01—Abstract
Summary
Summary of the 10-Q filed July 24, 2009. Cited figures are marked; the original filing is the authoritative source.
Union Pacific Corporation (UNP) reported its second quarter 2009 results, with net income for the three months ended June 30, 2009, at $468 milliona, or $0.92 per diluted share.
This represents a decrease compared to the same period in 2008, where net income was $531 millionb, or $1.02 per diluted share. The decline is largely attributable to a significant drop in operating revenues, primarily driven by a 22% reduction in freight volume, reflecting the challenging economic environment impacting demand across most market sectors. Despite the revenue decline, Union Pacific implemented cost-saving measures, including workforce reductions and the idling of locomotives and freight cars, which helped to mitigate the impact on profitability.
The company also benefited from lower fuel prices and a substantial pre-tax gain of $116 millionc from a real estate transaction in Colorado. Operating expenses decreased by 30% year-over-year for the quarter, largely due to lower fuel costs and reduced compensation and benefits. For the six months ended June 30, 2009, net income was $830 million, or $1.64 per diluted share, down from $974 million, or $1.87 per diluted share, in the prior year.
The company's financial position remains solid, with a debt-to-capital ratio of 38.4%d at June 30, 2009. The company also generated positive free cash flow, underscoring its operational resilience amidst economic headwinds.
02—Key points
Key Highlights
- Net income decreased to $468 million ($0.92/share) in Q2 2009 from $531 million ($1.02/share) in Q2 2008, primarily due to a 28% drop in operating revenues.
- Freight revenue declined 28% to $3,121 million in Q2 2009, driven by a 22% reduction in carloads across most commodity groups, reflecting weak economic demand.
- Operating expenses decreased significantly by 30% to $2,552 million in Q2 2009, largely due to a 68% decrease in fuel costs and cost-saving measures like workforce reductions (10% lower employee count).
- A notable pre-tax gain of $116 million from the sale of land in Colorado positively impacted Q2 2009 earnings.
- The company improved operational efficiency, with average train speed increasing by 20% in Q2 2009 compared to the prior year.
- Diluted earnings per share for the six months ended June 30, 2009, were $1.64, down from $1.87 in the same period of 2008.
- The company maintained a solid financial position with a debt-to-capital ratio of 38.4% as of June 30, 2009.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2009filed July 24, 2009Financial Statements
Q2 FY2009 against Q2 FY2008
| Line item | Q2 FY2009Q2 FY2008 | Change |
|---|---|---|
| Revenue | $3.30B$4.57B | −27.7% |
| Operating Expenses | $2.56B$3.64B | −29.7% |
| Operating Income | $748.00M$931.00M | −19.7% |
| Interest Expense | $150.00M$128.00M | +17.2% |
| Net Income | $465.00M$531.00M | −12.4% |
| EPS (Basic) | $0.46$0.52 | −10.7% |
| EPS (Diluted) | $0.46$0.51 | −9.8% |
| Shares Outstanding (Basic) | 1.01B1.03B | −2.2% |
| Shares Outstanding (Diluted) | 1.01B1.04B | −2.6% |
05—Questions
Frequently Asked Questions
What was the primary driver of Union Pacific's financial performance in the second quarter of 2009?
The primary driver was a significant decrease in freight volume, down 22% year-over-year, due to the broader economic recession impacting demand across various sectors. This led to a 28% decline in total operating revenues.
How did Union Pacific manage its expenses in response to lower revenues?
Union Pacific implemented significant cost-saving measures. Operating expenses decreased by 30% driven mainly by lower fuel prices (down 68%) and operational efficiencies, including a 10% workforce reduction, idling of equipment, and improved train speeds.
Did Union Pacific experience any one-time gains or losses that impacted its reported earnings?
Yes, Union Pacific recorded a substantial pre-tax gain of $116 million from the sale of land to the Regional Transportation District in Colorado during the second quarter of 2009. This gain partially offset the impact of lower operating revenues on net income.
What is the company's outlook regarding its capital expenditures and financial flexibility?
Union Pacific plans to reduce its capital expenditures for the full year to approximately $2.6 billion in response to economic conditions. The company maintains a solid financial position with a debt-to-capital ratio of 38.4% and has approximately $1.9 billion in available credit under its revolving credit facility, indicating continued financial flexibility.
06—Continue