01—Abstract
Summary
Summary of the 10-Q filed July 23, 2020. Cited figures are marked; the original filing is the authoritative source.
Union Pacific Corporation (UNP) reported its second-quarter 2020 financial results, reflecting significant impacts from the COVID-19 pandemic.
Total operating revenues for the quarter declined by 24% year-over-year to $4.24 billiona, driven by a 20% decrease in freight volumes across most market segments. This revenue drop was primarily attributed to the economic slowdown caused by the pandemic, particularly affecting automotive production, industrial chemicals, plastics, and intermodal shipments. Despite cost-saving measures like temporary unpaid leaves and salary reductions, operating expenses decreased by 22%, but not enough to offset the revenue decline, leading to a 27% decrease in operating income.
Net income for the quarter was $1.13 billionb, or $1.67 per diluted share, down from $1.57 billion, or $2.22 per diluted share, in the prior year. The company highlighted its operational resilience, with improved metrics like freight car velocity and train speed, and maintained its commitment to safety and customer service. Management anticipates continued uncertainty for the remainder of 2020 due to the pandemic's ongoing effects but remains focused on cost management, productivity, and new business opportunities.
02—Key points
Key Highlights
- Total operating revenues decreased 24% to $4.24 billion in Q2 2020 compared to $5.60 billion in Q2 2019, largely due to a 20% decline in freight volumes.
- Net income for Q2 2020 was $1.13 billion ($1.67 per diluted share), a decrease from $1.57 billion ($2.22 per diluted share) in Q2 2019.
- Operating expenses decreased by 22% to $2.59 billion due to lower volume, productivity initiatives, and reduced fuel prices, though this did not fully offset revenue declines.
- The COVID-19 pandemic significantly impacted demand across most market segments, with notable volume declines in automotive, industrial chemicals, plastics, and intermodal shipments.
- Despite volume declines, operational efficiency improved with key metrics like freight car velocity and average train speed showing year-over-year gains.
- The company maintained a strong liquidity position, with $2.7 billion in cash and cash equivalents and $2.0 billion available under its revolving credit facility as of June 30, 2020.
- Share repurchases were largely suspended in Q2 2020, with the exception of the final settlement of an accelerated share repurchase program.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2020filed July 23, 2020Financial Statements
Q2 FY2020 against Q2 FY2019
| Line item | Q2 FY2020Q2 FY2019 | Change |
|---|---|---|
| Revenue | $4.24B$5.60B | −24.2% |
| Operating Expenses | $2.59B$3.34B | −22.4% |
| Operating Income | $1.65B$2.26B | −26.8% |
| Interest Expense | $289.00M$259.00M | +11.6% |
| Net Income | $1.13B$1.57B | −27.9% |
| EPS (Basic) | $1.67$2.23 | −25.1% |
| EPS (Diluted) | $1.67$2.22 | −24.8% |
| Shares Outstanding (Basic) | 677.70M705.50M | −3.9% |
| Shares Outstanding (Diluted) | 679.20M708.00M | −4.1% |
05—Questions
Frequently Asked Questions
What was the primary driver of the revenue decline in the second quarter of 2020?
The primary driver of the revenue decline was the significant impact of the COVID-19 pandemic on economic activity, leading to a 20% decrease in freight volumes across most market segments. This was particularly pronounced in automotive production, industrial sectors, and intermodal shipments.
How did Union Pacific manage its costs in response to lower volumes?
Union Pacific implemented several cost-saving measures, including temporary unpaid leaves of absence for management and administrative employees, reduced executive and Board of Director salaries, and temporary closure of some repair facilities. These actions, combined with lower fuel prices and ongoing productivity initiatives, helped reduce operating expenses by 22%.
What is the company's outlook for the remainder of 2020?
Management anticipates continued economic uncertainty for the rest of 2020 due to the ongoing effects of the COVID-19 pandemic. While some industrial sectors are showing signs of rebound, the resurgence of the virus and consumer reactions could lead to further disruptions. The company remains focused on managing costs, enhancing productivity, and securing new business opportunities.
Did Union Pacific continue its share repurchase program during the quarter?
Share repurchase activity was largely suspended during the second quarter of 2020, with the exception of the final settlement for an accelerated share repurchase program initiated earlier in the year. The company plans to maintain its quarterly dividend payments.
06—Continue