Union Pacific 2002 Annual Report Download - page 74

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48
The Corporation’s use of derivative financial instruments had the following impact on pre-tax income for the years ended
December 31, 2002, 2001 and 2000:
Millions of Dollars 2002 2001 2000
Decrease in interest expense from interest rate hedging .............................. $ 29 $ 4 $ -
Decrease (increase) in fuel expense from rail fuel hedging.......................... 36 (14) 52
Decrease (increase) in fuel expense from rail fuel swaptions....................... 19 (6) -
Decrease in fuel expense from trucking fuel hedging................................... 1 - 2
Decrease (increase) in operating expenses .................................................... 85 (16) 54
Increase (decrease) in other income, net from rail fuel swaptions .............. 5 (18) -
Increase (decrease) in pre-tax income ........................................................... $ 90 $(34) $ 54
Fair Value of Debt Instruments – The fair value of the Corporation’s long- and short-term debt has been estimated using
quoted market prices or current borrowing rates. At December 31, 2002 and 2001, the fair value of total debt exceeded the
carrying value by approximately $991 million and $254 million, respectively. At December 31, 2002 and December 31, 2001,
approximately $513 million and $850 million, respectively, of fixed-rate debt securities contain call provisions that allow the
Corporation to retire the debt instruments prior to final maturity subject, in certain cases, to the payment of premiums.
Sale of Receivables – The Railroad has sold, on a 364-day revolving basis, an undivided percentage ownership interest in a
designated pool of accounts receivable to third parties through a bankruptcy-remote subsidiary. Receivables are sold at
carrying value, which approximates fair value. The third parties have designated the Railroad to service the sold receivables.
The amount of receivables sold fluctuates based upon the availability of the designated pool of receivables and is directly
affected by changing business volumes and credit risks. Payments collected from sold receivables can be reinvested in new
receivables on behalf of the buyers. Should the Corporation’s credit rating fall below investment grade, the amount of
receivables sold would be reduced, and in certain cases, the buyers have the right to discontinue this reinvestment, thus
requiring the Railroad to fund the receivables. At December 31, 2002 and 2001, accounts receivable are presented net of $600
million of receivables sold.
3. Properties
At December 31, 2002 and 2001, major property accounts were as follows:
Millions of Dollars 2002 2001
Railroad:
Road and other.................................................................................................................... $29,370 $27,934
Equipment........................................................................................................................... 7,451 7,507
Total railroad ............................................................................................................................ 36,821 35,441
Trucking.................................................................................................................................... 977 954
Other......................................................................................................................................... 40 41
Total........................................................................................................................................... $37,838 $36,436
At December 31, 2002 and 2001, major accumulated depreciation accounts were as follows:
Millions of Dollars 2002 2001
Railroad:
Road and other.................................................................................................................... $5,461 $4,910
Equipment........................................................................................................................... 2,380 2,267
Total railroad ............................................................................................................................ 7,841 7,177
Trucking.................................................................................................................................... 476 453
Other......................................................................................................................................... 16 14
Total........................................................................................................................................... $8,333 $7,644