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Press release from PR Newswire

Union Pacific Reports Record Second Quarter

Thursday, July 21, 2011

Union Pacific Reports Record Second Quarter08:00 EDT Thursday, July 21, 2011Achieves Best-Ever Earnings per Share Second Quarter Records - Diluted earnings per share improved 14 percent to $1.59. - Operating revenues totaled $4.9 billion, up 16 percent. - Operating income totaled $1.4 billion, up 9 percent. - Net income increased 10 percent to $785 million. - Customer Satisfaction Index improved three points to 92, an all-time quarterly record.OMAHA, Neb., July 21, 2011 /PRNewswire-FirstCall/ -- Union Pacific Corporation (NYSE: UNP) today reported 2011 second quarter net income of $785 million, or $1.59 per diluted share, compared to $711 million, or $1.40 per diluted share, in the second quarter 2010.(Logo:  http://photos.prnewswire.com/prnh/20110304/LA59497LOGO)"Union Pacific achieved another strong quarter, delivering best-ever quarterly earnings," said Jim Young, Union Pacific chairman and chief executive officer.  "We saw the benefits of our diverse franchise, with volume growth in five of our six commodity groups.  We generated record second quarter operating income and cash from operations despite the impact of severe flooding in the Midwest."Second Quarter SummarySecond quarter business volumes, as measured by total revenue carloads, grew 3 percent versus 2010.  Five of Union Pacific's six business groups reported volume growth, with strong growth in shipments of agricultural products and chemicals.  Intermodal volumes were down slightly during the quarter compared to 2010.  Quarterly operating revenue increased 16 percent in the second quarter 2011 to $4.9 billion versus $4.2 billion in the second quarter 2010.  In addition:Each of Union Pacific's six business groups reported freight revenue growth in the second quarter.  Increased fuel cost recoveries, core pricing gains, and volume growth contributed to these increases.Quarterly diesel fuel prices increased 44 percent from an average of $2.29 per gallon in the second quarter 2010 to an average of $3.29 per gallon in the second quarter 2011.Union Pacific's operating ratio of 71.3 percent was 1.9 points worse than the previous second-quarter record set in 2010.  The impact of higher fuel prices negatively impacted operating ratio and earnings by 2.0 points and $0.02 per diluted share compared to 2010.Flood-related issues increased operating expenses by $14 million, or $0.02 per diluted share and resulted in missed coal revenue of approximately $20 million, or $0.02 per diluted share net of estimated cost savings.The Customer Satisfaction Index of 92 set a new all-time quarterly best record, three points better than the second quarter 2010.Quarterly train speed, as reported to the Association of American Railroads, was 26.1 mph, decreasing one percent compared to the second quarter 2010.The Company repurchased 3.6 million shares in the second quarter 2011 at an average share price of $100.75 and an aggregate cost of approximately $360 million.Summary of Second Quarter Freight RevenuesAgricultural up 22 percentChemicals up 19 percentIndustrial Products up 16 percentEnergy up 14 percentAutomotive up 14 percentIntermodal up 13 percent2011 Outlook"Looking to the second half of the year, we expect stronger performance despite some economic uncertainties and ongoing flood challenges," said Young.  "With our diverse franchise and strong value proposition, we're well-positioned to leverage volume growth and achieve pricing gains that will improve financial returns for our shareholders."About Union PacificUnion Pacific Corporation owns one of America's leading transportation companies. Its principal operating company, Union Pacific Railroad, links 23 states in the western two-thirds of the country. Union Pacific serves many of the fastest-growing U.S. population centers and provides Americans with a fuel-efficient, environmentally responsible and safe mode of freight transportation. Union Pacific's diversified business mix includes Agricultural Products, Automotive, Chemicals, Energy, Industrial Products and Intermodal. The railroad emphasizes excellent customer service and offers competitive routes from all major West Coast and Gulf Coast ports to eastern gateways. Union Pacific connects with Canada's rail systems and is the only railroad serving all six major gateways to Mexico, making it North America's premier rail franchise.This press release and related materials contain statements about the Corporation's future that are not statements of historical fact, including specifically the statements regarding the Corporation's expectations with respect to economic conditions and its performance for the rest of the year; and its ability to leverage volume growth and improve pricing and financial returns.  These statements are, or will be, forward-looking statements as defined by the Securities Act of 1933 and the Securities Exchange Act of 1934.  Forward-looking statements also generally include, without limitation, information or statements regarding:  projections, predictions, expectations, estimates or forecasts as to the Corporation's and its subsidiaries' business, financial, and operational results, and future economic performance;  and management's beliefs, expectations, goals, and objectives and other similar expressions concerning matters that are not historical facts.Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times that, or by which, such performance or results will be achieved.  Forward-looking information, including expectations regarding operational and financial improvements and the Corporation's future performance or results are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statement.  Important factors, including risk factors, could affect the Corporation's and its subsidiaries' future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements.  Information regarding risk factors and other cautionary information are available in the Corporation's Annual Report on Form 10-K for 2010, which was filed with the SEC on February 4, 2011.  The Corporation updates information regarding risk factors if circumstances require such updates in its periodic reports on Form 10-Q and its subsequent Annual Reports on Form 10-K (or such other reports that may be filed with the SEC).Forward-looking statements speak only as of, and are based only upon information available on, the date the statements were made.  The Corporation assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information.  If the Corporation does update one or more forward-looking statements, no inference should be drawn that the Corporation will make additional updates with respect thereto or with respect to other forward-looking statements.  References to our website are provided for convenience and, therefore, information on or available through the website is not, and should not be deemed to be, incorporated by reference herein.UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES Condensed Consolidated Statements of Income (unaudited) Millions, Except Per Share Amounts and Percentages, 2nd QuarterYear-to-Date For the Periods Ended June 30, 20112010%20112010% Operating Revenues      Freight revenues$4,595$3,95616%$8,843$7,71115%      Other revenues2632261650543616            Total operating revenues4,8584,182169,3488,14715 Operating Expenses      Compensation and benefits1,1661,051112,3332,11011      Fuel904608491,7301,19145      Purchased services and materials516472999190410      Depreciation40136897967358      Equipment and other rents283282-5855722      Other 196122613843684            Total operating expenses3,4662,903196,8195,88016 Operating Income1,3921,27992,5292,26712      Other income 2619374120F      Interest expense(148)(152)(3)(289)(307)(6) Income before income taxes1,2701,146112,2811,98015 Income taxes (485)(435)11(857)(753)14 Net Income$785$71110%$1,424$1,22716% Share and Per Share      Earnings per share - basic$1.61$1.4213%$2.91$2.4419%      Earnings per share - diluted$1.59$1.4014$2.89$2.4219      Weighted average number of shares - basic488.4501.8(3)489.0503.1(3)      Weighted average number of shares - diluted492.4506.5(3)493.3507.6(3)      Dividends declared per share$0.475$0.3344$0.855$0.6043 Operating Ratio71.3%69.4%1.9pts72.9%72.2%0.7pts Effective Tax Rate 38.2%38.0%0.2pts37.6%38.0%(0.4)pts UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES Freight Revenues Statistics (unaudited)2nd QuarterYear-to-Date For the Periods Ended June 30, 20112010%20112010% Freight Revenues (Millions) Agricultural $849$69822%$1,656$1,42816% Automotive 3813341472363913 Chemicals 703592191,3671,17916 Energy 950836141,9021,68013 Industrial Products 803692161,4931,29016 Intermodal 909804131,7021,49514 Total $4,595$3,95616%$8,843$7,71115% Revenue Carloads (Thousands) Agricultural23721311%4754418% Automotive16515943223104 Chemicals2332091145641211 Energy49648621,0341,0023 Industrial Products29728645605286 Intermodal819827(1)1,5891,5691 Total2,2472,1803%4,4364,2624% Average Revenue per Car Agricultural$3,580$3,2779%$3,483$3,2388% Automotive2,3212,094112,2502,0599 Chemicals3,0242,82673,0002,8595 Energy1,9161,722111,8401,67710 Industrial Products2,6972,420112,6652,4449 Intermodal1,108974141,07195312 Average  $2,045$1,81513%$1,993$1,80910% UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES Condensed Consolidated Statements of Financial Position (unaudited)Jun. 30,Dec. 31, Millions, Except Percentages 20112010 Assets      Cash and cash equivalents$1,055$1,086      Other current assets 2,6442,346      Investments1,1761,137      Net properties 38,90838,253      Other assets246266 Total assets $44,029$43,088 Liabilities and Common Shareholders' Equity      Debt due within one year $179$239      Other current liabilities2,9742,713      Debt due after one year 8,7599,003      Deferred income taxes 12,01611,557      Other long-term liabilities1,7951,813 Total liabilities25,72325,325 Total common shareholders' equity18,30617,763 Total liabilities and common shareholders' equity$44,029$43,088 Debt to Capital32.8%34.2% Adjusted Debt to Capital*40.9%42.5%*Adjusted Debt to Capital is a non-GAAP measure; however, we believe that it is important in evaluating our financial performance. See page 8 for a reconciliation to GAAP. UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES Condensed Consolidated Statements of Cash Flows (unaudited) Millions,Year-to-Date For the Periods Ended June 30, 20112010 Operating Activities      Net income $1,424$1,227      Depreciation 796735      Deferred income taxes 459119      Other - net (39)(386) Cash provided by operating activities 2,6401,695 Investing Activities      Capital investments (1,327)(1,056)      Other - net (39)(12) Cash used in investing activities (1,366)(1,068) Financing Activities      Common shares repurchased(608)(422)      Dividends paid (374)(272)      Debt exchange(272)-      Debt repaid (131)(885)      Debt issued -400      Other - net 8019 Cash used in financing activities (1,305)(1,160) Net Change in Cash and Cash Equivalents (31)(533) Cash and cash equivalents at beginning of year 1,0861,850 Cash and Cash Equivalents End of Period$1,055$1,317 Free Cash Flow*      Cash provided by operating activities$2,640$1,695      Receivables securitization facility**-400      Cash provided by operating activities excluding receivables securitization facility2,6402,095      Cash used in investing activities(1,366)(1,068)      Dividends paid(374)(272) Free cash flow $900$755*Free cash flow is a non-GAAP measure; however, we believe that it is important in evaluating our financial performance and measures our ability to generate cash without incurring additional financing.**Effective January 1, 2010, new accounting guidance requires us to account for receivables transferred under our receivables securitization facility as secured borrowings in our Condensed Consolidated Statements of Financial Position and as financing activities in our Condensed Consolidated Statements of Cash Flows. The receivables securitization facility line in the above table is included in our free cash flow calculation to adjust cash provided by operating activities as though our receivables securitization facility had been accounted for under the new accounting guidance for all periods presented.   UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES Operating and Performance Statistics (unaudited)2nd QuarterYear-to-Date For the Periods Ended June 30, 20112010%20112010% Operating/Performance Statistics      Gross ton-miles (GTMs) (millions)239,216228,0625%474,622451,7725%      Employees (average)44,97142,571644,50842,3505      GTMs (millions) per employee5.325.36(1)10.6610.67-      Customer satisfaction index92893pts92884pts Locomotive Fuel Statistics      Average fuel price per gallon consumed $ 3.29$ 2.2944%$ 3.08$ 2.2239%      Fuel consumed in gallons (millions)26525735435204      Fuel consumption rate* 1.1091.126(2)1.1441.150(1) AAR Reported Performance Measures      Average train speed (miles per hour)26.126.4(1)%26.126.3(1)%      Average terminal dwell time (hours)25.624.7426.025.42      Average rail car inventory (thousands)271.9275.2(1)271.5276.4(2) Revenue Ton-Miles (Millions)      Agricultural22,54820,14712%45,15442,1997%      Automotive3,2053,271(2)6,3826,457(1)      Chemicals14,95313,3251229,52126,65811      Energy54,73053,4372113,000109,0154      Industrial Products17,00115,957732,10629,8208      Intermodal19,72620,177(2)38,76538,968(1) Total132,163126,3145%264,928253,1175%*   Fuel consumption is computed as follows: gallons of fuel consumed divided by gross ton-miles in thousands.   UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES Condensed Consolidated Statements of Income (unaudited)2011 Millions, Except Per Share Amounts and Percentages1st Qtr 2nd Qtr Year-to-Date  Operating Revenues      Freight revenues$4,248$4,595$8,843      Other revenues242263505            Total operating revenues4,4904,8589,348 Operating Expenses      Compensation and benefits1,1671,1662,333      Fuel8269041,730      Purchased services and materials475516991      Depreciation395401796      Equipment and other rents302283585      Other 188196384            Total operating expenses3,3533,4666,819 Operating Income1,1371,3922,529      Other income152641      Interest expense(141)(148)(289) Income before income taxes1,0111,2702,281 Income tax expense(372)(485)(857) Net Income$639$785$1,424 Share and Per Share      Earnings per share - basic$1.31$1.61$2.91      Earnings per share - diluted$1.29$1.59$2.89      Weighted average number of shares - basic489.6488.4489.0      Weighted average number of shares - diluted494.1492.4493.3      Dividends declared per share$0.38$0.475$0.855 Operating Ratio74.7%71.3%72.9% Effective Tax Rate36.8%38.2%37.6% UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES Freight Revenues Statistics (unaudited)20111st Qtr2nd QtrYear-to-Date Freight Revenues (Millions) Agricultural $807$849$1,656 Automotive342381723 Chemicals6647031,367 Energy9529501,902 Industrial Products6908031,493 Intermodal7939091,702 Total$4,248$4,595$8,843 Revenue Carloads (Thousands) Agricultural 238237475 Automotive157165322 Chemicals223233456 Energy5384961,034 Industrial Products263297560 Intermodal7708191,589 Total2,1892,2474,436 Average Revenue per Car Agricultural $3,386$3,580$3,483 Automotive2,1752,3212,250 Chemicals2,9743,0243,000 Energy1,7701,9161,840 Industrial Products2,6282,6972,665 Intermodal1,0311,1081,071 Average$1,941$2,045$1,993 UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES Non-GAAP Measures Reconciliation to GAAP Debt to Capital*Jun. 30,Dec. 31, Millions, Except Percentages20112010 Debt (a)$ 8,938$ 9,242 Equity 18,306 17,763 Capital (b)$ 27,244$ 27,005 Debt to capital (a/b)32.8%34.2%*Total debt divided by total debt plus equity. Management believes this is an important measure in evaluating our balance sheet strength and is important in managing our credit ratios and financing relationships. Adjusted Debt to Capital, Reconciliation to GAAP* Jun. 30,Dec. 31, Millions, Except Percentages20112010 Debt 8,938 9,242 Net present value of operating leases 3,325 3,476 Unfunded pension and OPEB 421 421 Adjusted debt (a)$ 12,684$ 13,139 Equity 18,306 17,763 Adjusted capital (b)$ 30,990$ 30,902 Adjusted debt to capital (a/b)40.9%42.5%*Total debt plus net present value of operating leases plus after-tax unfunded pension and OPEB obligation divided by total debt plus net present value of operating leases plus after-tax unfunded pension and OPEB obligation plus equity. Operating leases were discounted using 6.3% at June 30, 2011 and 6.2% at December 31, 2010. The higher discount rate reflects changes to interest rates and our current financing costs. Management believes this is an important measure in evaluating the total amount of leverage in our capital structure including off-balance sheet obligations.SOURCE Union Pacific CorporationFor further information: Investors, Michelle Gerhardt, +1-402-544-4227, or Media, Donna Kush, +1-402-544-3753