Union Pacific 2002 Annual Report Download - page 52

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26
outstanding as of December 31, 2002. The sale of receivables program is subject to certain requirements including the
maintenance of an investment grade bond rating. If the Corporation’s bond rating were to deteriorate, it could have an
adverse impact on the liquidity of the Corporation. Receivables sold as of December 31, 2002 were $600 million. Access to
commercial paper is dependent on market conditions. Deterioration of the Corporation’s operating results or financial
condition due to internal or external factors could negatively impact the Corporation’s ability to utilize commercial paper as
a source of liquidity. Liquidity through the capital markets is also dependent on the financial stability of the Corporation.
Financial Condition
Cash from operations was $2.3 billion, $2.0 billion and $2.1 billion in 2002, 2001 and 2000, respectively. The increase from
2001 to 2002 is the result of higher net income, partially offset by pension plan funding. The decrease from 2000 to 2001 was
primarily due to the timing of large cash payments, including the payments for the work force reduction plan in 2001.
Cash used in investing activities was $1.5 billion in 2002 and in 2001 and $1.6 billion in 2000. The amount remained
essentially flat from 2001 to 2002 as higher real estate sales, a warranty refund from a vendor and a dividend from an affiliate
in 2002 were offset by higher capital spending. The decrease from 2000 to 2001 was due to reduced capital spending and
higher asset sales in 2001, partially offset by the receipt of cash dividends in 2000.
The following table details capital expenditures for the years ended December 31, 2002, 2001 and 2000:
Capital Expenditures
Millions 2002 2001 2000
Track................................................................................................................. $1,200 $1,125 $1,066
Locomotives..................................................................................................... 187 176 250
Freight cars ...................................................................................................... 11 27 55
Facilities and other .......................................................................................... 489 408 412
Total.................................................................................................................. $1,887 $1,736 $1,783
Cash used in financing activities was $473 million, $440 million and $486 million in 2002, 2001 and 2000, respectively.
The increase from 2001 to 2002 reflects lower financings ($775 million in 2002 versus $925 million in 2001), partly offset by
an increase in the proceeds from the exercise of stock options ($150 million in 2002 versus $52 million in 2001). The decrease
from 2000 to 2001 reflects higher financings in 2001 ($925 million in 2001 versus $506 million in 2000) and an increase in
stock option proceeds ($52 million in 2001 versus $3 million in 2000), partially offset by higher debt repayments ($1.2 billion
in 2001 versus $796 million in 2000).
Including the convertible preferred securities (see note 5 to the Consolidated Financial Statements, Item 8) as an equity
instrument, the ratio of debt to total capital employed was 38.8%, 42.2% and 45.1% at December 31, 2002, 2001 and 2000,
respectively.
For the years ended December 31, 2002, 2001, and 2000, the Corporation’s ratio of earnings to fixed charges was 3.9, 3.0
and 2.5, respectively. The ratio of earnings to fixed charges has been computed on a consolidated basis. Earnings represent
net income less equity in undistributed earnings of unconsolidated affiliates, plus fixed charges and income taxes. Fixed
charges represent interest charges, amortization of debt discount, and the estimated amount representing the interest
portion of rental charges.
Contractual Obligations and Commercial Commitments
As described in the notes to the Consolidated Financial Statements, Item 8, as referenced in the tables below, the Corporation
has contractual obligations and commercial commitments that may affect the financial condition of the Corporation.
However, based on management’s assessment of the underlying provisions and circumstances of the material contractual
obligations and commercial commitments of the Corporation, including material sources of off-balance sheet and
structured finance arrangements, there is no known trend, demand, commitment, event or uncertainty that is reasonably
likely to occur which would have a material adverse effect on the Corporation’s consolidated results of operations, financial
condition or liquidity. In addition, the commercial obligations, financings and commitments made by the Corporation are
customary transactions which are similar to those of other comparable industrial corporations, particularly within the
transportation industry.