What was the primary driver of revenue growth for Union Pacific in the first nine months of 2008?

Revenue growth was primarily driven by an increase in freight revenues, which rose 13% year-over-year. This was achieved through a combination of higher average revenue per car (ARC), which increased 16% due to improved fuel cost recoveries and pricing, and a modest 2% increase in revenue ton-miles, despite a 3% decline in carloads. Strong performance in agricultural and energy shipments contributed significantly to this revenue increase.

How did rising fuel costs impact Union Pacific's profitability?

Rising fuel costs were a major factor increasing operating expenses, which grew 48% to $3.251 billion for the nine months ended September 30, 2008. While Union Pacific was able to recover a significant portion of these costs through fuel surcharges, the overall impact led to higher operating expenses. However, strong revenue growth, productivity improvements, and effective network management helped to mitigate the negative impact on net income, which still saw a 23% increase year-over-year.

What is the company's financial health and liquidity position based on this report?

Union Pacific's financial health appears robust. Total assets increased to $39.551 billion, and the company generated strong cash flow from operations ($3.038 billion for the nine months). Free cash flow saw a substantial increase to $685 million. The company maintained significant available credit under its revolving credit facility ($1.9 billion) and recently issued new debt, indicating continued access to capital markets and a well-managed liquidity position. The debt-to-capital ratio was 35.0% at September 30, 2008.

Were there any significant operational disruptions during the reporting period, and how did the company manage them?

Yes, Union Pacific experienced disruptions from Hurricanes Gustav and Ike, which blocked tracks and impacted customer operations. Additionally, flooding in the Midwest and a mudslide in Cascade caused disruptions. Despite these challenges, the company reported improvements in operational efficiency, with average train speed increasing by 6% and average terminal dwell time decreasing by 2% for the nine months ended September 30, 2008, compared to the prior year. These improvements reflect effective network management initiatives and productivity gains.

UNP 10-Q Quarterly Report Q3 FY2008 — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-Q filed October 23, 2008. Cited figures are marked; the original filing is the authoritative source.

Union Pacific Corporation (UNP) reported strong financial results for the nine months ended September 30, 2008, with net income increasing to $1.677 billion^a from $1.364 billion in the prior year.

This growth was driven by a 13% increase in total operating revenues to $13.684 billion^b, primarily from higher freight revenues across most commodity groups and improved average revenue per car (ARC). The company also demonstrated improved operational efficiency, with increases in average train speed and decreases in average terminal dwell time, despite disruptions from Hurricanes Gustav and Ike. Despite rising fuel costs, which significantly impacted operating expenses, Union Pacific managed to improve its operating ratio.

The company's balance sheet remains solid, with total assets growing to $39.551 billion^c. Management has actively managed its capital structure, including executing a two-for-one stock split in May 2008 and continuing a significant share repurchase program. The company also highlighted its available credit facilities and recent debt issuance, indicating a well-managed liquidity position.

02—Key points

Key Highlights

Net income for the nine months ended September 30, 2008, increased by approximately 23% to $1.677 billion, compared to $1.364 billion in the same period of 2007.
Total operating revenues grew by 13% year-over-year to $13.684 billion for the first nine months of 2008, driven by a 13% increase in freight revenues.
Average Revenue Per Car (ARC) increased by 16% for the nine months ended September 30, 2008, reflecting higher fuel cost recoveries and core pricing improvements.
Operating expenses rose by 12% to $10.750 billion for the nine months, primarily due to a significant 48% increase in fuel costs, though partially offset by productivity gains.
The company completed a two-for-one stock split in May 2008, and continued to execute its share repurchase program, buying back approximately $1.410 billion in stock during the nine months ended September 30, 2008.
Free cash flow improved significantly, reaching $685 million for the nine months ended September 30, 2008, up from $287 million in the prior year.
Despite disruptions from Hurricanes Gustav and Ike, operational metrics like average train speed improved, indicating effective network management.

03—One dollar

04—Financials

Financial Highlights

10-QQ3 FY2008filed October 23, 2008

Revenue$4.85B Net Income$703.00M14.5% Net Margin EPS (Diluted)$0.69 Cash & Equivalents$857.00M Free Cash Flow$509.00M

Financial Statements

Revenue	$4.85B
Operating Expenses	$3.63B
Operating Income	$1.22B
Interest Expense	$130.00M
Net Income	$703.00M
EPS (Basic)	$0.69
EPS (Diluted)	$0.69
Shares Outstanding (Basic)	1.01B
Shares Outstanding (Diluted)	1.02B

05—Questions

Frequently Asked Questions

What was the primary driver of revenue growth for Union Pacific in the first nine months of 2008?
Revenue growth was primarily driven by an increase in freight revenues, which rose 13% year-over-year. This was achieved through a combination of higher average revenue per car (ARC), which increased 16% due to improved fuel cost recoveries and pricing, and a modest 2% increase in revenue ton-miles, despite a 3% decline in carloads. Strong performance in agricultural and energy shipments contributed significantly to this revenue increase.
How did rising fuel costs impact Union Pacific's profitability?
Rising fuel costs were a major factor increasing operating expenses, which grew 48% to $3.251 billion for the nine months ended September 30, 2008. While Union Pacific was able to recover a significant portion of these costs through fuel surcharges, the overall impact led to higher operating expenses. However, strong revenue growth, productivity improvements, and effective network management helped to mitigate the negative impact on net income, which still saw a 23% increase year-over-year.
What is the company's financial health and liquidity position based on this report?
Union Pacific's financial health appears robust. Total assets increased to $39.551 billion, and the company generated strong cash flow from operations ($3.038 billion for the nine months). Free cash flow saw a substantial increase to $685 million. The company maintained significant available credit under its revolving credit facility ($1.9 billion) and recently issued new debt, indicating continued access to capital markets and a well-managed liquidity position. The debt-to-capital ratio was 35.0% at September 30, 2008.
Were there any significant operational disruptions during the reporting period, and how did the company manage them?
Yes, Union Pacific experienced disruptions from Hurricanes Gustav and Ike, which blocked tracks and impacted customer operations. Additionally, flooding in the Midwest and a mudslide in Cascade caused disruptions. Despite these challenges, the company reported improvements in operational efficiency, with average train speed increasing by 6% and average terminal dwell time decreasing by 2% for the nine months ended September 30, 2008, compared to the prior year. These improvements reflect effective network management initiatives and productivity gains.

06—Continue

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