10-QPeriod: Q2 FY2013

UNION PACIFIC CORP Quarterly Report for Q2 Ended Jun 30, 2013

Filed July 19, 2013For Securities:UNP

Summary

Union Pacific Corporation (UNP) reported solid financial results for the second quarter and first half of 2013, demonstrating resilience in a dynamic economic environment. The company experienced a notable increase in operating revenues, driven primarily by a 5% rise in freight revenues for the quarter, fueled by gains in Average Revenue per Car (ARC) due to core pricing and a favorable shift in shipment mix. While overall carloads saw a slight decline, specific segments like chemicals, automotive, and industrial products showed strong growth. Profitability improved, with net income increasing to $1.1 billion for the quarter and $2.1 billion year-to-date, leading to diluted EPS of $2.37 and $4.40 respectively. The company also improved its operating ratio to a record low of 65.7% for the quarter, indicating effective cost management. Union Pacific maintained a strong cash flow from operations, exceeding $3.2 billion year-to-date, which supported its investing and financing activities, including continued capital investments and share repurchases.

Financial Highlights

48 data points
Beta

Revenue

$5.47B

Net Income

$1.11B

20.2% Net Margin

EPS (Diluted)

$1.18

Total Assets

$49.03B

Cash & Equivalents

$1.84B

Free Cash Flow

$746.00M

Financial Statements
Beta
Revenue$5.47B
Operating Expenses$3.59B
Operating Income$1.88B
Interest Expense$133.00M
Net Income$1.11B
EPS (Basic)$1.19
EPS (Diluted)$1.18
Shares Outstanding (Basic)930.60M
Shares Outstanding (Diluted)935.30M

Key Highlights

  • 1Operating revenues increased by 5% to $5.47 billion in Q2 2013 compared to Q2 2012, driven by freight revenue growth.
  • 2Net income rose to $1.106 billion ($2.37/share diluted) for Q2 2013, up from $1.002 billion ($2.10/share diluted) in Q2 2012.
  • 3The operating ratio improved to a record low of 65.7% in Q2 2013, down from 67.0% in Q2 2012, indicating better cost efficiency.
  • 4Cash provided by operating activities for the first six months of 2013 was $3.218 billion, a significant increase from $2.776 billion in the same period of 2012.
  • 5Capital investments for the first six months of 2013 were $1.73 billion, a decrease from $1.816 billion in 2012, reflecting a shift in timing of expenditures.
  • 6The company continued its share repurchase program, buying back approximately 5.9 million shares in the first half of 2013.
  • 7Average Revenue per Car (ARC) increased across most commodity groups, contributing positively to revenue despite mixed volume trends.

Frequently Asked Questions

The primary driver of revenue growth was a 5% increase in total operating revenues, largely due to a 5% rise in freight revenues. This was primarily driven by an increase in Average Revenue per Car (ARC) resulting from core pricing gains and a favorable shift in shipment mix, rather than a significant increase in overall carloads.

Union Pacific improved its operating ratio to a record low of 65.7% in the second quarter of 2013. While certain expenses like compensation and benefits, and purchased services and materials increased, these were partially offset by a decrease in fuel costs due to lower prices. The company also benefited from efficient cost control measures and a focus on network efficiency.

The company reported strong year-to-date cash flow from operations of $3.2 billion, which it used for capital investments totaling $1.73 billion. Union Pacific also continued its share repurchase program, demonstrating a commitment to returning value to shareholders. The company indicated it may issue additional debt securities under its shelf registration to replace existing debt or access capital, while maintaining a solid debt-to-capital ratio.

Union Pacific is involved in various legal proceedings, including antitrust litigation related to fuel surcharges. The company states it denies the allegations, believes the lawsuits are without merit, and will vigorously defend its actions, not expecting a material adverse effect on its financial condition or liquidity. Environmental remediation costs and other contingent liabilities are also being managed.