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Union Pacific Corp. - Rail
Transport - Category Directory
(402) 271-5777
1416 Dodge Street
Omaha NE 68179
www.up.com
Sales
$11.6 billion
Business Description
Union Pacific Corporation operates primarily as a rail transportation
provider through Union Pacific Railroad Company, its principal operating
company, which is the largest railroad in North America, covering 23 states
across the western two-thirds of the United States. Union Pacific
Corporation was incorporated in Utah in 1969 with its principal executive
offices located at 1416 Dodge Street, Omaha, NE 68179. The telephone number
at that address is (402) 271-5777. The common stock of Union Pacific
Corporation is listed on the New York Stock Exchange (NYSE) under the symbol
“UNP”.
For purposes of this report, unless the context otherwise requires, all
references herein to “UPC”, “Corporation”, “we”, “us”, and “our” shall mean
Union Pacific Corporation and its subsidiaries, including Union Pacific
Railroad Company, which will be separately referred to as “UPRR” or the
“Railroad”.
Our operating results include Southern Pacific Rail Corporation, which we
acquired in October 1996. In addition, during 1997, the Railroad acquired an
ownership interest in a consortium which was granted a 50-year concession to
operate the Pacific-North and Chihuahua Pacific lines in Mexico. The
Railroad made an additional investment in the consortium in 1999 and
currently holds a 26% ownership interest. In November 2003, we completed the
sale of our entire trucking interest through an underwritten initial public
offering of all the common stock of Overnite Corporation, leaving the
Railroad as our only operating segment and the principal source of our
revenues.
OPERATIONS
The Railroad, along with its subsidiaries and rail affiliates, is our one
reportable business segment. The Consolidated Financial Statements also
include our discontinued trucking operations, consisting of Overnite
Transportation Company (OTC) and Motor Cargo Industries, Inc. (Motor Cargo).
Our trucking segment was reclassified as a discontinued operation in 2003.
Additional information regarding our operations is presented within Selected
Financial Data, Item 6 and the Consolidated Financial Statements, Item 8.
Continuing Operations – The Railroad is a Class I railroad that operates in
the United States. We have approximately 33,000 route miles linking Pacific
Coast and Gulf Coast ports with the Midwest and eastern United
States gateways and providing several north/south corridors to key Mexican
gateways. We serve the western two-thirds of the country and maintain
coordinated schedules with other rail carriers for the handling of freight
to and from the Atlantic Coast, the Pacific Coast, the Southeast, the
Southwest, Canada and Mexico. Export and import traffic is moved through
Gulf Coast and Pacific Coast ports and across the Mexican and Canadian
borders. Railroad commodity revenue totaled $11.0 billion in 2003 and is
comprised of the following six commodity groups:
Agricultural – The transportation of Agricultural Products, including whole
grains (for animal and human consumption) and commodities produced from
these grains, food and beverage products and sweeteners, provided 14% of
2003 commodity revenue. With access to most major grain markets, the
Railroad provides a critical link between the Midwest and western producing
areas and the primary Pacific Northwest (PNW) and Gulf ports, as well as
Mexico. UPRR also serves significant domestic markets, including grain
processors and feeders, as well as ethanol producers in the Midwest, West,
South and Rocky Mountain states. Unit trains of grain efficiently shuttle
between producers and export terminals or domestic markets. 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 consumption. Express Lane, our premium and perishables service
moving fruits and vegetables from the PNW and California to destinations in
the East, continues to draw market share from trucks. Frozen meat and
poultry are also transported to the West Coast ports for export, while
beverages are imported into the U.S. from Mexico. Sweeteners are primarily
short haul sugar beet movements from the fields to the refineries, both of
which are located in Idaho.
Automotive – UPRR is the largest automotive carrier west of the Mississippi
River, serving seven vehicle assembly plants and distributing imported
vehicles from six West Coast ports and Houston. The Railroad serves 42
vehicle distribution centers, from which vehicles are delivered to all major
western U.S. cities. These centers serve as railcar-to-truck haulaway
operations for major domestic and international automotive manufacturers. In
addition to transporting finished vehicles, UPRR currently provides
expedited handling of automobile materials in both boxcars and containers to
several assembly plants. Converting automotive material shipments from the
highway to rail is a key growth opportunity. Mexico is also an important
contributor to the automotive market for the Railroad, as manufacturers
continue to locate both vehicle manufacturing and parts facilities at
locations throughout the country. Automotive materials flow north and south
across the border bound for assembly plants in Mexico, the U.S. and Canada.
In 2003, the transportation of finished vehicles and automobile materials
accounted for 11% of total commodity revenue.
Chemicals – The transportation of Chemicals provided 14% of UPRR’s 2003
commodity revenue. The Railroad’s franchise enables it to serve the large
chemical producing areas along the Gulf Coast, as well as the Rocky Mountain
region. More than two-thirds of the chemicals business consists of liquid
and dry chemicals, plastics and liquid petroleum products. “Pipeline”
service, designed to eliminate unnecessary stops in terminals, reduces
delivery times and significantly improves asset utilization for customers
and the Railroad. In addition to transporting plastics, customers also
leverage UPRR’s industry leading storage-in-transit yards for intermediate
storage of plastic resins. Soda ash shipments originate in southwestern
Wyoming and California and are consumed primarily in glass producing markets
in the East, the West and abroad. Fertilizer movements originate on the Gulf
Coast, as well as in the West and Canada, bound for major agricultural
end-users in the Midwest and the western U.S.
Energy – Coal transportation accounted for 22% of UPRR’s 2003 commodity
revenue. The Railroad’s geographic footprint positions it to transport coal
destined for utilities and industrial facilities in 27 states, as well as to
the Gulf and rail/barge/ship facilities on the Mississippi and Ohio Rivers
and the Great Lakes. UPRR serves mines located in the Southern Powder River
Basin of Wyoming, in addition to Colorado, Utah, southern Wyoming and
southern Illinois. Southern Powder River Basin coal represents the largest
and fastest growing segment of the market, as utilities continue to favor
its low cost and low-sulfur content. In addition, UPRR continues to
penetrate markets in the East as electricity generation continues to grow in
the face of declining eastern coal production. High-BTU low-sulfur coal from
Colorado and Utah is also transported to domestic utilities and industries,
as well as for export to Mexico.
Industrial Products – Industrial products includes a broad range of
commodities, from bulk products like stone, cement, minerals, waste and
scrap to higher-value shipments like lumber, paper and government and
consumer goods. Bulk commodities often move in unit train service from
origin to a distribution facility in major metropolitan areas. Other
commodities move in manifest trains and rely on the Railroad’s extensive
network to move between thousands of shippers and customers across North
America. UPRR continues to focus on capturing share from trucks by providing
consistent and reliable service. In 2003, the transportation of industrial
products provided 20% of total commodity revenue.
Intermodal – UPRR’s Intermodal business, which represents 19% of 2003
commodity revenues, is classified as international, domestic or premium
shipments. International business consists of international container
traffic for steamship customers. It arrives at West Coast ports for
destinations throughout the United States. Domestic business includes
domestic container and trailer traffic handled by intermodal marketing
companies (primarily shipper agents and consolidators) and truckload
carriers. Less-than-truckload and package carriers with time sensitive
business requirements account for the majority of the premium business.
Service performance and reliability drive intermodal business growth, as
modeled by the 60-hour transcontinental rail service solution provided by
the Railroad and its partnering rail carrier to UPS in 2003.
Working Capital – We currently have, and historically have had, a working
capital deficit, which is not uncommon in our industry and does not indicate
a lack of liquidity or financial stability. We maintain adequate resources
to meet our daily cash requirements, and we have sufficient financial
capacity to satisfy our current liabilities.
Competition – We are subject to competition from other railroads, motor
carriers and barge operators. Our main rail competitor is Burlington
Northern Santa Fe Corporation. Its rail subsidiary, The Burlington Northern
and Santa Fe Railway Company, operates parallel routes in many of our main
traffic corridors. In addition, our operations are conducted in corridors
served by other competing railroads and by motor carriers. Motor carrier
competition is particularly strong with respect to five of our six commodity
groups (excluding energy), due to shorter delivery times offered by such
carriers. Because of the proximity of our routes to major inland and Gulf
Coast waterways, barge competition can be particularly pronounced,
especially for grain and bulk commodities. Competition can pressure both
transit time requirements and pricing, as well as place a greater emphasis
on the quality and reliability of the service provided. While we must build
or acquire and maintain our rail system, trucks and barges are able to use
public rights-of-way maintained by public entities. Any future improvements
or expenditures materially increasing the quality of these alternative modes
of transportation in the locations in which we operate, or legislation
granting materially greater latitude for motor carriers with respect to size
or weight limitations, could have a material adverse effect on our results
of operations, financial condition and liquidity.
Rail Transport Companies in the Directory
Burlington Northern Sante Fe
CSX
Norfolk Southern
Union Pacific
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