UNION PACIFIC CORP - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - FORM 8-K - UNION PACIFIC CORP	d244294d8k.htm

Exhibit 99.1

UNION PACIFIC REPORTS RECORD THIRD QUARTER

Achieves Best-Ever Earnings Per Share

FOR IMMEDIATE RELEASE

All-Time Quarterly Records

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Diluted earnings per share improved 19 percent to $1.85.

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Operating revenues totaled $5.1 billion, up 16 percent.

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Operating income totaled $1.6 billion, up 13 percent.

Omaha, Neb., October 20, 2011 – Union Pacific Corporation (NYSE: UNP) today reported 2011 third quarter net income of $904 million, or $1.85 per diluted share, compared to $778 million, or $1.56 per diluted share, in the third quarter 2010.

“Union Pacific delivered top and bottom line record results in the third quarter,” said Jim Young, Union Pacific chairman and chief executive officer. “We’re clearly demonstrating how Union Pacific’s diverse franchise and value-added service offerings are driving record free cash flow and improved financial returns for our shareholders.”

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Third Quarter Summary

Third quarter business volumes, as measured by total revenue carloads, grew one percent versus 2010. Four of Union Pacific’s six business groups reported volume increases, including strong growth in automotive, industrial products, energy and chemical shipments. Agricultural products and intermodal volumes were down in the quarter compared to 2010. Quarterly operating revenue increased 16 percent in the third quarter 2011 to a record $5.1 billion versus $4.4 billion in the third quarter 2010. In addition:

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Each of Union Pacific’s six business groups reported freight revenue growth in the third quarter driven by increased fuel cost recoveries, core pricing gains and volume growth.

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Average quarterly diesel fuel prices increased 42 percent from $2.24 per gallon in the third quarter 2010 to $3.18 per gallon in the third quarter 2011.

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Union Pacific’s operating ratio of 69.1 percent was 0.9 points higher than the best-ever quarterly record achieved in the third quarter 2010. The impact of higher fuel prices negatively impacted the operating ratio by 1.7 points compared to 2010.

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Severe heat and extended drought conditions in Texas and the resulting damage to large sections of track structure negatively impacted operating efficiencies, driving operating expenses up by $18 million during the quarter.

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The Customer Satisfaction Index of 91 set a new third quarter record, one point better than the third quarter 2010.

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Quarterly train speed, as reported to the Association of American Railroads, was 24.6 mph, decreasing four percent compared to the third quarter 2010, mainly driven by weather-related challenges.

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The Company repurchased 4.7 million shares in the third quarter 2011 at an average share price of $91.45 and an aggregate cost of $428 million.

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Summary of Third Quarter Freight Revenues

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Industrial Products up 24 percent

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Automotive up 23 percent

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Energy up 21 percent

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Chemicals up 14 percent

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Agricultural up 9 percent

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Intermodal up 8 percent

Outlook

“While the economic outlook is uncertain, we’re optimistic about the future for Union Pacific,” said Young. “As we have shown in this weaker economy, the diversity of our business continues to deliver record results. We remain confident in the strength of our fundamental strategy to enhance our franchise, provide increased value for our customers, and generate improved financial returns for our shareholders.”

About Union Pacific

Union Pacific Corporation owns one of America’s leading transportation companies. Its principal operating company, Union Pacific Railroad, links 23 states in the western two-thirds of the country. Union Pacific serves many of the fastest-growing U.S. population centers and provides Americans with a fuel-efficient, environmentally responsible and safe mode of freight transportation. Union Pacific’s diversified business mix includes Agricultural Products, Automotive, Chemicals, Energy, Industrial Products and Intermodal. The railroad emphasizes excellent customer service and offers competitive routes from all major West Coast and Gulf Coast ports to eastern gateways. Union Pacific connects with Canada’s rail systems and is the only railroad serving all six major gateways to Mexico, making it North America’s premier rail franchise.

Investor contact is Michelle Gerhardt, (402) 544-4227.

Media contact is Donna Kush, (402) 544-3753.

Supplemental financial information is attached.

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This press release and related materials contain statements about the Corporation’s future that are not statements of historical fact, including specifically the statements regarding the Corporation’s expectations with respect to its ability to generate returns for shareholders; current and future economic conditions; and its ability to enhance its franchise, provide value to its customers, and improve financial returns. These statements are, or will be, forward-looking statements as defined by the Securities Act of 1933 and the Securities Exchange Act of 1934. Forward-looking statements also generally include, without limitation, information or statements regarding: projections, predictions, expectations, estimates or forecasts as to the Corporation’s and its subsidiaries’ business, financial, and operational results, and future economic performance; and management’s beliefs, expectations, goals, and objectives and other similar expressions concerning matters that are not historical facts.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times that, or by which, such performance or results will be achieved. Forward-looking information, including expectations regarding operational and financial improvements and the Corporation’s future performance or results are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statement. Important factors, including risk factors, could affect the Corporation’s and its subsidiaries’ future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements. Information regarding risk factors and other cautionary information are available in the Corporation’s Annual Report on Form 10-K for 2010, which was filed with the SEC on February 4, 2011. The Corporation updates information regarding risk factors if circumstances require such updates in its periodic reports on Form 10-Q and its subsequent Annual Reports on Form 10-K (or such other reports that may be filed with the SEC).

Forward-looking statements speak only as of, and are based only upon information available on, the date the statements were made. The Corporation assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. If the Corporation does update one or more forward-looking statements, no inference should be drawn that the Corporation will make additional updates with respect thereto or with respect to other forward-looking statements. References to our website are provided for convenience and, therefore, information on or available through the website is not, and should not be deemed to be, incorporated by reference herein.

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UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Income (unaudited)


Millions, Except Per Share Amounts and Percentages, For the Periods Ended September 30,	*3rd Quarter*								*Year-to-Date*
	*2011*		2010			%			*2011*		2010		%
Operating Revenues
Freight revenues	$	4,836	$	4,187			16	%	$	13,679	$	11,898		15	%
Other revenues		265		221			20			770		657		17
Total operating revenues		5,101		4,408			16			14,449		12,555		15

Operating Expenses
Compensation and benefits		1,193		1,092			9			3,526		3,202		10
Fuel		916		608			51			2,646		1,799		47
Purchased services and materials		506		465			9			1,497		1,369		9
Depreciation		408		372			10			1,204		1,107		9
Equipment and other rents		293		292			-			878		864		2
Other		207		178			16			591		546		8

Total operating expenses		3,523		3,007			17			10,342		8,887		16

Operating Income		1,578		1,401			13			4,107		3,668		12
Other income		17		25			(32)			58		45		29
Interest expense		(142)		(153)			(7)			(431)		(460)		(6)
Income before income taxes		1,453		1,273			14			3,734		3,253		15
Income taxes		(549)		(495)			11			(1,406)		(1,248)		13
Net Income	$	904	$	778			16	%	$	2,328	$	2,005		16	%




Share and Per Share
Earnings per share - basic	$	1.87	$	1.58			18	%	$	4.78	$	4.01		19	%
Earnings per share - diluted	$	1.85	$	1.56			19		$	4.74	$	3.98		19
Weighted average number of shares - basic		484.2		493.0			(2)			487.4		499.8		(2)
Weighted average number of shares - diluted		488.1		497.7			(2)			491.5		504.3		(3)
Dividends declared per share	$	0.475	$	0.33			44		$	1.33	$	0.93		43



Operating Ratio		69.1%		68.2	%		0.9	pts		71.6%		70.8%		0.8	pts
Effective Tax Rate		37.8%		38.9	%		(1.1)	pts		37.7%		38.4%		(0.7)	pts

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)


	*3rd Quarter*							*Year-to-Date*
For the Periods Ended September 30,	*2011*		2010		%			*2011*		2010		%
*Freight Revenues (Millions)*
Agricultural	$	814	$	750		9	%	$	2,470	$	2,178		13	%
Automotive		379		309		23			1,102		948		16
Chemicals		720		629		14			2,087		1,808		15
Energy		1,112		922		21			3,014		2,602		16
Industrial Products		863		697		24			2,356		1,987		19
Intermodal *		948		880		8			2,650		2,375		12
Total	$	4,836	$	4,187		16	%	$	13,679	$	11,898		15	%

*Revenue Carloads (Thousands)*
Agricultural		223		229		(3)	%		698		670		4	%
Automotive		160		146		10			482		456		6
Chemicals		233		221		5			689		633		9
Energy		572		535		7			1,606		1,537		4
Industrial Products		305		282		8			865		810		7
Intermodal *		848		903		(6)			2,437		2,472		(1)
Total		2,341		2,316		1	%		6,777		6,578		3	%

*Average Revenue per Car*
Agricultural	$	3,655	$	3,271		12	%	$	3,537	$	3,249		9	%
Automotive		2,364		2,114		12			2,287		2,076		10
Chemicals		3,087		2,858		8			3,029		2,858		6
Energy		1,945		1,721		13			1,877		1,692		11
Industrial Products		2,832		2,470		15			2,724		2,453		11
Intermodal *		1,119		974		15			1,087		961		13
Average	$	2,066	$	1,807		14	%	$	2,019	$	1,809		12	%

*	Each intermodal container or trailer equals one carload.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Financial Position (unaudited)


Millions, Except Percentages	Sep. 30, 2011		Dec. 31, 2010
Assets
Cash and cash equivalents	$	1,647	$	1,086
Other current assets		2,567		2,346
Investments		1,171		1,137
Net properties		39,425		38,253
Other assets		256		266
Total assets	$	45,066	$	43,088




Liabilities and Common Shareholders’ Equity
Debt due within one year	$	642	$	239
Other current liabilities		3,082		2,713
Debt due after one year		8,765		9,003
Deferred income taxes		12,290		11,557
Other long-term liabilities		1,722		1,813
Total liabilities		26,501		25,325

Total common shareholders’ equity		18,565		17,763

Total liabilities and common shareholders’ equity	$	45,066	$	43,088




Debt to Capital		33.6%		34.2%
Adjusted Debt to Capital*		41.4%		42.5%

*	Adjusted Debt to Capital is a non-GAAP measure; however, we believe that it is important in evaluating our financial performance. See page 8 for a reconciliation to GAAP.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows (unaudited)


Millions,	*Year-to-Date*
For the Periods Ended September 30,	*2011*		2010
Operating Activities
Net income	$	2,328	$	2,005
Depreciation		1,204		1,107
Deferred income taxes		721		433
Other - net		81		(825)
Cash provided by operating activities		4,334		2,720




Investing Activities
Capital investments		(2,218)		(1,686)
Other - net		(23)		13
Cash used in investing activities		(2,241)		(1,673)




Financing Activities
Common shares repurchased		(1,036)		(1,019)
Dividends paid		(607)		(438)
Debt issued		486		894
Debt exchange		(272)		(98)
Debt repaid		(188)		(933)
Other - net		85		55
Cash used in financing activities		(1,532)		(1,539)




Net Change in Cash and Cash Equivalents		561		(492)
Cash and cash equivalents at beginning of year		1,086		1,850
Cash and Cash Equivalents End of Period	$	1,647	$	1,358




Free Cash Flow*
Cash provided by operating activities	$	4,334	$	2,720
Receivables securitization facility**		-		400
Cash provided by operating activities excluding receivables securitization facility		4,334		3,120

Cash used in investing activities		(2,241)		(1,673)
Dividends paid		(607)		(438)
Free cash flow	$	1,486	$	1,009

*	Free cash flow is a non-GAAP measure; however, we believe that it is important in evaluating our financial performance and measures our ability to generate cash without incurring additional financing.

Effective January 1, 2010, new accounting guidance requires us to account for receivables transferred under our receivables securitization facility as secured borrowings in our Condensed Consolidated Statements of Financial Position and as financing activities in our Condensed Consolidated Statements of Cash Flows. The receivables securitization facility line in the above table is included in our free cash flow calculation to adjust cash provided by operating activities as though our receivables securitization facility had been accounted for under the new accounting guidance for all periods presented.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Operating and Performance Statistics (unaudited)


	*3rd Quarter*							*Year-to-Date*
For the Periods Ended September 30,	*2011*		2010		%			*2011*		2010		%
Operating/Performance Statistics
Gross ton-miles (GTMs) (millions)		250,855		239,541		5	%		725,477		691,313		5	%
Employees (average)		45,507		43,375		5			44,841		42,692		5
GTMs (millions) per employee		5.51		5.52		-			16.18		16.19		-
Customer satisfaction index		91		90		1	pt		91		89		2	pts



Locomotive Fuel Statistics
Average fuel price per gallon consumed	$	3.18	$	2.24		42	%	$	3.11	$	2.23		39	%
Fuel consumed in gallons (millions)		277		261		6			820		781		5
Fuel consumption rate*		1.103		1.092		1			1.130		1.129		-



AAR Reported Performance Measures
Average train speed (miles per hour)		24.6		25.7		(4)	%		25.6		26.1		(2)	%
Average terminal dwell time (hours)		26.2		25.0		5			26.1		25.3		3
Average rail car inventory (thousands)		274.4		274.4		-			272.5		275.7		(1)



Revenue Ton-Miles (Millions)
Agricultural		20,991		22,062		(5)	%		66,145		64,261		3	%
Automotive		3,218		2,984		8			9,600		9,441		2
Chemicals		14,855		13,956		6			44,376		40,614		9
Energy		63,274		59,331		7			176,274		168,346		5
Industrial Products		17,746		15,687		13			49,852		45,507		10
Intermodal		19,961		20,489		(3)			58,726		59,457		(1)
Total		140,045		134,509		4	%		404,973		387,626		4	%

*	Fuel consumption is computed as follows: gallons of fuel consumed divided by gross ton-miles in thousands.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Income (unaudited)


	*2011*
Millions, Except Per Share Amounts and Percentages	*1st Qtr*			*2nd Qtr*			*3rd Qtr*			*Year-to-Date*
Operating Revenues
Freight revenues	$	4,248		$	4,595		$	4,836		$	13,679
Other revenues		242			263			265			770
Total operating revenues		4,490			4,858			5,101			14,449
Operating Expenses
Compensation and benefits		1,167			1,166			1,193			3,526
Fuel		826			904			916			2,646
Purchased services and materials		475			516			506			1,497
Depreciation		395			401			408			1,204
Equipment and other rents		302			283			293			878
Other		188			196			207			591
Total operating expenses		3,353			3,466			3,523			10,342
Operating Income		1,137			1,392			1,578			4,107
Other income		15			26			17			58
Interest expense		(141)			(148)			(142)			(431)
Income before income taxes		1,011			1,270			1,453			3,734
Income tax expense		(372)			(485)			(549)			(1,406)
Net Income	$	639		$	785		$	904		$	2,328



Share and Per Share
Earnings per share - basic	$	1.31		$	1.61		$	1.87		$	4.78
Earnings per share - diluted	$	1.29		$	1.59		$	1.85		$	4.74
Weighted average number of shares - basic		489.6			488.4			484.2			487.4
Weighted average number of shares - diluted		494.1			492.4			488.1			491.5
Dividends declared per share	$	0.38		$	0.475		$	0.475		$	1.33



Operating Ratio		74.7	%		71.3	%		69.1	%		71.6	%
Effective Tax Rate		36.8	%		38.2	%		37.8	%		37.7	%

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)


	*2011*
	*1st Qtr*		*2nd Qtr*		*3rd Qtr*		*Year-to-Date*
*Freight Revenues (Millions)*
Agricultural	$	807	$	849	$	814	$	2,470
Automotive		342		381		379		1,102
Chemicals		664		703		720		2,087
Energy		952		950		1,112		3,014
Industrial Products		690		803		863		2,356
Intermodal *		793		909		948		2,650
Total	$	4,248	$	4,595	$	4,836	$	13,679

*Revenue Carloads (Thousands)*
Agricultural		238		237		223		698
Automotive		157		165		160		482
Chemicals		223		233		233		689
Energy		538		496		572		1,606
Industrial Products		263		297		305		865
Intermodal *		770		819		848		2,437
Total		2,189		2,247		2,341		6,777

*Average Revenue per Car*
Agricultural	$	3,386	$	3,580	$	3,655	$	3,537
Automotive		2,175		2,321		2,364		2,287
Chemicals		2,974		3,024		3,087		3,029
Energy		1,770		1,916		1,945		1,877
Industrial Products		2,628		2,697		2,832		2,724
Intermodal *		1,031		1,108		1,119		1,087
Average	$	1,941	$	2,045	$	2,066	$	2,019

*	Each intermodal container or trailer equals one carload.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Non-GAAP Measures Reconciliation to GAAP


Debt to Capital*
Millions, Except Percentages	*Sep. 30,* *2011*		Dec. 31, 2010
Debt (a)	$	9,407	$	9,242
Equity		18,565		17,763
Capital (b)	$	27,972	$	27,005

Debt to capital (a/b)		33.6%		34.2%

*	Total debt divided by total debt plus equity. Management believes this is an important measure in evaluating our balance sheet strength and is important in managing our credit ratios and financing relationships.


Adjusted Debt to Capital, Reconciliation to GAAP*
Millions, Except Percentages	*Sep. 30,* *2011*		Dec. 31, 2010
Debt		9,407		9,242
Net present value of operating leases		3,267		3,476
Unfunded pension and OPEB		421		421
Adjusted debt (a)	$	13,095	$	13,139
Equity		18,565		17,763
Adjusted capital (b)	$	31,660	$	30,902

Adjusted debt to capital (a/b)		41.4%		42.5%

Total debt plus net present value of operating leases plus after-tax unfunded pension and OPEB obligation divided by total debt plus net present value of operating leases plus after-tax unfunded pension and OPEB obligation plus equity. Operating leases were discounted using 6.2% at September 30, 2011 and December 31, 2010. Management believes this is an important measure in evaluating the total amount of leverage in our capital structure including off-balance sheet obligations.

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