10-QPeriod: Q2 FY2011

UNION PACIFIC CORP Quarterly Report for Q2 Ended Jun 30, 2011

Filed July 22, 2011For Securities:UNP

Summary

Union Pacific Corporation (UNP) reported a strong second quarter and first half of 2011, with diluted earnings per share of $1.59 and $2.89, respectively. This represents significant year-over-year growth, driven by a 16% increase in operating revenues for the quarter and 15% for the year-to-date period. The company benefited from improved economic conditions leading to higher demand for services across most commodity groups, with freight revenues increasing substantially due to higher fuel surcharges, core pricing gains, and volume growth. Despite operational challenges, including Midwest flooding that added $14 million in operating expenses and impacted coal revenue, Union Pacific demonstrated effective cost management and operational leverage. Operating expenses increased, primarily due to higher fuel costs (up 49% for the quarter) and compensation, but were partially offset by productivity improvements. The company also continued its strong commitment to shareholder returns, repurchasing shares and increasing dividend payouts, while maintaining a solid free cash flow of $900 million for the first half of the year.

Financial Highlights

47 data points
Beta

Revenue

$4.86B

Net Income

$785.00M

16.2% Net Margin

EPS (Diluted)

$0.80

Total Assets

$44.03B

Cash & Equivalents

$1.05B

Free Cash Flow

$621.00M

Financial Statements
Beta
Revenue$4.86B
Operating Expenses$3.47B
Operating Income$1.39B
Interest Expense$148.00M
Net Income$785.00M
EPS (Basic)$0.81
EPS (Diluted)$0.80
Shares Outstanding (Basic)976.80M
Shares Outstanding (Diluted)984.80M

Key Highlights

  • 1Diluted EPS of $1.59 for Q2 2011 and $2.89 for H1 2011, up from $1.40 and $2.42 in the prior year periods.
  • 2Total operating revenues increased 16% to $4.86 billion in Q2 2011 and 15% to $9.35 billion in H1 2011, driven by strong freight revenue growth.
  • 3Freight revenues rose 16% year-over-year in Q2 2011, with notable increases across most commodity groups, reflecting improved economic conditions and higher pricing.
  • 4Operating expenses increased 19% in Q2 2011, largely due to a 49% surge in fuel costs, though offset by productivity gains.
  • 5Free cash flow remained strong, generating $900 million in the first half of 2011, demonstrating robust cash generation capabilities.
  • 6The company refinanced its revolving credit facility, securing $1.8 billion through May 2015, indicating continued access to liquidity on favorable terms.
  • 7Shareholder returns were enhanced through active share repurchases ($4.8 billion total since program inception) and increased dividend payments.

Frequently Asked Questions

Revenue growth was primarily driven by a 16% increase in freight revenues, fueled by higher fuel surcharges, core pricing gains, and a 3% increase in volume across multiple commodity groups. Improved economic conditions led to increased demand for Union Pacific's services.

The Midwest flooding resulted in approximately $14 million in increased operating expenses and an estimated $20 million in lost coal revenue in the second quarter. Union Pacific implemented rerouting strategies to maintain service for most customers and took measures to protect infrastructure.

Union Pacific is actively managing its capital structure, as evidenced by its share repurchase program and increased dividend payments. The company generated strong free cash flow of $900 million in H1 2011, which supports these shareholder returns and operational investments. The company also renewed its $1.8 billion revolving credit facility, ensuring continued financial flexibility.

Fuel costs were a significant driver of increased operating expenses, rising 49% in the second quarter of 2011 compared to the prior year. Union Pacific's fuel surcharge programs are in place to recover a portion of these increased fuel costs, with higher fuel prices and volume levels contributing to increased fuel surcharge revenues.