01—Abstract
Summary
Summary of the 10-Q filed July 22, 2011. Cited figures are marked; the original filing is the authoritative source.
Union Pacific Corporation (UNP) reported a strong second quarter and first half of 2011, with diluted earnings per share of $1.59a 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 millionb 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 millionc for the first half of the year.
02—Key points
Key Highlights
- Diluted 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.
- Total 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.
- Freight revenues rose 16% year-over-year in Q2 2011, with notable increases across most commodity groups, reflecting improved economic conditions and higher pricing.
- Operating expenses increased 19% in Q2 2011, largely due to a 49% surge in fuel costs, though offset by productivity gains.
- Free cash flow remained strong, generating $900 million in the first half of 2011, demonstrating robust cash generation capabilities.
- The company refinanced its revolving credit facility, securing $1.8 billion through May 2015, indicating continued access to liquidity on favorable terms.
- Shareholder returns were enhanced through active share repurchases ($4.8 billion total since program inception) and increased dividend payments.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2011filed July 22, 2011Financial Statements
Q2 FY2011 against Q2 FY2010
| Line item | Q2 FY2011Q2 FY2010 | Change |
|---|---|---|
| Revenue | $4.86B$4.18B | +16.2% |
| Operating Expenses | $3.47B$2.90B | +19.4% |
| Operating Income | $1.39B$1.28B | +8.8% |
| Interest Expense | $148.00M$152.00M | −2.6% |
| Net Income | $785.00M$711.00M | +10.4% |
| EPS (Basic) | $0.81$0.71 | +13.4% |
| EPS (Diluted) | $0.80$0.70 | +13.6% |
| Shares Outstanding (Basic) | 976.80M1.00B | −2.7% |
| Shares Outstanding (Diluted) | 984.80M1.01B | −2.8% |
05—Questions
Frequently Asked Questions
What were the primary drivers of Union Pacific's revenue growth in Q2 2011?
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.
How did the Midwest flooding impact Union Pacific's operations and financials?
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.
What is Union Pacific's approach to managing its capital structure and shareholder returns?
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.
How has fuel cost impacted Union Pacific's expenses, and what measures are in place?
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.
06—Continue