10-QPeriod: Q3 FY2012

UNION PACIFIC CORP Quarterly Report for Q3 Ended Sep 30, 2012

Filed October 18, 2012For Securities:UNP

Summary

Union Pacific Corporation (UNP) reported strong financial results for the third quarter and the first nine months of 2012, driven by robust freight revenue growth and improved operational efficiency. The company saw a notable increase in net income and earnings per share compared to the prior year, signaling robust performance. Revenue growth was propelled by core pricing gains across several commodity groups, particularly in Automotive, Chemicals, and Intermodal, offsetting declines in Coal and Agricultural products. This growth was supported by a 6% increase in average train speed and a 1% decrease in average terminal dwell time, contributing to an improved operating ratio. Financially, UNP demonstrated a healthy cash flow from operations, although investing activities saw increased outflows due to higher capital investments, particularly in locomotives and Positive Train Control technology. The company continued its commitment to shareholder returns through significant dividend payments and share repurchases. Despite these positive trends, investors should note the ongoing legal proceedings related to antitrust lawsuits concerning fuel surcharges and potential environmental liabilities, although the company does not expect these to have a material adverse effect on its financial condition.

Financial Highlights

48 data points
Beta

Revenue

$5.34B

Net Income

$1.04B

19.5% Net Margin

EPS (Diluted)

$1.09

Total Assets

$47.07B

Cash & Equivalents

$1.13B

Free Cash Flow

$530.00M

Financial Statements
Beta
Revenue$5.34B
Operating Expenses$3.56B
Operating Income$1.79B
Interest Expense$137.00M
Net Income$1.04B
EPS (Basic)$1.10
EPS (Diluted)$1.09
Shares Outstanding (Basic)944.00M
Shares Outstanding (Diluted)950.40M

Key Highlights

  • 1Net income for the third quarter of 2012 was $1.042 billion, a significant increase from $904 million in the same period of 2011.
  • 2Diluted earnings per share (EPS) rose to $2.19 in Q3 2012 from $1.85 in Q3 2011.
  • 3Total operating revenues increased by 5% year-over-year for the third quarter, reaching $5.343 billion.
  • 4Freight revenues saw a 4% increase in Q3, driven by core pricing gains and volume growth in key sectors like Automotive and Chemicals.
  • 5The operating ratio improved by 2.5 percentage points to a record 66.6% in Q3 2012, indicating enhanced operational efficiency.
  • 6Capital investments increased significantly, with $2.876 billion in the first nine months of 2012 compared to $2.218 billion in the prior year, focusing on infrastructure and technology.
  • 7The company returned substantial capital to shareholders through $860 million in dividends paid and share repurchases totaling $1.179 billion in the first nine months of 2012.

Frequently Asked Questions

Revenue growth in the third quarter of 2012 was primarily driven by core pricing gains across various commodity groups, notably in Automotive, Chemicals, and Intermodal segments. This was partially offset by lower volumes in Coal and Agricultural products, but the overall pricing improvements led to a 4% increase in freight revenues year-over-year.

Operating expenses saw a modest increase of 1% in the third quarter. This was managed through a combination of factors including lower fuel expenses due to reduced gross ton-miles and improved fuel consumption, which offset increases in depreciation, purchased services, and compensation and benefits. The company's focus on operational efficiency, evidenced by improved train speed and reduced dwell times, helped maintain cost control.

Union Pacific is increasing its capital investments, with planned new capital investments of approximately $3.6 billion for 2012. This investment is focused on infrastructure, capacity expansion, and technology like Positive Train Control. The company remains committed to returning capital to shareholders through substantial dividend payments and a continued share repurchase program, funded by operating cash flow and other financial strategies.

The company is involved in ongoing legal proceedings, including antitrust lawsuits related to fuel surcharges and various environmental matters, such as site remediation. While these are noted, Union Pacific states that it does not expect any of these known matters to have a material adverse effect on its consolidated results of operations, financial condition, or liquidity, after accounting for recorded liabilities and insurance recoveries.