Union Pacific 2010 Annual Report Download - page 6

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OPERATIONS
The Railroad, along with its subsidiaries and rail affiliates, is our one reportable operating segment.
Although revenue is analyzed by commodity group, we analyze the net financial results of the Railroad as
one segment due to the integrated nature of our rail network. Additional information regarding our
business and operations, including revenue and financial information and data and other information
regarding environmental matters, is presented in Risk Factors, Item 1A; Legal Proceedings, Item 3;
Selected Financial Data, Item 6; Management’s Discussion and Analysis of Financial Condition and
Results of Operations, Item 7; and the Financial Statements and Supplementary Data, Item 8 (which
include information regarding revenues, statements of income, and total assets).
Operations – UPRR is a Class I railroad
operating in the U.S. We have 31,953 route
miles, linking Pacific Coast and Gulf Coast
ports with the Midwest and eastern U.S.
gateways and providing several corridors to
key Mexican gateways. We serve the
western two-thirds of the country and
maintain coordinated schedules with other
rail carriers to move freight to and from the
Atlantic Coast, the Pacific Coast, the
Southeast, the Southwest, Canada, and
Mexico. Export and import traffic moves
through Gulf Coast and Pacific Coast ports
and across the Mexican and Canadian
borders. Our freight traffic consists of bulk,
manifest, and premium business. Bulk traffic is primarily coal, grain, rock, or soda ash in unit trains –
trains transporting a single commodity from one source to one destination. Manifest traffic is individual
carload or less than train-load business, including commodities such as lumber, steel, paper, and food.
The transportation of finished vehicles and intermodal containers is part of our premium business. In
2010, we generated freight revenues totaling $16.1 billion from the following six commodity groups:
Agricultural – Transporting agricultural products generated 19% of our freight revenues in 2010. Included
in this commodity group are whole grains, products produced from grains, and food and beverage
products, in addition to corn for ethanol production and its by products. With access to most major grain
markets, we provide a critical link between the Midwest and western producing areas and export
terminals in the Pacific Northwest (the PNW) and Gulf ports, as well as Mexico. Unit trains of grain
efficiently shuttle between domestic markets or export terminals and producers. We also serve significant
domestic markets, including grain processors, animal feeders, and ethanol producers in the Midwest,
West, South, and Rocky Mountain region. Primary food commodities consist of a variety of fresh and
frozen fruits and vegetables, dairy products, and beverages, which are moved to major U.S. population
centers for distribution and consumption. Express Lane and Produce Unit Train are premium perishable
services that compete with the trucking industry by moving fruits and vegetables from the PNW and
California to destinations in the East. We transport frozen meat and poultry to the West Coast ports for
export, while beverages, primarily beer, enter the U.S. from Mexico.
Automotive – We are the largest automotive carrier west of the Mississippi River, serving vehicle
assembly plants and distributing imported vehicles from West Coast ports and Houston. We operate or
access 43 vehicle distribution centers covering most major western U.S. cities. In addition to transporting
finished vehicles, we provide expedited handling of automotive parts in both boxcars and intermodal
containers to several assembly plants. We carry automotive materials bound for assembly plants in
Mexico, the U.S., and Canada, and we also transport finished vehicles from manufacturing facilities in
Canada and Mexico. In 2010, transportation of finished vehicles and automotive materials accounted for
8% of our freight revenues.
Chemicals – Transporting chemicals provided 15% of our freight revenues in 2010. Our unique franchise
enables us to serve the chemical producing areas along the Gulf Coast, as well as the Rocky Mountain
region. Two-thirds of the chemicals business consists of industrial chemicals, plastics, and liquid
petroleum products. Plastics customers also use our storage-in-transit yards for intermediate storage of
plastic resins. Soda ash shipments originate in southwestern Wyoming and California, destined primarily
for glass producing markets in the East, the West, and abroad. Fertilizer movements originate primarily in
2010 Freight Revenue