the increased use of linehaul rail and contract transportation to handle the additional
business of the former Consolidated Freightways. Depreciation expense increased $11 million (23%) compared to 2001.
Excluding Motor Cargo in 2002 and 2001, expense increased $2 million (5%) due to purchases of new equipment. Fuel and
utilities costs increased $1 million (1%). Excluding Motor Cargo in 2002 and 2001, expenses decreased $7 million (11%) as
a result of lower fuel prices during the year (74 cents per gallon average in 2002 compared to 82 cents per gallon average in
2001, including transportation costs but excluding taxes), and by a 3% decrease in gallons consumed. For the year ended
December 31, 2002, Overnite hedged approximately 14% of its fuel consumed for 2002, which decreased fuel prices by $1.2
million. As of December 31, 2002, expected fuel consumption for 2003 is 5% hedged at 58 cents per gallon excluding taxes,
transportation costs and regional pricing spreads. Materials and supplies expense increased $4 million (8%) compared to
2001. Excluding Motor Cargo in 2002 and 2001, expenses decreased $2 million (4%) due to lower maintenance and
operating supplies expense as a result of cost control measures. Casualty costs increased $8 million (17%). Excluding Motor
Cargo in 2002 and 2001, expenses increased $6 million (12%) due to higher personal injury and insurance expenses.
Purchased services and other costs decreased $2 million (2%). Excluding Motor Cargo in 2002 and 2001, expenses decreased
$15 million (16%) due to lower general supplies expense, a favorable legal settlement in the second quarter, insourcing of
contract programmers, and other cost control measures.
Operating Income – Trucking operations generated operating income of $71 million in 2002, an increase of $17 million over
2001. Excluding Motor Cargo in 2002 and 2001, operating income increased $8 million (14%). The operating margin was
5.3% compared to 4.7% in 2001. Motor Cargo improved the operating margin by 0.2 percentage points in 2002.
Other Product Lines
Other – Operating losses increased $17 million in 2002 compared to 2001. Operating revenues increased $26 million year
over year resulting from operations of a new logistics subsidiary created in the latter part of 2001 and increased external
revenues from two technology subsidiaries. Operating expenses increased $43 million primarily due to increased incentive
compensation expense, pension and retiree benefit costs in 2002, as well as asset write-offs at two technology subsidiaries.
2001 COMPARED TO 2000 RESULTS OF OPERATIONS
Consolidated
Net Income – The Corporation reported net income of $966 million ($3.90 per basic share and $3.77 per diluted share) in
2001 compared to $842 million ($3.42 per basic share and $3.34 per diluted share) in 2000. Excluding the effect of a $115
million pre-tax ($72 million after-tax) charge in 2000 related to a work force reduction plan at the Railroad, 2000 net income
was $914 million ($3.71 per basic share and $3.61 per diluted share). The increase in net income excluding the work force
reduction charge in 2000 was due primarily to revenue growth, productivity gains and cost control, lower non-operating
expense and lower fuel prices.
Operating Revenues – Operating revenues increased $95 million (1%) to $12.0 billion in 2001, reflecting 1% growth at the
Railroad and 3% growth in the trucking segment. The Corporation recognizes transportation revenues on a percentage-of-
completion basis as freight moves from origin to destination. Other revenue is recognized as service is performed or
contractual obligations are met.