10-QPeriod: Q2 FY2000

UNION PACIFIC CORP Quarterly Report for Q2 Ended Jun 30, 2000

Filed August 14, 2000For Securities:UNP

Summary

Union Pacific Corporation (UNP) reported a solid increase in net income for both the three-month and six-month periods ended June 30, 2000, compared to the prior year. This improvement was driven by robust revenue growth across its rail operations and increased efficiency, which more than offset higher fuel costs. The company's rail segment, its primary revenue generator, saw significant gains in several commodity groups, including automotive, industrial products, and intermodal. While the company's trucking segment, Overnite, experienced revenue growth, its profitability was impacted by higher fuel prices and labor-related issues. Overall, UNP demonstrated strong operational performance, with improvements in its operating ratio. The company also provided updates on its ongoing integration of the Southern Pacific acquisition and addressed market risks through hedging strategies, particularly for fuel prices. Investors should note the company's continued capital investments and its focus on productivity gains as key drivers for future performance.

Key Highlights

  • 1Net income increased to $244 million for Q2 2000 ($0.96/diluted share) from $194 million ($0.77/diluted share) in Q2 1999.
  • 2For the six months ended June 30, 2000, net income rose to $429 million ($1.70/diluted share) from $323 million ($1.31/diluted share) in the same period of 1999.
  • 3Operating revenues grew by 7% to $2.979 billion for Q2 2000 and by 7% to $5.892 billion for the first six months of 2000.
  • 4The rail segment's operating income increased by 23% year-over-year for the quarter, with operating ratio improving to 79.9% from 82.5%.
  • 5Fuel costs significantly increased due to higher prices, impacting operating expenses, though partially offset by hedging activities.
  • 6The company continues integration efforts related to the Southern Pacific acquisition, with ongoing costs for consolidation and employee relocation.
  • 7Union Pacific has updated its credit facilities, now totaling $2.0 billion with maturities in 2001 and 2004.

Frequently Asked Questions

The primary driver for the increase in net income was robust revenue growth in the rail segment, coupled with productivity gains, which more than offset higher fuel prices and other operating cost increases.

Higher fuel prices significantly increased operating expenses, particularly for the rail and trucking segments. While the company employs hedging strategies to mitigate some of this impact, it remains a key cost factor.

The company is continuing with consolidation activities related to the Southern Pacific acquisition, including workforce adjustments and facility mergers. Costs associated with these activities are being recognized, and the company expects remaining payments over the next 18 months.

Yes, Union Pacific is involved in two major class-action lawsuits stemming from the Southern Pacific merger, alleging misrepresentations about service and congestion issues. A settlement has been proposed, subject to court approval, involving a cash payment primarily covered by insurance and adoption of certain procedural measures. Additionally, the company is addressing regulatory matters with the Surface Transportation Board and responding to claims related to a derailment in Louisiana.