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Press release from PR Newswire

Union Pacific Reports Record Third Quarter

Thursday, October 20, 2011

Union Pacific Reports Record Third Quarter08:00 EDT Thursday, October 20, 2011Achieves Best-Ever Earnings Per Share All-Time Quarterly Records - Diluted earnings per share improved 19 percent to $1.85. - Operating revenues totaled $5.1 billion, up 16 percent. - Operating income totaled $1.6 billion, up 13 percent.OMAHA, Neb., Oct. 20, 2011 /PRNewswire/ -- Union Pacific Corporation (NYSE: UNP) today reported 2011 third quarter net income of $904 million, or $1.85 per diluted share, compared to $778 million, or $1.56 per diluted share, in the third quarter 2010.  (Logo: http://photos.prnewswire.com/prnh/20110304/LA59497LOGO)"Union Pacific delivered top and bottom line record results in the third quarter," said Jim Young, Union Pacific chairman and chief executive officer.  "We're clearly demonstrating how Union Pacific's diverse franchise and value-added service offerings are driving record free cash flow and improved financial returns for our shareholders."Third Quarter SummaryThird quarter business volumes, as measured by total revenue carloads, grew one percent versus 2010.  Four of Union Pacific's six business groups reported volume increases, including strong growth in automotive, industrial products, energy and chemical shipments.  Agricultural products and intermodal volumes were down in the quarter compared to 2010.  Quarterly operating revenue increased 16 percent in the third quarter 2011 to a record $5.1 billion versus $4.4 billion in the third quarter 2010.  In addition:Each of Union Pacific's six business groups reported freight revenue growth in the third quarter driven by increased fuel cost recoveries, core pricing gains and volume growth.Average quarterly diesel fuel prices increased 42 percent from $2.24 per gallon in the third quarter 2010 to $3.18 per gallon in the third quarter 2011.Union Pacific's operating ratio of 69.1 percent was 0.9 points higher than the best-ever quarterly record achieved in the third quarter 2010.  The impact of higher fuel prices negatively impacted the operating ratio by 1.7 points compared to 2010.Severe heat and extended drought conditions in Texas and the resulting damage to large sections of track structure negatively impacted operating efficiencies, driving operating expenses up by $18 million during the quarter.The Customer Satisfaction Index of 91 set a new third quarter record, one point better than the third quarter 2010. Quarterly train speed, as reported to the Association of American Railroads, was 24.6 mph, decreasing four percent compared to the third quarter 2010, mainly driven by weather-related challenges.The Company repurchased 4.7 million shares in the third quarter 2011 at an average share price of $91.45 and an aggregate cost of $428 million.  Summary of Third Quarter Freight RevenuesIndustrial Products up 24 percentAutomotive up 23 percentEnergy up 21 percentChemicals up 14 percentAgricultural up 9 percentIntermodal up 8 percentOutlook"While the economic outlook is uncertain, we're optimistic about the future for Union Pacific," said Young.  "As we have shown in this weaker economy, the diversity of our business continues to deliver record results.  We remain confident in the strength of our fundamental strategy to enhance our franchise, provide increased value for our customers, and generate improved 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. Supplemental financial information is attached.    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 its ability to generate returns for shareholders; current and future  economic conditions; and its ability to enhance its franchise, provide value to its customers, and improve 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, 3rd QuarterYear-to-Date For the Periods Ended September 30, 2011 2010 %2011 2010 % Operating Revenues      Freight revenues$4,836$4,18716    %$13,679$11,89815    %      Other revenues2652212077065717            Total operating revenues5,1014,4081614,44912,55515 Operating Expenses      Compensation and benefits1,1931,09293,5263,20210      Fuel916608512,6461,79947      Purchased services and materials50646591,4971,3699      Depreciation408372101,2041,1079      Equipment and other rents293292-8788642      Other 207178165915468            Total operating expenses3,5233,0071710,3428,88716 Operating Income1,5781,401134,1073,66812      Other income 1725(32)584529      Interest expense(142)(153)(7)(431)(460)(6) Income before income taxes1,4531,273143,7343,25315 Income taxes (549)(495)11(1,406)(1,248)13 Net Income$904$77816    %$2,328$2,00516    % Share and Per Share      Earnings per share - basic$1.87$1.5818    %$4.78$4.0119    %      Earnings per share - diluted$1.85$1.5619$4.74$3.9819      Weighted average number of shares - basic484.2493.0(2)487.4499.8(2)      Weighted average number of shares - diluted488.1497.7(2)491.5504.3(3)      Dividends declared per share$0.475$0.3344$1.33$0.9343 Operating Ratio69.1%68.2%0.9pts71.6%70.8%0.8pts Effective Tax Rate 37.8%38.9%(1.1)pts37.7%38.4%(0.7)ptsUNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES Freight Revenues Statistics (unaudited)3rd QuarterYear-to-Date For the Periods Ended September 30, 2011 2010 %2011 2010 % Freight Revenues (Millions) Agricultural $814$7509  %$2,470$2,17813  % Automotive 379309231,10294816 Chemicals 720629142,0871,80815 Energy 1,112922213,0142,60216 Industrial Products 863697242,3561,98719 Intermodal *94888082,6502,37512 Total $4,836$4,18716  %$13,679$11,89815  % Revenue Carloads (Thousands) Agricultural223229(3) %6986704  % Automotive160146104824566 Chemicals23322156896339 Energy57253571,6061,5374 Industrial Products30528288658107 Intermodal *848903(6)2,4372,472(1) Total2,3412,3161  %6,7776,5783  % Average Revenue per Car Agricultural$3,655$3,27112  %$3,537$3,2499  % Automotive2,3642,114122,2872,07610 Chemicals3,0872,85883,0292,8586 Energy1,9451,721131,8771,69211 Industrial Products2,8322,470152,7242,45311 Intermodal *1,119974151,08796113 Average  $2,066$1,80714  %$2,019$1,80912  %*      Each intermodal container or trailer equals one carload. UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES Condensed Consolidated Statements of Financial Position (unaudited)Sep. 30,Dec. 31, Millions, Except Percentages 2011 2010  Assets      Cash and cash equivalents$1,647$1,086      Other current assets 2,5672,346      Investments1,1711,137      Net properties 39,42538,253      Other assets256266 Total assets $45,066$43,088 Liabilities and Common Shareholders' Equity      Debt due within one year $642$239      Other current liabilities3,0822,713      Debt due after one year 8,7659,003      Deferred income taxes 12,29011,557      Other long-term liabilities1,7221,813 Total liabilities26,50125,325 Total common shareholders' equity18,56517,763 Total liabilities and common shareholders' equity$45,066$43,088 Debt to Capital33.6%34.2% Adjusted Debt to Capital*41.4%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 September 30, 2011 2010  Operating Activities      Net income $2,328$2,005      Depreciation 1,2041,107      Deferred income taxes 721433      Other - net 81(825) Cash provided by operating activities 4,3342,720 Investing Activities      Capital investments (2,218)(1,686)      Other - net (23)13 Cash used in investing activities (2,241)(1,673) Financing Activities      Common shares repurchased(1,036)(1,019)      Dividends paid (607)(438)      Debt issued 486894      Debt exchange(272)(98)      Debt repaid (188)(933)      Other - net 8555 Cash used in financing activities (1,532)(1,539) Net Change in Cash and Cash Equivalents 561(492) Cash and cash equivalents at beginning of year 1,0861,850 Cash and Cash Equivalents End of Period$1,647$1,358 Free Cash Flow*      Cash provided by operating activities$4,334$2,720      Receivables securitization facility**-400      Cash provided by operating activities excluding receivables securitization facility4,3343,120      Cash used in investing activities(2,241)(1,673)      Dividends paid(607)(438) Free cash flow $1,486$1,009*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)3rd QuarterYear-to-Date For the Periods Ended September 30, 2011 2010 %2011 2010 % Operating/Performance Statistics      Gross ton-miles (GTMs) (millions)250,855239,5415  %725,477691,3135  %      Employees (average)45,50743,375544,84142,6925      GTMs (millions) per employee5.515.52-16.1816.19-      Customer satisfaction index91901pt91892pts Locomotive Fuel Statistics      Average fuel price per gallon consumed $ 3.18$ 2.2442  %$ 3.11$ 2.2339  %      Fuel consumed in gallons (millions)27726168207815      Fuel consumption rate* 1.1031.09211.1301.129- AAR Reported Performance Measures      Average train speed (miles per hour)24.625.7(4) %25.626.1(2) %      Average terminal dwell time (hours)26.225.0526.125.33      Average rail car inventory (thousands)274.4274.4-272.5275.7(1) Revenue Ton-Miles (Millions)      Agricultural20,99122,062(5) %66,14564,2613  %      Automotive3,2182,98489,6009,4412      Chemicals14,85513,956644,37640,6149      Energy63,27459,3317176,274168,3465      Industrial Products17,74615,6871349,85245,50710      Intermodal19,96120,489(3)58,72659,457(1) Total140,045134,5094  %404,973387,6264  %*   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 Qtr2nd Qtr3rd QtrYear-to-Date Operating Revenues      Freight revenues$4,248$4,595$4,836$13,679      Other revenues242263265770            Total operating revenues4,4904,8585,10114,449 Operating Expenses      Compensation and benefits1,1671,1661,1933,526      Fuel8269049162,646      Purchased services and materials4755165061,497      Depreciation3954014081,204      Equipment and other rents302283293878      Other 188196207591            Total operating expenses3,3533,4663,52310,342 Operating Income1,1371,3921,5784,107      Other income15261758      Interest expense(141)(148)(142)(431) Income before income taxes1,0111,2701,4533,734 Income tax expense(372)(485)(549)(1,406) Net Income$639$785$904$2,328 Share and Per Share      Earnings per share - basic$1.31$1.61$1.87$4.78      Earnings per share - diluted$1.29$1.59$1.85$4.74      Weighted average number of shares - basic489.6488.4484.2487.4      Weighted average number of shares - diluted494.1492.4488.1491.5      Dividends declared per share$0.38$0.475$0.475$1.33 Operating Ratio74.7%71.3%69.1%71.6% Effective Tax Rate36.8%38.2%37.8%37.7% UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES Freight Revenues Statistics (unaudited)2011 1st Qtr 2nd Qtr3rd QtrYear-to-Date Freight Revenues (Millions) Agricultural $807$849$814$2,470 Automotive3423813791,102 Chemicals6647037202,087 Energy9529501,1123,014 Industrial Products6908038632,356 Intermodal *7939099482,650 Total$4,248$4,595$4,836$13,679 Revenue Carloads (Thousands) Agricultural 238237223698 Automotive157165160482 Chemicals223233233689 Energy5384965721,606 Industrial Products263297305865 Intermodal *7708198482,437 Total2,1892,2472,3416,777 Average Revenue per Car Agricultural $3,386$3,580$3,655$3,537 Automotive2,1752,3212,3642,287 Chemicals2,9743,0243,0873,029 Energy1,7701,9161,9451,877 Industrial Products2,6282,6972,8322,724 Intermodal *1,0311,1081,1191,087 Average$1,941$2,045$2,066$2,019*      Each intermodal container or trailer equals one carload. UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES Non-GAAP Measures Reconciliation to GAAP Debt to Capital*Sep. 30,Dec. 31, Millions, Except Percentages2011 2010  Debt (a)$9,407$9,242 Equity18,56517,763 Capital (b)$27,972$27,005 Debt to capital (a/b)33.6%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* Sep. 30,Dec. 31, Millions, Except Percentages2011 2010  Debt9,4079,242 Net present value of operating leases3,2673,476 Unfunded pension and OPEB421421 Adjusted debt (a)$13,095$13,139 Equity18,56517,763 Adjusted capital (b)$31,660$30,902 Adjusted debt to capital (a/b)41.4%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 6.2% at September 30, 2011 and December 31, 2010. 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