10-QPeriod: Q1 FY2011

UNION PACIFIC CORP Quarterly Report for Q1 Ended Mar 31, 2011

Filed April 21, 2011For Securities:UNP

Summary

Union Pacific Corporation (UNP) reported a strong first quarter for 2011, with net income increasing by 23.8% to $639 million, or $1.29 per diluted share, compared to $516 million, or $1.01 per diluted share, in the same period of 2010. This growth was primarily driven by a 13% increase in total operating revenues to $4.49 billion, fueled by a significant rise in freight revenues across all commodity groups, reflecting improved economic conditions and higher volumes. The company demonstrated effective cost management despite increased operating expenses, particularly in fuel, which rose 42% due to higher prices. The operating ratio improved slightly to 74.7%, indicating efficient operations. Union Pacific also continued its commitment to returning capital to shareholders, with share repurchases totaling $248 million and dividend payments increasing. While the company faced challenges from severe winter weather in early February, its operational performance remained resilient, with key metrics like average train speed holding steady despite increased carloads. The company's financial position remains solid, supported by robust cash flow from operations and a manageable debt level, positioning it well for continued growth.

Financial Highlights

48 data points
Beta

Revenue

$4.49B

Net Income

$639.00M

14.2% Net Margin

EPS (Diluted)

$0.65

Total Assets

$43.59B

Cash & Equivalents

$1.25B

Free Cash Flow

$692.00M

Financial Statements
Beta
Revenue$4.49B
Operating Expenses$3.35B
Operating Income$1.14B
Interest Expense$141.00M
Net Income$639.00M
EPS (Basic)$0.66
EPS (Diluted)$0.65
Shares Outstanding (Basic)979.20M
Shares Outstanding (Diluted)988.20M

Key Highlights

  • 1Net income increased by 23.8% to $639 million ($1.29 per diluted share) in Q1 2011, up from $516 million ($1.01 per diluted share) in Q1 2010.
  • 2Total operating revenues grew by 13% to $4.49 billion, driven by a 13% increase in freight revenues to $4.25 billion.
  • 3Freight revenue growth was broad-based across all six commodity groups, with Industrial Products (+15%) and Intermodal (+15%) showing particularly strong increases.
  • 4Operating expenses increased by 13% to $3.35 billion, significantly impacted by a 42% rise in fuel costs ($826 million) due to higher prices.
  • 5The operating ratio improved slightly to 74.7% from 75.1% in the prior year's quarter, indicating improved operational efficiency.
  • 6Cash provided by operating activities more than doubled to $1.29 billion from $656 million in the prior year's quarter.
  • 7The company repurchased $248 million in common stock during the quarter and increased dividends paid to $186 million, demonstrating a commitment to shareholder returns.

Frequently Asked Questions

Revenue growth was primarily driven by a 13% increase in total operating revenues to $4.49 billion. This was largely due to a 13% rise in freight revenues to $4.25 billion, fueled by increased volumes across all six commodity groups (a 5% overall increase in revenue carloads) and higher average revenue per car (up 8%), which benefited from core pricing gains and increased fuel surcharges.

While operating expenses increased by 13% to $3.35 billion, this was heavily influenced by a 42% surge in fuel costs to $826 million due to higher prices. The company managed to improve its operating ratio to 74.7% from 75.1% in the prior year by implementing productivity improvements, achieving better asset utilization, and leveraging volume growth, which helped to offset some of the cost pressures from fuel and inflation.

Union Pacific demonstrated its commitment to shareholder returns by repurchasing $248 million of its common stock during the quarter under its authorized share repurchase program. Additionally, dividends paid increased to $186 million, reflecting a higher dividend per share of $0.38 compared to $0.27 in the prior year's quarter. The company also announced a new 40 million share repurchase authorization effective April 1, 2011.

Yes, severe winter weather in early February significantly impacted network operations, particularly in the Chicago area which handles a substantial portion of UNP's traffic. This weather event caused operational disruptions and contributed to a slight increase in average terminal dwell time. Despite these challenges, the company managed its operations effectively, with average train speed remaining flat despite a 5% increase in carloads.