Union Pacific 2002 Annual Report Download - page 59

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Work Force Reduction – During 2003, the Corporation is planning to reduce approximately 1,000 administrative positions,
through a combination of attrition and involuntary severance. The estimated 2003 severance cost is $45 million, pre-tax,
the majority of which should occur in the first quarter of 2003.
A LOOK FORWARD
2003 Business Outlook
Rail – The Railroad expects to build on the positive momentum generated in the past several years and continue to grow
revenue, operating income and free cash flow. Free cash flow is defined as cash provided by operating activities less cash used
in investing activities and dividends paid. Year-over-year revenue growth is projected in all commodity groups with the
largest percentage increases projected in the intermodal, agricultural and industrial groups. Revenue derived from chemical
and energy shipments is expected to increase steadily over 2003. Automotive revenue is also expected to increase slightly
from last year’s record setting pace, thereby continuing as a strong revenue provider. The Railroad will continue to focus on
improving service performance while developing new, innovative rail service offerings to meet the changing needs of its
customers. While operating expenses will likely increase for such items as insurance, pension, operating taxes and minimum
guaranteed payments to union employees, cost controls and continuing improvements in productivity will remain a focus
to drive the operating ratio lower. Fuel price will remain susceptible to near term volatile price swings. To help reduce the
impact of fuel price volatility on earnings, the Railroad will continue to look for opportunities to use hedge contracts.
Trucking – Overnite expects financial performance to further improve upon its positive 2002 results. Solid revenue growth
is projected, in part due to additional business resulting from the forced closure of Consolidated Freightways. Cost controls
and productivity improvements are projected to positively impact operating expenses, which will mitigate the impact of
inflationary pressures and volatile fuel prices. Overnite will continue to offer reliable on-time performance and quality
service, which should enable Overnite to maintain profitable margins.
2003 Capital Investments
The Corporation’s 2003 capital expenditures and debt service requirements are expected to be funded through cash
generated from operations, additional debt financings and the sale or lease of various operating and non-operating
properties. The Corporation expects that these sources will continue to provide sufficient funds to meet cash requirements
in the foreseeable future. In 2003, the Corporation expects to spend approximately $1.8 to $2.0 billion on capital
expenditures. These capital expenditures will be used to maintain track and structures, continue capacity expansions on the
Railroad’s main lines, upgrade and augment equipment to better meet customer needs, build infrastructure and develop and
implement new technologies. OTC and Motor Cargo will continue to maintain their truck fleet, expand service centers and
enhance technology.
CAUTIONARY INFORMATION
Certain statements in this report are, and statements in other material filed or to be filed with the Securities and Exchange
Commission (as well as information included in oral statements or other written statements made or to be made by the
Corporation) are, or will be, forward-looking statements as defined by the Securities Act of 1933 and the Securities Exchange
Act of 1934. These forward-looking statements include, without limitation, statements regarding: expectations as to
operational improvements; expectations as to cost savings, revenue growth and earnings; the time by which certain objectives
will be achieved; estimates of costs relating to environmental remediation and restoration; proposed new products and
services; expectations that claims, lawsuits, environmental costs, commitments, contingent liabilities, labor negotiations or
agreements, or other matters will not have a material adverse effect on the Corporation’s consolidated financial position,
results of operations or liquidity; and statements concerning projections, predictions, expectations, estimates or forecasts as
to the Corporation’s and its subsidiaries’ business, financial and operational results, and future economic performance,
statements of management’s goals and objectives and other similar expressions concerning matters that are not historical facts.
Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily
be accurate indications of the times that, or by which, such performance or results will be achieved. Forward-looking
information is based on information available at the time and/or management’s good faith belief with respect to future
events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those
expressed in the statements.