01—Abstract
Summary
Summary of the 10-Q filed April 23, 2020. Cited figures are marked; the original filing is the authoritative source.
Union Pacific Corporation (UNP) reported its first quarter 2020 results, a period marked by the onset of the COVID-19 pandemic which began to impact revenues in late March.
Total operating revenues decreased by 3% to $5.23 billiona, primarily driven by a 7% decline in freight carloads. Despite the revenue dip, operating income saw a 9% increase to $2.14 billion, and net income rose to $1.47 billion, or $2.15 per diluted share. This improvement was largely due to significant operating expense reductions, down 10% overall, stemming from productivity initiatives, lower fuel prices, and reduced workforce and weather-related costs.
The company highlighted strong operational performance metrics, achieving an all-time record operating ratio of 59.0%b. Management has taken proactive steps to manage liquidity and capital resources in light of the pandemic's uncertainty, including reducing projected 2020 capital expenditures and suspending share repurchases aside from a prior accelerated repurchase program settlement. While acknowledging the potential for material impacts from the ongoing pandemic, UNP remains focused on executing its strategic plan and maintaining its dividend.
02—Key points
Key Highlights
- Total operating revenues declined 3% to $5.23 billion, impacted by a 7% decrease in freight carloads, with the COVID-19 pandemic beginning to affect volumes in late March.
- Despite lower revenues, operating income increased 9% to $2.14 billion, driven by a 10% reduction in operating expenses.
- Net income grew to $1.47 billion, or $2.15 per diluted share, up from $1.39 billion, or $1.93 per diluted share, in the prior year's first quarter.
- The company achieved an all-time record operating ratio of 59.0%, an improvement of 4.6 percentage points year-over-year, reflecting strong operational efficiencies.
- Union Pacific reduced its 2020 capital expenditure forecast by $150-$200 million due to economic uncertainties stemming from the COVID-19 pandemic.
- The company suspended share repurchase programs, with the exception of the final settlement of an accelerated share repurchase program, to preserve liquidity.
- Liquidity remains strong with over $1 billion in cash and cash equivalents and access to a $2 billion revolving credit facility and $400 million undrawn on its Receivables Facility as of March 31, 2020.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2020filed April 23, 2020Financial Statements
Q1 FY2020 against Q1 FY2019
| Line item | Q1 FY2020Q1 FY2019 | Change |
|---|---|---|
| Revenue | $5.23B$5.38B | −2.9% |
| Operating Expenses | $3.09B$3.42B | −9.9% |
| Operating Income | $2.14B$1.96B | +9.3% |
| Interest Expense | $278.00M$247.00M | +12.6% |
| Net Income | $1.47B$1.39B | +6.0% |
| EPS (Basic) | $2.15$1.94 | +10.8% |
| EPS (Diluted) | $2.15$1.93 | +11.4% |
| Shares Outstanding (Basic) | 684.30M716.80M | −4.5% |
| Shares Outstanding (Diluted) | 686.20M719.50M | −4.6% |
05—Questions
Frequently Asked Questions
How did the COVID-19 pandemic impact Union Pacific's first quarter 2020 results?
The COVID-19 pandemic began to impact Union Pacific's results in late March 2020. It led to a 7% decline in freight carloads and a 3% decrease in total operating revenues. The company also incurred additional expenses related to employee and customer safety and anticipates potential increases in bad debt provisions if customer creditworthiness deteriorates.
What is Union Pacific's outlook for capital expenditures in 2020?
Due to the economic uncertainties arising from the COVID-19 pandemic, Union Pacific has reduced its estimated 2020 capital expenditures by $150 million to $200 million from its previously announced plan. Further revisions may occur depending on business conditions.
How is Union Pacific managing its liquidity and financial flexibility in the current environment?
Union Pacific is managing its liquidity by generating strong operating cash flow, reducing capital expenditures, and suspending share repurchases (except for final ASR settlement). As of March 31, 2020, the company held over $1 billion in cash and cash equivalents and had access to significant credit facilities, allowing it to meet its financial obligations and debt maturities.
What is the significance of the record operating ratio?
The record operating ratio of 59.0% signifies that Union Pacific is generating more revenue per dollar of operating expense than ever before. This improvement was driven by effective productivity initiatives, lower fuel prices, and a reduction in weather-related costs, demonstrating strong operational efficiency.
06—Continue