10-QPeriod: Q1 FY2010

UNION PACIFIC CORP Quarterly Report for Q1 Ended Mar 31, 2010

Filed April 23, 2010For Securities:UNP

Summary

Union Pacific Corporation (UNP) reported a strong first quarter of 2010, demonstrating a significant recovery from the economic downturn experienced in 2009. Net income rose by 42.5% to $516 million, or $1.01 per diluted share, compared to $362 million, or $0.72 per diluted share, in the same period of the previous year. This improvement was driven by a 16% increase in total operating revenues to $3.97 billion, primarily fueled by a 13% growth in freight carloads and higher average revenue per car (ARC), which benefited from core pricing gains and increased fuel surcharges. The company successfully managed operating expenses, which rose by 8% but were outpaced by revenue growth. Key expense drivers included a 51% increase in fuel costs due to higher prices and a 7% rise in purchased services and materials. However, these increases were partially offset by a 6% reduction in workforce and improved operational efficiencies, leading to a notable improvement in the operating ratio to 75.1% from 80.4% year-over-year. Union Pacific maintained a solid financial position, with $1.75 billion in cash and cash equivalents and manageable debt levels.

Financial Highlights

47 data points
Beta

Revenue

$3.96B

Net Income

$516.00M

13.0% Net Margin

EPS (Diluted)

$0.51

Total Assets

$42.71B

Cash & Equivalents

$1.75B

Free Cash Flow

$195.00M

Financial Statements
Beta
Revenue$3.96B
Operating Expenses$2.98B
Operating Income$988.00M
Interest Expense$155.00M
Net Income$516.00M
EPS (Basic)$0.51
EPS (Diluted)$0.51
Shares Outstanding (Basic)1.01B
Shares Outstanding (Diluted)1.02B

Key Highlights

  • 1Net income increased by 42.5% year-over-year to $516 million ($1.01 per diluted share), indicating a strong recovery from the 2009 economic downturn.
  • 2Total operating revenues grew 16% to $3.97 billion, driven by a 13% increase in freight carloads and higher average revenue per car (ARC).
  • 3Operating expenses increased 8% to $2.98 billion, largely due to a 51% rise in fuel costs, but were effectively managed through efficiency gains.
  • 4The operating ratio improved significantly, decreasing by 5.3 percentage points to 75.1%.
  • 5The company reduced its workforce by 6% as part of ongoing productivity initiatives, contributing to cost management.
  • 6Cash provided by operating activities was $656 million, with a significant portion attributable to the adoption of new accounting guidance for its receivables securitization facility.
  • 7Capital investments were $461 million, reflecting ongoing investment in infrastructure and equipment.

Frequently Asked Questions

Revenue growth was primarily driven by a 13% increase in freight carloads, reflecting economic recovery and increased demand across various sectors. Additionally, higher average revenue per car (ARC) contributed, benefiting from core pricing gains and increased fuel surcharges due to rising fuel prices.

While fuel costs rose significantly by 51%, Union Pacific managed overall operating expenses through several initiatives. These included a 6% reduction in workforce as part of productivity efforts, improved operational efficiencies, and better asset utilization. These measures helped to offset the impact of higher fuel prices and other rising costs.

Effective January 1, 2010, Union Pacific adopted new accounting guidance for its receivables securitization facility. Previously treated as a sale of assets, it is now accounted for as a secured borrowing. This change impacted the presentation of cash flows, moving it from operating activities to financing activities, and also affected the reported debt levels. The company states this change has no impact on its underlying business or cash generation but alters how it's reported.

The report indicates a strong recovery in Q1 2010 compared to the prior year, suggesting positive momentum. However, the MD&A section notes that severe winter weather and track maintenance programs impacted average train speed and terminal dwell time. The cautionary information section also highlights that forward-looking statements are subject to risks and uncertainties, including those detailed in the company's 2009 10-K, indicating that future results could differ materially from expectations.