Union Pacific 2012 Annual Report Download - page 31

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31
Other income increased in 2011 versus 2010 due to higher gains from real estate sales, lower
environmental costs associated with non-operating properties and the comparative impact of premiums
paid for early redemption of long-term debt in the first quarter of 2010.
Interest Expense – Interest expense decreased in 2012 versus 2011 reflecting a lower effective interest
rate in 2012 of 6.0% versus 6.2% in 2011 as the debt level did not materially change in 2012.
Interest expense decreased in 2011 versus 2010 due to a lower weighted-average debt level of $9.2
billion versus $9.7 billion. The effective interest rate was 6.2% in both 2011 and 2010.
Income Taxes – Higher pre-tax income increased income taxes in 2012 compared to 2011. Our effective
tax rate for 2012 was relatively flat at 37.6% compared to 37.5% in 2011.
Income taxes were higher in 2011 compared to 2010, primarily driven by higher pre-tax income. Our
effective tax rate remained relatively flat at 37.5% in 2011 compared to 37.3% in 2010.
OTHER OPERATING/PERFORMANCE AND FINANCIAL STATISTICS
We report key performance measures weekly to the Association of American Railroads (AAR), including
carloads, average daily inventory of freight cars on our system, average train speed, and average
terminal dwell time. We provide this data on our website at www.up.com/investors/reports/index.shtml.
Operating/Performance Statistics
Railroad performance measures reported to the AAR, as well as other performance measures, are
included in the table below:
2012 2011 2010 % Change
2012 v 2011 % Change
2011 v 201
0
Average train speed (miles per hour) 26.5 25.6 26.2 4 % (2)%
Average terminal dwell time (hours) 26.2 26.2 25.4 - % 3 %
Average rail car inventory (thousands) 269.1 272.9 274.4 (1)% (1)%
Gross ton-miles (billions) 959.3 978.2 931.4 (2)% 5 %
Revenue ton-miles (billions) 521.1 544.4 520.4 (4)% 5 %
Operating ratio 67.8 70.7 70.6 (2.9)pts 0.1 pts
Employees (average) 45,928 44,861 42,884 2 % 5 %
Customer satisfaction index 93 92 89 1 pt 3 pts
Average Train Speed – Average train speed is calculated by dividing train miles by hours operated on our
main lines between terminals. Average train speed, as reported to the Association of American Railroads
(AAR), increased 4% in 2012 versus 2011. Efficient operations and relatively mild weather conditions
during the year compared favorably to 2011, during which severe winter weather, flooding, and extreme
heat and drought affected various parts of our network. We continued operating a fluid and efficient
network while handling essentially the same volume and adjusting operations to accommodate increased
capital project work on our network compared to 2011. The extreme weather challenges in addition to
increased carloadings and traffic mix changes, led to a 2% decrease in average train speed in 2011
compared to 2010.
Average Terminal Dwell Time – Average terminal dwell time is the average time that a rail car spends at
our terminals. Lower average terminal dwell time improves asset utilization and service. Average terminal
dwell time remained flat in 2012 compared to 2011, despite a shift in traffic mix to more manifest
shipments, which require more switching at terminals. Average terminal dwell time increased 3% in 2011
compared to 2010. Additional volume, weather challenges, track replacement programs, and a shift of
traffic mix to more manifest shipments, which require additional terminal processing, all contributed to the
increase.
Average Rail Car Inventory – Average rail car inventory is the daily average number of rail cars on our
lines, including rail cars in storage. Lower average rail car inventory reduces congestion in our yards and
sidings, which increases train speed, reduces average terminal dwell time, and improves rail car
utilization. Despite a shift in traffic mix from coal to shale-related and automotive shipments with longer