<PAGE> COVER
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[X] SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[ ] SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _________ to _________
Commission file number 1-6075
UNION PACIFIC CORPORATION
(Exact name of registrant as specified in its charter)
Utah 13-2626465
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Martin Tower, Eighth and Eaton Avenues 18018
Bethlehem, Pennsylvania (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (610) 861-3200
___________________________________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ---------------------------------------- -----------------------------
Common Stock (Par Value $2.50 per share) New York Stock Exchange, Inc.
4 3/4% Convertible Debentures Due 1999 New York Stock Exchange, Inc.
___________________________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X].
___________________________________
As of March 3, 1994, the aggregate market value of the registrant's Common
Stock held by non-affiliates (using the New York Stock Exchange closing price)
was approximately $12,213,500,846.
The number of shares outstanding of the registrant's Common Stock as of
March 3, 1994 was 205,086,336.
Portions of the following documents are incorporated by reference into this
Report: (1) registrant's Annual Report to Stockholders for the year ended
December 31, 1993 (Parts I and II); and (2) registrant's definitive Proxy
Statement for the annual meeting of stockholders to be held on May 11, 1994
(Part III).
<PAGE> 1
PART I
Item 1. Business
and
Item 2. Properties
Union Pacific Corporation, incorporated in Utah in 1969, operates, through
subsidiaries, in the areas of rail transportation (Union Pacific Railroad
Company and Missouri Pacific Railroad Company), oil, gas and mining (Union
Pacific Resources Company), trucking (Overnite Transportation Company) and waste
management (USPCI, Inc.). Each of these subsidiaries is indirectly wholly-owned
by Union Pacific Corporation.
Except as the context otherwise requires, the terms "Union Pacific" or the
"Corporation" mean Union Pacific Corporation and its subsidiaries, and the terms
"Union Pacific Railroad" or the "Railroad" mean Union Pacific Railroad Company
("UPRR") and Missouri Pacific Railroad Company ("MPRR") and their respective
subsidiaries.
A brief description of Union Pacific's principal businesses follows.
Additional information about these businesses and other financial information
for Union Pacific is presented on pages 14 through 22 and 41 through 44 of the
1993 Annual Report to Stockholders ("Annual Report") and such information
(excluding photographs set forth on pages 14 through 22, which do not supplement
the text and are not otherwise required to be disclosed herein) is incorporated
herein by reference. Information on business segments on page 30 and a map of
Union Pacific's operations on the inside back cover of the Annual Report are
also incorporated herein by reference.
Recent Developments
- -------------------
In May 1993, the Corporation completed the acquisition of Skyway Freight
Systems, Inc. ("Skyway"). Skyway is a transportation logistics company
primarily engaged in arranging time-definite transportation by motor, rail or
air carriers, and in providing transportation information services.
In early 1994, in response to depressed market conditions caused by
regulatory uncertainty in the waste management industry, the ongoing delay of
remediation activities, and the recent restructurings by several major industry
participants, the Corporation began a re-evaluation of USPCI, Inc. ("USPCI"),
including its business environment and prospects.
The Corporation has sold its investment in the Wilmington, California, oil
field and related facilities to the Port of Long Beach, California, for $405
million. The sale resulted in an after-tax gain of over $100 million, and
reduced proved reserves by approximately 13 million barrels of oil equivalent
("MMBOE"). The transaction will not significantly affect the Corporation's
future operating results.
Union Pacific Resources Company ("Resources") has entered into an agreement
to acquire Amax Oil & Gas Inc. ("Amax"), a subsidiary of Cyprus Amax Minerals
Company, for a net purchase price $725 million. Resources will purchase all of
the outstanding shares of Amax for $819 million in cash. Immediately upon
<PAGE> 2
closing, certain of Amax's assets will be sold to Universal Resources
Corporation for $94.5 million. The operations to be retained primarily consist
of natural gas producing, transportation and processing properties in Texas,
Louisiana and Arkansas. These properties include interests in 14 major fields,
encompassing 600,000 acres and approximately 2,000 producing wells. Resources
will add approximately 550 billion cubic feet of gas equivalent (92 MMBOE) of
proved reserves as a result of the acquisition.
Rail Transportation
- -------------------
Union Pacific Railroad is the third largest railroad in the United States,
with nearly 18,000 route miles linking Pacific Coast and Gulf Coast ports with
the Midwest. The Railroad maintains coordinated schedules with other carriers
for the handling of freight to and from the Atlantic seaboard, 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
Texas-Mexico and (primarily through interline connections) Canadian borders.
Major categories of freight hauled by the Railroad are automotive, chemicals,
energy (coal), food/consumer/government, grains and grain products, intermodal,
and metals/minerals/forest. In 1993, energy was the largest commodity in terms
of percentage of revenue ton-miles (34.3%), while chemicals traffic produced the
highest percentage of freight revenue (20.9%). Percentages of revenue ton-miles
and freight revenue for other commodities are presented on page 41 of the Annual
Report.
A separate Annual Report on Form 10-K for the year ended December 31, 1993,
is filed by MPRR. Reference is made to such report for additional information
concerning that company.
Oil, Gas and Mining
- -------------------
Resources an independent oil and gas company engaged in the exploration for
and production of natural gas, crude oil and associated products. Excluding the
Amax acquisition described above, substantially all of Resources' exploration
and production programs are in the Austin Chalk trend and the Carthage area
in eastern Texas and Louisiana; the Union Pacific Land Grant in Colorado,
Wyoming and Utah; the Gulf of Mexico; and Canada.
Resources is also responsible for Union Pacific's interests in trona and
coal development through the management of Union Pacific Minerals, Inc., an
affiliated corporation. Trona activities consist of royalties from mining on
Union Pacific Land Grant acreage and equity and partnership interests which
equate to a 49 percent interest in Rhone Poulenc of Wyoming, which mines trona
and processes it into soda ash. Coal activities consist principally of royalties
from third party mines and a 50 percent ownership interest in Black Butte Coal
Company, a joint venture mine operated by the joint venture partner. Effective
January 1, 1993, Black Butte entered into a revised coal supply arrangement with
its largest customer. Under this agreement, in exchange for annual settlement
payments to be received for a nine-year period, the coal previously mined at
Black Butte will be obtained from unaffiliated mines in Wyoming's Powder River
Basin. Black Butte's earnings have not been adversely affected by the revised
agreement.
<PAGE> 3
The estimated quantities of proved oil and gas reserves set forth under Oil
and Gas - Proved Reserves on pages 42 and 43 of the Annual Report have been
prepared by petroleum reservoir engineers who are employees of Resources. In
1993, Union Pacific filed certain reports with the Department of Energy's Energy
Information Administration containing oil and gas reserve information for the
year ended December 31, 1992. The information reported differed from that
contained in the Annual Report by less than 5 percent.
Trucking
- --------
Overnite Transportation Company ("Overnite"), a major interstate trucking
company, serves all 50 states and portions of Canada through 166 service
centers (located primarily in the eastern, southeastern and central United
States and on the West Coast) and through agency partnerships with several
small, high-quality carriers serving areas not directly covered by Overnite. As
one of the largest trucking companies in the United States, Overnite specializes
in less-than-truckload shipments and transports a variety of products, including
machinery, tobacco, textiles, plastics, electronics and paper products.
The Railroad also has a trucking subsidiary which principally serves rail
movements. This motor carrier subsidiary has authority from the Interstate
Commerce Commission ("ICC") to operate between all points in the continental
United States and also has nationwide authority to provide contract services for
Union Pacific's motor carrier broker, Union Pacific Freight Services Company.
USPCI provides trucking services for certain customers of its disposal,
treatment and recovery services.
Waste Management
- ----------------
USPCI provides comprehensive waste management services (analysis,
treatment, recovery, recycling, disposal, remediation and transportation) to
industry and government. USPCI operates the following commercial landfills that
accept industrial and hazardous waste: (a) Grassy Mountain facility, a RCRA
(hereinafter defined) regulated facility located in Utah, (b) Lone Mountain
facility, a RCRA regulated facility located in Oklahoma, and (c) Grayback
Mountain facility, a TSCA (hereinafter defined) regulated facility permitted for
polychlorinated biphenyls ("PCB") disposal located adjacent to the Grassy
Mountain facility. In addition, USPCI operates industrial waste facilities in
Sawyer, North Dakota and Rosemount, Minnesota, and has a 60 percent ownership
interest in ECDC Environmental, L.C. ("ECDC"), which operates an industrial and
municipal waste disposal site in Carbon County, Utah. USPCI holds an option,
effective June 1, 1994, to acquire the remaining interest in ECDC.
USPCI's hazardous waste incinerator in Clive, Utah, is scheduled for start-
up in late 1994. The 130,000-ton-per-year facility will handle both solid and
liquid waste, serving customers throughout the United States.
USPCI operates facilities in California, Kansas, Oklahoma and Texas using
distillation systems to redistill, filter and separate hydrocarbons, process
used oil, clean solvents, and treat oils and coolants, and also performs other
services to recover petroleum products and solvents. In addition, USPCI
operates facilities in Georgia, Pennsylvania, Kansas, Utah and Canada that
analyze, reclaim, recover and treat PCBs. This treatment involves the chemical
destruction of PCBs in PCB-contaminated liquids and PCB-contaminated oil in
transformers.
<PAGE> 4
USPCI operates a subsidiary in Georgia that processes combustion by-
products for sale, including coal ash, and also operates a stand-alone
laboratory in Oklahoma that provides a wide range of services, including
hazardous waste evaluation and water monitoring.
USPCI also provides a full range of on-site waste management and
remediation services, including the control and cleanup of spills and
contamination at improper disposal sites.
Competition
- -----------
In its rail transportation business, Union Pacific is subject to
competition from other railroads, motor carriers and barge operators. Most of
its railroad operations are conducted in corridors served by competing railroads
and by motor carriers. Motor carrier competition has been strengthened by
longer combination vehicles which are allowed in a number of states in which the
Railroad operates. Because of the proximity of MPRR's routes to major inland
and Gulf Coast waterways and of a UPRR route to the Columbia River, seasonal
barge competition can be particularly pronounced in certain markets.
Resources competes for oil and gas reserves and technology advances with
smaller companies as well as with the larger integrated oil companies. Mining
operations also are subject to competition from a number of companies, many of
which have larger operations.
Overnite provides the majority of Union Pacific's trucking operations,
specializing in the less-than-truckload business. Other motor carriers, both
regional and national, provide intense competition based on service and price.
USPCI competes with numerous hazardous, municipal and industrial waste
commercial landfills currently operating in the United States. There are several
operating landfill sites in the southern and western United States with which
USPCI competes directly. USPCI also competes with companies that dispose of PCBs
through incineration and landfills, as well as other companies that provide
chemical destruction services or other waste management services. USPCI's
competitors include major national and regional environmental service firms.
USPCI's Clive incinerator will compete with hazardous waste incinerators
operating throughout the United States, as well as cement kilns and waste
generators' on-site incineration facilities.
Skyway competes with integrated logistics providers and freight expediters,
many with larger operations. Competition focuses on service and on-time
performance.
Employees
- ---------
During 1993, Union Pacific had an average of 47,000 employees, of whom
approximately 52 percent belonged to various labor organizations.
As is true with employees of all the principal railroads in the country,
most of the 29,000 employees of Union Pacific Railroad are organized along craft
lines and represented by national labor unions. The Railroad continues to adapt
agreements from the previous round of national negotiations to meet local
requirements throughout its system. The Railroad has negotiated the ability to
<PAGE> 5
operate all through-freight trains with two-person crews, and is currently
modifying operations to take full advantage of this ability.
On December 31, 1994, all outstanding labor contracts will reopen for
negotiation. Discussions concerning the Railroad's notices for contract
revisions will begin in October. The negotiations will likely continue through
1995 and management is optimistic that they will be completed in an expeditious
manner.
Governmental Regulation
- -----------------------
Union Pacific's operations are subject to a variety of Federal, state and
local regulations. A description of the more significant regulations follows.
Union Pacific Railroad's operations are subject to the regulatory
jurisdiction of the ICC, other Federal agencies and various state agencies. The
ICC has jurisdiction over rates charged on certain regulated traffic, freight
car compensation, issuance or guarantee of railroad and certain railroad holding
company securities, extension or abandonment of rail lines, and acquisition of
control of rail common carriers and motor carriers by rail common carriers.
Other Federal agencies have jurisdiction over safety, movement of hazardoUs
materials, movement and disposal of hazardous waste, and equipment standards.
The state agencies regulate intrastate freight rates to the extent that they
have adopted Federal standards and procedures and continue to follow such
procedures. However, several states in which railroad operations are conducted
have ceded intrastate rail rate regulation to the ICC. Various state and local
agencies also have jurisdiction over disposal of hazardous wastes and seek to
regulate movement of hazardous materials.
Most of Resources' crude oil, field condensate and natural gas is in
jurisdictions in which production is regulated under applicable conservation
laws. Exploration and production activities are also subject to regulations
respecting safety. The transportation of Resources' natural gas is affected by
the provisions of the Natural Gas Act and the Natural Gas Policy Act. These
acts, administered by the Federal Energy Regulatory Commission ("FERC"),
regulate the interstate transportation of gas, including rates and the terms and
conditions for service. FERC also governs the tariffs for common carrier liquid
pipelines. The Department of the Interior regulates the leasing of Federal
lands and the exploration for and production of oil and gas on and from such
lands. The transmission by pipeline of liquid petroleum, petroleum products and
natural gas is subject to Federal and state pipeline safety laws.
Resources' mining operations are subject to a variety of Federal and state
regulations respecting safety, land use and reclamation. In addition, the
Department of the Interior regulates the leasing of Federal lands for coal
development as provided in the Mineral Lands Leasing Act of 1920. Section 2(c)
of the Mineral Lands Leasing Act of 1920 prohibits a company operating a
railroad from holding a Federal coal lease. In late 1982 the Department of the
Interior decided that the Section prohibits new leasing to affiliates of
railroads, such as Resources. The Department of Justice and the Department of
the Interior have both concluded that under current conditions Section 2(c) is
an impediment to competition and that it should be repealed. In January 1993, a
Regional Solicitor of the Department of the Interior opined that Section 2(c)
does not prohibit Resources' Black Butte joint venture coal company mine from
holding Federal coal leases.
<PAGE> 6
Environmental Regulation
- ------------------------
USPCI's business is highly regulated by the Environmental Protection Agency
("EPA"), the Department of Transportation and various state environmental and
transportation regulatory authorities. In addition, other subsidiaries of Union
Pacific as well as USPCI are subject to various environmental statutes and
regulations, including the Resource Conservation and Recovery Act ("RCRA"), the
Toxic Substances Control Act ("TSCA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA") and the Clean Air Act ("CAA").
RCRA applies to hazardous waste generators and transporters, as well as
persons engaged in treatment and disposal of hazardous waste, and specifies
standards for storage areas, treatment units and land disposal units. All
generators of hazardous waste are required to label shipments in accordance with
detailed regulations and to prepare a detailed manifest identifying the material
and stating its destination before waste can be released for offsite transport.
The transporter must deliver the hazardous waste in accordance with the manifest
and only to a treatment, storage or disposal facility qualified for RCRA interim
status or having a final RCRA permit.
The EPA's regulations under RCRA have established a comprehensive system
for the management of hazardous waste. These regulations identify a wide range
of industrial by-products and residues as hazardous waste, and specify
requirements for "cradle-to-grave" management of such waste from the time of
generation through the time of disposal and beyond. States that have adopted
hazardous waste management programs with standards at least as stringent as
those promulgated by the EPA may be authorized by the EPA to administer all or
part of RCRA on behalf of the EPA. The States of Oklahoma and Utah, where USPCI
conducts its principal hazardous waste operations, have been so authorized, and
Oklahoma and Utah oversee virtually all aspects of USPCI's operations in those
states. Permits are required to construct and operate hazardous waste management
units. Final RCRA permits for the Lone Mountain and Grassy Mountain facilities
have been issued.
USPCI is subject to the EPA's regulations under TSCA, which established a
comprehensive program for the regulation of hazardous chemicals in the United
States and the distribution and use of PCBs in particular. The EPA's final
regulations on notification and manifesting of PCB activities essentially
establish a "cradle-to-grave" tracking and management system for PCBs similar to
that required under RCRA. PPM, Inc. of Georgia ("PPM"), a wholly-owned
subsidiary of USPCI, had a national permit to destroy PCBs in certain fluids
which was effective until August 1988. An indefinite extension of this permit
has been granted by EPA national headquarters until it acts on PPM's application
for a revised permit. USPCI's permit to dispose of PCB solids at Grayback
Mountain in Utah was issued in November 1985 for an indefinite period.
Subsequent permits have been issued, the latest in September 1992, for
additional disposal capacity at the Grayback Mountain facility.
The EPA has, and to the extent they administer the RCRA program, Oklahoma
and Utah have, the authority at any time to modify or withdraw the existing
requirements or to impose new requirements for permits.
CERCLA was designed to establish a strategy for cleaning up facilities at
which hazardous waste or other hazardous substances have created actual or
potential environmental hazards. The EPA has designated certain facilities as
requiring cleanup or further assessment. Among other things, CERCLA authorizes
the Federal government either to clean up such facilities itself or to order
<PAGE> 7
persons responsible for the situation to do so. The act creates an $8.5 billion
fund to be used by the Federal government to pay for such cleanup efforts.
CERCLA imposes strict liability on the owners and operators of facilities
in which hazardous waste and other hazardous substances are deposited or from
which they are released or are likely to be released into the environment, the
generators of such waste, and the transporters of the waste who select the
disposal or treatment sites. Liability may include cleanup costs incurred by
third persons and damage to publicly owned natural resources. USPCI and other
Union Pacific subsidiaries are subject to potential liability under CERCLA as
owners and operators of hazardous waste treatment and disposal facilities, as
generators of hazardous waste and as transporters. Some states have enacted,
and other states are considering enacting, legislation similar to CERCLA.
Certain provisions of these acts are more stringent than CERCLA. States which
have passed such legislation are currently active in designating more facilities
as requiring cleanup and further assessment. CERCLA is subject to
reauthorization in 1994 and may be substantially modified as part of that
reauthorization.
The operations of Union Pacific's subsidiaries are subject to the
requirements of the CAA. The 1990 amendments to the CAA include a provision
under Title V that requires certain facilities to obtain operating permits. EPA
regulations require all states to develop Federally approvable permit programs.
State permit programs were required to be submitted for approval by November
1993. The EPA must act to approve or disapprove these programs by November 1994,
and affected facilities must submit air operating permit applications to the
respective states within one year of the EPA's approval of the state programs.
Certain Union Pacific facilities, such as gas processing plants and other
facilities at Resources, may be required to obtain such permits.
The operations of Union Pacific's subsidiaries are also subject to other
laws protecting the environment, including permit requirements for wastewater
discharges pursuant to the National Pollutant Discharge Elimination System and
stormwater regulations under the Federal Water Pollution Control Act.
Item 3. Legal Proceedings
MKT Registered Certificates
- ---------------------------
On June 7, 1991, Timothy O. Stuy, purporting to represent a class of all
certificateholders, filed an action in the United States District Court for the
District of Delaware (Civil Action No. 91-322) against MPRR with respect to the
Certificates Representing a Charge on Income, dated January 1, 1958 (the
"Certificates"), which had been issued by The Missouri-Kansas-Texas Railroad
Company ("MKT"). MPRR acquired MKT in 1988 and assumed MKT's obligations with
respect to the Certificates at that time. The lawsuit asserted, among other
things, that certain contingent sinking fund payments were not made as a result
of allegedly improper modifications to the terms of the Certificates and other
actions by the defendant, and sought an unspecified amount of damages and
injunctive relief. The Certificate modifications were approved by the ICC in
connection with the MKT acquisition. The lawsuit was stayed pending resolution
of a lawsuit previously filed in the Delaware District Court that raised similar
issues with respect to the MKT's 5 1/2% Subordinated Income Debentures due
January 1, 2033 (the "Debentures"). In response to motions filed by MPRR and
other defendants, the Debenture lawsuit was dismissed by the District Court for
lack of subject matter jurisdiction. On November 17, 1993, MPRR filed a motion
to
<PAGE> 8
dismiss the Certificate lawsuit on similar grounds. On February 16, 1994, a
Stipulation and Order of Dismissal was entered by the District Court dismissing
the Certificate lawsuit with prejudice to the named plaintiff.
Environmental
- -------------
In 1983, UPRR and the EPA entered into two consent orders under CERCLA and
RCRA, respectively, relating to groundwater pollution resulting from the
wastewater treatment system at UPRR's tie treating facility in Laramie, Wyoming
which was closed in 1983. UPRR and the State of Wyoming entered into an
agreement suspending litigation brought by the State alleging violation of state
environmental laws with respect to the site. Pursuant to the consent orders and
the agreement, UPRR financed a remedial investigation and feasibility study for
the site and constructed a containment isolation system. In January 1988, the
EPA and UPRR entered into a new RCRA consent order regarding the oil recovery
and on-site treatment testing program which UPRR was conducting at the site.
More recently, UPRR completed a Corrective Measures Study which recommends a
final remedy for the site. UPRR expects the EPA to approve this study provided
that its remedial effect is subject to re-evaluation after 5 years. UPRR has
paid $253,317 for oversight costs incurred by the EPA prior to September 30,
1986 and $237,996 for costs incurred between September 30, 1986 and November
30, 1991. EPA oversight costs incurred after that date are being paid on an
annual basis. The EPA is authorized under CERCLA to receive reimbursement for
such costs.
The Southern California Air Quality Management District ("AQMD") has served
several Notices of Violation on UPRR for excessive emissions of smoke from
locomotives operating in the Cajon Pass area north of San Bernardino,
California. UPRR's mechanical and environmental personnel have been meeting with
the locomotive manufacturer and reviewing UPRR operating practices to determine
how to reduce smoke emissions in this area. New procedures designed to reduce
locomotive smoke are being implemented and an $80,000 fine will be paid to
settle all outstanding UPRR violations.
In October 1992, UPRR and MPRR received Complaints and Notices of
Opportunity for Hearing from Region VIII of the EPA alleging various violations
of TSCA at USPCI's Clive, Utah and Timpe, Utah transfer facilities, including
the failure to properly mark railcars containing PCBs, failure to properly
dispose of PCB waste, failure to properly contain or store PCB waste, and
failure to properly manifest PCB waste. The Complaints include proposed
penalties totalling $95,000 and $295,000, for UPRR and MPRR, respectively. UPRR
and MPRR have met with the EPA and expect to settle these alleged violations for
substantially less than the initial penalty demands.
In December 1992, the Texas Natural Resources Conservation Commission
("TNRCC") served MPRR with a Notice of Violation for alleged discharges and
fuel spills at MPRR's San Antonio, Texas railyard. The TNRCC proposed penalties
totalling $500,000. MPRR and the TNRCC have tentatively settled this matter for
a penalty payment of $300,000 plus the implementation of certain environmental
projects in Texas costing $275,000.
Two complaints and a compliance report issued in 1991 and 1992 by the
California Department of Toxic Substance Control ("CDTSC") alleged various
violations of waste oil management regulations at UPRR's East Los Angeles,
California railyard. In November 1993, the CDTSC issued an enforcement order
proposing a $198,000 penalty for these alleged violations. UPRR has met with
the CDTSC and expects to settle this matter for substantially less than the
initial demand.
<PAGE> 9
UPRR has received a notice from the San Bernardino, California, County
District Attorney indicating an intent to file a civil penalty action against
UPRR for a penalty of up to $225,000 for certain alleged violations of the
California Fish and Game Code. This matter involves UPRR's alleged failure to
obtain a necessary permit from the California Department of Fish and Game prior
to performing certain maintenance work in stream beds and banks in order to
restore desert tortoise habitat in Nipton, California. Settlement discussions
have been initiated.
In March 1991, the EPA filed a Complaint against USPCI's subsidiary,
Hydrocarbon Recyclers, Inc. ("HRI"), alleging that HRI's Tulsa, Oklahoma
recycling facility failed to provide the required notice prior to receiving
certain hazardous wastes generated in Mexico. The EPA proposed a penalty of
$177,750. HRI filed an Answer to the Complaint and initiated settlement
discussions. The EPA and HRI have agreed to settle this matter for $35,000.
USPCI received a Notice of Violation and Order for Compliance dated October
26, 1993 from the State of Utah. The Notice alleges that USPCI's Grassy
Mountain facility improperly disposed of hazardous debris without the proper
documentation and that hazardous waste was improperly disposed of in an
industrial waste cell. USPCI has received a draft Consent Agreement from the
State of Utah, which contains a proposed penalty of $276,000 and would impose an
additional $280,000 penalty if the alleged violations recur within a six month
period.
In addition to the foregoing, Union Pacific and several of its subsidiaries
have received notices from the EPA and state environmental agencies alleging
that they are or may be liable under CERCLA, RCRA, and other Federal or state
environmental legislation for the remediation costs associated with alleged
contamination or for violations of environmental requirements at various sites
throughout the United States. There are approximately 57 sites for which such
notices have been received which are on the Superfund National Priorities List
or state superfund lists. Although specific claims have been made by the EPA and
state regulators with respect to some of these sites, the ultimate impact of
these proceedings and suits by third parties cannot be predicted at this time
because of the number of potentially responsible parties involved, the degree of
contamination by various wastes, the scarcity and quality of volumetric data
related to many of the sites and/or the speculative nature of remediation costs.
Nevertheless, at many of the superfund sites, the Corporation believes it will
have little or no exposure because no liability should be imposed under
applicable law, one or more other financially able parties generated all or most
of the contamination, or a settlement of Union Pacific's exposure has been
reached although regulatory proceedings at the sites involved have not been
formally terminated.
The Corporation has accrued a liability of $181 million for future
remediation costs for sites where its obligation is probable and where such
costs can be reasonably estimated (See Note 12 to the Financial Statements).
While the ultimate cost of resolution of the foregoing issues cannot be fully
determined, the Corporation does not believe that the resolution of such issues
will materially affect the Corporation's financial condition or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
<PAGE> 10
Executive Officers of the Registrant
- ------------------------------------
Business
Experience
During Past
Name Position Age Five Years
---- -------- --- -----------
Drew Lewis.............. Chairman, President and Chief 62 (1)
Executive Officer
L. White Matthews, III.. Executive Vice President - 48 (2)
Finance
Ursula F. Fairbairn..... Senior Vice President - 51 (3)
Human Resources
Carl W. von Bernuth..... Senior Vice President 50 (4)
and General Counsel
Charles E. Billingsley.. Vice President and Controller 60 (5)
John E. Dowling......... Vice President - Corporate 46 (6)
Development
John B. Gremillion, Jr.. Vice President - Taxes 47 (7)
Mary E. McAuliffe....... Vice President - External 48 (8)
Relations
Gary F. Schuster........ Vice President - Corporate 52 Current
Relations Position
Gary M. Stuart.......... Vice President and Treasurer 53 (9)
Judy L. Swantak......... Vice President and Corporate 38 (10)
Secretary
___________________________________
(1) Mr. Lewis has served in his present position for the past five
years. In addition, Mr. Lewis also served as Chairman of the
Railroad during August and September 1991.
(2) Mr. Matthews was elected to his present position effective April
1992. Prior thereto, he served as Senior Vice President -
Finance of Union Pacific.
(3) Mrs. Fairbairn was elected to her present position effective
April 1990. From October 1989 through March 1990, she served as
IBM Director of Education and Management Development for
International Business Machines Corporation ("IBM") and prior
thereto as IBM Director of Education.
(4) Mr. von Bernuth was elected to his present position effective
September 1991. Prior thereto, he served as Vice President and
General Counsel of Union Pacific.
<PAGE> 11
(5) Mr. Billingsley was elected to his present position effective
January 1990. Prior thereto, he served as Controller of Union
Pacific.
(6) Mr. Dowling was elected to his present position effective
January 1990. Prior thereto, he served as Vice President -
Financial Administration of Union Pacific.
(7) Mr. Gremillion was elected to his present position effective
February 1992. From June 1989 until January 1992, he served as
Director of Taxes of Union Pacific. Prior thereto, he served as
Director of Taxes and Regulatory Analysis of Resources.
(8) Ms. McAuliffe was elected to her present position effective
December 1991. Prior thereto, she served as Director -
Washington Affairs, Transportation and Tax of Union Pacific.
(9) Mr. Stuart was elected to his present position effective January
1990. Prior thereto he served as Treasurer of Union Pacific.
(10) Mrs. Swantak was elected to her present position effective
September 1991. From March 1990 through September 1991 she
served as Corporate Secretary of Union Pacific. Prior thereto,
she served as Assistant Secretary of Union Pacific.
<PAGE> 12
Principal Executive Officers of Subsidiaries
- --------------------------------------------
Business
Experience
During Past
Name Position Age Five Years
---- -------- --- -----------
Richard K. Davidson... Chairman and Chief Executive 52 (1)
Officer of the Railroad
Jack L. Messman....... President and Chief Executive 54 (2)
Officer of Resources; Chairman
of USPCI
Thomas W. Boswell..... President and Chief Executive 49 (3)
Officer of Overnite
Robert S. Jackson..... President and Chief Executive 48 (4)
Officer of USPCI
___________________________________
(1) Mr. Davidson was elected Chairman of the Railroad in September 1991, and
was elected President and Chief Executive Officer of the Railroad in
August 1991. From July 1989 through August 1991 he served as Executive
Vice President - Operations of the Railroad. Prior thereto, he served as
Vice President - Operations of the Railroad.
(2) Mr. Messman was elected President and Chief Executive Officer of
Resources effective May 1991 and has served as Chairman of USPCI for the
past five years. Prior to May 1991, he served as Chief Executive Officer
of USPCI.
(3) Mr. Boswell was elected to his present position effective March 1991.
From March 1990 through March 1991 he served as Vice Chairman and Chief
Executive Officer of Overnite, and from July 1989 through March 1990 he
served as Vice Chairman of Overnite. Prior thereto, he served as Senior
Executive Vice President of Overnite.
(4) Mr. Jackson was elected to his present position effective May 1991. Prior
thereto, he served as Executive Vice President and Chief Financial
Officer of Resources.
<PAGE> 13
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Information as to the markets in which Union Pacific's Common Stock is
traded, the quarterly high and low prices for such stock and the dividends
declared with respect to the Common Stock during the last two years, and the
approximate number of stockholders of record at January 31, 1994, is set forth
under Selected Quarterly Data and Stockholders and Dividends, appearing on page
41 of the Annual Report. Information as to restrictions on the payment of
dividends with respect to the Corporation's Common Stock is set forth in Note 8
to Financial Statements, appearing on page 38 of the Annual Report. Such
information is incorporated herein by reference.
Item 6. Selected Financial Data
Selected Financial Data for Union Pacific for each of the last five years
are set forth under Ten-Year Financial Summary, appearing on page 45 of the
Annual Report. All such information is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Information as to Union Pacific's results of operations, financial
condition and capital investments is set forth in the Financial Review,
appearing on pages 23 through 28 of the Annual Report, and is incorporated
herein by reference.
Item 8. Financial Statements and Supplementary Data
The Corporation's consolidated financial statements, accounting policy
disclosures, notes to financial statements, business segment information and
independent auditors' report are presented on pages 29 through 40 of the Annual
Report. Selected quarterly financial data are set forth under Selected
Quarterly Data, appearing on page 41 of the Annual Report. Information with
respect to oil and gas producing activities is set forth under Supplementary
Information, appearing on pages 42 through 44 of the Annual Report. All such
information is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE> 14
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Directors of Registrant.
Information as to the names, ages, positions and offices with Union
Pacific, terms of office, periods of service, business experience during the
past five years and other directorships held by each director or person
nominated to become a director of Union Pacific is set forth in the Directors
segments of the Proxy Statement and is incorporated herein by reference.
(b) Executive Officers of Registrant.
Information concerning the executive officers of Union Pacific and its
subsidiaries is presented in Part I of this Report under Executive Officers of
the Registrant and Principal Executive Officers of Subsidiaries.
(c) Section 16(a) Compliance.
Information concerning compliance with Section 16(a) of the Securities
Exchange Act of 1934 is set forth in the Certain Relationships and Related
Transactions segment of the Proxy Statement and is incorporated herein by
reference.
Item 11. Executive Compensation
Information concerning remuneration received by Union Pacific's executive
officers and directors is presented in the Compensation of Directors, Report on
Executive Compensation, Summary Compensation Table, Option/SAR Grants Table,
Option/SAR Exercises and Year-End Value Table, Long-Term Incentive Plan Awards
Table, Defined Benefit Plans and Five-Year Performance Comparison segments of
the Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information as to the number of shares of Union Pacific's equity securities
beneficially owned as of March 3, 1994 by each of its directors and nominees for
director, its five most highly compensated executive officers and its directors
and executive officers as a group is set forth in the Directors and Security
Ownership of Management segments of the Proxy Statement and is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions
Information on related transactions is set forth in the Certain
Relationships and Related Transactions and Compensation Committee Interlocks and
Insider Participation segments of the Proxy Statement and is incorporated herein
by reference.
<PAGE> 15
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) and (2) Financial Statements and Schedules
See Index to Financial Statements on page F-1.
(3) Exhibits - Items 10(a) through 10(n) constitute the management
contracts and executive compensation plans and
arrangements required to be filed as exhibits to this
report.
(3) (a) Union Pacific's Revised Articles of Incorporation, as amended
through April 17, 1992, are incorporated herein by reference to
Exhibit 3(a) to Union Pacific's Report on Form 10-Q for the
quarter ended March 31, 1992.
(3) (b) Union Pacific's By-Laws, amended effective as of January 27,
1994, are incorporated herein by reference to Exhibit 3.3 to
Union Pacific's Registration Statement on Form S-3 (File No.
33-52645).
(4) Pursuant to various indentures and other agreements, Union
Pacific has issued long-term debt, but no such agreement has
securities or obligations covered thereby which exceed 10% of
Union Pacific's total consolidated assets. Union Pacific agrees
to furnish the Commission with a copy of any such indenture or
agreement upon request by the Commission.
(10) (a) The Executive Incentive Plan of Union Pacific Corporation and
Subsidiaries, amended effective as of September 30, 1993, is
incorporated herein by reference to Exhibit 10 to Union
Pacific's Report on Form 10-Q for the quarter ended September
30, 1992 and Exhibit 10(a) to Union Pacific's Report on Form
10-Q for the quarter ended September 30, 1993.
(10) (b) The 1982 Stock Option and Restricted Stock Plan of Union
Pacific Corporation, as amended as of February 1, 1992, is
incorporated herein by reference to Exhibit 10(c) to Union
Pacific's Report on Form 10-K for the year ended December 31,
1991.
(10) (c) The 1988 Stock Option and Restricted Stock Plan of Union
Pacific Corporation, as amended as of February 1, 1992, is
incorporated herein by reference to Exhibit 10(d) to Union
Pacific's Report on Form 10-K for the year ended December 31,
1991.
(10) (d) The Supplemental Pension Plan for Officers and Managers of
Union Pacific Corporation and Affiliates, as amended and
restated.
<PAGE> 16
(10) (e) The Supplemental Pension Plan for Exempt Salaried Employees of
Union Pacific Resources Company and Affiliates, as amended and
restated.
(10) (f) The Employment Agreement, dated as of January 30, 1986, between
Union Pacific and Andrew L. Lewis, Jr. is incorporated herein
by reference to Exhibit 10(e) to Union Pacific's Report on Form
10-K for the year ended December 31, 1985.
(10) (g) The 1990 Retention Stock Plan of Union Pacific Corporation, as
amended as of September 30, 1993, is incorporated herein by
reference to Exhibit 10(e) to Union Pacific's Report on Form
10-Q for the quarter ended September 30, 1991 and Exhibit 10(b)
to Union Pacific's Report on Form 10-Q for the quarter ended
September 30, 1993.
(10) (h) The 1992 Restricted Stock Plan for Non-Employee Directors of
Union Pacific Corporation, as amended as of January 28, 1993,
is incorporated herein by reference to Exhibit 10(a) to Union
Pacific's Current Report on Form 8-K filed March 16, 1993.
(10) (i) The 1993 Stock Option and Retention Stock Plan of Union Pacific
Corporation, as amended as of September 30, 1993, is
incorporated herein by reference to Exhibit 10(b) to Union
Pacific's Current Report on Form 8-K filed March 16, 1993 and
Exhibit 10(c) to Union Pacific's Report on Form 10-Q filed for
the quarter ended September 30, 1993.
(10) (j) Pension Plan for Non-Employee Directors of Union Pacific
Corporation is incorporated herein by reference to Exhibit
10(k) to Union Pacific's Report on Form 10-K for the year ended
December 31, 1992.
(10) (k) Written Description of Deferred Compensation Plan for Non-
Employee Directors of Union Pacific Corporation is incorporated
herein by reference to Exhibit 10(l) to Union Pacific's Report
on Form 10-K for the year ended December 31, 1992.
(10) (l) Written Description of Charitable Contribution Plan for Non-
Employee Directors of Union Pacific Corporation is incorporated
herein by reference to Exhibit 10(m) to Union Pacific's Report
on Form 10-K for the year ended December 31, 1992.
(10) (m) Written Description of Executive Life Insurance Plan of Union
Pacific Corporation is incorporated herein by reference to
Exhibit 10(n) to Union Pacific's Report on Form 10-K for the
year ended December 31, 1992.
(10) (n) Written Description of Other Executive Compensation
Arrangements of Union Pacific Corporation is incorporated
herein by reference to Exhibit 10(o) to Union Pacific's Report
on Form 10-K for the year ended December 31, 1992.
(11) Statement re computation of earnings per share.
<PAGE> 17
(12) Statement re computation of ratio of earnings to fixed charges.
(13) Pages 14 through 45, inclusive, and the system map contained on
the inside back cover of Union Pacific's Annual Report to
Stockholders for the year ended December 31, 1993, but
excluding photographs set forth on pages 14 through 22, which
do not supplement the text and are not otherwise required to be
disclosed in this Form 10-K.
(21) List of Union Pacific's significant subsidiaries and their
respective states of incorporation.
(23) Independent Auditors' Consent.
(24) Powers of attorney executed by the directors of Union Pacific.
(99) (a) Form 11-K Annual Report of the Union Pacific Corporation
Thrift Plan for the Fiscal Year Ended December 31, 1993 - To
be filed by amendment.
(99) (b) Form 11-K Annual Report of the USPCI, Inc. Savings Plan for the
Fiscal Year Ended December 31, 1993 - To be filed by amendment.
(99) (c) Form 11-K Annual Report of the Union Pacific Fruit Express
Company Agreement Employee 401(k) Retirement Thrift Plan for
the Fiscal Year Ended December 31, 1993 - To be filed by
amendment.
(99) (d) Form 11-K Annual Report of the Skyway Retirement Savings Plan
for the Fiscal Year Ended December 31, 1993 - To be filed by
amendment.
(99) (e) Form 11-K Annual Report of the Union Pacific Agreement Employee
401(k) Retirement Thrift Plan for the Fiscal Year Ended
December 31, 1993 - To be filed by amendment.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1993.
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on this 29th day of
March, 1994.
UNION PACIFIC CORPORATION
By /s/ Drew Lewis
---------------------------------
(Drew Lewis, Chairman, President
and Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below, on this 29th day of March, 1994, by the following
persons on behalf of the registrant and in the capacities indicated.
PRINCIPAL EXECUTIVE OFFICER
AND DIRECTOR:
/s/ Drew Lewis
---------------------------------
(Drew Lewis, Chairman, President
and Chief Executive Officer)
PRINCIPAL FINANCIAL OFFICER:
/s/ L. White Matthews, III
---------------------------------
(L. White Matthews, III,
Executive Vice President -
Finance)
PRINCIPAL ACCOUNTING OFFICER:
/s/ Charles E. Billingsley
---------------------------------
(Charles E. Billingsley,
Vice President and Controller)
<PAGE> 19
SIGNATURES - (Continued)
DIRECTORS:
Robert P. Bauman* Richard J. Mahoney*
Richard B. Cheney* Claudine B. Malone*
E. Virgil Conway* John R. Meyer*
Spencer F. Eccles* Thomas A. Reynolds, Jr.*
Elbridge T. Gerry, Jr.* James D. Robinson, III*
William H. Gray, III* Robert W. Roth*
Judith R. Hope* Richard D. Simmons*
Lawrence M. Jones*
* By /s/ Judy L. Swantak
-----------------------------------
(Judy L. Swantak, Attorney-in-fact)
<PAGE> F-1
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report........................................ F-2
Financial Statements:
The financial statements, accounting policy disclosures, notes
to financial statements and independent auditors' report
appearing on pages 29 through 40, inclusive, of Union
Pacific's 1993 Annual Report to Stockholders are incorporated
herein by reference.
Schedule V - Property, Plant and Equipment for the Years Ended
December 31, 1993, 1992 and 1991............................... F-3
Schedule VI - Accumulated Depreciation, Depletion and Amortization
of Properties for the Years Ended December 31, 1993, 1992 and
1991........................................................... F-5
Schedule X - Supplementary Income Statement Information for the
Years Ended December 31, 1993, 1992 and 1991................... F-7
Schedules other than those listed above are omitted because of the
absence of the conditions under which they are required or because the
required information is set forth in the financial statements referred
to above.
<PAGE> F-2
INDEPENDENT AUDITORS' REPORT
Union Pacific Corporation, its Directors and Stockholders:
We have audited the statements of consolidated financial position of Union
Pacific Corporation and subsidiary companies as of December 31, 1993 and 1992,
and the related statements of consolidated income, changes in common
stockholders' equity, and consolidated cash flows for each of the three years in
the period ended December 31, 1993, and have issued our report thereon dated
January 20, 1994; such financial statements and report are included in your 1993
Annual Report to Stockholders and are incorporated herein by reference. Our
audits also included the financial statement schedules of Union Pacific
Corporation and subsidiary companies, listed in the accompanying index to Item
14. The financial statement schedules are the responsibility of the
Corporation's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such financial statement schedules, when considered
in relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ DELOITTE & TOUCHE
DELOITTE & TOUCHE
New York, New York
January 20, 1994
<PAGE> F-3
<TABLE>
<CAPTION>
SCHEDULE V
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
PROPERTY, PLANT AND EQUIPMENT
For the Years Ended December 31, 1993, 1992 and 1991
(Millions of Dollars)
Balance at Balance
Beginning Additions Retirements Other at End
Classification of Year at Cost or Sales Changes of Year
- ----------------------- ---------- --------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Railroad:
Road and other...... $ 7,282 $ 591 $ (100) $ 162 $ 7,935
Equipment........... 4,328 214 (44) 77 4,575
------- ------- ------- ------- -------
11,610 805 (144) 239(b) 12,510
------- ------- ------- ------- -------
Natural resources:
Exploration and
production(a)..... 3,668 504 (147) -- 4,025
Other............... 117 3 (1) -- 119
------- ------- ------- ------- -------
3,785 507 (148) -- 4,144
------- ------- ------- ------- -------
Trucking.............. 555 80 (14) -- 621
------- ------- ------- ------- -------
Waste management...... 350 114 (2) 2 464
------- ------- ------- ------- -------
Other................. 85 14 (4) 26(c) 121
------- ------- ------- ------- -------
Total $16,385 $ 1,520 $ (312) $ 267 $17,860
======= ======= ======= ======= =======
- ------------------------
Year ended December 31, 1992:
Railroad:
Road and other...... $ 6,895 $ 504 $ (159) $ 42 $ 7,282
Equipment........... 4,087 263 (33) 11 4,328
------- ------- ------- ------- -------
10,982 767 (192) 53 11,610
------- ------- ------- ------- -------
Natural resources:
Exploration and
production(a)..... 3,420 547 (299) -- 3,668
Other............... 116 5 (4) -- 117
------- ------- ------- ------- -------
3,536 552 (303) -- 3,785
------- ------- ------- ------- -------
Trucking.............. 490 72 (7) -- 555
------- ------- ------- ------- -------
Waste management...... 248 109 (7) -- 350
------- ------- ------- ------- -------
Other................. 77 25 (3) (14) 85
------- ------- ------- ------- -------
Total $15,333 $ 1,525 $ (512) $ 39 $16,385
======= ======= ======= ======= =======
</TABLE>
<PAGE> F-4
<TABLE>
<CAPTION>
SCHEDULE V
(Continued)
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
PROPERTY, PLANT AND EQUIPMENT
For the Years Ended December 31, 1993, 1992 and 1991
(Millions of Dollars)
Balance at Balance
Beginning Additions Retirements Other at End
Classification of Year at Cost or Sales Changes of Year
- ------------------- ---------- --------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1991:
Railroad:
Road and other...... $ 6,511 $ 440 $ (82) $ 26 $ 6,895
Equipment........... 3,861 181 14 31 4,087
------- ------- ------- ------- -------
10,372 621 (68) 57 10,982
------- ------- ------- ------- -------
Natural resources:
Exploration and
production(a)..... 3,126 417 (123) -- 3,420
Other............... 106 10 -- -- 116
------- ------- ------- ------- -------
3,232 427 (123) -- 3,536
------- ------- ------- ------- -------
Trucking.............. 457 40 (5) (2) 490
------- ------- ------- ------- -------
Waste management...... 154 97 (2) (1) 248
------- ------- ------- ------- -------
Other................. 141 6 (16) (54) 77
------- ------- ------- ------- -------
Total $14,356 $ 1,191 $ (214) $ -- $15,333
======= ======= ======= ======= =======
(a) Includes pipeline properties.
(b) Includes adjustments required in the adoption of Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes".
See Note 2 to the Financial Statements.
(c) Includes the acquisition of Skyway Freight Systems, Inc.
</TABLE>
<PAGE> F-5
<TABLE>
<CAPTION>
SCHEDULE VI
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTIES
For the Years Ended December 31, 1993, 1992 and 1991
(Millions of Dollars)
Additions
Balance at Charged Balance
Beginning to Retirements Other at End
Classification of Year Expense or Sales Changes of Year
- ------------------- ---------- --------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Railroad:
Road and other...... $ 1,693 $ 236 $ (118) $ 179 $ 1,990
Equipment........... 1,730 206 (20) (147) 1,769
------- ------- ------- ------- -------
3,423 442 (138) 32 3,759
------- ------- ------- ------- -------
Natural resources:
Exploration and
production(a)..... 2,067 384 (150) -- 2,301
Other............... 57 6 (1) 1 63
------- ------- ------- ------- -------
2,124 390 (151) 1 2,364
------- ------- ------- ------- -------
Trucking.............. 138 34 (7) -- 165
------- ------- ------- ------- -------
Waste management...... 82 20 (1) -- 101
------- ------- ------- ------- -------
Other................. 18 6 (1) 7 30
------- ------- ------- ------- -------
Total $ 5,785 $ 892 $ (298) $ 40 $ 6,419
======= ======= ======= ======= =======
- ------------------------
Year ended December 31, 1992:
Railroad:
Road and other...... $ 1,564 $ 206 $ (125) $ 48 $ 1,693
Equipment........... 1,558 182 (13) 3 1,730
------- ------- ------- ------- -------
3,122 388 (138) 51 3,423
------- ------- ------- ------- -------
Natural resources:
Exploration and
production(a)..... 1,921 394 (248) -- 2,067
Other............... 50 7 (1) 1 57
------- ------- ------- ------- -------
1,971 401 (249) 1 2,124
------- ------- ------- ------- -------
Trucking.............. 112 31 (4) (1) 138
------- ------- ------- ------- -------
Waste management...... 60 22 (1) 1 82
------- ------- ------- ------- -------
Other................. 17 1 -- -- 18
------- ------- ------- ------- -------
Total $ 5,282 $ 843 $ (392) $ 52 $ 5,785
======= ======= ======= ======= =======
</TABLE>
<PAGE> F-6
<TABLE>
<CAPTION>
SCHEDULE VI
(Continued)
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTIES
For the Years Ended December 31, 1993, 1992 and 1991
(Millions of Dollars)
Additions
Balance at Charged Balance Balance
Beginning to Retirements Other at End
Classification of Year Expense or Sales Changes of Year
- ------------------- ---------- --------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1991:
Railroad:
Road and other...... $ 1,340 $ 197 $ (77) $ 104 $ 1,564
Equipment........... 1,344 176 32 6 1,558
------- ------- ------- ------- -------
2,684 373 (45) 110 3,122
------- ------- ------- ------- -------
Natural resources:
Exploration and
production(a)..... 1,733 255 (107) 40 1,921
Other............... 43 7 -- -- 50
------- ------- ------- ------- -------
1,776 262 (107) 40 1,971
------- ------- ------- ------- -------
Trucking.............. 84 30 (5) 3 112
------- ------- ------- ------- -------
Waste management...... 40 20 -- -- 60
------- ------- ------- ------- -------
Other................. 21 6 (10) -- 17
------- ------- ------- ------- -------
Total $ 4,605 $ 691 $ (167) $ 153(b) $ 5,282
======= ======= ======= ======= =======
(a) Includes pipeline properties.
(b) Includes $136 million relating to the 1991 special charge. See Note 3 to
the Financial Statements.
</TABLE>
<PAGE> F-7
<TABLE>
<CAPTION>
SCHEDULE X
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
For the Years Ended December 31, 1993, 1992 and 1991
(Millions of Dollars)
Item 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Maintenance and repairs.... $1,024 $1,047 $1,043
====== ====== ======
Selling, general and
administrative expenses.. $ 688 $ 671 $ 634
====== ====== ======
Taxes other than payroll
and income taxes:
Property/Ad valorem tax.. $ 105 $ 84 $ 93
Other taxes.............. 92 70 93
------ ------ ------
Total ................. $ 197 $ 154 $ 186
====== ====== ======
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit Number
- --------------
(3)(a) Union Pacific's Revised Articles of Incorporation, as amended
through April 17, 1992, are incorporated herein by reference
to Exhibit 3(a) to Union Pacific's Report on Form 10-Q for
the quarter ended March 31, 1992.
(3)(b) Union Pacific's By-Laws, amended effective as of January 27,
1994, are incorporated herein by reference to Exhibit 3.3 to
Union Pacific's Registration Statement on Form S-3 (File No.
33-52645).
(4) Pursuant to various indentures and other agreements, Union
Pacific has issued long-term debt, but no such agreement has
securities or obligations covered thereby which exceed 10% of
Union Pacific's total consolidated assets. Union Pacific
agrees to furnish the Commission with a copy of any such
indenture or agreement upon request by the Commission.
(10)(a) The Executive Incentive Plan of Union Pacific Corporation and
Subsidiaries, amended effective as of September 30, 1993, is
incorporated herein by reference to Exhibit 10 to Union
Pacific's Report on Form 10-Q for the quarter ended September
30, 1992 and Exhibit 10(a) to Union Pacific's Report on Form
10-Q for the quarter ended September 30, 1993.
(10)(b) The 1982 Stock Option and Restricted Stock Plan of Union
Pacific Corporation, as amended as of February 1, 1992, is
incorporated herein by reference to Exhibit 10(c) to Union
Pacific's Report on Form 10-K for the year ended December 31,
1991.
(10)(c) The 1988 Stock Option and Restricted Stock Plan of Union
Pacific Corporation, as amended as of February 1, 1992, is
incorporated herein by reference to Exhibit 10(d) to Union
Pacific's Report on Form 10-K for the year ended December 31,
1991.
(10)(d) The Supplemental Pension Plan for Officers and Managers of
Union Pacific Corporation and Affiliates, as amended and
restated.
(10)(e) The Supplemental Pension Plan for Exempt Salaried Employees
of Union Pacific Resources Company and Affiliates, as amended
and restated.
(10)(f) The Employment Agreement, dated as of January 30, 1986,
between Union Pacific and Andrew L. Lewis, Jr. is incorpo-
rated herein by reference to Exhibit 10(e) to Union Pacific's
Report on Form 10-K for the year ended December 31, 1985.
(10)(g) The 1990 Retention Stock Plan of Union Pacific Corporation,
as amended as of September 30, 1993, is incorporated herein
by reference to Exhibit 10(e) to Union Pacific's Report on
Form 10-Q for the quarter ended September 30, 1991 and
Exhibit 10(b) to Union Pacific's Report on Form 10-Q for the
quarter ended September 30, 1993.
(10)(h) The 1992 Restricted Stock Plan for Non-Employee Directors of
Union Pacific Corporation, as amended as of January 28, 1993,
is incorporated herein by reference to Exhibit 10(a) to Union
Pacific's Current Report on Form 8-K filed March 16, 1993.
(10)(i) The 1993 Stock Option and Retention Stock Plan of Union
Pacific Corporation, as amended as of September 30, 1993, is
incorporated herein by reference to Exhibit 10(b) to Union
Pacific's Current Report on Form 8-K filed March 16, 1993 and
Exhibit 10(c) to Union Pacific's Report on Form 10-Q filed
for the quarter ended September 30, 1993.
(10)(j) Pension Plan for Non-Employee Directors of Union Pacific
Corporation is incorporated herein by reference to Exhibit
10(k) to Union Pacific's Report on Form 10-K for the year
ended December 31, 1992.
(10)(k) Written Description of Deferred Compensation Plan for Non-
Employee Directors of Union Pacific Corporation is
incorporated herein by reference to Exhibit 10(l) to Union
Pacific's Report on Form 10-K for the year ended December 31,
1992.
(10)(l) Written Description of Charitable Contribution Plan for Non-
Employee Directors of Union Pacific Corporation is
incorporated herein by reference to Exhibit 10(m) to Union
Pacific's Report on Form 10-K for the year ended December 31,
1992.
(10)(m) Written Description of Executive Life Insurance Plan of Union
Pacific Corporation is incorporated herein by reference to
Exhibit 10(n) to Union Pacific's Report on Form 10-K for the
year ended December 31, 1992.
(10)(n) Written Description of Other Executive Compensation
Arrangements of Union Pacific Corporation is incorporated
herein by reference to Exhibit 10(o) to Union Pacific's
Report on Form 10-K for the year ended December 31, 1992.
(11) Statement re computation of earnings per share.
(12) Statement re computation of ratio of earnings to fixed
charges.
(13) Pages 14 through 45, inclusive, and the system map contained
on the inside back cover of Union Pacific's Annual Report to
Stockholders for the year ended December 31, 1993, but
excluding photographs set forth on pages 14 through 22, which
do not supplement the text and are not otherwise required to
be disclosed in this Form 10-K.
(21) List of Union Pacific's significant subsidiaries and their
respective states of incorporation.
(23) Independent Auditors' Consent.
(24) Powers of attorney executed by the directors of Union
Pacific.
(99)(a) Form 11-K Annual Report of the Union Pacific
Corporation Thrift Plan for the Fiscal Year Ended December
31, 1993 - To be filed by amendment.
(99)(b) Form 11-K Annual Report of the USPCI, Inc. Savings Plan for
the Fiscal Year Ended December 31, 1993 - To be filed by
amendment.
(99)(c) Form 11-K Annual Report of the Union Pacific Fruit Express
Company Agreement Employee 401(k) Retirement Thrift Plan for
the Fiscal Year Ended December 31, 1993 - To be filed by
amendment.
(99)(d) Form 11-K Annual Report of the Skyway Retirement Savings Plan
for the Fiscal Year Ended December 31, 1993 - To be filed by
amendment.
(99)(e) Form 11-K Annual Report of the Union Pacific Agreement
Employee 401(k) Retirement Thrift Plan for the Fiscal Year
Ended December 31, 1993 - To be filed by amendment.
<PAGE> 1
EXHIBIT 10(d)
SUPPLEMENTAL PENSION PLAN
For Officers and Managers
of
Union Pacific Corporation
and
Affiliates
(As amended and restated in its entirety
effective as of January 1, 1976, including all
amendments adopted through May, 1990)
<PAGE> 2
TABLE OF CONTENTS
Article Page
------- ----
One Scope of Supplemental Plan and Definitions 3
Two Total Service and Vesting Service 6
Three Amount and Payment of Pension 7
Four Manner of Payment 12
Five Vesting 13
Six Employee Transfers 14
Seven Optional Pre-Retirement Survivor's Benefit 15
Eight Administration 18
Nine Amendment or Termination 20
Ten General Provisions 21
Eleven Transfers to Non-Covered Employment 22
<PAGE> 3
ARTICLE ONE
Scope of Supplemental Plan and Definitions
1.1 The "Union Pacific Railroad Company Pension Plan," effective May 5,
1937, as amended from time to time, and as in effect immediately prior to July
1, 1968, shall establish the rights of officers and supervisors whose
remuneration and working conditions were not subject to agreement and who
retired prior to July 1, 1968. The Prior Supplemental Plan, effective July 1,
1968, and as amended from time to time, shall establish the rights of officers
and supervisors whose remuneration and working conditions were not subject to
agreement and who retired or otherwise terminated their employment on or after
July 1, 1968 and prior to January 1, 1976. The Supplemental Plan, as set
forth herein, effective January 1, 1976, and as it may hereafter be amended
from time to time, shall establish the rights of officers and managers whose
remuneration and working conditions are not subject to agreement and who
retire or otherwise terminate their employment on or after January 1, 1976.
The rights provided to officers and managers under the Supplemental Plan shall
be in addition to, and not in lieu of, the rights, if any, provided to such
persons under the "Pension Plan for Salaried Employees of Union Pacific
Corporation and Affiliates," effective January 1, 1976, and as it may
hereafter be amended from time to time.
1.2 As used in this Supplemental Plan, the following terms have the
meanings set forth below, unless a different meaning is plainly required by
the context:
(a) "Administrator" means the Senior Vice President-Human Resources of Union
Pacific.
(b) "Average Earnings" for purposes of Sections 3.1(a) and 3.4 means the
average Earnings of a Participant for any 60 months of highest Earnings
preceding his Retirement Date; provided, however, that for purposes of
such calculation, the Earnings of such Participant following July 1,
1968 shall be deemed to be his annual Earnings as of July 1, 1968.
(c) "Company" means Union Pacific Corporation (herein called "Union
Pacific") and any Affiliate of Union Pacific which is included in the
Supplemental Plan by action of (1) its Board of Directors and (2) either
the Board of Directors or the Administrator; provided, however, if an
Affiliate of Union Pacific is included in the Plan by virtue of action
by the Administrator, unless the Board of Directors ratifies such action
not later than the first regularly scheduled meeting of the Board of
Directors held subsequent to the taking of such action by the
Administrator, such Affiliate shall cease to be so included as of the
close of business on the last day of the month in which such meeting
occurs.
(d) "Early Supplemental Pension" means the pension provided for in Section
3.4.
(e) "Effective Date" means January 1, 1976.
(f) "Excess Supplemental Pension" means the pension provided for in Section
3.6.
(g) "Incentive Compensation" means incentive compensation awarded a
Participant under the Executive Incentive Plan of Union Pacific
Corporation and Subsidiaries, as amended and restated as of January 1,
1981 and as it may thereafter be amended from time to time, but only to
<PAGE> 4
the extent that such incentive compensation is not taken into account in
computing the Participant's Final Average Earnings under the Plan.
Awards of Incentive Compensation shall be taken into account on the
accrual basis at the time such awards are made, provided, however, that
no more than three awards of Incentive Compensation shall be taken into
account for any 36-month period.
(h) "Normal Supplemental Pension" means the pension provided for in Section
3.3.
(i) "Participant" means
(i) any person who was a Participant in the Prior
Supplemental Plan on December 31, 1975 and who
is an Employee on the Effective Date, or
(ii) any Member of the Plan who is an officer or
manager of the Company and whose remuneration
and working conditions are not subject to
agreement.
(j) "Plan" means the "Pension Plan for Salaried Employees of Union Pacific
Corporation and Affiliates", effective January 1, 1976, and as it may be
hereafter amended from time to time.
(k) "Postponed Supplemental Pension" means the pension provided for in
Section 3.5.
(l) "Prior Supplemental Plan" means the "Supplemental Pension Plan for
Officers and Supervisors of Union Pacific Railroad Company and
Affiliates" as it existed on December 31, 1975.
(m) "Supplemental Plan" means the "Supplemental Pension Plan for Officers
and Managers of Union Pacific Corporation and Affiliates," as described
herein, and as it may hereafter be amended from time to time; such term
shall also include the Prior Supplemental Plan, except where specific
reference is made to the Prior Supplemental Plan.
(n) "Surviving Spouse" means the spouse of a Participant who is legally
married to the Participant on the date of his death and
(i) where payments to the Participant under the
Supplemental Plan have not begun, who was legally
married to the Participant continuously during the
12 months immediately preceding the date of the
Participant's death, or
(ii) where payments to the Participant under the
Supplemental Plan have begun, who was legally
married to the Participant continuously during the
12 months immediately preceding the date that such
payments began.
(o) "Surviving Spouse's Pension" means the pension provided for in Section
3.7.
(p) "Total Service" means the period of service recognized for Supplemental
Plan purposes, as set forth in Section 2.1.
(q) "Vesting Service" means the period of service recognized for
Supplemental Plan purposes, as set forth in Section 2.2.
<PAGE> 5
(r) The following terms have the respective meanings set forth in the
definition provisions of Section 1.2 of the Plan:
(i) Actuarial Equivalent
(ii) Affiliate
(iii) Board of Directors
(iv) Continuous Service
(v) Credited Service
(vi) Early Retirement Date
(vii) Early Retirement Pension
(viii) Earnings
(ix) Employment Commencement Date
(x) Employment
(xi) Final Average Earnings
(xii) Member
(xiii) Normal Retirement Date
(xiv) Normal Retirement Pension
(xv) Postponed Retirement Date
(xvi) Postponed Retirement Pension
(xvii) Retirement Date
(xviii) Year of Service
(xix) Contingent Annuitant
(xx) Hour of Service
(xxi) Retirement Pension
The masculine pronoun wherever the context so indicates shall include
the feminine. Wherever any words are used herein in the singular, they
shall be construed as though they were also used in the plural in all
cases where they shall so apply.
<PAGE> 6
ARTICLE TWO
Total Service and Vesting Service
2.1 Total Service. (expressed in the years, including portions thereof)
shall include:
(a) all years of Credited Service (including portions thereof) as set
forth in Article Three of the Plan;
(b) such additional years of training prior to the Participant's
Employment Commencement Date, as may have, in the opinion of the
Company, especially qualified the Participant for service with the
Company, but only after approval of such additional years by the
Board of Directors and the communication of such approval to the
Participant (including any such years approved under the Prior
Supplemental Plan); and,
(c) as provided in Section 3.1(a) and in Section 3.5, but only in
respect of a Participant entitled to a Supplemental Pension pursuant
to Section 3.1(a), a Participant's entire uninterrupted period of
service with the Company, if any, subsequent to attainment of age
65.
2.2 Vesting Service. (expressed in years, including portions thereof)
shall include:
(a) all years of Continuous Service (including portions thereof) as set
forth in Article Two of the Plan; and
(b) any additional years approved under Section 2.1(b).
<PAGE> 7
ARTICLE THREE
Amount and Payment of Pension
3.1 Normal Make-up Pension. A Participant who on July 1, 1968 had
attained age 55 and who was at that time a participant in the Prior
Supplemental Plan shall be entitled to an annual normal make-up pension
commencing on his Normal Retirement Date equal to the excess, if any, of (a)
over (b), where:
(a) equals a sum arrived at by taking 0.5% of the first
$4,800 and 1.25% of the excess of such Participant's
Average Earnings and multiplying that amount by his
Total Service included in Total Service, for this
purpose (i) in the case of Participants who attained age
65 prior to July 1, 1968, all service beyond age 65,
and (ii) in the case of Participants whose Total
Service includes the 10 years immediately preceding
Retirement Date, the period of full-time service with
any common carrier railroad company (established to the
satisfaction of the Administrator); and
(b) equals the annual Normal or Early or Postponed
Retirement Pension determined under Article Five of the
Plan without regard, however, to the limitation in
Section 5.5 thereof.
3.2 Normal Additional Years of Service and/or Incentive Compensation
Pension. A Participant whose Total Service includes additional years under
Section 2.1(b) beyond the years of Credited Service recognized under Article
Three of the Plan and/or who has been awarded Incentive Compensation within
the 10-year period immediately preceding his Retirement Date will be entitled
to an annual additional years of service and/or incentive compensation
pension, commencing on his Normal Retirement Date, equal to the excess of (i)
the annual Normal Retirement Pension computed on the basis of the formula
provided in Section 5.1 of the Plan, including in the Participant's Final
Average Earnings under such formula the Incentive Compensation awarded such
Participant and utilizing all such additional years included in Total Service,
but not beyond an aggregate of 40 years of Total Service, over (ii) the annual
Normal or Early or Postponed Retirement Pension determined under Article Five
of the Plan without regard, however, to the limitation in Section 5.5 thereof.
3.3 Normal Supplemental Pension. A Participant who is entitled to
receive a normal make-up pension as provided in Section 3.1 and is also
entitled to receive a normal additional years of service and/or incentive
compensation pension as provided in Section 3.2, shall receive whichever
furnishes the higher Normal Supplemental Pension.
3.4 Early Supplemental Pension. A Participant retired on an Early
Retirement Date shall be entitled to receive a supplemental pension commencing
at Normal Retirement Date, computed in accordance with Section 3.3, based upon
Total Service rendered and/or Incentive Compensation awarded, and for purposes
of Section 3.1(a), if applicable, Average Earnings prior to his Early
Retirement Date. In lieu thereof, such Participant may elect to receive a
reduced supplemental pension, commencing on his Early Retirement Date, which
is the Normal Supplemental Pension accrued under the Supplemental Plan to his
Early Retirement Date multiplied by the early retirement factor determined
from the table below (prorated on a monthly basis for fractions of a year).
<PAGE> 8
EARLY RETIREMENT FACTORS
Age on Early
Retirement Date Percentage Factor
--------------- -----------------
55 60
56 65
57 70
58 75
59 80
60 85
61 88
62 91
63 94
64 97
3.5 Postponed Supplemental Pension. A Participant who at the request of
the Company retires on a Postponed Retirement Date shall be entitled to a
supplemental pension, commencing on his Postponed Retirement Date, which is
the Normal Supplemental Pension; provided, however, that, in the case of a
Participant entitled to a Normal Make-up Pension as provided in Section 3.1,
Normal Supplemental Pension shall be calculated on the basis of including in
Total Service for the purpose of Section 3.1(a) all years beyond Normal
Retirement Date.
3.6 Excess Supplemental Pension. A Participant whose Normal or Early or
Postponed Retirement Pension is reduced as a result of the application of the
limitation in Section 5.5 of the Plan shall be entitled to a supplemental
pension, commencing on his Retirement Date, equal to the amount of such
reduction.
3.7 Surviving Spouse's Pension. The Surviving Spouse of a Participant
having attained age 55, and having retired on or after July 1, 1974, or of a
Participant having attained age 65 on or after July 1, 1974 shall be entitled
to a Surviving Spouse's Pension equal to one-half of the normal form of the
Normal or Early or Postponed or Excess Supplemental Pension payable to such
deceased Participant under the Supplemental Plan. Such Surviving Spouse's
Pension shall be payable to such Spouse in equal monthly installments for
life, commencing on the first day of the month immediately following the death
of such Participant. In no event shall the Surviving Spouse who was also
designated as the Participant's Contingent Annuitant under the Plan receive
more than 100% of the retirement income payable to the Participant under the
Contingent Annuitant Option under the Plan.
3.8 Involuntary Termination Supplemental Pension.
(a) In addition to a Normal Supplemental Pension determined
under Section 3.3, if the employment of any Participant
(i) who is elected officer, and (ii) whose highest
annual Earnings (plus Incentive Compensation) is not
less than $200,000, is involuntarily terminated prior
to the 5th anniversary date of a "change in control"
(as hereinafter defined) and prior to his Normal
Retirement Date, and if, at the time of such
involuntary termination, such Participant has completed
10 or more years of Continuous Service and is within
the 10-year period immediately preceding his Normal
Retirement Date, such Participant shall be entitled to
an Involuntary Termination Supplemental Pension
commencing on his Normal Retirement Date, equal to the
excess of (i) the Normal Supplemental Pension computed
in accordance with Section 3.3, based on Total Service
<PAGE> 9
rendered and as projected to be rendered to the 5th
anniversary of such change in control (or, if earlier,
his Normal Retirement Date) over (ii) the Normal
Supplemental Pension determined under Section 3.3. In
lieu thereof, such Participant shall, in the event he
elects an Early Retirement Date, receive an Involuntary
Termination Supplemental Pension commencing on such
Early Retirement Date, equal to the excess of (i) the
Early Supplemental Pension computed in accordance with
Section 3.4, based on Total Service rendered and as
projected to be rendered to the 5th anniversary of such
change in control (or, if earlier, his Normal
Retirement Date) multiplied by the early retirement
factor determined from the table set forth in Section
3.4, but based on the Participant's projected age on
the 5th anniversary date of such change in control (or,
if earlier, his Normal Retirement Date), over (ii) the
Early Supplemental Pension determined under Section
3.4.
(b) In addition to any supplemental pension determined
under Section 5.2, if the employment of any Participant
(other than a Participant described in (a) above (i)
who is an elected officer and (ii) whose highest annual
Earnings (including Incentive Compensation) is not less
than $200,000) is involuntarily terminated prior to the
5th anniversary date of a change in control and prior
to his Normal Retirement Date, and if such Participant
would have attained age 55 and been credited with at
least 15 years of Vesting Service had he continued to
be employed to such 5th anniversary date, such
Participant shall be entitled to an Involuntary
Termination Supplemental Pension commencing on the date
his supplemental pension under Section 5.2 commences,
equal to the excess of (i) the supplemental pension
computed in accordance with Section 5.2, based on Total
Service rendered and as projected to be rendered to the
5th anniversary of such change in control (or, if
earlier, his Normal Retirement Date), provided that, in
the event such Participant elects to receive his
supplemental pension commencing on a date prior to his
Normal Retirement Date, the Actuarial Equivalent
referred to in Section 5.2 shall be based on the
Participant's projected age on the 5th anniversary date
of such change of control (or, if earlier, his Normal
Retirement Date), over (ii) the supplemental pension
determined under Section 5.2
(c) For purposes of this Section 3.8, the term "involuntary
termination" means any action taken subsequent to a
change in control by the Company or any successor to,
or assignee of, its obligations under this Supplemental
Plan, terminating employment for other than an unlawful
act or, without the consent of a Participant, adversely
affecting the employment status by reducing earnings or
demoting in title, or lessening of authority or
responsibilities, or changing the situs of employment
which requires a change of residence, of such
Participant.
(d) For purposes of this Section 3.8, a change in control
shall occur if (i) any person (within the meaning of
<PAGE> 10
Section 13(d) of the Securities Exchange Act of 1934
(the "Act")), other than Union Pacific Corporation or a
subsidiary of Union Pacific Corporation or any employee
benefit plan sponsored by Union Pacific Corporation or
a subsidiary of Union Pacific Corporation, shall become
the beneficial owner (as such term is defined in Rule
13d-3 under the Act) directly or indirectly of thirty
percent or more of the outstanding stock of Union
Pacific Corporation (calculated as provided in
paragraph (d) of Rule 13d-3 under the Act in the case
of rights to acquire common stock), (ii) the
shareholders of Union Pacific Corporation shall approve
(A) any consolidation or merger of Union Pacific
Corporation in which Union Pacific Corporation is not
the continuing or surviving corporation or pursuant to
which shares of common stock of Union Pacific
Corporation would be converted into cash, securities or
other property, other than a merger of Union Pacific
Corporation in which holders of common stock of Union
Pacific Corporation immediately prior to the merger
have the same proportionate ownership of common stock
of the surviving corporation immediately after the
merger as immediately before or (B) any sale, lease,
exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially
all the assets of Union Pacific Corporation or (iii)
there shall have been a change in the composition of
the Board of Directors of Union Pacific Corporation
such that within any period of two consecutive years or
less individuals who at the beginning of such period
constituted such Board, together with any new directors
whose election, or nomination for election by Union
Pacific Corporation's stockholders, was approved by a
vote of at least two-thirds of the directors then in
office who were directors at the beginning of such
period, shall for any reason no longer constitute a
majority of the directors of Union Pacific Corporation.
(e) In the event any amount paid or benefit otherwise
received by a Participant under the Supplemental Plan
shall be determined by the Internal Revenue Service to
constitute an "excess parachute payment" as such term
is defined in Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code"), and to be subject to
an excise tax under Section 4999 of the Code, or any
successor provision thereto (collectively, "Excise
Tax"), the Company shall pay to the Participant an
additional amount such that after taking into account
taxes, including interest and penalties with respect
thereto, incurred by the Participant on the receipt of
such additional amount, the Participant is left with
the same after-tax amount the Participant would have
been left with had no Excise Tax been imposed.
3.9 Pre-Termination Age and Service Grant. The pension to which a
Participant would otherwise be entitled hereunder shall be redetermined by
including in Total Service such additional years as may be approved by the
Chief Executive Officer of Union Pacific Corporation prior to termination of
Employment or by adding to such Participant's age such additional years as may
then be approved by the Chief Executive Officer of Union Pacific Corporation,
or both, but not in excess of five years in either case. All rights of a
<PAGE> 11
Participant or his beneficiaries hereunder shall be determined on the basis of
such additional years. For purposes of Section 3.4 and Section 3.7, the age
of any Participant shall be determined by adding to such Participant's age
such additional years as were granted to such person under the Plan.
3.10 Suspension of Benefits. Notwithstanding any provisions of Article
Three or Article Five to the contrary, the payment of the supplemental pension
to which a Participant is otherwise entitled under the Supplemental Plan shall
be suspended during any period for which payment of the Retirement Pension to
which such Participant is otherwise entitled under the Plan is suspended under
the terms of the Plan due to such Participant's return to Employment. Upon
the resumption of payment of such supplemental pension to such Participant, no
actuarial or other adjustment shall be made to the amounts otherwise payable
to such Participant under the Supplemental Plan so as to reflect such
suspension.
<PAGE> 12
ARTICLE FOUR
Manner of Payment
4.1 The supplemental pension to which a Participant is entitled under
Section 3.3, 3.4, 3.5 or 3.6 shall be paid to him in the same form as the
manner of payment in effect for him under Article Six of the Plan.
<PAGE> 13
ARTICLE FIVE
Vesting
5.1 Termination Prior to Vesting. A Participant who terminates his
Employment prior to his Early or Normal Retirement Date and prior to his
completion of 3 years of Continuous Service shall not be entitled to any of
the benefits herein provided. If the Chief Executive Officer of Union Pacific
Corporation determines that the requirement set forth in the preceding
sentence of the completion of 3 years of Continuous Service would be
disadvantageous to the Company in the case of any Participant, such
requirement shall be increased to the completion of 5 years of Continuous
Service by the Participant. The Chief Executive Officer of Union Pacific
Corporation shall make his determination by the date the Participant
terminates his Employment.
5.2 Termination after Vesting. Except as provided in Section 6.2, a
Participant who terminates his Employment prior to his Normal or Early
Retirement Date but after his completion of 3 years or 5 years of Continuous
Service, whichever is applicable to him as determined under Section 5.1, shall
be entitled to receive, commencing on his Normal Retirement Date, the
supplemental pension accrued under the Supplemental Plan to the date he
terminated his Employment. In lieu thereof, such Participant may elect to
receive such supplemental pension commencing on the first day of any month
within the 10-year period preceding his Normal Retirement Date, in which case
such supplemental pension shall be the Actuarial Equivalent of the
supplemental pension which would have been payable on his Normal Retirement
Date, based upon the difference in age between the Participant's age when such
supplemental pension is to begin and his Normal Retirement Date.
5.3 Normal Form of Vested Benefit. The supplemental pension credited to
a vested terminated Participant shall be paid in equal monthly installments as
follows:
(a) If the Participant is married at the time payment is to
begin, his supplemental pension shall be paid in the
form of a 50% Contingent Annuitant Option calculated in
accordance with Section 6.3 of the Plan, with his
spouse as Contingent Annuitant.
(b) If the Participant is not married at the time payment
is to begin, his supplemental pension shall be in the
form of a life income pension, payable in equal
installments to him for life.
5.4 Optional Form of Vested Benefit. A vested terminated Participant
included in Section 5.3(a) above may elect at any time 90 or more days before
payment is to begin to receive his supplemental pension in the form of a life
income pension, payable in equal installments for life. If the vested
terminated Participant makes such election, no amount shall be payable to
his spouse under Section 5.3(a).
<PAGE> 14
ARTICLE SIX
Employee Transfers
6.1 Transfers into Supplemental Plan from Other Supplemental Plan. If
any employee who is a participant in any other supplemental pension plan of an
Affiliate is transferred to the Company and is a Participant in this
Supplemental Plan after such transfer, such employee shall retain no rights in
the other supplemental pension plan from which he is transferred and shall
receive all benefits to which he is entitled under this Supplemental Plan,
based upon his Total Service which shall include as to such employee any
service used in determining his benefits under such other supplemental pension
plan.
6.2 Transfers to Other Supplemental Plans. If a Participant is
transferred to an Affiliate and becomes a participant in a supplemental
pension plan of the Affiliate after such transfer, such Participant shall
retain no rights in this Supplemental Plan if such other supplemental pension
plan has provisions that substantially conform to the transfer provisions for
the protection of transferees that are contained in this Article Six.
6.3 No Duplication of Benefits. There shall under no circumstances be
any duplication of benefits under this Supplemental Plan or any supplemental
pension plan of an Affiliate by reason of the same period of employment.
<PAGE> 15
ARTICLE SEVEN
Optional Pre-Retirement Survivor's Benefit
7.1 Eligibility
(a) General - The Surviving Spouse of a Participant who had
at least one Hour of Service after August 22, 1984 and
who either (i) terminated Employment due to death prior
to his Normal Retirement Date or (ii) (A) terminated
Employment other than due to death after his completion
of 3 years or 5 years of Continuous Service, whichever
is applicable to him as determined under Section 5.1,
but prior to the 10-year period immediately preceding
his Normal Retirement Date and (B) died prior to the
time payment of the supplemental pension credited to
such Participant would otherwise have begun pursuant to
Section 5.3, shall, except to the extent provided in
subsection (b) of this Section 7.1, receive the benefit
determined pursuant to Section 7.2
(b) Waiver - The Surviving Spouse of a Participant
described in subsection (a) of this Section 7.1 shall
not receive that benefit determined pursuant to Section
7.2 if there is in effect, for purposes of Section 8.1
of the Plan, on the date of such Participant's death a
waiver with respect to such Participant complying with
the requirements of subsection (b) of Section 8.1 of
the Plan.
7.2 Benefit -
(a) General - The benefit payable to the Surviving Spouse
of a Participant described in Clause "(i)" of
subsection (a) of Section 7.1 shall be equal to 50% of
the supplemental pension, reduced to the extent
required pursuant to subsection (c) of this Section
7.2, such Participant would have received determined,
to the extent otherwise applicable, in accordance with
Section 3.4 had such Participant received a
supplemental pension (i) commencing as of the later of
(A) the earliest date on which such Participant's Early
Retirement Date could have occurred, had such
Participant not died prior thereto, based upon the
Total Service actually credited to such Participant, or
(B) the first day of the month immediately following
the date of such Member's death and (ii) in the form of
a 50% Contingent Annuitant Option calculated in
accordance with Section 6.3 of the Plan, with his
Surviving Spouse as Contingent Annuitant. The benefit
payable to the Surviving Spouse of a Participant
described in clause "(ii)" of subsection (a) of Section
7.1 shall be equal to 50% of the supplemental pension,
reduced to the extent required pursuant to subsection
(c) of this Section 7.2, such Participant would have
received determined, to the extent otherwise
applicable, under Section 5.2 had such Participant
commenced receiving a supplemental pension (i)
commencing as of the later of (A) the earliest date on
which such Participant could have commenced receiving
<PAGE> 16
his supplemental pension pursuant to Section 5.2, had
such Participant not died prior thereto, based upon the
Total Service actually credited to such Participant or
(B) the first day of the month immediately following
the date of such Participant's death and (ii) in the
form of 50% Contingent Annuitant Option, calculated in
accordance with Section 6.3 of the Plan, with his
Surviving Spouse as Contingent Annuitant.
(b) Timing - The benefit a Surviving Spouse of a
Participant shall be entitled to pursuant to subsection
(a) of the Section 7.2 shall be paid monthly to such
Surviving Spouse, commencing as of the later of (i) the
earliest date on which (A) such Member's Early
Retirement Date could have occurred or (B) such
Participant could have commenced receiving his
supplemental pension pursuant to Section 5.2, as the
case may be, had such Participant not died prior
thereto or (ii) the first day of the month immediately
following the date of such Participant's death and
shall continue thereafter with the last payment being
made on the first day of the month in which the
Surviving Spouse dies.
(c) Cost of Benefit - For purposes of determining the
benefit payable pursuant to subsection (a) of this
Section 7.2 to the Surviving Spouse of a Participant
described in subsection (a) of Section 7.1, the
supplemental pension such Participant would have
received as of the date which is relevant under
subsection (a) of this Section 7.2 in determining the
amount of the benefit payable to such Surviving Spouse,
determined under whichever provisions of the
Supplemental Plan would have been applicable with
respect to such Participant, shall be reduced by the
sum of:
(i) if such Participant had attained at least 55 years
of age and completed at least 10 years of Vesting
Service (including in such Vesting Service not
less than 5 years of Continuous Service) prior to
August 23, 1984, 1/24 of 1% for each calendar
month or part thereof prior to August 23, 1984 for
which such Participant had in effect an election
prior to the amendment and restatement of such
Article effective as of August 22, 1984 and
(ii) 1/24 of 1% for each calendar month or part thereof
subsequent to December 31, 1986 with respect to
which a 1/24 of 1% per month reduction is imposed
under Article Eight of the Plan in determining the
benefit payable to such Surviving Spouse under
such Article Eight or would be so imposed under
such Article Eight were the number of such
Participant's years of Continuous Service under
the Plan equal to the number of such Participant's
years of Total Service.
7.3 Reduction in Participant's Retirement Pension - Notwithstanding any
other provision of the Supplemental Plan to the contrary, a Participant who
has at least one Hour of Service after August 22, 1984 shall have such
Participant's supplemental pension, determined under whichever provisions of
<PAGE> 17
the Supplemental Plan shall be applicable to such Participant, reduced for all
purposes of the Supplemental Plan in an amount equal to the reduction which
would have occurred under subsection (c) of Section 7.2 with respect to such
Participant's supplemental pension had such Participant died on the day
immediately preceding the earlier of (i) the date on which such Participant
attains age 65, (ii) the date with respect to which payment of the
supplemental pension credited to such Participant shall commence or (iii) if
such Participant terminates Employment within the 10-year period immediately
preceding his Normal Retirement Date, the date such Member terminates
Employment.
<PAGE> 18
ARTICLE EIGHT
Administration
8.1 Administration. To the extent herein provided, the Senior Vice
President-Human Resources of Union Pacific shall have authority to control and
manage the operation and administration of the Supplemental Plan. For
purposes of the Supplemental Plan, the Senior Vice President-Human Resources
of Union Pacific shall be referred to as the Administrator.
8.2 Responsibilities and Powers of Administrator. Except for the
responsibilities and powers elsewhere herein given specifically to the Board
of Directors, the Administrator shall have all responsibilities for the
operation and administration of the Supplemental Plan and shall have all
powers necessary to carry out his responsibilities hereunder. Without
limiting the generality of the foregoing, the Administrator shall have the
responsibility and power to:
(a) keep and maintain such accounts and records with
respect to Participants as he may deem necessary or
proper;
(b) determine all questions of the eligibility and of the
status and rights of Participants and any other person
hereunder and interpret and construe the Supplemental
Plan in connection therewith; and,
(c) adopt from time to time mortality and other tables and
interest rates upon which all actuarial calculations
shall be based, including the determination of the
appropriate factors for the adjustment of pension
payments.
The Administrator shall carry out all his responsibilities and exercise all
his powers in accordance with the terms of the Supplemental Plan. The
determination of the Administrator as to any questions involving his
responsibilities hereunder shall be conclusive and binding on all persons.
8.3 Certification and Payment of Benefits. The Administrator shall
compute the amount and manner of payment of benefits to which the
Participants, retired Participants, Surviving Spouses and beneficiaries become
entitled. All payments of benefits shall be made directly by the Company upon
the instructions of the Administrator.
8.4 Reports to Board of Directors. As he deems necessary or proper or
as the Board of Directors may require, but in any event at least once during
each calendar year, the Administrator shall report to the Board of Directors
on the operation and administration of the Supplemental Plan and on any other
matter concerning the Supplemental Plan he deems advisable or required by the
Board of Directors.
8.5 Designation and Delegation. The Administrator may designate other
persons to carry out such of his responsibilities hereunder for the operation
and administration of the Supplemental Plan as he deems advisable and delegate
to the persons so designated such of his powers as he deems necessary to carry
out such responsibilities. Such designation and delegation shall be subject
to such terms and conditions as the Administrator deems necessary or proper.
Any action or determination made or taken in carrying out responsibilities
<PAGE> 19
hereunder by the persons so designated by the Administrator shall have the
same force and effect for all purposes as if such action or determination had
been made or taken by the Administrator.
8.6 Outside Services. The Administrator may engage counsel and such
clerical, medical, financial, actuarial, accounting and other specialized
services as he may deem necessary or desirable for the operation and
administration of the Supplemental Plan. The Administrator and persons
designated by him under Section 8.5 shall be entitled to rely, and shall
be fully protected in any action or determination or omission taken or made or
omitted in good faith in so relying, upon any opinions, reports or other
advice which is furnished by counsel or their specialist engaged for that
purpose.
8.7 Expenses. All expenses, including any fees for outside services
under Section 8.6, incurred by the Administrator and by persons designated by
him under Section 8.5 in the operation and administration of the Supplemental
Plan shall be paid by the Company. Neither the Administrator nor any
other person who is an Employee shall receive any compensation solely for
services in carrying out any responsibility hereunder.
8.8 Bonding. No bond or other security shall be required of the
Administrator or of any person designated by him under Section 8.5.
8.9 Liability. The Administrator and persons designated by him under
Section 8.5 shall use ordinary care and diligence in the performance of their
duties. The Company shall indemnify the Administrator and each other person
designated by him under Section 8.5 against any and all claims, loss,
damages, expense (including reasonable counsel fees), and liability arising
from any action or failure to act or other conduct in their official capacity,
except when the same is due to the gross negligence or willful misconduct of
the Administrator or other persons.
<PAGE> 20
ARTICLE NINE
Amendment or Termination
9.1 Amendment or Termination - The Board of Directions reserves the
right to modify, alter, amend or terminate the Supplemental Plan from time
to time and to modify, withdraw or terminate any pension granted under the
Supplemental Plan, to any extent that it may deem advisable; provided, that no
such modification, alteration, amendment or termination shall impair any
rights which have accrued to Participants hereunder to the date of such
modification, alteration, amendment or termination.
<PAGE> 21
ARTICLE TEN
General Provisions
10.1 No Right To Employment. Nothing herein contained shall be deemed
to give any Participant the right to be retained in the Employment of the
Company or to interfere with the rights of the Company to discharge any
Participant at any time.
10.2 Alienability of Benefits. Pension payments under the Supplemental
Plan may not be assigned or hypothecated, and to the extent permitted by law,
no such payments shall be subject to legal process or attachment for the
payment of any claims against any person entitled to receive the same.
10.3 Payment Due an Incompetent. If it shall be found that any person
to whom a payment is due hereunder is unable to care for his affairs
because of physical or mental disability, as determined by a licensed
physician, the Administrator shall have the authority to cause the payments
becoming due such person to be made to the legally appointed guardian of any
such person or to the spouse, brother, sister, or other person as it shall
determine. Payments made pursuant to such power shall operate as a complete
discharge of the Company.
10.4 Controlling State Law. The Plan shall be construed, regulated and
administered according to the laws of the State of Utah.
10.5 Successors. This Supplemental Plan shall be binding upon any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company in the same manner and to the same extent that the Company would be
bound to perform if no such succession had taken place.
<PAGE> 22
ARTICLE ELEVEN
Transfers to Non-Covered Employment
11.1 Notwithstanding any of the provisions of the Supplemental Plan to
the contrary, if an executive participating in the Plan is transferred to
the employment of a member of the controlled group of corporations of which
Union Pacific Corporation is the common parent that has not adopted either the
Plan or the Pension Plan for Employees of Union Pacific Resources Company
("non-covered employment"), upon the approval of the Chief Executive Officer
of Union Pacific Corporation, any benefits to which such executive would be
entitled under the Plan or the Supplemental Plan, or both, by treating such
executive's non-covered employment as if it were service covered by such Plans
and by aggregating such service with such executive's other service
covered by such plans shall be provided to such executive pursuant to the
provisions of this Article Eleven to the extent that such benefits exceed such
executive's benefits under the Plan, such executive benefits under the
Supplemental Plan determined without regard to the provisions of this Article
Eleven and such executive benefits under any other pension plan that are based
upon such executive benefits under any other pension plan that are based upon
such executive's non-covered employment. If any beneficiary would be entitled
to any benefits under the Plan or the Supplemental Plan, or both, as a result
of treating such executive's non-covered employment as if it were service
covered by such Plans and by aggregating such service with such executive's
other service covered by such Plans, such benefits shall be provided to such
beneficiary pursuant to the provisions of this Article Eleven to the extent
that such benefits exceed such beneficiary's benefits under the Plan, such
beneficiary's benefits under the Supplemental Plan determined without regard
to the provisions of this Article Eleven and such beneficiary's benefits under
any other pension plan that are based upon such executive's non-covered
employment.
<PAGE> 1
EXHIBIT 10(e)
SUPPLEMENTAL PENSION PLAN
For Exempt Salaried Employees
of
Union Pacific Resources Company
and
Affiliates
(As amended and restated in its entirety
effective as of January 1, 1976, including all
amendments adopted through August, 1993)
<PAGE> 2
TABLE OF CONTENTS
Article Page
------- ----
One Scope of Plan and Definitions 3
Two Total Service and Vesting Service 6
Three Amount and Payment of Pension 7
Four Manner of Payment 11
Five Vesting 12
Six Employee Transfers 14
Seven Pre-Retirement Survivor's Benefit 15
Eight Administration 18
Nine Amendment or Termination 20
Ten General Provisions 21
Eleven Transfers to Non-Covered Employment 22
<PAGE> 3
ARTICLE ONE
Scope of Plan and Definitions
1.1 The Prior Supplemental Plan, effective January 1, 1971, and as
amended from time to time, shall establish certain rights of certain exempt
salaried employees of the Company who retired or otherwise terminated their
employment on or after January 1, 1971 and prior to January 1, 1976. The
Supplemental Plan, as set forth herein, effective January 1, 1976, and as it
may hereafter be amended from time to time, shall establish certain rights of
certain exempt employees of the Company who retire or otherwise terminate
their employment on or after January 1, 1976. The rights provided for such
exempt salaried employees under the Supplemental Plan shall be in addition to,
and not in lieu of, the rights, if any, provided to such individuals under the
"Pension Plan for Salaried Employees of Union Pacific Corporation and
Affiliates," effective January 1, 1990 and as it may thereafter be amended
from time to time.
1.2 As used in this Supplemental Plan, the following terms have the
meanings set forth below, unless a different meaning is plainly required by
the context:
(a) "Administrator" means the Vice President-Benefit Administration of
Resources.
(b) "Company" means Union Pacific Resources Company (herein called
"Resources") and any Affiliate which is included in the Supplemental
Plan by action of the Board of Directors of Resources and such
Affiliate.
(c) "Early Supplemental Pension" means the pension provided for in Section
3.3.
(d) "Effective Date" means January 1, 1976.
(e) "Excess Supplemental Pension" means the pension provided for in Section
3.4.
(f) "Incentive Compensation" means Incentive compensation awarded a
Participant under the Executive Incentive Plan of Union Pacific
Corporation and Subsidiaries, as amended and restated as of January 1,
1981 and as it may thereafter be amended from time to time, but only to
the extent that such incentive compensation is not taken into account in
computing the Participant's Final Average Earnings under the Plan.
Awards of Incentive Compensation shall be taken into account on the
accrual basis at the time such awards are made, provided, however, that
no more than three awards of Incentive Compensation shall be taken into
account for any 36-month period.
(g) "Normal Supplemental Pension" means the pension provided for in Section
3.1.
(h) "Participant" means any employee of the Company who has been designated
as a Participant by the Board of Directors.
(i) "Plan" means the "Pension Plan for Salaried Employees of Union Pacific
Corporation and Affiliates", effective January 1, 1990, and as it may be
hereafter amended from time to time.
<PAGE> 4
(j) "Prior Supplemental Plan" means the "Supplemental Pension Plan for
Exempt Salaried Employees of Champlin Petroleum Company" as it existed
on December 31, 1975.
(k) "Supplemental Plan" means the "Supplemental Pension Plan for Exempt
Salaried Employees of Union Pacific Resources Company and Affiliates" as
described herein, and as it may hereafter be amended from time to time;
such term shall also include the Prior Supplemental Plan, except where
specific reference is made to the Prior Supplemental Plan.
(l) "Surviving Spouse" means the spouse of a Participant who is legally
married to the Participant on the date of his death and
(i) where payments to the Participant under the
Supplemental Plan have not begun, who was legally
married to the Participant continuously during the
12 months immediately preceding the date of the
Participant's death, or
(ii) where payments to the Participant under the
Supplemental Plan have begun, who was legally
married to the Participant continuously during the
12 months immediately preceding the date that such
payments began.
(m) "Surviving Spouse's Pension" means the pension provided for in Section
3.5.
(n) "Total Service" means the period of service recognized for Supplemental
Plan purposes, as set forth in Section 2.1.
(o) "Vesting Service" means the period of service recognized for
Supplemental Plan purposes, as set forth in Section 2.2.
(p) The following terms have the respective meanings set forth in the
definition provisions of Section 1.2 of the Plan:
(i) Actuarial Equivalent
(ii) Affiliate
(iii) Continuous Service
(iv) Credited Service
(v) Early Retirement Date
(vi) Early Retirement Pension
(vii) Earnings
viii) Employee
(ix) Employment
(x) Employment Commencement Date
(xi) Final Average Earnings
(xii) Member
(xiii) Normal Retirement Date
(xiv) Normal Retirement Pension
(xv) Postponed Retirement Date
(xvi) Postponed Retirement Pension
(xvii) Retirement Date
(xviii) Year of Service
(xix) Contingent Annuitant
(xx) Hour of Service
(xxi) Retirement Pension
<PAGE> 5
(q) The masculine pronoun wherever the context so indicates shall include
the feminine. Wherever any words are used herein in the singular, they
shall be construed as though they were also used in the plural in all
cases where they shall so apply.
(r) "Board of Directors" means the board of directors of the Company.
<PAGE> 6
ARTICLE TWO
Total Service and Vesting Service
2.1 Total Service (expressed in the years, including portions thereof)
shall include:
(a) all years of Credited Service (including portions thereof) as set
forth in Article Three of the Plan; and,
(b) such additional years of training, prior to the Participant's
Employment Commencement Date or intervening between periods of
Employment, as has afforded to the Participant such training as has,
in the opinion of the Company, especially qualified him for his
position and induced his employment by the Company, but only after,
and to the extent that, (i) the Board of Directors has recommended
that credit for such additional years be granted, (ii) such
recommendation has been approved by the Board of Directors of Union
Pacific Corporation, and (iii) the Participant has been notified of
such approval (including any such additional years approved under
the Prior Supplemental Plan).
2.2 Vesting Service (expressed in years, including portions thereof)
shall include:
(a) all years of Continuous Service (including portions thereof) as set
forth in Article Two of the Plan; and,
(b) any additional years approved under Section 2.1(b).
<PAGE> 7
ARTICLE THREE
Amount and Payment of Pension
3.1 Normal Supplemental Pension. A Participant retired on his Normal
or Postponed Retirement Date will be entitled to receive an additional years
of service and/or incentive compensation pension computed as provided in
Section 3.3.
3.2 Additional Years of Service and/or Incentive
Compensation Pension. A Participant whose Total Service includes additional
years under Section 2.1(b) beyond the years of Credited Service recognized
under Article Three of the Plan and/or who has been awarded Incentive
Compensation within the 10-year period immediately preceding his Retirement
Date shall be entitled to an annual additional years of service and/or
incentive compensation pension, commencing on his Normal or Postponed
Retirement Date, equal to the excess of (i) the annual Normal Retirement
Pension computed on the basis of the formula provided in Section 5.1 of the
Plan, including in the Participant's Final Average Earnings under such formula
the Incentive Compensation awarded such Participant and utilizing all such
additional years included in Total Service, but not beyond an aggregate of 40
years of Total Service, over (ii) the annual Normal Retirement Pension
determined under Article Five of the Plan without regard, however, to the
limitation in Section 5.5 thereof.
3.3 Early Supplemental Pension. A Participant retired on an Early
Retirement Date shall be entitled to receive a supplemental pension commencing
at Normal Retirement Date, computed in accordance with Section 3.2, based upon
Total Service rendered and/or Incentive Compensation awarded prior to his
Early Retirement Date. In lieu thereof, such Participant may elect to receive
a reduced supplemental pension, commencing on his Early Retirement Date, which
is the Normal Supplemental Pension accrued under the Supplemental Plan to his
Early Retirement Date multiplied by the early retirement factor determined
from the table below (prorated on a monthly basis for fractions of a year).
EARLY RETIREMENT FACTORS
Age on Early
Retirement Date Percentage Factor
--------------- -----------------
55 60
56 65
57 70
58 75
59 80
60 85
61 88
62 91
63 94
64 97
3.4 Excess Supplemental Pension. A Participant whose Normal or Early or
Postponed Retirement Pension under the Plan is reduced as a result of the
application of the limitation in Section 5.5 of the Plan shall be entitled to
a supplemental pension, commencing on his Retirement Date, equal to the amount
of such reduction.
3.5 Surviving Spouse's Pension. The Surviving Spouse, if any, of a
deceased Participant who dies after retirement on a Postponed, Normal or Early
Retirement Date, or while an active Employee after his Normal Retirement Date,
shall receive a Surviving Spouse's Pension equal to one-half of the normal
<PAGE> 8
form of the supplemental pension payable to such deceased Participant under
the Supplemental Plan. Such Surviving Spouse's Pension shall be payable to
such Spouse in equal monthly installments for life, commencing on the first
day of the month immediately following the death of such Participant. In no
event shall the Surviving Spouse who was also designated as the Participant's
Contingent Annuitant under the Plan receive more than 100% of the retirement
income payable to the Participant under the Contingent Annuitant Option under
the Plan.
3.6 Involuntary Termination Supplemental Pension.
(a) In addition to a Normal Supplemental Pension determined
under Section 3.1, if the employment of any Participant
(i) who is elected officer, and (ii) whose highest
annual Earnings (plus Incentive Compensation) is not
less than $200,000, is involuntarily terminated prior
to the 5th anniversary date of a "change in control"
(as hereinafter defined) and prior to his Normal
Retirement Date, and if, at the time of such
involuntary termination, such Participant has completed
10 or more years of Continuous Service and is within
the 10-year period immediately preceding his Normal
Retirement Date, such Participant shall be entitled to
an Involuntary Termination Supplemental Pension
commencing on his Normal Retirement Date, equal to the
excess of (i) the Normal Supplemental Pension computed
in accordance with Section 3.1, based on Total Service
rendered and as projected to be rendered to the 5th
anniversary of such change in control (or, if earlier,
his Normal Retirement Date) over (ii) the Normal
Supplemental Pension determined under Section 3.1. In
lieu thereof, such Participant shall, in the event he
elects an Early Retirement Date, receive an Involuntary
Termination Supplemental Pension commencing on such
Early Retirement Date, equal to the excess of (i) the
Early Supplemental Pension computed in accordance with
Section 3.3, based on Total Service rendered and as
projected to be rendered to the 5th anniversary of such
change in control (or, if earlier, his Normal
Retirement Date) multiplied by the early retirement
factor determined from the table set forth in Section
3.3, but based on the Participant's projected age on
the 5th anniversary date of such change in control (or,
if earlier, his Normal Retirement Date), over (ii) the
Early Supplemental Pension determined under Section
3.3.
(b) In addition to any supplemental pension determined
under Section 5.2, if the employment of any Participant
(other than a Participant described in (a) above (i)
who is an elected officer and (ii) whose highest annual
Earnings (including Incentive Compensation) is not less
than $200,000) is involuntarily terminated prior to the
5th anniversary date of a change in control and prior
to his Normal Retirement Date, and if such Participant
would have attained age 55 and been credited with at
least 15 years of Vesting Service had he continued to
be employed to such 5th anniversary date, such
Participant shall be entitled to an Involuntary
Termination Supplemental Pension commencing on the date
his supplemental pension under Section 5.2 commences,
equal to the excess of (i) the supplemental pension
<PAGE> 9
computed in accordance with Section 5.2, based on Total
Service rendered and as projected to be rendered to the
5th anniversary of such change in control (or, if
earlier, his Normal Retirement Date), provided that, in
the event such Participant elects to receive his
supplemental pension commencing on a date prior to his
Normal Retirement Date, the Actuarial Equivalent
referred to in Section 5.2 shall be based on the
Participant's projected age on the 5th anniversary date
of such change of control (or, if earlier, his Normal
Retirement Date), over (ii) the supplemental pension
determined under Section 5.2.
(c) For purposes of this Section 3.6, the term "involuntary
termination" means any action taken subsequent to a
change in control by Union Pacific Corporation or the
Company or any successor to, or assignee of, its
obligations under this Supplemental Plan, terminating
employment for other than an unlawful act or, without the
consent of a Participant, adversely affecting the employment
status by reducing earnings or demoting in title, or lessening
of authority or responsibilities, or changing the situs of
employment which requires a change of resident, of such
Participant.
(d) For purposes of this Section 3.6, a change in control
shall occur if (i) any person (within the meaning of
Section 13(d) of the Securities Exchange Act of 1934
(the "Act")), other than Union Pacific Corporation or a
subsidiary of Union Pacific Corporation or any employee
benefit plan sponsored by Union Pacific Corporation or
a subsidiary of Union Pacific Corporation, shall become
the beneficial owner (as such term is defined in Rule
13d-3 under the Act) directly or indirectly of thirty
percent or more of the outstanding stock of Union
Pacific Corporation (calculated as provided in
paragraph (d) of Rule 13d-3 under the Act in the case
of rights to acquire common stock), (ii) the
shareholders of Union Pacific Corporation shall approve
(A) any consolidation or merger of Union Pacific
Corporation in which Union Pacific Corporation is not
the continuing or surviving corporation or pursuant to
which shares of common stock of Union Pacific
Corporation would be converted into cash, securities or
other property, other than a merger of Union Pacific
Corporation in which holders of common stock of Union
Pacific Corporation immediately prior to the merger
have the same proportionate ownership of common stock
of the surviving corporation immediately after the
merger as immediately before or (B) any sale, lease,
exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially
all the assets of Union Pacific Corporation or (iii)
there shall have been a change in the composition of
the Board of Directors of Union Pacific Corporation
such that within any period of two consecutive years or
less individuals who at the beginning of such period
constituted such Board, together with any new directors
whose election, or nomination for election by Union
Pacific Corporation's stockholders, was approved by a
vote of at least two-thirds of the directors then in
office who were directors at the beginning of such
<PAGE> 10
period, shall for any reason no longer constitute a
majority of the directors of Union Pacific Corporation.
(e) In the event any amount paid or benefit otherwise
received by a Participant under the Supplemental Plan
shall be determined by the Internal Revenue Service to
constitute an "excess parachute payment" as such term
is defined in Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code"), and to be subject to
an excise tax under Section 4999 of the Code, or any
successor provision thereto (collectively, "Excise
Tax"), the Company shall pay to the Participant an
additional amount such that after taking into account
taxes, including interest and penalties with respect
thereto, incurred by the Participant on the receipt of
such additional amount, the Participant is left with
the same after-tax amount the Participant would have
been left with had no Excise Tax been imposed.
3.7 Pre-Termination Age and Service Grant. The pension to which a
Participant would otherwise be entitled hereunder shall be redetermined by
including in Total Service such additional years as may be approved by the
Chief Executive Officer of Union Pacific Corporation prior to termination of
Employment or by adding to such Participant's age such additional years as may
then be approved by the Chief Executive Officer of Union Pacific Corporation,
or both, but not in excess of five years in either case. All rights of a
Participant or his beneficiaries hereunder shall be determined on the basis of
such additional years.
3.8 Suspension of Benefit. Notwithstanding any provisions of Article
Three or Article Five to the contrary, the payment of the supplemental pension
to which a Participant is otherwise entitled under the Supplemental Plan shall
be suspended during any period for which payment of the Retirement Pension to
which such Participant is otherwise entitled under the Plan is suspended under
the terms of the Plan due to such Participant's return to Employment. Upon
the resumption of payment of such supplemental pension to such Participant, no
actuarial or other adjustment shall be made to the amounts otherwise payable
to such Participant under the Supplemental Plan so as to reflect such
suspension.
<PAGE> 11
ARTICLE FOUR
Manner of Payment
4.1 The supplemental pension to which a Participant is entitled under
Section 3.1, 3.3 or 3.4 shall be paid to him in the same form as the manner of
payment, if any, in effect for him under Article Six of the Plan.
<PAGE> 12
ARTICLE FIVE
Vesting
5.1 Termination Prior to Vesting. A Participant who terminates his
Employment prior to his Early or Normal Retirement Date and prior to his
completion of 3 years of Continuous Service shall not be entitled to any of
the benefits herein provided. If the Chief Executive Officer of Union Pacific
Corporation determines that the requirement set forth in the preceding
sentence of the completion of 3 years of Continuous Service would be
disadvantageous to the Company in the case of any Participant, such
requirement shall be increased to the completion of 5 years of Continuous
Service by the Participant. The Chief Executive Officer of Union Pacific
Corporation shall make his determination by the date the Participant
terminates his Employment.
5.2 Termination after Vesting. Except as provided in Section 6.2, a
Participant who terminates his Employment prior to his Normal or Early
Retirement Date but after his completion of 3 years or 5 years of Continuous
Service, whichever is applicable to him as determined under Section 5.1, shall
be entitled to receive, commencing on his Normal Retirement Date, the
supplemental pension accrued under the Supplemental Plan to the date he
terminated his Employment. In lieu thereof, such Participant may elect to
receive such supplemental pension commencing on the first day of any month
within the 10-year period preceding his Normal Retirement Date, in which case
such supplemental pension shall be the Actuarial Equivalent of the
supplemental pension which would have been payable on his Normal Retirement
Date, based upon the difference in age between the Participant's age when such
supplemental pension is to begin and his Normal Retirement Date.
The immediately preceding paragraph shall not apply in the case of a
Participant (i) whose Employment terminates prior to his Normal or Early
Retirement Date but after the completion of 10 years of Vesting Service
(including in such Vesting Service not less than 5 years of Continuous Service
beginning not earlier than a Year of Service in which the Participant attained
age 22)(a "Vested Terminee") and (ii) becomes a "Transferred Employee" as such
term is defined in the Asset Purchase and Contribution Agreement among
Petroleos de Venezuela, S.A., Properchamp, Inc., Union Pacific Corporation,
Union Pacific Resources Company, Union Pacific Refining, Inc., and Champlin
Refining Company dated as of March 17, 1987. With respect to each Vested
Terminee, (i) employment with Champlin Refining Company and the benefit
accrued by such individual under all pension plans maintained by Champlin
Refining Company such be taken into account in determining the amount of the
supplemental pension payable from the Supplemental Plan and (ii) such
supplemental pension shall not be payable prior to the earlier of each
individual's Normal Retirement Date or the termination of employment with
Champlin Refining Company.
Therefore, each Vested Terminee who becomes a Transferred Employee shall be
entitled to receive, commencing on his Normal Retirement Date, a supplemental
pension equal to the lesser of (i) the supplemental pension accrued under the
Supplemental Plan, giving due regard to the provisions of Article Eighteen of
the Plan, to the date he terminates Employment or (ii) the amount, if any, by
which, determined as of the earlier of such individual's Normal Retirement
Date or the date he terminates employment with Champlin Refining Company, (A)
the sum of (I) the vested benefit accrued under the Plan computed on the basis
of the formula provided in Section 5.1 thereof and (II) the pension referred
to in clause "(i)", above, exceeds (B) the sum of (I) the vested benefit
accrued under the Plan computed on the basis of the formula provided in
Section 5.1 of the Plan and (II) the aggregate vested benefit, payable on such
<PAGE> 13
individual's Normal Retirement Date, accrued under all pension plans
established by Champlin Refining Company. In lieu thereof, such Vested
Terminee may elect to receive his supplemental pension commencing on the first
day of any month within the 10-year period preceding his Normal Retirement
Date, but not earlier than the first day of the month contemporaneous with or
next succeeding the day he terminates employment with Champlin Refining
Company, in which case such supplemental pension shall be the Actuarial
Equivalent of the supplemental pension, if any, determined pursuant to the
immediately preceding sentence, which would have been payable on his Normal
Retirement Date, based on the difference in age between such Vested Terminee's
age when such supplemental pension is to begin and his Normal Retirement Date.
5.3 Normal Form of Vested Benefit. The supplemental pension credited to
a vested terminated Participant shall be paid in equal monthly installments as
follows:
(a) if the Participant is married at the time payment is to
begin, his supplemental pension shall be paid in the
form of a 50% Contingent Annuitant Option calculated in
accordance with Section 6.3 of the Plan, with his
spouse as Contingent Annuitant.
(b) if the Participant is not married at the time payment
is to begin, his supplemental pension shall be in the
form of a life income pension, payable in equal
installments to him for life.
5.4 Optional Form of Vested Benefit. A vested terminated Participant
included in Section 5.3(a) above may elect at any time 90 or more days before
payment is to begin to receive his supplemental pension in the form of a life
income pension, payable in equal installments for life. If the vested
terminated Participant makes such election, no amount shall be payable to his
spouse under Section 5.3(a).
<PAGE> 14
ARTICLE SIX
Employee Transfers
6.1 Transfers into Supplemental Plan from Other Supplemental Plans. If
any employee who is a participant in any other supplemental pension plan of an
Affiliate is transferred to the Company and is a Participant in this
Supplemental Plan after such transfer, such employee shall retain no rights in
the other supplemental pension plan from which he is transferred and shall
receive all benefits to which he is entitled under this Supplemental Plan,
based upon his Total Service which shall include as to such employee any
service used in determining his benefits under such other supplemental pension
plan.
6.2 Transfers to Other Supplemental Plans. If a Participant is
transferred to an Affiliate and becomes a participant in a supplemental
pension plan of the Affiliate after such transfer, such Participant shall
retain no rights in this Supplemental Plan if such other supplemental pension
plan has provisions that substantially conform to the transfer provisions for
the protection of transferees that are contained in this Article Six.
6.3 No Duplication of Benefits. There shall under no circumstances be
any duplication of benefits under this Supplemental Plan or any supplemental
pension plan of an Affiliate by reason of the same period of employment.
<PAGE> 15
ARTICLE SEVEN
Pre-Retirement Survivor's Benefit
7.1 Eligibility
(a) General - The Surviving Spouse of a Participant who had
at least one Hour of Service after August 22, 1984 and
who either (i) terminated Employment due to death prior
to his Normal Retirement Date or (ii) (A) terminated
Employment other than due to death after his completion
of 3 years or 5 years of Continuous Service, whichever
is applicable to him as determined under Section 5.1,
but prior to the 10-year period immediately preceding
his Normal Retirement Date and (B) died prior to the
time payment of the supplemental pension credited to
such Participant would otherwise have begun pursuant to
Section 5.3, shall, except to the extent provided in
subsection (b) of this Section 7.1, receive the benefit
determined pursuant to Section 7.2.
(b) Waiver - The Surviving Spouse of a Participant
described in subsection (a) of this Section 7.1 shall
not receive that benefit determined pursuant to Section
7.2 if there is in effect, for purposes of Section 8.1
of the Plan, on the date of such Participant's death a
waiver with respect to such Participant complying with
the requirements of subsection (b) of Section 8.1 of
the Plan.
7.2 Benefit -
(a) General - The benefit payable to the Surviving Spouse
of a Participant described in Clause "(i)" of
subsection (a) of Section 7.1 shall be equal to 50% of
the supplemental pension, reduced to the extent
required pursuant to subsection (c) of this Section
7.2, such Participant would have received determined,
to the extent otherwise applicable, in accordance with
Section 3.3 had such Participant received a
supplemental pension (i) commencing as of the later of
(A) the earliest date on which such Participant's Early
Retirement Date could have occurred, had such
Participant not died prior thereto, based upon the
Total Service actually credited to such Participant, or
(B) the first day of the month immediately following
the date of such Member's death and (ii) in the form of
a 50% Contingent Annuitant Option, calculated in
accordance with Section 6.3 of the Plan, with his
Surviving Spouse as Contingent Annuitant. The benefit
payable to the Surviving Spouse of a Participant
described in clause "(ii)" of subsection (a) of Section
7.1 shall be equal to 50% of the supplemental pension,
reduced to the extent required pursuant to subsection
(c) of this Section 7.2, such Participant would have
received determined, to the extent otherwise
applicable, under Section 5.2 had such Participant
commenced receiving a supplemental pension (i)
commencing as of the later of (A) the earliest date on
which such Participant could have commenced receiving
<PAGE> 16
his supplemental pension pursuant to Section 5.2, had
such Participant not died prior thereto, based upon the
Total Service actually credited to such Participant or
(B) the first day of the month immediately following
the date of such Participant's death and (ii) in the
form of 50% Contingent Annuitant Option, calculated in
accordance with Section 6.3 of the Plan, with his
Surviving Spouse as Contingent Annuitant.
(b) Timing - The benefit a Surviving Spouse of a
Participant shall be entitled to pursuant to subsection
(a) of the Section 7.2 shall be paid monthly to such
Surviving Spouse, commencing as of the later of (i) the
earliest date on which (A) such Member's Early
Retirement Date could have occurred or (B) such
Participant could have commenced receiving his
supplemental pension pursuant to Section 5.2, as the
case may be, had such Participant not died prior
thereto or (ii) the first day of the month immediately
following the date of such Participant's death and
shall continue thereafter with the last payment being
made on the first day of the month in which the
Surviving Spouse dies.
(c) Cost of Benefit - For purposes of determining the
benefit payable pursuant to subsection (a) of this
Section 7.2 to the Surviving Spouse of a Participant
described in subsection (a) of Section 7.1, the
supplemental pension such Participant would have
received as of the date which is relevant under
subsection (a) of this Section 7.2 in determining the
amount of the benefit payable to such Surviving Spouse,
determined under whichever provisions of the
Supplemental Plan would have been applicable with
respect to such Participant, shall be reduced by the
sum of:
(i) if such Participant had attained at least 55 years
of age and completed at least 10 years of Vesting
Service (including in such Vesting Service not less
than 5 years of Continuous Service) prior to August
23, 1984, 1/24 of 1% for each calendar month or part
thereof prior to August 23, 1984 for which such
Participant had in effect an election pursuant to
Article Seven as in effect prior to the amendment and
restatement of such Article effective as of August 22,
1984 and
(ii) 1/24 of 1% for each calendar month or part thereof
subsequent to December 31, 1986 with respect to
which a 1/24 of 1% per month reduction is imposed
under Article Eight of the Plan in determining the
benefit payable to such Surviving Spouse under
such Article Eight or would be so imposed under
such Article Eight were the number of such
Participant's years of Continuous Service under
the Plan equal to the number of such Participant's
years of Total Service.
7.3 Reduction in Participant's Retirement Pension - Notwithstanding any
other provision of the Supplemental Plan to the contrary, a Participant who has
at least one Hour of Service after August 22,
<PAGE> 17
1984 shall have such Participant's supplemental pension, determined under
whichever provisions of the Supplemental Plan shall be applicable to such
Participant, reduced for all purposes of the Supplemental Plan in an amount
equal to the reduction which would have occurred under subsection (c) of Section
7.2 with respect to such Participant's supplemental pension had such Participant
died on the day immediately preceding the earlier of (i) his Normal Retirement
Date (ii) the date with respect to which payment of the supplemental pension
credited to such Participant shall commence or (iii) if such Participant
terminates Employment within the 10-year period immediately preceding his Normal
Retirement Date, the date such Member terminates Employment.
<PAGE> 18
ARTICLE EIGHT
Administration
8.1 Administration. To the extent herein provided, the Vice President-
Benefit Plan Administrator of Resources shall have authority to control and
manage the operation and administration of the Supplemental Plan. For
purposes of the Supplemental Plan, the Vice President-Benefit Plan
Administrator of Resources shall be referred to as the Administrator.
8.2 Responsibilities and Powers of Administrator. Except for the
responsibilities and powers elsewhere herein given specifically to the Board
of Directors, the Administrator shall have all responsibilities for the
operation and administration of the Supplemental Plan and shall have all
powers necessary to carry out his responsibilities hereunder. Without
limiting the generality of the foregoing, the Administrator shall have the
responsibility and power to:
(a) keep and maintain such accounts and records with
respect to Participants as he may deem necessary or
proper;
(b) determine all questions of the eligibility and of the
status and rights of Participants and any other person
hereunder and interpret and construe the Supplemental
Plan in connection therewith; and,
(c) adopt from time to time mortality and other tables and
interest rates upon which all actuarial calculations
shall be based, including the determination of the
appropriate factors for the adjustment of pension
payment.
The Administrator shall carry out all his responsibilities and exercise all
his powers in accordance with the terms of the Supplemental Plan. The
determination of the Administrator as to any questions involving his
responsibilities hereunder shall be conclusive and binding on all persons.
8.3 Certification and Payment of Benefits. The Administrator shall
compute the amount and manner of payment of benefits to which the
Participants, retired Participants, Surviving Spouses and beneficiaries become
entitled. All payments of benefits shall be made directly by the Company upon
the instructions of the Administrator.
8.4 Reports to Board of Directors. As he deems necessary or proper or
as the Board of Directors may require, but in any event at least once during
each calendar year, the Administrator shall report to the Board of Directors
on the operation and administration of the Supplemental Plan and on any other
matter concerning the Supplemental Plan he deems advisable or required by the
Board of Directors.
8.5 Designation and Delegation. The Administrator may designate other
persons to carry out such of his responsibilities hereunder for the operation
and administration of the Supplemental Plan as he deems advisable and delegate
to the person so designated such of his powers as he deems necessary to carry
out such responsibilities. Such designation and delegation shall be subject
to such terms and conditions as the Administrator deems necessary or
<PAGE> 19
proper. Any action or determination made or taken in carrying out
responsibilities hereunder by the persons so designated by the Administrator
shall have the same force and effect for all purposes as if such action or
determination had been made or taken by the Administrator.
8.6 Outside Services. The Administrator may engage counsel and such
clerical, medical, financial, actuarial, accounting and other specialized
services as he may deem necessary or desirable for the operation and
administration of the Supplemental Plan. The Administrator and persons
designated by him under Section 8.5 shall be entitled to rely, and shall
be fully protected in any action or determination or omission taken or made or
omitted in good faith in so relying, upon any opinions, reports or other
advice which is furnished by counsel or their specialist engaged for that
purpose.
8.7 Expenses. All expenses, including any fees for outside services
under Section 8.6, incurred by the Administrator and by persons designated by
him under Section 8.5 in the operation and administration of the Supplemental
Plan shall be paid by the Company. Neither the Administrator nor any
other person who is an Employee shall receive any compensation solely for
services in carrying out any responsibility hereunder.
8.8 Bonding. No bond or other security shall be required of the
Administrator or of any person designated by him under Section 8.5.
8.9 Liability. The Administrator and persons designated by him under
Section 8.5 shall use ordinary care and diligence in the performance of their
duties. The Company shall indemnify the Administrator and each other person
designated by him under Section 8.5 against any and all claims, loss,
damages, expense (including reasonable counsel fees), and liability arising
from any action or failure to act or other conduct in their official capacity,
except when the same is due to the gross negligence or willful misconduct of
the Administrator or other person.
<PAGE> 20
ARTICLE NINE
Amendment or Termination
9.1 Amendment or Termination - The Board of Directors reserves the
right to modify, alter, amend or terminate the Supplemental Plan from time
to time and to modify, withdraw or terminate any pension granted under the
Supplemental Plan, to any extent that it may deem advisable; provided, that no
such modification, alteration, amendment or termination shall impair any
rights which have accrued to Participants hereunder to the date of such
modification, alteration, amendment or termination. No amendment to the
Supplemental Plan adopted by the Board of Directors shall become effective,
however, until the same has been assented to by the Board of Directors of
Union Pacific Corporation.
<PAGE> 21
ARTICLE TEN
General Provisions
10.1 No Right To Employment. Nothing herein contained shall be deemed
to give any Participant the right to be retained in the service of the
Company or to interfere with the rights of the Company to discharge any
Participant at any time.
10.2 Alienability of Benefits. Pension payments under the Supplemental
Plan may not be assigned or hypothecated, and to the extent permitted by law,
no such payments shall be subject to legal process or attachment for the
payment of any claims against any person entitled to receive the same.
10.3 Payment Due an Incompetent. If it shall be found that any person
to whom a payment is due hereunder is unable to care for his affairs
because of physical or mental disability, as determined by a licensed
physician, the Administrator shall have the authority to cause the payments
becoming due such person to be made to the legally appointed guardian of any
such person or to the spouse, brother, sister, or other person as it shall
determine. Payments made pursuant to such power shall operate as a complete
discharge of the Company.
10.4 Controlling State Law. The Supplemental Plan shall be construed,
regulated and administered according to the laws of the State of Texas.
10.5 Successors. This Supplemental Plan shall be binding upon any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company in the same manner and to the same extent that the Company would be
bound to perform if no such succession had taken place.
<PAGE> 22
ARTICLE ELEVEN
Transfers to Non-Covered Employment
11.1 Notwithstanding any of the provisions of the Supplemental Plan to
the contrary, if an executive participating in the Plan is transferred to
the employment of a member of the controlled group of corporations of which
Union Pacific Corporation is the common parent that has not adopted either the
Plan or the Pension Plan for Employees of Union Pacific Resources Company
("non-covered employment"), upon the approval of the Chief Executive Officer
of Union Pacific Corporation, any benefits to which such executive would be
entitled under the Plan or the Supplemental Plan, or both, by treating all or
any of such executive's non-covered employment as if it were service covered
by such Plans and by aggregating such service with such executive's other
service covered by such plans shall be provided to such executive pursuant to
the provisions of this Article Eleven to the extent that such benefits exceed
such executive's benefits under the Plan, such executive benefits under the
Supplemental Plan determined without regard to the provisions of this Article
Eleven and such executive benefits under any other pension plan that are based
upon such executive's non-covered employment. If any beneficiary would be
entitled to any benefits under the Plan or the Supplemental Plan, or both, as
a result of treating such executive's non-covered employment as if it were
service covered by such Plans and by aggregating such service with such
executive's other service covered by such Plans, such benefits shall be
provided to such beneficiary pursuant to the provisions of this Article Eleven
to the extent that such benefits exceed such beneficiary's benefits under the
Plan, such beneficiary's benefits under the Supplemental Plan determined
without regard to the provisions of this Article Eleven and such beneficiary's
benefits under any other pension plan that are based upon such executive's
non-covered employment.
<PAGE>
Exhibit 11
<TABLE>
<CAPTION>
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER SHARE
For the Years Ended December 31, 1993, 1992 and 1991
(Thousands of Dollars, Except Per Share Amounts)
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Weighted average number of shares outstanding... 204,854 203,248 201,431
Average shares issuable on exercise of
stock options less shares repurchasable
from proceeds................................. 660 635 592
-------- -------- --------
Weighted average number of shares used
in computation of earnings per share.......... 205,514 203,883 202,023
======== ======== ========
Income before cumulative effect of changes in
accounting principles......................... $705,357 $728,217 $ 63,559(b)
Cumulative effect to January 1, 1993 of changes
in accounting principles...................... (175,226)(a) -- --
-------- -------- --------
Net Income...................................... $530,131 $728,217 $ 63,559(b)
======== ======== ========
Earnings per share:
Income before cumulative effect of changes in
accounting principles....................... $ 3.43 $ 3.57 $ 0.31(b)
Cumulative effect to January 1, 1993 of
changes in accounting principles............ (0.85)(a) -- --
-------- -------- --------
Net Income.................................... $ 2.58 $ 3.57 $ 0.31(b)
======== ======== ========
(a) See Note 2 to the Financial Statements regarding the 1993 accounting changes.
(b) See Note 3 to the Financial Statements regarding the 1991 special charge.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
RATIO OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars, Except for Ratio)
1991
Excluding
Special
1993 1992 1991 Charge (c) 1990 1989
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Earnings from continuing
operations (a) $ 705,357 $ 728,217 $ 63,559 $ 638,559 $ 618,138 $ 594,505
Add (deduct) distributions
greater (to extent less)
than income of
unconsolidated affiliates (33,847) (23,188) (25,189) (25,189) (11,878) (15,491)
---------- ---------- ---------- ---------- ---------- ----------
Total 671,510 705,029 38,370 613,370 606,260 579,014
---------- ---------- ---------- ---------- ---------- ----------
Income taxes (b):
Federal 421,806 372,922 48,183 343,183 334,351 298,684
State and local 27,815 3,972 11,906 11,906 20,531 9,009
---------- ---------- ---------- ---------- ---------- ----------
Total 449,621 376,894 60,089 355,089 354,882 307,693
---------- ---------- ---------- ---------- ---------- ----------
Fixed charges:
Interest expense including
amortization of debt
discount 324,018 359,575 388,286 388,286 380,243 368,535
Portion of rentals
representing an interest
factor 44,443 43,948 46,281 46,281 43,362 15,783
---------- ---------- ---------- ---------- ---------- ----------
Total 368,461 403,523 434,567 434,567 423,605 384,318
---------- ---------- ---------- ---------- ---------- ----------
Earnings available for
fixed charges $1,489,592 $1,485,446 $ 533,026 $1,403,026 $1,384,747 $1,271,025
========== ========== ========== ========== ========== ==========
Fixed charges - as above $ 368,461 $ 403,523 $ 434,567 $ 434,567 $ 423,605 $ 384,318
Interest capitalized 10,973 8,504 6,293 6,293 3,483 6,952
---------- ---------- ---------- ---------- ---------- ----------
Total $ 379,434 $ 412,027 $ 440,860 $ 440,860 $ 427,088 $ 391,270
========== ========== ========== ========== ========== ==========
Ratio of earnings to
fixed charges 3.9 3.6 1.2 3.2 3.2 3.2
========== ========== ========== ========== ========== ==========
(a) Before cumulative effect of changes in accounting principles of $175,226 in 1993 (See Note 2 to the Financial
Statements).
(b) In 1993, Income taxes include the impact of the adoption of SFAS 109, "Accounting for Income Taxes", and the
effect of the Omnibus Budget Reconciliation Act of 1993 (See Notes 2 and 7 to the Financial Statements).
(c) See Note 3 to the Financial Statements.
</TABLE>
<PAGE> COVER
EXHIBIT 13
Pages 14 through 45, inclusive, and the system map contained on the inside
back cover from Union Pacific's Annual Report to Stockholders for the year ended
December 31, 1993, but excluding photographs set forth on pages 14 through 22,
which do not supplement the text and are not otherwise required to be disclosed
in this Form 10-K.
<PAGE> 14
REVIEW OF OPERATIONS
Union Pacific Railroad
<TABLE>
<CAPTION>
1993 1992 1991(a)
------ ------ ------
<S> <C> <C> <C>
Operating Revenues (millions of dollars) $4,987 $4,897 $4,776
Operating Income (millions of dollars) $1,042 $1,031 $ 190
Carloadings (thousands) 4,619 4,458 4,304
Operating Ratio 79.1 79.0 96.0
(a) Excluding the 1991 special charge, Operating Income and the Operating
Ratio would have been $935 million and 80.4, respectively (see Note 3
to the Financial Statements).
</TABLE>
(Two photographs, not incorporated by reference - see prefacing comment on
Exhibit 13 Cover Page.)
Union Pacific Railroad achieved strong earnings in the face of the worst
natural disasters to strike it in nearly 125 years. Excluding the
accounting adjustments, net income would have been $669 million, compared
to $667 million in 1992.
Severe snowstorms struck western segments of the system in January and
February, requiring the use of the company's rotary snowplow on the
mainline for the first time since 1949. The record flood knocked out the
heart of the Railroad's track, adversely affecting traffic throughout the
system. Then, with many levees still decimated, portions of UPRR's track
along the Mississippi River were flooded again when heavy rains came in
October.
Despite this devastation, the Railroad increased its carloadings 4
percent and maintained its operating ratio below 80 percent for the second
year in a row.
Major Thrusts in 1993-94
Several programs launched in 1993 will strengthen Union Pacific in 1994,
particularly in the most promising growth areas of Mexico, intermodal and
coal.
The North American Free Trade Agreement should bolster most traffic
categories. Union Pacific's shipments to Mexico were down slightly in 1993
but had been growing at double-digit rates and are expected to resume that
pace for the rest of the decade. The Railroad's three major gateways into
Mexico make it the pre-eminent carrier in this increasingly open market.
Another key to UPRR's growth is its expanding network of "partnerships"
with major U.S. trucking companies, particularly those in the long-haul
truckload business. These shipping arrangements have enhanced Union
Pacific's market share in several key commodities and have maximized the
use of the Railroad's equipment, generating substantial gains in intermodal
traffic and promising more for the remainder of the decade.
In October, UPRR began hauling low-sulfur coal from the Powder River
Basin in eastern Wyoming to Georgia Power's Plant Scherer in central
Georgia--the largest contract for delivery east of the Mississippi River.
This 1,800-mile haul on Union Pacific and two other railroads is the
nation's longest unit-train coal run. The new contract is expected to add
approximately 5 million tons to UP's coal shipments in 1994. This and
other new contracts promise to provide continued improvement in energy
revenues.
To support continued growth, as well as to enhance service reliability,
the Railroad has embarked on several key expansion programs. Its triple-
track project on the Nebraska mainline will improve the company's major
traffic corridor. This corridor carries nearly 110 trains a day--the
busiest in the world. In addition, intermodal expansions are under way at
Memphis, Seattle and Stockton, California, while the state-of-the-art
Livonia, Louisiana yard began operating in early 1994, speeding traffic
throughout the lower Mississippi Valley. For Mexico, construction of a new
double-track bridge connecting Union Pacific's Laredo intermodal yard with
the Mexican Railway should be under way within a year.
<PAGE> 15
(Two photographs, not incorporated by reference - see prefacing comment on
Exhibit 13 Cover Page.)
Realigning for the Future
Late in the year the Railroad realigned its marketing and operating
departments into seamless business units organized along major commodity
lines. Aimed at increasing customer focus, this structure makes marketing,
operating and financial people jointly responsible for customer
satisfaction, quality and profitability.
Another major development was completing negotiations for through-
freight, conductor-only operations on the entire system. By year-end 1993,
nearly all through-freight trains were operated by two-person crews. This
change--combined with national work rule changes authorized by Presidential
Emergency Boards 219 and 220--will continue to generate substantial future
savings. In late 1993, Union Pacific began negotiating on the west end of
the system for the right to operate yard and local trains with two-person
crews.
<PAGE> 16
REVIEW OF OPERATIONS
Union Pacific Resources
<TABLE>
<CAPTION>
1993 1992 1991(a)
------ ------ ------
<S> <C> <C> <C>
Operating Revenues (millions of dollars) $1,323 $1,259 $1,091
Operating Income (millions of dollars) $ 382 $ 315 $ 259
Total Reserves (MMBOE) (b) 445.4 441.5 437.3
Total Production (MMBOE) (b) 69.6 67.0 60.5
(a) Excluding the 1991 special charge, Operating Income would have been
$314 million (see Note 3 to the Financial Statements).
(b) Natural gas converted to millions of barrels of oil equivalent on a
ratio of 6:1.
</TABLE>
(Photograph, not incorporated by reference - see prefacing comment on Exhibit 13
Cover Page.)
During 1993 Union Pacific Resources achieved record production and record
revenues, while increasing its reserves for the sixth straight year. These
increases were achieved with 15 percent fewer employees. Excluding the
accounting adjustments, earnings would have risen to $309 million from $272
million in 1992.
Equally important, Resources took several steps in 1993 to ensure
continued growth. A 1992 reorganization that created profit centers has
led to significant cost savings, improved efficiencies and increased
emphasis on profitability.
Exploration successes were encouraging, with discoveries in northeast
British Columbia, the eastern Austin Chalk and offshore Gulf of Mexico.
Reserve additions in 1993 were approximately 60 million barrels of oil
equivalent--a direct result of the company's leading-edge oil field
technology.
Land Grant Production
Nearly 40 percent of Resources' production came from the company's Land
Grant acreage in Wyoming, Utah and Colorado. Resources has been drilling
aggressively in the Greater Green River Basin in western Wyoming, which
contains significant natural gas reserves. During the last two years,
through innovative completion and design technology, Resources has reduced
average well costs in this area from $1.4 million to $800,000. These lower
costs should dramatically increase future drilling opportunities.
In western Wyoming, Resources is completing construction of the
Wahsatch Gathering System, which will allow the company to tap up to 55
million cubic feet of gas per day that previously could not be produced and
processed.
As part of its program in the Land Grant, the company is arranging to
drill at least 300 wells with an industry partner in the Wattenberg area of
Colorado over the next three years. In addition, Resources became a 34
percent partner in a processing plant in the Wamsutter area of Wyoming.
<PAGE> 17
(Photograph, not incorporated by reference - see prefacing comment on Exhibit 13
Cover Page.)
Austin Chalk
The Austin Chalk formation in south-central Texas and Louisiana continues
to be highly productive. The company participated in the drilling of 266
horizontal wells in 1993. Of these wells, 45 were dual laterals, which
typically tap two zones, and 60 were opposing laterals, which tap zones in
opposite directions. During the year Resources drilled its first quad
lateral well, which draws from four separate areas in a formation.
Applying this technology dramatically reduces the average cost of reserve
additions.
Austin Chalk production reached an average of 66,600 barrels of oil
equivalent per day in 1993, a 13 percent increase over 1992. Most of the
production was from the Giddings Field in south-central Texas. Resources
also extended its acreage into eastern Texas and Louisiana and now controls
more than one million acres throughout the area.
Because of its expertise in horizontal drilling, its understanding and
application of sophisticated recovery techniques and its success in
reducing drilling costs, Resources believes it can continue to extend the
productive limits of this highly successful trend.
East Texas
During 1993 Resources strengthened its leadership as a processor and
gatherer of natural gas in East Texas. It increased its ownership to 88
percent in three key East Texas assets: the East Texas gas plant, the
Carthage Hub and the Panola Pipeline, adding value through vertical
integration.
In addition, the company initiated a number of related expansion
projects. Construction began on a new 88 percent-owned plant that will
increase gas processing capacity by 120 million cubic feet per day. An
extension to the Panola Pipeline will expand capacity to transport natural
gas liquids to Mt. Belvieu, Texas, the center of the natural gas liquids
market.
The company is continuing to develop reserves in the Gulf of Mexico,
bringing on two fields in 1993. It currently has interests in 19 platforms
in the Gulf, 14 of which are company-operated.
In Canada, the company is successfully developing two exploration plays
in northeast British Columbia. Resources has an interest in more than
115,000 acres in this area. Seismic and other field analyses indicate that
the potential for future discoveries is very promising.
Over 25 percent of Resources' operating income came from its mineral
operations, which mine and process coal and natural soda ash in the Land
Grant area. Minerals also earn royalties on lands leased to others.
(Photograph, not incorporated by reference - see prefacing comment on Exhibit 13
Cover Page.)
<PAGE> 18
REVIEW OF OPERATIONS
Overnite Transportation
<TABLE>
<CAPTION>
1993 1992 1991(a)
------ ------ ------
<S> <C> <C> <C>
Operating Revenues (millions of dollars) $ 939 $ 873 $ 800
Operating Income (millions of dollars) $ 69 $ 57 $ 19
Operating Ratio 90.2 90.9 95.1
(a) Excluding the 1991 special charge, Operating Income and Operating Ratio
would have been $44 million and 91.9, respectively (see Note 3 to the
Financial Statements).
</TABLE>
(Photograph, not incorporated by reference - see prefacing comment on Exhibit 13
Cover Page.)
Overnite Transportation had an excellent operating performance in 1993
despite a highly competitive pricing environment and a sluggish first half.
Excluding the accounting adjustments and before goodwill amortization, net
income would have increased to a record $65 million from $60 million in
1992.
Overnite achieved all-time highs in total tonnage and
less-than-truckload (LTL) traffic, reflecting the company's aggressive
marketing programs. Overall volume was up 4 percent, with LTL traffic up 7
percent. Average price levels increased and service standards improved in
several key traffic lanes. Overnite's operating ratio of 90.2 percent
remained the lowest among the top five LTL carriers. The company also
invested a record $80 million, primarily to expand its service center
network, to acquire more than 600 tractors and 1,800 trailers, and to
launch its centralized customer service and billing center in Richmond.
Aggressive Marketing
The company really hit its stride in the second half of 1993, with double-
digit growth in four of its five regions--led by a 23 percent gain in the
Northeast. Niteliner service, which provides next-day delivery, and
Fastbreak, which focuses on 48-hour delivery on longer-distance, major-
market lanes, increased tonnage both within and between regions. With
geographic coverage reaching 95 percent of the country's population,
Overnite can deliver across the street, across the state or across the
country.
Logistical partnerships helped generate tonnage increases and greatly
expanded services with many major customers. These partnerships are the
future of trucking, and Overnite has been a leader in the field. The
company has placed representatives on-site in several customers'
facilities, creating a seamless relationship by solving transportation
problems. Customers of all sizes are tying into the company's expanding
electronic network.
<PAGE> 19
(Photograph, not incorporated by reference - see prefacing comment on Exhibit 13
Cover Page.)
New Technology
At the core of these partnerships is Overnite's growing sophistication in
technology. In August, 1993, with assistance from UP Technologies, the
company began converting its 166 service centers to its centralized
customer service and billing systems in Richmond. Bills of lading at each
service center are electronically scanned into the system every night,
thereby expediting invoices, improving billing accuracy and creating an
electronic document library for customer service. Overnite will complete
the centralization of these operations during 1994.
Next target: the front line. In 1994, Overnite will test a fully
integrated dispatching, yard management, dock management, and time tracking
system in pilot service centers. Hand-held computers with integrated
scanners and computer dock-planning models will facilitate trailer
positioning and freight-loading sequencing. Such advanced technology
should ensure maximum use of equipment and manpower, enabling Overnite to
improve its own effectiveness while providing its customers with accurate,
real-time, freight movement information.
<PAGE> 20
REVIEW OF OPERATIONS
USPCI
<TABLE>
<CAPTION>
1993 1992 1991(a)
---- ---- ------
<S> <C> <C> <C>
Operating Revenues (millions of dollars) $236 $262 $251
Operating Income (Loss) (millions of dollars) $ (5) $ 8 $(19)
(a) Excluding the 1991 special charge, Operating Income would have been $6
million (see Note 3 to the Financial Statements).
</TABLE>
Hazardous waste volumes were significantly below industry expectations in
1993 because of the slow economic recovery, industry's reluctance to commit
funds to cleanups and the regulatory uncertainty caused by the new
administration in Washington. As a result, revenues were down $26 million
to $236 million. Nonetheless, USPCI managed to break even before goodwill
amortization of $9 million.
Contracts for disposal of non-hazardous waste were somewhat better.
USPCI is the sole provider of non-hazardous waste disposal services for 131
automotive plants in the United States and five in Mexico. To fulfill this
major long-term contract, USPCI has dedicated substantial capacity at its
Echo Mountain landfill in Sawyer, North Dakota. The hazardous waste from
the automotive plants is sent to USPCI's landfills in Waynoka, Oklahoma and
Tooele County, Utah. Five railroads, including the Union Pacific, and a
network of trucking companies haul the waste materials to USPCI's
facilities.
USPCI transported demolition debris from a Burbank, California,
assembly plant to its jointly-owned East Carbon Development Corporation
(ECDC) landfill in central Utah, using the Union Pacific Railroad. After
being unloaded by ECDC's highly efficient rotary dumping equipment, the
gondola cars are cleaned for hauling other products back to Los Angeles.
This high utilization of equipment allows ECDC to market quality service at
attractive rates to other customers.
JTM, USPCI's successful ash management company, is under contract with
Reynolds Metals Company to market the non-hazardous by-product of Reynolds'
patented spent potliner treatment process.
At Clive, Utah, the startup of the hazardous waste incinerator has been
delayed until late 1994 because of necessary permit modifications and
USPCI's comprehensive testing program.
(Photograph, not incorporated by reference - see prefacing comment on Exhibit 13
Cover Page.)
<PAGE> 21
REVIEW OF OPERATIONS
Skyway Freight Systems
Skyway--the newest member of the Union Pacific family--is a multi-faceted
logistics and transportation company headquartered in Watsonville,
California. At any given hour, Skyway may be rushing a critical part for a
customer by charter jet, moving an entire warehouse by stack train, running
a distribution center, assembling and testing computers, or developing a
comprehensive transportation and logistics strategy based on state-of-the-
art information management. In a nutshell, the company specializes in
customized logistical support tailored to the needs of its customers across
the country.
In 1993, Skyway earned a record $5 million before goodwill amortization
and also reported record revenues of over $100 million, reflecting an
annual average growth rate of approximately 30 percent for the past three
years. The company has several innovative programs that are expected to
further expand its business. Skyway's in-transit merge and distribution
services streamline product delivery and save costs on cross-country
shipping. The company's next-flight-out service helps customers meet
critical delivery requirements on high-value parts. And its catalog
warehouse inventory and distribution program--with Skyway employees
handling the entire delivery cycle for catalog sales companies--adds a new
dimension to its logistics business.
Major investments in updated technologies and facilities generated
improved projects and services in 1993:
Several new terminals were added, such as Skyway's state-of-the-art
Sacramento, California facility and the Raleigh, North Carolina terminal,
plus nine customer facilities--all operated by Skyway employees.
New information technologies now facilitate electronic communications
with more customers and allow sales representatives to access
up-to-the-minute information on shipments by telephone, enabling
Skyway's people to keep pace with evolving customer needs.
(Photograph, not incorporated by reference - see prefacing comment on Exhibit 13
Cover Page.)
<PAGE> 22
REVIEW OF OPERATIONS
Union Pacific Technologies
Union Pacific Technologies develops sophisticated computer software for the
corporation's operating companies and aggressively pursues research in new
technologies. The company also has expanded the scope of its commercial
activities outside of Union Pacific.
Technologies continues to assist the Ferrocarriles Nacionales de Mexico
(FNM), the national railway of Mexico, with the installation of computer
software similar to that used by Union Pacific Railroad. During 1993,
Technologies installed a new yard management system at FNM's 17 largest
yards. The system maintains an inventory of freight cars in each yard and
generates switching instructions for the assembly of outbound trains.
(Photograph, not incorporated by reference - see prefacing comment on Exhibit 13
Cover Page.)
Technologies also helped the FNM upgrade its central computer facility
in Mexico City. Over the past two years, the FNM has more than doubled the
capacity of its computers, which are now electronically linked with the
Association of American Railroads' computer systems. This allows for a
detailed exchange of information on trains and shipments moving across the
U.S.-Mexico border.
Domestically, Technologies continued with the implementation of the
advanced train control work order system on the Union Pacific Railroad.
Nearly 1,700 of Union Pacific's locomotives have been equipped with on-
board computers capable of receiving and sending car pickup and placement
information, and over 5,000 conductors have been trained in their use. By
1995, all of Union Pacific's trains will be equipped with on-board
computers.
At Overnite, Technologies is assisting with the installation of a
centralized billing system that uses imaging and other leading-edge
systems. Technologies also modified USPCI's Facilities Information
Management System (FIMS) for use at its new incinerator in Clive, Utah.
FIMS tracks shipments from arrival through treatment and disposal.
Technologies' commercial sales continue to grow. The Shipment
Management Service, the industry benchmark for shipment tracking, is the
company's fastest growing commercial product. More than 100 companies
subscribe to this service.
<PAGE> 23
FINANCIAL REVIEW
Consolidated Results of Operations
This review should be read in conjunction with the financial statements, notes
and supplementary information.
1993 Compared to 1992
Consolidated: In the first quarter of 1993, Union Pacific Corporation (the
Corporation) recorded a $175 million after-tax or $0.85 per share charge to
reflect the adoption of new Financial Accounting Standards Board (FASB)
pronouncements as described in Note 2 to the Financial Statements. In the
third quarter, the Corporation recorded a $61 million or $0.30 per share
charge reflecting a deferred tax adjustment that resulted from the Omnibus
Budget Reconciliation Act of 1993 (the 1993 Tax Act) (see Note 7 to the
Financial Statements). The components of these accounting adjustments are as
follows:
<TABLE>
<CAPTION>
In Millions, Except
Per Share Amounts
Income (Loss)
before Net
Accounting Accounting 1993 Income
Adjustments Changes Tax Act (Loss)
----------- ---------- ------- -------
<S> <C> <C> <C> <C>
Railroad $ 669 $ (72) $ (57) $ 540
Natural resources 309 (59) (6) 244
Trucking 42 (79) (1) (38)
Waste management (9) -- 1 (8)
Corporate services
and other operations (245) 35 2 (208)
----- ------ ------ ------
Consolidated $ 766 $ (175) $ (61) $ 530
----- ------ ------ ------
Per share $3.73 $(0.85) $(0.30) $ 2.58
----- ------ ------ ------
</TABLE>
As a result of the accounting adjustments, the absence of Union Pacific
Resources Company's (Resources) $63 million ($42 million after-tax) 1992
production-based tax settlement and the 1993 effects of weather-related
traffic interruptions on the operations of Union Pacific Railroad Company and
its affiliate Missouri Pacific Railroad Company (collectively the Railroad),
the Corporation's earnings declined to $530 million ($2.58 per share) in 1993
compared to $728 million ($3.57 per share) a year ago. Excluding accounting
adjustments, the Corporation's earnings would have risen to $766 million
($3.73 per share). Income, excluding accounting adjustments, would have
improved at all operating units except USPCI, Inc. (USPCI).
(Graph of Union Pacific Corporation Operating Revenues - see Appendix)
Operating revenues advanced 4% to $7.56 billion in 1993 from $7.29 billion a
year ago. Revenues advanced on the strength of growing transportation
volumes, rising average natural gas prices, a 5% increase in hydrocarbon sales
volumes and the acquisition of Skyway Freight Systems, Inc. (Skyway) (see Note
5 to the Financial Statements).
Operating expenses rose $183 million to $6.07 billion compared to $5.89
billion in 1992. Equipment and other rents increased $52 million and fuel
and utility costs rose $21 million due to higher transportation volumes and
weather-related traffic interruptions at the Railroad. Depreciation charges
increased $40 million, reflecting asset adjustments required by the first
quarter adoption of SFAS No. 109 (Accounting for Income Taxes) and the
Corporation's continued high level of capital investment, offset by lower
surrendered lease activity and dry hole costs at Resources. Other taxes rose
$39 million, resulting from the absence of 1992 tax settlements at Resources
and the Railroad, while third party transportation costs increased $30 million
mainly due to the acquisition of Skyway. In addition, weather-related
inefficiencies and volume growth caused wage and benefit costs to escalate $19
million, and materials and supplies $13 million. Higher hydrocarbon sales
volumes and prices caused the cost of pipeline and gas plant product purchased
for resale to rise $15 million. Operating cost inflation was tempered by
efficiency and productivity improvements at the Railroad and Resources and the
absence of Resources' $24 million 1992 workforce reduction charge. Operating
income improved 6% to $1.49 billion in 1993 compared to $1.40 billion a year
ago as gains occurred at all operating units except USPCI.
(Graph of Union Pacific Corporation Operating Income - see Appendix)
Other income declined $57 million largely due to the absence of interest
related to Resources' 1992 tax settlement and diminished property sales.
Interest expense also declined $36 million reflecting lower average interest
rates and debt refinancing activities, while corporate expenses rose $9
million due to higher professional fees and depreciation charges. Net income-
- -excluding accounting adjustments--as a percentage of operating revenues would
have been 10.1% in 1993 and 10.0% in 1992. On the same basis, return on
average common stockholders' equity would have declined to 15.7% in 1993 from
16.5% a year ago.
Railroad: The Railroad posted earnings of $540 million in 1993. Excluding
the 1993 accounting adjustments, earnings would have been $669 million (before
considering the effects of the harsh winter and Midwest flooding) compared to
$667 million in 1992. Operating revenues improved 2% to $4.99 billion as a 4%
increase in carloadings was partially offset by
<PAGE> 24
a 2% decline in average revenue per car. This decline resulted from volume
growth of lower-rated commodities--mainly intermodal and energy--and growth
of lower-rated goods within chemicals, as well as increased use of
shipper-owned equipment for coal shipments. Revenues also included higher
earnings from equity investments in related operations. Automotive
carloadings advanced 8%, reflecting improvements in the domestic auto
industry. Energy carloadings also grew 8% because of an expanding domestic
customer base and higher demand created by more normal temperature patterns.
Intermodal traffic improved 6% as market share continued to expand reflecting
new partnership arrangements with trucking companies. In addition, chemical
carloadings increased 1%, while weather-related traffic interruptions and crop
damage caused grain carloadings to decline 2%. Carloading declines also
occurred in food, consumer and government products (2%) and in metals,
minerals and forest products (1%).
Operating expenses increased to $3.95 billion this year from $3.87 billion in
1992. Depreciation expense grew $54 million reflecting asset adjustments
required by the 1993 adoption of SFAS No. 109 and continuing capital spending
on equipment and track. Employee injury expense rose $29 million as
continuing declines in the number of injuries were more than offset by higher
settlement costs per injury. Growing volumes and weather-related traffic
congestion accounted for a $25 million rise in equipment and other rents and a
$17 million increase in fuel and utility costs. Wage and benefit costs also
rose $6 million as weather and inflation-related cost increases were largely
offset by train crew reductions. Higher operating costs were tempered by a
$23 million reduction in joint facility costs and an additional $22 million of
cost offsets associated with car repairs for other carriers.
Operating income at the Railroad rose $11 million in 1993 to $1.04 billion.
Despite severe weather conditions, the Railroad maintained an operating ratio
of 79.1 in 1993 compared to 79.0 a year ago.
Natural Resources: Resources' 1993 earnings were $244 million. Without the
1993 accounting adjustments, earnings would have risen $37 million (14%) to
$309 million compared to $272 million a year ago, despite the absence of the
1992 production-based tax settlement. Operating revenues climbed $64 million
(5%) to $1.32 billion in 1993 as a result of a 5% rise in total hydrocarbon
sales volumes, higher average natural gas prices and pipeline volume growth.
Natural gas sales volumes grew 7% to 619 mmcf/day, reflecting production
improvements in the Austin Chalk and the southwestern Wyoming portion of the
Land Grant. Natural gas liquids sales volumes were up 10% to 39,855 bbl/day,
largely because of increased production in the Austin Chalk, the return to
operation of a damaged pipeline, increased ownership in the Carthage gas
processing plant and improved recoveries under processing agreements, while
crude oil sales volumes held steady at 66,456 bbl/day. Including hedging
activities, natural gas average prices advanced 20% to $1.82/mcf (an increase
of $0.30/mcf), while crude oil prices fell $1.56/bbl (9%) to $15.66/bbl.
Average prices for natural gas liquids also declined 8% to $9.84/bbl. Once
again, Resources improved its reserve position, despite rising production
levels, as it remained the most active driller in the United States.
Operating expenses declined to $941 million in 1993 from $944 million a year
ago. Surrendered lease costs decreased $33 million because of accelerated
lease surrender activity in 1992. Wage and benefit costs declined $24
million stemming from the absence of Resources' 1992 workforce reduction
charge and ongoing productivity improvements. Insurance and other settlements
in 1993 lowered other operating costs $12 million. Mining costs declined $9
million due to lower operating costs stemming from the ongoing effects of a
favorable 1992 contract settlement at Resources' joint venture coal mine. In
addition, dry hole costs decreased $8 million reflecting improved exploration
success. These cost reductions were largely offset by volume-related cost
increases. Depreciation and depletion charges rose $21 million reflecting
higher production levels and higher per barrel rates in the Chalk. Increased
exploration activities generated a $17 million expansion in geological and
geophysical costs. In addition, production and other taxes rose $28 million
caused by the absence of the 1992 tax settlement and growing volumes, while
higher volumes and prices caused the cost of pipeline and gas plant product
purchases to increase $15 million.
Operating income for all of Resources' operations improved $67 million (21%)
to $382 million in 1993. Other income declined $17 million, mainly due to the
absence of the interest portion of the 1992 tax settlement.
Operating income from Resources' minerals operations declined $9 million (8%)
in 1993 to $102 million. This decline was the result of the absence of a
favorable uranium contract settlement recognized in 1992 and volume and price
declines at its soda ash joint venture. These declines were partially offset
by the ongoing effects of a favorable 1992 contract settlement at Resources'
coal joint venture.
Trucking: Overnite Transportation Company (Overnite) recorded a net loss of
$38 million in 1993. Without the 1993 accounting adjustments, earnings would
have improved $2 million to $42 million (after goodwill amortization of $23
million). Operating revenues rose $66 million (8%) to $939 million as a 3%
rise in average prices combined with a 4% volume improvement. Higher volumes
were generated by a 7% increase in less-than-truckload (LTL) business (driven by
<PAGE> 25
tonnage gains in the Northeast--reflecting the recent bankruptcy of a major
regional carrier--and continued business expansion). Higher LTL volumes were
partially offset by truckload traffic declines reflecting Overnite's focus on
its core LTL business. Revenue growth was also stimulated by the 1993
addition of the Special Services Division, which supports the Railroad's
automotive traffic.
Operating expenses increased $54 million to $870 million for the year.
Salaries, wages and employee benefit costs grew $28 million in response to
higher volumes and inflation. Equipment and other rents rose $15 million,
largely because of increased contracted rail usage and volume-related growth
in line-haul charges, while continued capital spending caused depreciation
expense to rise $6 million. Operating income improved to $69 million this
year from $57 million in 1992. Overnite's operating ratio, excluding goodwill
amortization, improved to 90.2 from 90.9 in 1992.
Waste Management: In 1993, USPCI recorded a loss of $8 million (after
goodwill amortization of $9 million and a $1 million benefit from the 1993
accounting adjustments) compared to break-even results a year ago. Operating
revenues declined ($26 million or 10%) to $236 million for the year as
disposal, remediation and transportation volumes fell in response to weak
market demand and uncertainty over Federal environmental policies. Operating
expenses declined $13 million to $241 million, largely the result of volume-
related reductions in outside hauling costs as well as the positive effects of
administrative restructuring. USPCI's operating loss was $5 million in 1993
compared to operating income of $8 million in 1992.
Corporate Services and Other Operations: Expenses related to Corporate
Services and Other Operations--which include corporate expenses, interest
expense, other income and income taxes that are not related to other segments,
and the results of Skyway and other operating units--totaled $208 million in
1993. Excluding the accounting adjustments, these costs would have been $245
million compared to $251 million in 1992. This decline was largely the result
of lower interest expense and improved results at other operations, partially
offset by higher corporate expenses. Operating income from other operations
improved $7 million to $1 million in 1993, reflecting the addition of Skyway.
1992 Compared to 1991
The Corporation's consolidated net income was $728 million in 1992, compared
to $64 million in 1991. Excluding the 1991 special charge (see Note 3 to the
Financial Statements), net income would have improved $89 million (14%) over
1991's earnings of $639 million. Earnings per share for 1992 were $3.57, up
from $0.31 in 1991, and would have risen $0.41 (13%) over 1991's $3.16 per
share excluding the special charge.
Revenues advanced $265 million (4%) to $7.29 billion as increases at all
operating companies more than compensated for a $108 million decline from
curtailed operations at Union Pacific Realty Company (Realty).
(Graph of Union Pacific Corporation Revenues Per Employee - see Appendix)
Consolidated operating expenses for 1992 were $5.89 billion, a decrease of
$679 million from 1991. Without the 1991 special charge, operating expenses
would have risen $191 million. Depreciation, depletion and amortization
increased $161 million because of exploration and production activity at
Resources and the Corporation's continuing high level of capital expenditures.
Salaries, wages and employee benefits expense increased $82 million,
reflecting volume growth, inflation and reinstatement of incentive
compensation accruals, offset by savings from continued cost containment and
productivity improvement programs, including the implementation of new train
crew size agreements. Partially offsetting these increases were a $40 million
reduction in other taxes, resulting from a production-based tax settlement at
Resources and property tax settlements at the Railroad, and a $70 million
decline relating to diminished Realty operations.
The Corporation's 1992 operating income rebounded to $1.40 billion from $461
million in 1991. Excluding the 1991 special charge, operating income would
have improved $74 million (6%) over 1991's $1.33 billion, principally
reflecting improvements at the Railroad and Overnite, countered by curtailed
operations at Realty. Other income rose $24 million, as interest income
included in Resources' tax settlement was offset by reduced gains from property
dispositions. Interest expense declined $28 million, reflecting lower interest
rates, while corporate expenses increased $7 million. Net income as a
percentage of operating revenues improved to 10.0% for 1992 from 9.1% in 1991
excluding the special charge. On the same basis, return on average
stockholders' equity improved to 16.5% in 1992 from 14.2% in 1991.
Railroad: The Railroad improved earnings to $667 million in 1992 compared to
$110 million in 1991. Excluding the 1991 special charge, earnings would have
advanced $65 million (11%). Operating income increased to $1.03 billion from
$190 million in 1991. Without the special charge, operating income would
have risen $96 million (10%) from $935 million in 1991. The Railroad's
operating ratio continued to improve,
<PAGE> 26
declining to 79.0 from 80.4 in 1991 (excluding the special charge),
reflecting productivity improvements arising from the 1991 Presidential
Emergency Board (PEB) settlement.
Revenues improved $121 million (3%) to $4.90 billion, as a 4% rise in
carloadings was partly offset by a 1% decline in average revenue per car
caused by traffic mix shifts, principally the growth of intermodal shipments.
Automotive carloadings rose 15%, resulting from strong improvements in both
parts and assembled auto traffic, while intermodal shipments were up 9%
reflecting growth from both new and existing customers. In addition, metals,
minerals and forest traffic rose 6% as a result of higher construction market
demand, and grain increased 6% relating to expanding export markets. Other
carloading increases occurred in chemicals (2%) and food, consumer and
government products (1%). Energy traffic decreased 5% reflecting weak coal
demand from utilities, the result of unusually mild weather and the absence of
1991 test burn activities.
Operating expenses declined $720 million to $3.87 billion in 1992. Excluding
the 1991 special charge, operating expenses would have increased $25 million.
Equipment and other rent expense rose $28 million relating to volume growth,
and depreciation increased $15 million as a result of the Railroad's
continuing capital program. In addition, outside hauling costs resulting from
growth in intermodal traffic rose $6 million. Offsetting these increases were
a $22 million decline in other taxes, reflecting favorable property tax
settlements and a $16 million decrease in materials and supplies costs.
Productivity improvements and cost containment programs continued, with
salaries, wages and employee benefits increasing only $3 million as savings
stemming from the 1991 PEB settlement negated increases relating to inflation
and volume growth. In addition, fuel costs rose only $2 million as
improvements in the consumption rate combined with lower fuel prices to offset
a 4% increase in gross ton-miles.
Natural Resources: Resources' net income improved to $272 million from $207
million in 1991. Excluding the 1991 special charge, net income would have
risen $29 million (12%). Operating income of $315 million improved $56
million, but would have remained essentially flat without the 1991 special
charge. Results for 1992 include a favorable one-time $63 million ($42
million after-tax) production-based tax settlement and a $24 million ($16
million after-tax) charge relating to a workforce reduction program.
Revenues climbed $168 million to $1.26 billion, as a 9% increase in total
sales volumes and higher average prices for natural gas more than compensated
for price declines for crude oil and plant products. Sales volumes were again
strengthened by expanded horizontal drilling activity in the Austin Chalk in
southeastern Texas. Crude oil sales volumes rose 21% to 66,500 bbl/day and
natural gas sales volumes improved 8% to 576 mmcf/day; however, plant products
sales volumes dipped 5% to 36,300 bbl/day, reflecting a temporary decline
caused by a pipeline disruption. Including hedging activity, average sales
prices for natural gas improved 9% over 1991 to $1.52/mcf, while average
prices for crude oil slipped 6% to $17.22/bbl and average prices for plant
products dropped 10% to $10.67/bbl. Resources increased its hydrocarbon
reserve position slightly through its drilling programs, primarily in the
Austin Chalk and the Land Grant, despite the strong increase in total 1992
production.
Operating expenses increased $112 million to $944 million for 1992, but would
have risen $167 million without the 1991 special charge. Depreciation,
depletion and amortization rose $147 million reflecting expanded production
levels, higher rates for new wells, property write-offs and accelerated lease
surrender activity. In addition, the cost of pipeline and gas plant product
purchased for resale increased $22 million, resulting from higher volumes.
Also included in operating expenses is $24 million relating to a 15% workforce
reduction program. These cost increases were partially mitigated by the
production-based tax settlement, which contributed to a $17 million reduction
in other taxes.
Other income increased $27 million in 1992, principally because of $39 million
in interest income included in the production-based tax settlement, offset by
the absence of a $13 million gain from 1991 surface rights sales.
Resources' minerals operations recorded operating income of $111 million in
1992, an 8% gain over 1991's $103 million, reflecting improvements in sales
volumes and average prices at its coal joint venture.
Trucking: Overnite earned $40 million in 1992, up from $13 million in 1991,
including $20 million of goodwill amortization. Excluding the 1991 special
charge, 1992 earnings would have been up $10 million. Operating income
improved to $57 million compared to $19 million in 1991, and would have
risen $13 million over the prior year excluding the 1991 special charge.
Overnite's operating ratio, excluding the 1991 special charge and goodwill
amortization, improved to 90.9 compared to 91.9 in 1991.
Despite the sluggish economy, revenues increased $73 million (9%) to $873
million as a 3% improvement in average prices combined with a 6% rise in total
volumes. The volume increase included a 9% advance in tonnage for Overnite's
core LTL business, reflecting increased market penetration and an expanding
customer base. Operating expenses were up $35 million to $816 million, and
would have risen $60 million without the 1991 special charge. Salaries, wages
and employee benefits expense increased $43 million as a result of
inflation and increased employee levels required to handle
<PAGE> 27
volume gains, while the remaining expense increase was primarily
volume-related, including $6 million for increased use of contracted
rail transportation.
Waste Management: USPCI broke even in 1992 compared to a net loss of $20
million in 1991, including $9 million of goodwill amortization. Excluding the
1991 special charge, USPCI's results would have been $3 million better than
the previous year. Operating income was $8 million, up from an operating loss
of $19 million in 1991. Excluding the special charge, operating income would
have improved $2 million over 1991.
Revenues increased $11 million (4%) to $262 million as remediation, treatment
and ash management operations improved. Operating expenses fell $16 million
from 1991 to $254 million. Without the 1991 special charge, operating expenses
would have risen $9 million, as outside disposal costs and contracted
transportation expense increased $10 million.
Corporate Services and Other Operations: Consolidated net income also
included after-tax expense of $251 million in 1992 and $246 million in 1991
relating to Corporate Services and Other Operations. Corporate Services
expense declined $18 million from 1991, as lower interest expense on corporate
debt, reduced stock appreciation rights expense and the absence of the
administrative portion of the 1991 special charge more than offset increased
incentive compensation costs. However, reduced Realty earnings negated this
improvement, causing a $5 million increase in overall expense. A $6 million
operating loss was recognized in 1992 from other operations, while 1991
results included $12 million of operating income, representing Realty's sales
activity countered by the 1991 special charge.
Cash Flows, Liquidity and Capital Resources
Cash from operations declined $97 million in 1993 to $1.56 billion. This
decline resulted from a $232 million increase from changes in working capital,
partially offset by a $51 million decline in cash used for special charges, a
$40 million rise in depreciation expense and a $38 million improvement in
earnings excluding the non-cash accounting adjustments.
(Graph of Union Pacific Corporation Dividend History - see Appendix)
Cash used in investing activities increased to $1.55 billion (an increase of
$206 million compared to a year ago) reflecting a $195 million reduction in
proceeds from property sales, the acquisition of Skyway and additional
investments in Chicago and North Western Holdings Corporation (see Note 5 to
the Financial Statements). The Corporation will continue its high level of
capital spending in 1994. At Resources, spending will be focused on drilling
in the Austin Chalk and exploitation of the Land Grant, as well as expanding
Resources' production base. The Railroad will continue to expand its high-
density main lines and acquire and upgrade equipment to meet customer needs.
Overnite will continue to expand its distribution network, and upgrade its
truck fleet and technology. Capital spending at USPCI will be reduced in 1994
as the Clive incinerator nears completion.
Major financings in 1993 included $57 million of Railroad equipment
financings, $515 million of additional commercial paper and $330 million of
the Corporation's notes and debentures. Debt financings were used to fund
capital expenditures, repay maturing debt and to call $350 million of notes
with higher than market interest rates. In 1993, the Corporation also entered
into a new credit facility (see Note 8 to the Financial Statements). The
quarterly common stock dividend was raised to $0.40 per share in the third
quarter of 1993, up from $0.37 per share. The Corporation's ratio of debt to
capital employed improved to 35.6% at December 31, 1993 compared to 36.9% at
December 31, 1992. This improvement resulted from an increase in debt
discount due to the adoption of SFAS No. 109, increased deferred taxes caused
by the 1993 Tax Act and the inclusion of 1993 earnings, partially offset by
higher debt levels.
The Corporation's 1994 capital expenditures and debt service requirements will
be funded primarily through cash generated from operations, property sales
and, if required, through debt financings. The Corporation expects that such
sources will continue to provide sufficient funds to meet cash requirements in
the foreseeable future. At December 31, 1993, the Corporation had
authorization from the Board of Directors to repurchase up to $359 million of
the Corporation's common stock. At year-end, the Corporation had available
$475 million in short-term credit facilities and $800 million in revolving
credit facilities expiring through 1998.
(Graph of Union Pacific Corporation Capital Investments - see Appendix)
Railroad-Related Matters
Employees of the Railroad who are injured in work-related accidents are
compensated under the Federal Employers' Liability Act (FELA). FELA's finding
of fault and damage is
<PAGE> 28
usually assessed based on litigation or out-of-court settlements. Although the
number of injury claims has continued to decline, settlement cost per claim has
increased, causing annual expense to rise from $125 million in 1991 and 1992 to
$154 million in 1993. The Railroad is continuing its efforts to contain these
costs through aggressive training programs, improving safety in work areas,
working with injured employees, and by participating in an industry-wide effort
to replace FELA with a no-fault system. These efforts could significantly
reduce personal injury costs while maintaining fair and equitable compensation
to injured employees.
Accounting Pronouncements
The FASB has issued Statement No. 112, "Employers' Accounting for
Postemployment Benefits" and Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Both Statements will be effective
by January 1994. Statement No. 112 requires employers to recognize the
obligation to provide benefits to former or inactive employees after
employment but prior to retirement. Statement No. 115 creates new reporting
classifications for investments in debt and certain equity securities. The
Corporation has evaluated these Statements and has determined that the
Statements will not have a significant effect on the Corporation.
Other Matters
Environmental Costs: The Corporation generates, transports, remediates and
disposes of hazardous and non-hazardous waste in its current and former
operations. It is engaged in reducing emissions, spills and migration of
hazardous materials, and spent $16 million and $12 million in 1993 and 1992,
respectively, for control and prevention. Remediation of sites previously
used in operations, used by tenants or contaminated by former owners required
spending of $42 million in 1993 and $39 million in 1992. In 1994, it
anticipates spending $7 million for control and prevention, and $42 million
for remediation. The Corporation had accrued $181 million at December 31,
1993 for future remediation costs; however, the ultimate cost could be lower
or as much as 50% higher. Future remediation obligations should not have a
material impact on the results of operations or financial condition of the
Corporation.
Inflation: The cumulative effect of long periods of inflation has
significantly increased asset replacement costs for capital-intensive
companies such as the Railroad and Overnite. As a result, depreciation
charges on an inflation-adjusted basis, assuming that all operating assets are
replaced at current price levels, would be substantially greater than
historically reported amounts.
A Look Forward
General Economic Factors: The Corporation's future results can be affected by
fluctuations in oil and natural gas prices and by the economic environment.
Resources directly benefits from increases in hydrocarbon prices, inclusive of
hedging activity, while the Railroad and Overnite can be adversely affected by
increases in diesel fuel costs, to the extent that such costs are not
recovered through higher revenues and improved fuel conservation or mitigated
by hedging activity. In addition, certain categories of rail carloadings and
trucking tonnages can be negatively impacted by a prolonged economic downturn.
(Graph of Union Pacific Corporation Year-End Closing Stock Price - see Appendix)
1994 Outlook: Rail volumes are anticipated to improve in 1994 because of new
coal contracts, growing intermodal market share, expanding traffic with
Mexico, improving demand for finished autos and general economic expansion,
while average revenue per car is expected to remain at 1993 levels. Sales
volumes at Resources are expected to improve, while commodity price volatility
is expected to continue. Resources' volume growth will reflect an expansion
in natural gas and natural gas liquids sales volumes resulting from production
increases in the Austin Chalk and the Land Grant in Wyoming, Utah and
Colorado. Future oil and gas reserve additions will come from exploration,
development of existing properties and acquisitions. The Corporation's
continuing strategy is to evaluate potential reserve acquisitions, which could
result in significant transactions. Overnite anticipates improvements in the
current pricing environment and continued tonnage growth. Higher volumes at
Overnite will be generated by continued growth in the Northeast and Midwest, and
expansion in the West. At USPCI, depressed market conditions caused by
regulatory uncertainty, the ongoing delay of remediation activities, and the
recent restructurings by several major industry participants have caused the
Corporation to begin a re-evaluation of USPCI's business environment and
prospects.
Wilmington Sale: Negotiations are under way to sell the Corporation's
Wilmington, California, oil field and related facilities to the Port of Long
Beach, California, for cash and notes. The sale, including a provision for
retained environmental and other liabilities, is expected to result in an
after-tax gain. The sale of these operations will not significantly affect
the Corporation's future operating results and is expected to be completed
later in 1994.
<PAGE> 29
Independent Auditors' Report
Union Pacific Corporation, its Directors and Stockholders:
We have audited the accompanying statements of consolidated financial position
of Union Pacific Corporation and subsidiary companies as of December 31, 1993
and 1992, and the related statements of consolidated income, changes in common
stockholders' equity, and consolidated cash flows for each of the three years
in the period ended December 31, 1993. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Union Pacific Corporation and
subsidiary companies at December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1993 in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the consolidated financial statements, in January
1993, the Corporation changed its method of accounting for postretirement
benefits other than pensions, income taxes and transportation revenue and
expense recognition.
/s/Deloitte & Touche
New York, New York
January 20, 1994
Responsibilities for Financial Statements
The accompanying financial statements, which consolidate the accounts of Union
Pacific Corporation and its subsidiaries, have been prepared in conformity
with generally accepted accounting principles.
The integrity and objectivity of data in these financial statements and
accompanying notes, including estimates and judgements related to matters not
concluded by year-end, are the responsibility of management as is all other
information in this Annual Report. Management devotes ongoing attention to
review and appraisal of its system of internal controls. This system is
designed to provide reasonable assurance, at an appropriate cost, that the
Corporation's assets are protected, that transactions and events are recorded
properly and that financial reports are reliable. The system is augmented by
a staff of corporate traveling auditors supplemented by internal auditors in
the subsidiary operating companies; careful attention to selection and
development of qualified financial personnel; programs to further timely
communication and monitoring of policies, standards and delegated authorities;
and evaluation by independent public accountants during their audits of the
annual financial statements.
The Audit Committee of the Board of Directors, composed entirely of outside
directors, as identified on page 47, meets regularly with financial
management, the corporate auditors and the independent public accountants to
review the work of each. The independent public accountants and corporate
auditors have free access to the Audit Committee, without management
representatives present, to discuss the results of their audits and their
comments on the adequacy of internal controls and the quality of financial
reporting.
/s/Drew Lewis
Chairman and Chief Executive Officer
/s/L. White Matthews III
Executive Vice President-Finance
/s/Charles E. Billingsley
Vice President and Controller
<PAGE> 30
<TABLE>
<CAPTION>
BUSINESS SEGMENTS
Union Pacific Corporation and Subsidiary Companies
Millions of Dollars 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Operating Railroad $ 4,987 $ 4,897 $ 4,776
Revenues Natural resources 1,323 1,259 1,091
Trucking 939 873 800
Waste management 236 262 251
Corporate services and other
operations 76 3 111
------- ------- -------
Total $ 7,561 $ 7,294 $ 7,029
======= ======= =======
Operating Railroad $ 1,042 $ 1,031 $ 190
Income Natural resources 382 315 259
(Loss)(Note 3) Trucking 69 57 19
Waste management (5) 8 (19)
Corporate services and other
operations 1 (6) 12
------- ------- -------
Total $ 1,489 $ 1,405 $ 461
======= ======= =======
Income (Loss) Railroad $ 669 $ 667 $ 110
before Natural resources 309 272 207
Accounting Trucking 42 40 13
Adjustments Waste management (9) -- (20)
(Notes 2 and Corporate services and other
7)(a) operations (245) (251) (246)
------- ------- -------
Total $ 766 $ 728 $ 64
======= ======= =======
Cash from Railroad $ 1,074 $ 999 $ 910
Operations Natural resources 567 776 554
Trucking 44 100 116
Waste management 21 42 44
Corporate services and other
operations (143) (257) (232)
------- ------- -------
Total $ 1,563 $ 1,660 $ 1,392
======= ======= =======
Assets Railroad $10,014 $ 9,397 $ 9,002
(at Year-End) Natural resources 2,246 2,061 1,962
Trucking 1,393 1,350 1,319
Waste management 802 693 632
Corporate services and other
operations 546 597 411
------- ------- -------
Total $15,001 $14,098 $13,326
======= ======= =======
Depreciation, Railroad $ 443 $ 389 $ 374
Depletion and Natural resources 410 435 287
Amortization Trucking 58 51 51
Waste management 31 32 31
Corporate services and other
operations 7 2 5
------- ------- -------
Total $ 949 $ 909 $ 748
======= ======= =======
Capital Railroad $ 805 $ 767 $ 621
Expenditures Natural resources 507 552 427
Trucking 80 72 40
Waste management 114 109 97
Corporate services and other
operations 14 25 6
------- ------- -------
Total $ 1,520 $ 1,525 $ 1,191
======= ======= =======
(a) Accounting adjustments consist of the cumulative effect
of changes in accounting principles and the deferred
tax effect of the Omnibus Budget Reconciliation Act of
1993.
This information should be read in conjunction with the
accompanying accounting policies and notes to the
financial statements.
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
STATEMENT OF CONSOLIDATED INCOME
Union Pacific Corporation and Subsidiary Companies
Millions of Dollars, Except Per
Share Amounts 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Operating Sales and Revenues (Notes 2
Revenues and 4) $ 7,561 $ 7,294 $ 7,029
------- ------- -------
Operating Salaries, wages and employee
Expenses benefits 2,535 2,516 2,434
Depreciation, depletion and
amortization 949 909 748
Equipment and other rents 590 538 495
Fuel and utilities 506 485 488
Materials and supplies 403 390 409
Other costs 1,089 1,051 1,124
Special charge (Note 3) -- -- 870
------- ------- -------
Total 6,072 5,889 6,568
------- ------- -------
Income Operating Income 1,489 1,405 461
Other Income - Net (Note 13) 89 146 122
Interest Expense (Note 8) (324) (360) (388)
Corporate Expenses (99) (90) (83)
------- ------- -------
Income before Income Taxes
and the Cumulative Effect
of Accounting Changes 1,155 1,101 112
Income Taxes (Notes 2 and 7) (450) (373) (48)
------- ------- -------
Income before Cumulative
Effect of Changes in
Accounting Principles 705 728 64
Cumulative Effect to
January 1, 1993 of Changes
in Accounting Principles
(Note 2) (175) -- --
------- ------- -------
Net Income $ 530 $ 728 $ 64
======= ======= =======
Per Share Income before Cumulative
Effect of Changes in
Accounting Principles $ 3.43 $ 3.57 $ 0.31
Cumulative Effect to
January 1, 1993 of
Changes in Accounting
Principles (0.85) -- --
Net Income 2.58 3.57 0.31
Dividends 1.54 1.42 1.305
The accompanying accounting policies and notes to the
financial statements are an integral part of these
statements.
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
Union Pacific Corporation and Subsidiary Companies
Millions of Dollars 1993 1992
------- -------
<S> <C> <C>
Assets
Current Assets Cash and temporary investments $ 113 $ 245
Accounts receivable 651 575
Inventories 252 244
Deferred income taxes (Notes 2
and 7) 117 151
Other current assets 249 166
------- -------
Total 1,382 1,381
------- -------
Investments Investments in and advances to
affiliated companies (Note 5) 455 417
Other investments 170 187
------- -------
Total 625 604
------- -------
Properties Cost (Notes 6 and 8) 17,860 16,385
Accumulated depreciation,
depletion and amortization (6,419) (5,785)
------- -------
Net 11,441 10,600
------- -------
Other Intangible and Other Assets - Net 1,553 1,513
------- -------
Total Assets $15,001 $14,098
======= =======
Liabilities and
Stockholders' Equity
Current Accounts payable $ 477 $ 523
Liabilities Accrued wages and vacation 253 242
Dividends and interest 176 177
Income and other taxes 162 176
Accrued casualty costs 135 135
Debt due within one year 115 110
Restructuring reserve (Note 3) 107 177
Other current liabilities 664 544
------- -------
Total 2,089 2,084
------- -------
Other Debt Due After One Year
Liabilities (Notes 8 and 9) 4,069 3,989
and Equity Deferred Income Taxes
(Notes 2 and 7) 2,676 2,376
Retiree Benefits Obligation
(Notes 2 and 10) 599 175
Restructuring Reserve (Note 3) 50 204
Other Long-Term Liabilities (Note 12) 633 631
Common Stockholders' Equity (page 34) 4,885 4,639
------- -------
Total Liabilities and Stockholders'
Equity $15,001 $14,098
======= =======
The accompanying accounting policies and notes to the
financial statements are an integral part of these
statements.
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
STATEMENT OF CONSOLIDATED CASH FLOWS
Union Pacific Corporation and Subsidiary Companies
Millions of Dollars 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Cash from Net Income $ 530 $ 728 $ 64
Operations Non-cash charges to income:
Depreciation, depletion
and amortization 949 909 748
Deferred income taxes 320 217 (58)
Cumulative effect of changes
in accounting principles
(Note 2) 175 -- --
Special charge (Note 3) -- -- 870
Other non-cash charges (141) (105) (290)
Changes in current assets and
liabilities (128) 104 116
Cash used for special charges (142) (193) (58)
------- ------- -------
Cash from operations 1,563 1,660 1,392
------- ------- -------
Investing Capital investments and
Activities exploratory expenditures (1,574) (1,567) (1,231)
Investments and acquisitions
(Note 5) (75) (71) --
Proceeds from sale of
assets and other
investing activities 96 291 94
------- ------- -------
Cash used for investing
activities (1,553) (1,347) (1,137)
------- ------- -------
Equity and Dividends paid (309) (282) (257)
Financing Debt repaid (Note 8) (753) (677) (373)
Activities Purchase of treasury stock
(Note 11) (10) (5) --
Financings 930 752 350
------- ------- -------
Cash used in equity and
financing activities (142) (212) (280)
------- ------- -------
Net Change in Cash and
Temporary Investments $ (132) $ 101 $ (25)
======= ======= =======
Changes in Accounts receivable $ (76) $ (59) $ 29
Current Assets Inventories (8) (22) 21
and Liabilities Other current assets (49) (31) 12
Accounts, wages and vacation
payable (35) 143 64
Other current liabilities 40 73 (10)
------- ------- -------
Total $ (128) $ 104 $ 116
======= ======= =======
The accompanying accounting policies and notes to the
financial statements are an integral part of these
statements.
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
Union Pacific Corporation and Subsidiary Companies
Millions of Dollars 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Common Stock Common Stock, $2.50
par value (authorized
500,000,000 shares)
Balance at beginning of year
(229,774,547 issued shares
in 1993; 228,410,296 in
1992; 126,182,132 in 1991) $ 574 $ 571 $ 315
Conversions, exercises of
stock options and other
(1,013,628 shares in
1993; 1,364,251 in 1992;
1,032,780 in 1991) 3 3 3
Stock split (101,195,384 shares
in 1991) (Note 11) -- -- 253
------- ------- -------
Balance at end of year
(230,788,175 issued shares
in 1993; 229,774,547 in 1992;
228,410,296 in 1991) 577 574 571
------- ------- -------
Paid-in Balance at beginning of year 1,339 1,288 1,235
Surplus Conversions, exercises of
stock options and other 44 51 53
------- ------- -------
Balance at end of year 1,383 1,339 1,288
------- ------- -------
Retained Balance at beginning of year 4,338 3,899 4,353
Earnings Net Income 530 728 64
------- ------- -------
Total 4,868 4,627 4,417
Dividends declared:
Cash dividends (315) (289) (265)
Stock split (Note 11) -- -- (253)
Exchangeable note conversion
(Note 8) (24) -- --
------- ------- -------
Balance at end of year
(Note 8) 4,529 4,338 3,899
------- ------- -------
Treasury Balance at end of year,
Stock at cost (25,626,946 shares
in 1993; 25,879,742 in 1992;
25,566,455 in 1991) (1,604) (1,612) (1,595)
------- ------- -------
Total Common Stockholders'
Equity (Note 11) $ 4,885 $ 4,639 $ 4,163
======= ======= =======
The accompanying accounting policies and notes to the
financial statements are an integral part of these
statements.
</TABLE>
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Union Pacific
Corporation (the Corporation) and all subsidiaries. Investments in affiliated
companies (20% to 50% owned) are accounted for on the equity method. In
addition, the Corporation consolidates its proportionate share of oil, gas
and mineral ventures. All material intercompany transactions are eliminated.
Cash and Temporary Investments
Temporary investments are stated at cost that approximates fair market value,
and consist of investments with original maturities of three months or less.
Accounts Receivable
Union Pacific Railroad Company has sold, on a revolving basis, an undivided
percentage ownership interest in a designated pool of accounts receivable.
Collection risk on the pool of receivables is minimal. At December 31, 1993
and 1992, accounts receivable are presented net of the $300 million of
receivables sold.
Inventories
Inventories consist primarily of materials and supplies carried at the lower
of cost or market.
Exploration and Production
Oil and gas exploration costs are accounted for using the successful efforts
method.
Drilling costs of unsuccessful exploratory wells, geological and geophysical
costs and carrying costs are charged to expense when incurred. Costs to
develop producing properties, including drilling costs and applicable
leasehold acquisition costs, are capitalized.
Depletion and amortization of producing properties, including depreciation of
well and support equipment and amortization of related lease costs, are
determined by using a unit-of-production method based upon proved reserves.
Acquisition costs of unproved properties are amortized from the date of
acquisition on a composite basis, which considers past success experience and
average lease life.
Property and Depreciation
Properties are carried at cost. Provisions for depreciation are computed
principally on the straight-line method based on estimated service lives of
depreciable property.
The cost (net of salvage) of depreciable rail property retired or replaced in
the ordinary course of business is charged to accumulated depreciation. A
gain or loss is recognized on all other property upon disposition.
The Corporation capitalizes interest and certain labor costs on significant
construction projects during construction.
Intangible Assets
Intangible and Other Assets in 1993 and 1992 include $1.32 billion and $1.29
billion, respectively, of costs in excess of net assets of acquired
businesses. Amortization is generally recorded over forty years on a
straight-line basis. The Corporation regularly assesses the recoverability of
costs in excess of net assets of acquired businesses through a review of cash
flows and fair values of those businesses.
Revenue Recognition
Transportation revenues are recognized on a percentage-of-completion basis,
while delivery costs are recognized as incurred (see Note 2).
Hedging Transactions
The Corporation periodically hedges hydrocarbon sales and purchases, and
interest rates. Gains and losses from these transactions are recognized at
delivery of the commodity or over the life of the instrument (see Note 4).
Earnings Per Share
Earnings per share are based on the weighted average number of common shares
outstanding during the periods, plus shares issuable upon exercise of
outstanding stock options (see Note 11).
Change in Presentation
Certain 1991 and 1992 amounts have been reclassified to conform to the 1993
financial presentation.
1. Business
The Corporation consists of companies operating principally in the United
States engaged in rail transportation; oil, gas and minerals production;
trucking; and waste management.
The following financial information is an integral part of these financial
statements:
Business Segments
Supplementary Information (unaudited)
Selected Quarterly Data;
Oil and Gas -- Proved Reserves;
Capitalized Exploration and Production Costs;
Costs Incurred in Exploration and Development;
Results of Operations for Producing Activities; and
Standardized Measure of Cash Flows
<PAGE> 36
2. Accounting Changes
The Corporation adopted the following accounting changes with a cumulative
adjustment--which resulted in a $175 million or $0.85 per share after-tax
charge to earnings--in January 1993:
<TABLE>
<CAPTION>
In Millions, Except
Per Share Amounts
Income Revenue
OPEB Taxes Recogn. Total
------- ------- ------- -------
<S> <C> <C> <C> <C>
Railroad $ (171) $ 121 $ (22) $ (72)
Natural resources (44) (15) -- (59)
Trucking (47) (25) (7) (79)
Waste management -- -- -- --
Corporate services
and other operations (9) 44 -- 35
------ ------ ------ ------
Consolidated $ (271) $ 125 $ (29) $ (175)
====== ====== ====== ======
Per share $(1.32) $ 0.61 $(0.14) $(0.85)
</TABLE>
Other Postretirement Benefits (OPEB): The Financial Accounting Standards Board
(FASB) issued Statement No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," which requires that the cost of non-pension
benefits for retirees be accrued during their period of employment. The
adoption of this Statement will not affect future cash funding requirements
for these benefits (see Note 10).
Income Taxes: The FASB issued Statement No. 109, "Accounting for Income
Taxes," which requires the balance sheet approach of accounting for income
taxes, whereby assets and liabilities are recorded at the tax rates currently
enacted. The Corporation's results were not significantly affected by the
adoption of this Statement; however, future results may be affected by changes
in the corporate income tax rate. 1993's income tax expense (before accounting
changes) rose $73 million as a result of the Omnibus Budget Reconciliation Act
of 1993 (the 1993 Tax Act) (see Note 7).
Revenue Recognition: The Corporation changed its method of transportation
revenue and expense recognition from accruing both revenues and expenses at the
inception of service to the industry practice of allocating revenues between
reporting periods based on relative transit time, while recognizing expenses as
incurred. The Corporation's results were not significantly affected by this
accounting change.
3. 1991 Special Charge
In 1991, the Corporation announced a major restructuring program, including an
$870 million ($575 million after-tax) charge. The program included a
provision of $480 million for severance and other costs associated with
personnel reductions at Union Pacific Railroad Company and its affiliate,
Missouri Pacific Railroad Company (collectively the Railroad), as well as $265
million for costs related to the disposition of light density rail lines. In
addition, the Corporation provided $125 million for operational realignments
at its other operating companies. The Corporation spent $142 million and $193
million in 1993 and 1992, respectively, for the restructuring program.
4. Price Risk Management
The Corporation utilizes futures contracts, option contracts and swap
agreements to manage price volatility related to sales and purchases of
hydrocarbons. Union Pacific Resources Company (Resources) has purchased fixed
price contracts to hedge 1994 natural gas sales volumes of 161 mmcf/day at
$2.27/mcf, approximately 25% of Resources' 1994 natural gas production.
Overnite Transportation Company (Overnite) has purchased fixed price contracts
to hedge virtually all of its 1994 diesel fuel consumption (62 million gallons
at $0.48 per gallon). Credit risk related to these activities is minimal.
5. Investments and Acquisitions
In May 1993, the Corporation acquired all of the outstanding common stock of
Skyway Freight Systems, Inc. (Skyway) for $65 million and the conversion of
its initial $7 million preferred stock investment. Skyway specializes in
providing customized logistics and transportation support for the time-
definite and specialized freight markets.
In 1992, the Corporation exchanged its preferred stock investment in Chicago
and North Western Holdings Corporation (CNW) for non-voting common stock (the
Stock). Through additional Stock purchases, the Corporation holds a 30%
equity interest in CNW. The Stock is exchangeable into voting common stock
pending Interstate Commerce Commission approval. The CNW investment is
accounted for on the equity method.
<PAGE> 37
6. Properties
<TABLE>
<CAPTION>
Major property accounts are as follows:
Millions of Dollars 1993 1992
------- -------
<S> <C> <C>
Railroad:
Road and other $ 7,935 $ 7,282
Equipment 4,575 4,328
------- -------
Total Railroad 12,510 11,610
Natural resources 4,144 3,785
Trucking 621 555
Waste management 464 350
Other 121 85
------- -------
Total $17,860 $16,385
======= =======
</TABLE>
<TABLE>
<CAPTION>
Accumulated depreciation, depletion and amortization are as follows:
Millions of Dollars 1993 1992
------ ------
<S> <C> <C>
Railroad:
Road and other $1,990 $1,693
Equipment 1,769 1,730
------ ------
Total Railroad 3,759 3,423
Natural resources 2,364 2,124
Trucking 165 138
Waste management 101 82
Other 30 18
------ ------
Total $6,419 $5,785
====== ======
</TABLE>
7. Income Taxes
In August 1993, President Clinton signed the 1993 Tax Act into law raising the
Federal corporate income tax rate to 35% from 34% retroactive to January 1.
As a result, 1993 income tax expense increased by $73 million: $61 million for
the one-time non-cash recognition of deferred income taxes related to prior
periods and $12 million of incremental current year Federal income tax
expense.
<TABLE>
<CAPTION>
Components of income tax expense are as follows:
Millions of Dollars 1993
----
<S> <C>
Current:
Federal $118
State 12
----
Total current 130
----
Deferred:
Federal 304
State 16
----
Total deferred 320
----
Total $450
====
</TABLE>
Prior years' components of tax expense, which have not been restated to
reflect the accounting change (see Note 2), were $156 million in 1992 and $106
million in 1991 for current Federal income tax expense and $217 million in
1992 and $(58) million in 1991 for deferred Federal income tax expense.
<TABLE>
<CAPTION>
Deferred tax liabilities (assets) are comprised of the following:
Millions of Dollars 1993
-------
<S> <C>
Net current deferred tax asset - Restructuring
and other reserves $ (117)
------
Excess tax over book depreciation 2,459
Exploration costs 286
State taxes - Net 221
Alternative minimum tax (178)
Postretirement benefits (152)
Special charge (101)
Other 141
------
Net long-term deferred tax liability 2,676
------
Net deferred tax liability $2,559
======
</TABLE>
<TABLE>
<CAPTION>
A reconciliation between statutory and effective tax rates is as follows:
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Statutory tax rate 35.0% 34.0% 34.0%
Cumulative effect of Federal
rate increase 5.3 -- --
State taxes - Net 1.6 -- --
Goodwill amortization 1.1 3.1 29.5
Section 29 credits (1.2) (1.8) --
Dividend exclusion (1.6) (0.9) (16.1)
Other (1.2) (0.5) (4.5)
----- ----- -----
Effective tax rate 39.0% 33.9% 42.9%
===== ===== =====
</TABLE>
All material IRS deficiencies prior to 1978 have been settled. In addition,
the Corporation has filed refund claims for 1946 through 1967. The
Corporation is contesting deficiencies in the Tax Court for 1978 and 1979.
The Corporation has reached a partial settlement with the Appeals Office of
the IRS for 1980 through 1983; the remaining issues will be resolved as part
of the Tax Court case for 1978 and 1979, as well as the refund claim filed for
1983. The Corporation is negotiating with the Appeals Office concerning 1984
through 1986. The IRS is examining the Corporation's returns for 1987 through
1989. The Corporation believes it has adequately provided for Federal and
state income taxes.
Payments of income taxes were $142 million in 1993, $168 million in 1992 and
$158 million in 1991.
<PAGE> 38
8. Debt
<TABLE>
<CAPTION>
Long-term debt is summarized below:
Millions of Dollars 1993 1992
------ ------
<S> <C> <C>
Notes and Debentures, 4.75% to 10.80%
due through 2054 $2,189 $2,554
Equipment obligations, 6.15% to 15.50%
due through 2012 664 678
Commercial paper, average of 3.35%
in 1993 and 3.62% in 1992 868 353
Mortgage bonds, 4.25% to 5.00%, due
through 2030 178 179
Tax-exempt financings, 2.41% to 9.60%
due through 2026 206 173
Capitalized leases 144 158
Unamortized discount (180) (106)
------ ------
Total long-term debt $4,069 $3,989
====== ======
</TABLE>
Maturities of long-term debt for each year, 1994 through 1998, are $115
million, $271 million, $65 million, $156 million and $1.147 billion,
respectively.
Approximately 55% of all rail equipment and other railroad properties secure
outstanding equipment obligations and mortgage bonds.
Certain tax-exempt financings had variable interest rates from 2.41% to 3.10%
at December 31, 1993, and from 2.65% to 3.50% at December 31, 1992.
Commercial paper borrowings are due within one year, but have been classified
as long-term debt because the Corporation intends to refinance these
obligations by the issuance of additional commercial paper or other long-term
debt. Long-term credit facilities are available to replace outstanding
commercial paper.
The Corporation has $1.275 billion of credit facilities for general corporate
purposes with various banks. These facilities consist of revolving credit
facilities of $800 million that expire in 1998 and $400 million that expire in
March 1994, and $75 million of other short-term facilities. Borrowings on the
$400 million credit facility are payable up to one year from the date the
funds are borrowed. Commitment fees and interest rates payable under these
facilities are comparable to fees and rates available to the most creditworthy
corporate borrowers.
In February 1993, the remaining $25 million of the 7.50% Exchangeable
Guaranteed Notes due 2003, which were issued in conjunction with the
acquisition of the Missouri-Kansas-Texas Railroad, were exchanged for
approximately 774,000 shares of the Corporation's common stock. These common
shares were held in treasury prior to the exchange.
The Corporation is subject to certain restrictions related to the payment of
cash dividends. The amount of retained earnings available for dividends under
the most restrictive test was $2.6 billion at December 31, 1993.
Interest expense is net of capitalized interest of $11 million in 1993, $9
million in 1992 and $6 million in 1991. Interest payments approximate gross
interest expense.
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, 1993, the fair value of total debt exceeded the carrying value by 5%.
9. Leases
The Corporation leases certain locomotives, freight cars, trailers, production
platforms and other property. Future minimum lease payments for capital and
operating leases with initial or remaining non-cancelable lease terms in
excess of one year as of December 31, 1993, are as follows:
<TABLE>
<CAPTION>
Operating Capital
Millions of Dollars Leases Leases
--------- -------
<C> <C> <C>
1994 $114 $ 27
1995 54 26
1996 47 25
1997 38 24
1998 35 21
Later years 95 200
---- ----
Total minimum payments $383 323
====
Amount representing interest (167)
----
Present value of minimum lease
payments $156
====
</TABLE>
The present value of future capital lease payments includes $12 million
classified as a current liability and $144 million classified as long-term
debt.
Rent expense for operating leases with terms exceeding one month was $123
million in 1993, $112 million in 1992 and $111 million in 1991. Contingent
rentals and sub-rentals are not significant.
10. Retirement Plans
The Corporation and certain of its subsidiaries provide pension and
postretirement health care and life insurance benefits to substantially all
salaried and certain hourly employees.
Pension Benefits: Pension plan benefits are based on years of service and
compensation during the last years of employment. Contributions to the plans
are calculated based on the Projected Unit Credit actuarial funding method and
are not less than the minimum funding standards set forth in the Employee
Retirement Income Security Act of 1974, as amended. In addition, Railroad
employees are covered by the Railroad Retirement System. Contributions made to
the System are expensed as incurred and amounted to $195 million, $201 million
and $197 million in 1993, 1992 and 1991, respectively. Since 1989, the
Corporation has settled a portion of the non-qualified unfunded supplemental
plans' accumulated benefit obligation by purchasing annuities.
<PAGE> 39
<TABLE>
<CAPTION>
Pension cost includes the following components:
Millions of Dollars 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Service cost - benefits
earned during the period $ 32 $ 32 $ 28
Interest on projected
benefit obligation 88 84 77
Return on assets
- actual gain (140) (57) (203)
- deferred gain (loss) 60 (19) 132
Net amortization costs 8 10 8
---- ---- ----
Charge to operations $ 48 $ 50 $ 42
==== ==== ====
</TABLE>
The projected benefit obligation was determined using a discount rate of 7.0%
in 1993 and 8.0% in 1992. The estimated rate of salary increase approximated
5.0% in 1993 and 6.25% in 1992. The expected long-term rate of return on plan
assets was 8.0% in both years. The change in assumptions will not
significantly affect 1994 pension cost. As of year-end 1993 and 1992,
approximately 34% and 31%, respectively, of the funded plans' assets were held
in fixed-income and short-term securities, with the remainder primarily in
equity securities.
<TABLE>
<CAPTION>
The funded status of the plans is as follows:
Assets Accumulated
Exceed Benefits
Accumulated Exceed
Millions of Dollars Benefits Assets (a)
-------------- ------------
1993 1992 1993 1992
------ ------ ---- ----
<S> <C> <C> <C> <C>
Plan assets at fair value $1,182 $1,086 $ -- $ --
------ ------ ---- ----
Actuarial present value
of benefit obligations:
Vested benefits 923 783 39 27
Non-vested benefits 54 39 1 --
------ ------ ---- ----
Accumulated benefit
obligation 977 822 40 27
Additional benefits
based on estimated
future salaries 205 239 26 12
------ ------ ---- ----
Projected benefit obligation 1,182 1,061 66 39
------ ------ ---- ----
Plan assets (over) under
projected benefit
obligation -- (25) 66 39
Unamortized net transition
asset (obligation) 39 43 (33) (40)
Unrecognized prior service
cost (46) (64) (39) (25)
Unrecognized net gain (loss) 167 194 (30) (13)
Minimum liability -- -- 76 66
------ ------ ---- ----
Pension liability $ 160 $ 148 $ 40 $ 27
====== ====== ==== ====
(a) Represents the Corporation's non-qualified unfunded supplemental plans.
</TABLE>
Other Postretirement Benefits: The Corporation adopted the provisions of SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (see Note 2) in January 1993. The Corporation does not currently
pre-fund health care and life insurance benefit costs. Cash payments for
these benefits (which were not affected by the adoption of SFAS No. 106) were
$16 million in 1993. Railroad agreement employees' health care and life
insurance benefits are covered by a separate multiemployer plan and therefore
are not subject to the provisions of this Statement.
In late 1993, the Corporation amended its postretirement health care plans to
provide greater employee cost sharing and, for the plan covering Overnite's
employees, implemented stricter eligibility requirements. As a result of these
amendments, future plan expense will be reduced.
<TABLE>
<CAPTION>
Components of the postretirement health care and life insurance benefit
expense are as follows:
Millions of Dollars 1993
----
<S> <C>
Service cost-benefits
earned during the period $ 7
Interest costs on accumulated
benefit obligation 21
---
Charge to operations $28
===
</TABLE>
<TABLE>
<CAPTION>
The liability for postretirement benefit plans is as follows:
Millions of Dollars 1993
----
<S> <C>
Accumulated postretirement benefit
obligation (APBO):
Retirees $201
Fully eligible active employees 21
Other active employees 99
----
Total APBO 321
Unrecognized prior service gain 76
Unrecognized net gain 40
----
Postretirement benefits liability $437
====
</TABLE>
The APBO was determined using a discount rate of 7.0%. The initial assumed
health care cost trend rate was 13.0%, gradually decreasing to 4.8% for 2009
and all future years. If the assumed health care cost trend rate increases by
one percentage point in each subsequent year, annual postretirement benefit
expense would increase by $4 million and the aggregate postretirement benefits
liability would rise by $35 million.
<PAGE> 40
11. Stock Option Plans, Retention Stock Plans and Other Capital Stock
Pursuant to the Corporation's stock option, retention and restricted stock
plans for directors, officers and key employees, 14,469,250, 4,095,900 and
5,530,500 common shares or options for common shares were available for grant
at December 31, 1993, 1992 and 1991, respectively.
Options under the plans are granted at 100% of market value at the date of
grant, become exercisable one year after that date and are exercisable for a
period of ten years from the grant date. The plans also provide for granting
of stock appreciation rights (SAR's) that permit certain holders to surrender
related exercisable options in exchange for cash or stock in an amount equal
to the excess of the market price of the Corporation's common stock on the
date the right is exercised over the option price. As a result of changes in
the market value of the stock, $4 million, $6 million and $18 million were
charged to expense in 1993, 1992 and 1991, respectively. During 1993, 1992
and 1991, options with SAR's were granted for 437,400, 441,500 and 282,500
shares, respectively. At December 31, 1993, 1992 and 1991, there were
1,298,200, 937,400 and 969,500 shares subject to outstanding SAR's,
respectively.
<TABLE>
<CAPTION>
Changes in common stock options and SAR's outstanding are as follows:
Shares Price Range
Under Option Per Share
------------ ----------------
<S> <C> <C>
Balance Dec. 31, 1990 5,784,000 $19.04 to $40.41
Granted 1,049,400 46.66 to 49.13
Exercised (2,361,480) 20.04 to 40.41
Expired/Surrendered (65,200) 34.07 to 40.41
---------- ----------------
Balance Dec. 31, 1991 4,406,720 19.04 to 49.13
Granted 1,322,250 54.13
Exercised (1,511,920) 19.04 to 46.66
Expired/Surrendered (61,100) 46.66 to 54.13
---------- ----------------
Balance Dec. 31, 1992 4,155,950 20.04 to 54.13
Granted 1,352,850 63.75
Exercised (792,890) 20.04 to 54.13
Expired/Surrendered (19,450) 28.32 to 54.13
---------- ----------------
Balance Dec. 31, 1993 4,696,460 20.04 to 63.75
========== ================
Exercisable Dec. 31
1991 3,357,320 $19.04 to $40.41
1992 2,833,700 20.04 to 49.13
1993 3,343,610 20.04 to 54.13
</TABLE>
The plans also provide for granting restricted shares of common stock to
eligible employees, subject to forfeiture if employment terminates during the
prescribed restricted period. During 1993, 1992 and 1991, 208,700, 131,450
and 385,900 retention and restricted shares, respectively, were issued.
The Corporation has announced programs to repurchase up to $1.2 billion of its
common shares. Since 1984, 15 million shares have been repurchased at a cost
of $841 million. In 1991, the Corporation split its outstanding common stock
on a two-for-one basis. Accordingly, all appropriate share and per share
information has been restated.
12. Commitments and Contingencies
There are various lawsuits pending against the Corporation and certain of its
subsidiaries. The Corporation is also subject to Federal, state and local
environmental laws and regulations, and is currently participating in the
investigation and remediation of numerous sites. Where the remediation costs
can be reasonably determined, and where such remediation is probable, the
Corporation has recorded a liability. At December 31, 1993, the Corporation
had accrued $181 million for estimated future environmental costs and believes
it is reasonably possible that actual environmental costs could be lower than
the recorded reserve or as much as 50% higher. The Corporation has also
entered into commitments and provided guarantees for specific financial and
contractual obligations of its subsidiaries and affiliates. The Corporation
does not expect that the lawsuits, environmental costs, commitments or
guarantees will have a material adverse effect on its consolidated financial
position or its results of operations.
13. Other Income - Net
<TABLE>
<CAPTION>
Other Income - Net includes the following:
Millions of Dollars 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Rental income $ 33 $ 38 $ 45
Net gain on
property dispositions 18 36 51
Interest on tax settlements -- 55 15
Interest and other - Net 38 17 11
---- ---- ----
Total $ 89 $146 $122
==== ==== ====
</TABLE>
<PAGE> 41
SUPPLEMENTARY INFORMATION (unaudited)
<TABLE>
<CAPTION>
Selected Quarterly Data
Selected unaudited quarterly data are as follows:
Millions of Dollars
Except Per Share
Amounts Mar.31 Jun.30 Sep.30 Dec.31
------ ------ ------ ------
1993
<S> <C> <C> <C> <C>
Operating revenues $1,830 $1,848 $1,901 $1,982
Operating income 343 385 345 416
Net income (loss) (11)(a) 198 108(b) 235
Per share:
Net income (loss) (0.06)(a) 0.96 0.53(b) 1.14
Dividends 0.37 0.37 0.40 0.40
Common stock price:
High 62.38 65.38 67.00 64.88
Low 56.88 58.75 58.38 57.88
1992
Operating revenues $1,745 $1,782 $1,851 $1,916
Operating income 307 376 372 350
Net income 145 206(c) 185 192
Per share:
Net income 0.71 1.01(c) 0.91 0.94
Dividends 0.34 0.34 0.37 0.37
Common stock price:
High 51.00 55.25 55.50 60.50
Low 44.38 45.75 48.00 50.63
(a) Income before the cumulative effect of accounting changes was $164
million or $0.80 per share.
(b) Included a $61 million ($0.30 per share) increase in income tax expense
resulting from the deferred tax effect of the 1993 Tax Act (see Note 7 to the
Financial Statements).
(c) Included a $63 million ($42 million after-tax) production-based tax
settlement, which increased earnings per share by $0.21.
</TABLE>
Stockholders and Dividends
The common stock of the Corporation is traded on various stock exchanges,
principally the New York Stock Exchange. At January 31, 1994, there were
205,077,299 shares of outstanding common stock and approximately 63,600 common
stockholders. At that date, the closing price of the common stock on the New
York Stock Exchange was $65.38.
Cash dividends declared on common stock by the Corporation were $1.54 per
share in 1993 and $1.42 per share in 1992. Union Pacific has paid dividends
to its common stockholders during each of the past 94 years. See Note 8 to
the Financial Statements for a discussion regarding restrictions relating to
the payment of cash dividends.
Rail Transportation
<TABLE>
<CAPTION>
Commodities
Revenue ton-miles (RTM) and freight revenue for major commodities by percent
and in total are as follows:
1993 1992 1991
Percent of Frght. Frght. Frght.
Total RTM Rev. RTM Rev. RTM Rev.
----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
Automotive 4.0% 11.3% 3.7% 10.7% 3.2% 10.0%
Chemicals 14.0 20.9 14.8 21.6 14.4 21.6
Energy 34.3 18.3 31.2 17.6 33.8 18.9
Food, consumer
and government 5.8 6.6 6.3 7.1 6.2 7.4
Grains and grain
products 16.1 12.9 17.3 13.5 16.1 12.9
Intermodal 12.0 14.3 12.1 13.2 11.6 13.1
Metals, minerals
and forest 13.8 15.7 14.6 16.3 14.7 16.1
----- ---- ----- ---- ----- ----
Total 100% 100% 100% 100% 100% 100%
===== ==== ===== ==== ===== ====
Amounts in
Billions 220.7 $4.8 209.1 $4.7 200.9 $4.6
===== ==== ===== ==== ===== ====
</TABLE>
<TABLE>
<CAPTION>
Equipment
Owned or leased at year-end 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Locomotives 3,142 3,074 3,065
Freight cars
Covered hoppers 23,399 22,656 23,049
Box cars 15,826 16,573 18,279
Open-top hoppers 10,885 11,064 11,221
Gondolas 9,969 10,438 10,686
Other 8,013 8,408 8,868
Work equipment 4,704 4,922 5,048
Acquired during the year
Locomotives 74 74 68
Freight cars 1,394 646 783
Average age of equipment (years)
Locomotives 12.2 11.8 11.3
Freight cars 19.8 19.3 18.3
Bad order ratio-freight cars 7.9% 8.2% 11.2%
</TABLE>
(Graph of Union Pacific Railroad Revenue Ton-Miles Per Employee - see Appendix)
<PAGE> 42
<TABLE>
<CAPTION>
Expenditures
Millions of Dollars 1993 1992 1991
---- ---- ----
Capital Expenditures
<S> <C> <C> <C>
Roadway and other $591 $504 $440
Equipment 214 263 181
---- ---- ----
Total $805 $767 $621
==== ==== ====
Maintenance Expenditures
Roadway $247 $273 $295
Equipment 490 485 463
---- ---- ----
Total $737 $758 $758
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Transportation Statistics
Railroad (track miles) 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Main line 13,972 14,032 14,563
Branch line 3,863 4,988 5,698
Yards, siding and other
main line 12,480 12,717 12,401
------ ------ ------
Total 30,315 31,737 32,662
====== ====== ======
Track miles of continuous
welded rail (at year-end) 13,735 13,528 13,291
Track miles under centralized
traffic-control (at year-end) 8,861 8,847 8,790
Track miles of rail replaced
New 280 373 223
Used 254 267 292
Track miles re-ballasted 2,510 3,296 3,687
Ties replaced (thousands) 2,017 1,946 1,785
Freight Operations
Operating ratio 79.1 79.0 80.4
Carloadings (thousands) 4,619 4,458 4,304
Average revenue per
carloading $1,032 $1,055 $1,064
Average price of diesel
fuel (per gallon)(cents) 62.8 63.9 66.5
</TABLE>
Trucking
<TABLE>
<CAPTION>
Freight Operations
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Shipments (thousands)
Less-than-truckload 8,146 7,603 7,034
Truckload 60 67 72
----- ----- -----
Total 8,206 7,670 7,106
===== ===== =====
Tonnage (thousands)
Less-than-truckload 4,277 3,994 3,652
Truckload 733 837 914
----- ----- -----
Total 5,010 4,831 4,566
===== ===== =====
Revenue per hundredweight $9.28 $9.03 $8.76
Operating ratio 90.2 90.9 91.9
</TABLE>
<TABLE>
<CAPTION>
Equipment and Terminals
Owned or leased at year-end 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Tractors 5,254 5,311 5,205
Trailers 17,105 16,123 14,318
Straight trucks 93 101 121
Automobiles and service units 237 385 525
Service centers 166 160 149
Average age of equipment (years)
Tractors 6.8 7.2 7.8
Trailers 8.0 8.7 8.5
</TABLE>
<TABLE>
<CAPTION>
Capital Expenditures
Millions of Dollars 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Revenue equipment $ 40 $ 48 $ 26
Other 40 24 14
---- ---- ----
Total $ 80 $ 72 $ 40
==== ==== ====
</TABLE>
Natural Resources
<TABLE>
<CAPTION>
Oil and Gas -- Proved Reserves
Proved reserves of crude oil, which include condensate and natural gas
liquids, are as follows:
Millions of Barrels 1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Beginning of year 156.6 161.4 153.0
Revisions of previous estimates 5.5 7.1 3.7
Improved recovery 1.3 -- 6.3
Extensions, discoveries and
other additions 20.8 27.2 22.4
Purchases (sales) of
reserves-in-place 4.6 (7.3) 3.9
Production (31.9) (31.8) (27.9)
----- ----- -----
End of year 156.9 156.6 161.4
===== ===== =====
Proved developed reserves 153.8 148.5 135.4
----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
The table above includes the following amounts with respect to natural gas
liquids:
Millions of Barrels 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Production (7.7) (7.5) (7.6)
Reserves, end of year 74.3 67.8 64.5
</TABLE>
<PAGE> 43
<TABLE>
<CAPTION>
Proved natural gas reserves are as follows:
Billions of Cubic Feet 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Beginning of year 1,709.2 1,655.5 1,694.4
Revisions of previous
estimates (35.6) 37.2 15.5
Extensions, discoveries
and other additions 237.0 427.1 147.8
Purchases (sales) of
reserves-in-place 46.6 (199.6) (6.9)
Production (226.0) (211.0) (195.3)
------- ------- -------
End of year 1,731.2 1,709.2 1,655.5
======= ======= =======
Proved developed reserves 1,643.5 1,610.8 1,512.9
------- ------- -------
Over 90% of proved reserves are in the United States. At December 31, 1990,
proved developed reserves of oil and gas were 130.0 million barrels and
1,595.0 billion cubic feet, respectively.
</TABLE>
<TABLE>
<CAPTION>
Drilling and Production Activities
Drilling 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Gross wells 529 483 382
Gross productive wells 491 435 308
Net wells:
Exploration 20 33 44
Development 303 291 201
Net productive wells:
Exploration 10 13 18
Development 295 285 185
At December 31, 1993, 146 gross wells and 72 net wells were in process of
being drilled.
</TABLE>
<TABLE>
<CAPTION>
Sales Price and Cost (a) 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Crude oil sales price $15.66 $17.22 $18.33
Natural gas liquids sales
price 9.84 10.67 11.86
Gas sales price 1.82 1.52 1.39
Lifting cost (b) 4.12 4.12 4.33
(a) Average per bbl or mcf, except lifting cost which is per barrel oil
equivalent converted at 6:1.
(b) Lifting cost per unit includes 6.9 million, 5.8 million and 6.2 million
barrels of natural gas liquids earned through plant ownership in 1993,
1992 and 1991, respectively.
</TABLE>
<TABLE>
<CAPTION>
Production (per day) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Net crude oil (thousand bbl) 66.5 66.5 54.9
Net natural gas liquids
(thousand bbl) 21.0 20.6 21.4
Net natural gas (mmcf) 619.0 576.0 535.0
Natural gas processed (mmcf) 949.4 935.1 915.0
</TABLE>
<TABLE>
<CAPTION>
Acreage and Wells
Oil and gas acreage is as follows:
Thousands of Acres 1993 1992
------ ------
<S> <C> <C>
Gross developed 1,569 1,581
Net developed 833 821
Gross undeveloped 17,588 27,529
Net undeveloped 15,733 24,574
Gross and net undeveloped acreage at December 31, 1993, includes 13.6 million
acres and 12.8 million acres, respectively, which were acquired under foreign
work programs, substantially all in South America. The table excludes 7.1
million gross acres and 6.4 million net acres, which were acquired through
19th century Congressional Land Grant Acts. Substantial portions of this
acreage are considered prospective for oil and gas.
</TABLE>
<TABLE>
<CAPTION>
Productive oil and gas wells at December 31, 1993, are as follows:
Wells Oil Gas
----- -----
<S> <C> <C>
Gross (a) 4,306 2,582
Net 1,402 1,509
(a) Approximately 833 are multiple completions, 442 of which are gas wells.
</TABLE>
<TABLE>
<CAPTION>
Capitalized Exploration and Production Costs
Millions of Dollars 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Proved properties $ 386 $ 402 $ 355
Unproved properties 151 134 204
Wells, related equipment and
facilities 3,110 2,791 2,606
Uncompleted wells, equipment
and facilities 197 200 148
------ ------ ------
Gross capitalized costs 3,844 3,527 3,313
------ ------ ------
Accumulated depreciation,
depletion, amortization
and valuation provisions (2,208) (1,983) (1,861)
------ ------ ------
Net capitalized costs $1,636 $1,544 $1,452
====== ====== ======
</TABLE>
(Graph of Union Pacific Resources Production - see Appendix)
<PAGE> 44
<TABLE>
<CAPTION>
Costs Incurred in Exploration and Development
Costs incurred in oil and gas property acquisition, and exploration and
development activities are as follows:
Millions of Dollars 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Costs incurred (a)
Proved acreage $ 27 $ 3 $ 29
Unproved acreage 57 31 42
Exploration costs 88 89 111
Development costs 400 485 309
(a) Costs incurred include capitalized costs.
</TABLE>
<TABLE>
<CAPTION>
Results of Operations for Producing Activities
Millions of Dollars 1993 1992 1991
------ ---- ----
<S> <C> <C> <C>
Revenues - Third parties $1,044 $957 $849
------ ---- ----
Production costs 315 300 288
Exploration expenses 76 89 76
Depreciation, depletion and
amortization 400 409 270
------ ---- ----
Total costs 791 798 634
------ ---- ----
Pre-tax results 253 159 215
Income taxes 83 58 73
------ ---- ----
Results of operations $ 170 $101 $142
====== ==== ====
Pipeline results, overhead expenses and interest costs have been excluded in
computing these results of operations.
</TABLE>
<TABLE>
<CAPTION>
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved
Oil and Gas Reserves
Millions of Dollars 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Future cash inflows from
sale of oil and gas $4,540 $5,256 $4,792
Future production and
development costs (1,631) (1,451) (1,406)
Future income taxes (859) (1,156) (963)
------ ------ ------
Future net cash flows 2,050 2,649 2,423
10% annual discount (761) (1,097) (919)
------ ------ ------
Standardized measure of
discounted future net
cash flows $1,289 $1,552 $1,504
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
An analysis of changes in standardized measure of discounted future net cash
flows follows:
Millions of Dollars 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Beginning of year $1,552 $1,504 $1,689
Changes due to current
year operations:
Additions and discoveries
less related production
and other costs 441 721 371
Sales of oil and gas, net
of production costs (733) (657) (561)
Development costs 400 485 309
Purchases (sales) of
reserves-in-place 28 (228) 15
Changes due to revisions in:
Price (516) (4) (325)
Development costs (358) (414) (355)
Quantity estimates (5) 103 43
Income taxes 143 (101) 133
Other 123 (56) (46)
Discount accretion 214 199 231
------ ------ ------
End of year $1,289 $1,552 $1,504
====== ====== ======
</TABLE>
Future oil and gas sales, and production and development costs have been
estimated using prices and costs in effect as of each year-end. Future net
revenues were discounted to present value at 10%, a uniform rate set by the
FASB. Income taxes represent the tax effect (at statutory rates) of the
difference between the standardized measure values and tax bases of the
underlying properties at the end of the year.
Changes in the supplies and demand for oil and natural gas, inflation, timing
of production, reserve revisions and other factors make these estimates
inherently imprecise and subject to substantial revision. As a result, these
measures are not the Corporation's estimate of future cash flows nor do these
measures serve as an estimate of current market value.
<PAGE> 45
<TABLE>
<CAPTION>
TEN-YEAR FINANCIAL SUMMARY
Union Pacific Corporation and Subsidiary Companies
Millions of Dollars, Except Per Share Amounts, Ratios and Employee Statistics
1993[a] 1992 1991[b] 1990 1989
-------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 7,561 7,294 7,029 6,964 6,388
Operating Income (Loss) 1,489 1,405 461 1,324 1,243
Net Income (Loss) 530 728 64 618 595
Per Share:
Net Income (Loss) 2.58 3.57 0.31 3.08 2.81
Dividends $ 1.54 1.42 1.305 1.18 1.12
At Year-End
Total Assets $ 15,001 14,098 13,326 13,078 12,459
Total Debt 4,184 4,099 4,050 4,084 4,036
Common Stockholders'
Equity 4,885 4,639 4,163 4,277 3,911
Per Common Share $ 23.81 22.75 20.52 21.36 19.50
For the Year
Capital Investments [c] $ 1,574 1,567 1,231 1,206 1,174
Cash from Operations 1,563 1,660 1,392 1,467 1,483
Total Salaries, Wages and
Employee Benefits [d] $ 2,863 2,850 2,706 2,694 2,593
Average Number of
Employees 47,126 46,039 47,090 48,323 48,126
Revenues Per Employee $160,400 158,400 149,300 144,100 132,700
Financial Ratios (%)
Debt to Total Capital
Employed 35.6 36.9 39.2 38.5 40.3
Return on Average Common
Stockholders' Equity 11.1 16.5 1.5 15.1 14.2
1988 1987 1986 1985 1984
-------- ------- -------- ------- -------
Operating Revenues $ 6,068 5,351 4,773 5,078 5,289
Operating Income (Loss) 1,200 991 (364) 825 946
Net Income (Loss) 644 583 (460) 501 494
Per Share:
Net Income (Loss) 2.83 2.55 (2.28) 2.09 2.01
Dividends $ 1.05 1.00 0.93 0.90 0.90
At Year-End
Total Assets $ 12,228 10,919 10,863 10,710 10,392
Total Debt 3,356 2,885 3,061 2,192 2,186
Common Stockholders'
Equity 4,482 3,761 3,408 4,356 4,231
Per Common Share $ 19.85 17.90 16.23 19.84 18.76
For the Year
Capital Investments [c] $ 1,240 748 738 1,067 1,017
Cash from Operations 1,391 950 1,333 1,317 1,220
Total Salaries, Wages and
Employee Benefits [d] $ 2,498 2,284 1,978 2,188 2,216
Average Number of
Employees 47,259 46,559 39,476 44,419 46,388
Revenues Per Employee $128,400 114,900 120,900 114,300 114,000
Financial Ratios (%)
Debt to Total Capital
Employed 34.5 32.7 36.1 24.7 25.8
Return on Average Common
Stockholders' Equity 13.4 12.9 -- 10.1 11.6
[a] 1993 results include a net after-tax charge of $175 million for the
adoption of changes in accounting methods and a $61 million charge
for the deferred tax effect of the 1993 Tax Act (See Notes 2 and 7
to the Financial Statements, respectively). Excluding these accounting
adjustments, net income would have been $766 million with a return
on average common stockholders' equity of 15.7%.
[b] Earnings excluding the special charge would have been $639 million with
a return on average common stockholders' equity of 14.2%.
[c] Includes exploratory expenditures and capital expenditures of
unconsolidated affiliated companies.
[d] Includes capitalized salaries, wages and employee benefit costs.
</TABLE>
<PAGE> INSIDE BACK COVER
(Union Pacific Corporation System Map - see Appendix)
<PAGE> APPENDIX
Union Pacific Corporation 1993 Annual Report
Appendix: Description of Graphic Material omitted from electronically
filed excerpts of the 1993 Annual Report
<TABLE>
<CAPTION>
Financial Review - Page 23
Union Pacific Corporation
Millions
1989 1990 1991 1992 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Operating Revenues $6,388 $6,964 $7,029 $7,294 $7,561
Operating Income 1,243 1,324 1,331 1,405 1,489
(a)
(a) Excludes an $870 million special charge.
</TABLE>
<TABLE>
<CAPTION>
Financial Review - Page 25
Union Pacific Corporation
Thousands
1989 1990 1991 1992 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues Per
Employee $132.7 $144.1 $149.3 $158.4 $160.4
</TABLE>
<TABLE>
<CAPTION>
Financial Reveiw - Page 27
Union Pacific Corporation
1989 1990 1991 1992 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Dividends
Per Share $1.12 $1.18 $1.305 $1.42 $1.54
Capital
Investments
Millions 1,174 1,206 1,231 1,567 1,574
</TABLE>
<TABLE>
<CAPTION>
Financial Summary - Page 28
Year-End Closing Stock Price
Union Pacific Corporation
Per share
1989 1990 1991 1992 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Stock Price $38.31 $35.31 $51.75 $58.50 $62.63
</TABLE>
<TABLE>
<CAPTION>
Supplementary Information - Page 41
Union Pacific Railroad
Millions
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue
Ton-Miles
Per Employee 5.72 6.10 6.58 7.21 7.66
</TABLE>
<TABLE>
<CAPTION>
Supplementary Information - Page 43
Production
Union Pacific Resources
Millions of Equivalent Barrels
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
MMBOE of Gas (6:1) 26 34 33 35 38
Barrels of Oil 23 23 28 32 32
</TABLE>
Union Pacific Corporation System Map - Inside Back Cover
Map Description
- ----------------
Two-page white map of the Continental United States, Western
Provinces of Canada, and Alaska, on a gray background.
The location of significant assets and operations are indicated
on the map by operating company as follows:
A. Union Pacific Corporation
1. Corporate Headquarters in Bethlehem, Pennsylvania.
B. Union Pacific Railroad
1. Headquarters in Omaha, Nebraska
2. Single, Double and Triple Track located in the states of
Nebraska, Iowa, Illinois, Missouri, Kansas, Oklahoma,
Arkansas, Tennessee, Louisiana, Texas, Colorado,
Wyoming, Utah, Idaho, Nevada, California, Oregon and
Washington.
3. Classification Yards located in the states of Nebraska,
Illinois, Missouri, Arkansas, Louisiana, Texas, Idaho,
California and Oregon.
4. Major Intermodal Trailer/Container Terminals located in
the states of Nebraska, Illinois, Missouri, Arkansas,
Tennessee, Louisiana, Texas, Colorado, Utah, California
and Washington.
C. Union Pacific Resources
1. Headquarters in Fort Worth, Texas.
2. Major Petroleum Producing Areas in Texas, Arkansas,
Oklahoma, Kansas, North Dakota, Colorado, Wyoming,
Utah, California, Alberta, offshore California and the
Gulf of Mexico.
3. Exploration and Development Activities in Ontario,
Alberta, British Columbia, Louisiana, Texas, Colorado,
Wyoming, Utah and the Gulf of Mexico.
4. Gas Processing Plants in California, Texas, Utah,
Wyoming, Colorado, Oklahoma, and Alberta.
5. Cogeneration Plant in California.
6. Coal Operations in Wyoming.
7. Trona Activities in Wyoming.
8. Construction Materials Activities in Missouri and Utah.
9. Pipelines - Overland Trail Pipeline in Wyoming and the
Wahsatch Gathering System in Utah, Idaho and Wyoming.
D. Overnite Transportation
1. Headquarters in Richmond, Virginia.
2. Key Terminals spread throughout the eastern half of the
Continental United States, and in the western states of
Washington, Oregon, California, Nevada, Utah, Arizona
and Colorado.
E. Skyway Freight Systems
1. Headquarters in Watsonville, California.
2. Key Terminals in the states of Washington, California,
Texas, Illinois, Georgia, New Jersey and Massachusetts.
F. USPCI
1. Headquarters in Houston, Texas.
2. Non-hazardous Waste Disposal Activities in Utah, North
Dakota and Minnesota.
3. Hazardous Waste Disposal Activities in Utah and
Oklahoma.
4. Transportation Terminals in California, Utah, Oklahoma,
and Texas.
5. Analysis and Research Labs in Saskatchewan, Georgia, and
Oklahoma.
6. PCB Treatment, Storage and Decontamination Facilities in
Saskatchewan, Utah, Missouri, Georgia, Ohio and
Pennsylvania.
7. Recycling/Transfer Facilities in California, Kansas,
Oklahoma, Texas and Georgia.
8. Pending Hazardous Waste Incinerator in Utah.
EXHIBIT 21
SIGNIFICANT SUBSIDIARIES
OF UNION PACIFIC CORPORATION
State of
Name of Corporation Incorporation
------------------- -------------
H. W. M. A. Corporation ..................... New York
USPCI, Inc. ................................. Delaware
Overnite Transportation Company ............. Virginia
Union Pacific Holdings, Inc. ................ Utah
Union Pacific Railroad Company .............. Utah
Missouri Pacific Corporation ................ Delaware
Missouri Pacific Railroad Company ........... Delaware
Resources Holdings, Inc. .................... Delaware
Union Pacific Finance Company ............... Delaware
Union Pacific Resources Company ............. Delaware
Union Pacific Technologies, Inc. ............ Delaware
Skyway Freight Systems, Inc. ................ California
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Post-Effective Amendment No. 1
to Registration Statement No. 2-79663, Post-Effective Amendment No. 1 to
Registration Statement No. 33-12513, Registration Statement No. 33-18877,
Registration Statement No. 33-22106, Registration Statement No. 33-22607,
Registration Statement No. 33-25500, Registration Statement No. 33-44236,
Registration Statement No. 33-53968, Registration Statement No. 33-49785,
Registration Statement No. 33-49849, Registration Statement No. 33-51071,
Registration Statement No. 33-51735, and Registration Statement 33-52277 on
Forms S-8 and Registration Statement No. 33-52645 on Form S-3 of our reports
dated January 20, 1994, appearing in and incorporated by reference in the Annual
Report on Form 10-K of Union Pacific Corporation for the year ended December 31,
1993.
/s/DELOITTE & TOUCHE
DELOITTE & TOUCHE
New York, New York
March 29, 1994
EXHIBIT 24
UNION PACIFIC CORPORATION
POWER OF ATTORNEY
The undersigned, a director of Union Pacific Corporation, a Utah
corporation (the "Company"), hereby appoints each of Drew Lewis, L. White
Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact and
agent, to sign on his behalf the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, and any and all amendments thereto, and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Robert P. Bauman
ROBERT P. BAUMAN
UNION PACIFIC CORPORATION
POWER OF ATTORNEY
The undersigned, a director of Union Pacific Corporation, a Utah
corporation (the "Company"), hereby appoints each of Drew Lewis, L. White
Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact and
agent, to sign on his behalf the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, and any and all amendments thereto, and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Richard B. Cheney
RICHARD B. CHENEY
UNION PACIFIC CORPORATION
POWER OF ATTORNEY
The undersigned, a director of Union Pacific Corporation, a Utah
corporation (the "Company"), hereby appoints each of Drew Lewis, L. White
Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact and
agent, to sign on his behalf the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, and any and all amendments thereto, and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/E. Virgil Conway
E. VIRGIL CONWAY
UNION PACIFIC CORPORATION
POWER OF ATTORNEY
The undersigned, a director of Union Pacific Corporation, a Utah
corporation (the "Company"), hereby appoints each of Drew Lewis, L. White
Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact and
agent, to sign on his behalf the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, and any and all amendments thereto, and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Spencer F. Eccles
SPENCER F. ECCLES
UNION PACIFIC CORPORATION
POWER OF ATTORNEY
The undersigned, a director of Union Pacific Corporation, a Utah
corporation (the "Company"), hereby appoints each of Drew Lewis, L. White
Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact and
agent, to sign on his behalf the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, and any and all amendments thereto, and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Elbridge T. Gerry, Jr.
ELBRIDGE T. GERRY, JR.
UNION PACIFIC CORPORATION
POWER OF ATTORNEY
The undersigned, a director of Union Pacific Corporation, a Utah
corporation (the "Company"), hereby appoints each of Drew Lewis, L. White
Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact and
agent, to sign on his behalf the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, and any and all amendments thereto, and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/William H. Gray, III
WILLIAM H. GRAY, III
UNION PACIFIC CORPORATION
POWER OF ATTORNEY
The undersigned, a director of Union Pacific Corporation, a Utah
corporation (the "Company"), hereby appoints each of Drew Lewis, L. White
Matthews, III and Judy L. Swantak her true and lawful attorney-in-fact and
agent, to sign on her behalf the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, and any and all amendments thereto, and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Judith Richards Hope
JUDITH RICHARDS HOPE
UNION PACIFIC CORPORATION
POWER OF ATTORNEY
The undersigned, a director of Union Pacific Corporation, a Utah
corporation (the "Company"), hereby appoints each of Drew Lewis, L. White
Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact and
agent, to sign on his behalf the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, and any and all amendments thereto, and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Lawrence M. Jones
LAWRENCE M. JONES
UNION PACIFIC CORPORATION
POWER OF ATTORNEY
The undersigned, a director of Union Pacific Corporation, a Utah
corporation (the "Company"), hereby appoints each of Drew Lewis, L. White
Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact and
agent, to sign on his behalf the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, and any and all amendments thereto, and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Richard J. Mahoney
RICHARD J. MAHONEY
UNION PACIFIC CORPORATION
POWER OF ATTORNEY
The undersigned, a director of Union Pacific Corporation, a Utah
corporation (the "Company"), hereby appoints each of Drew Lewis, L. White
Matthews, III and Judy L. Swantak her true and lawful attorney-in-fact and
agent, to sign on her behalf the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, and any and all amendments thereto, and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Claudine B. Malone
CLAUDINE B. MALONE
UNION PACIFIC CORPORATION
POWER OF ATTORNEY
The undersigned, a director of Union Pacific Corporation, a Utah
corporation (the "Company"), hereby appoints each of Drew Lewis, L. White
Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact and
agent, to sign on his behalf the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, and any and all amendments thereto, and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/John R. Meyer
JOHN R. MEYER
UNION PACIFIC CORPORATION
POWER OF ATTORNEY
The undersigned, a director of Union Pacific Corporation, a Utah
corporation (the "Company"), hereby appoints each of Drew Lewis, L. White
Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact and
agent, to sign on his behalf the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, and any and all amendments thereto, and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Thomas A. Reynolds, Jr.
THOMAS A. REYNOLDS, JR.
UNION PACIFIC CORPORATION
POWER OF ATTORNEY
The undersigned, a director of Union Pacific Corporation, a Utah
corporation (the "Company"), hereby appoints each of Drew Lewis, L. White
Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact and
agent, to sign on his behalf the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, and any and all amendments thereto, and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/James D. Robinson, III
JAMES D. ROBINSON, III
UNION PACIFIC CORPORATION
POWER OF ATTORNEY
The undersigned, a director of Union Pacific Corporation, a Utah
corporation (the "Company"), hereby appoints each of Drew Lewis, L. White
Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact and
agent, to sign on his behalf the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, and any and all amendments thereto, and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Robert W. Roth
ROBERT W. ROTH
UNION PACIFIC CORPORATION
POWER OF ATTORNEY
The undersigned, a director of Union Pacific Corporation, a Utah
corporation (the "Company"), hereby appoints each of Drew Lewis, L. White
Matthews, III and Judy L. Swantak his true and lawful attorney-in-fact and
agent, to sign on his behalf the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, and any and all amendments thereto, and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission.
/s/Richard D. Simmons
RICHARD D. SIMMONS
