Union Pacific 2002 Annual Report Download - page 83

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57
stock units, and restricted shares were issued at a weighted-average fair value of $41.21. The cost of retention and restricted
awards is amortized to expense over the retention period.
Under the LTP, 11,900 performance retention stock units and 1,019,500 performance retention shares and stock units
were issued at a weighted-average fair value of $60.97 and $50.07 during 2002 and 2001, respectively. The cost of the LTP is
expensed over the performance period which ends January 31, 2004.
The cost associated with the ESPIP retention criterion is amortized to expense over the 40-month period. The cost
associated with the ESPIP first performance criterion is expensed over the life of the loan, and the cost associated with the
second performance criterion was expensed in December 2002.
During the years ended December 31, 2002, 2001 and 2000, UPC expensed $50 million, $18 million and $18 million,
respectively, related to the other incentive plans described above.
9. Earnings Per Share
The following table provides a reconciliation between basic and diluted earnings per share for the years ended December 31,
2002, 2001 and 2000:
Millions, Except Per Share Amounts 2002 2001 2000
Net income available to common shareholders - basic ................................ $ 1,341 $ 966 $ 842
Dilutive effect of interest associated with the CPS .................................. 58 58 58
Net income available to common shareholders - diluted............................. $ 1,399 $ 1,024 $ 900
Weighted-average number of shares outstanding:
Basic ............................................................................................................ 252.1 248.0 246.5
Dilutive effect of stock options ................................................................. 1.8 1.3 0.6
Dilutive effect of retention shares, stock units and restricted shares...... 1.1 0.8 0.6
Dilutive effect of CPS................................................................................. 21.8 21.8 21.8
Diluted ............................................................................................................. 276.8 271.9 269.5
Common stock options totaling 2.3 million, 12.8 million and 21.5 million shares for 2002, 2001 and 2000, respectively
were excluded from the computation of diluted EPS because the exercise prices of these options exceeded the average market
price of the Corporation’s common stock for the respective periods, and the effect of their inclusion would be anti-dilutive.
10. Commitments and Contingencies
Unasserted Claims – There are various claims and lawsuits pending against the Corporation and certain of its subsidiaries.
It is not possible at this time for the Corporation to determine fully the effect of all unasserted claims on its consolidated
financial condition, results of operations or liquidity; however, to the extent possible, where unasserted claims can be
estimated and where such claims are considered probable, the Corporation has recorded a liability. The Corporation does
not expect that any known lawsuits, claims, environmental costs, commitments, contingent liabilities or guarantees will have
a material adverse effect on its consolidated financial condition, results of operations or liquidity.
Personal Injury and Occupational Illness – The cost of injuries to employees and others related to Railroad activities or in
accidents involving the trucking segment is charged to expense based on actuarial estimates of the ultimate cost and number
of incidents each year. During 2002, the Railroad’s reported number of work-related injuries that resulted in lost job time
decreased 5% compared to the number of injuries reported during 2001, and accidents at grade crossings decreased 16%
compared to 2001. Annual expenses for the Corporation’s personal injury-related events were $259 million in 2002, $227
million in 2001 and $226 million in 2000. As of December 31, 2002 and 2001, the Corporation had a liability of $724 million
and $743 million, respectively, accrued for future personal injury costs, of which $304 million and $295 million were
recorded in current liabilities as accrued casualty costs. The Railroad has additional amounts accrued for claims related to
certain occupational illnesses. Compensation for Railroad work-related accidents is governed by the Federal Employers’
Liability Act (FELA). Under FELA, damages are assessed based on a finding of fault through litigation or out-of-court
settlements. The Railroad offers a comprehensive variety of services and rehabilitation programs for employees who are
injured at work.