Union Pacific Reports Record Quarterly Earnings

OMAHA, Neb. — Union Pacific Corp. reported 2010 second quarter net income of $711 million, or $1.40 per diluted share, compared to $465 million, or $0.92 per diluted share, in the second quarter 2009. Second quarter 2009 net income included $72 million, or $0.14 per diluted share, related to a Colorado land sale.

“Beyond strong earnings growth, the real highlight was achieving a 69.4 percent operating ratio – our first sub-70 quarterly mark, ” said Jim Young, Union Pacific chairman and chief executive officer. “We demonstrated great volume leverage, efficiently handling an 18 percent increase in carloadings at modest incremental cost. This is a tremendous achievement for the men and women of UP, who not only operated a very safe and efficient network, but also drove an all-time-high for customer satisfaction.”

Second Quarter Summary

Second quarter business volumes, as measured by total revenue carloads, grew 18 percent versus the prior year’s recession-impacted levels. This is the first time in six years that all six Union Pacific business groups reported volume growth in the same quarter. Quarterly operating revenue increased 27 percent in the second quarter 2010 to $4.2 billion versus $3.3 billion in the second quarter 2009. In addition:

  • Freight revenues for all six business groups increased in the second quarter, up 27 percent versus 2009 to a total of $4.0 billion. Driving the increase were double-digit volume growth, increased fuel cost recoveries and core pricing gains.
  • Quarterly diesel fuel prices increased 46 percent from an average of $1.57 per gallon in the second quarter 2009 to an average of $2.29 per gallon in the second quarter 2010.
  • Union Pacific’s operating ratio was a best-ever 69.4 percent, an 8 point improvement versus 2009. Strong volume growth combined with ongoing efficiency initiatives and quarterly pricing gains drove the record performance.
  • The Company’s Customer Satisfaction Index of 89 was a quarterly best and 2 points better than the second quarter 2009.
  • Quarterly train speed, as reported to the Association of American Railroads, was 26.4 mph, down 4 percent versus record velocity in the second quarter 2009. Operations were slowed by June flooding in the Midwest and network infrastructure replacement and improvement programs.
  • The Company repurchased nearly 6.5 million shares in the second quarter 2010 at an average share price of $71.74, and aggregate cost of approximately $466 million.

Summary of Second Quarter Freight Revenues

  • Automotive up 105 percent.
  • Intermodal up 35 percent.
  • Industrial Products up 30 percent.
  • Chemicals up 19 percent.
  • Energy up 17 percent.
  • Agricultural up 13 percent.

Outlook

“While the pace and direction of the economic recovery is uncertain, we expect and are prepared to handle continued volume growth on our network, both in 2010 and beyond,” Young said. “As carloadings increase, we are focused on meeting the increased expectations of customers and shareholders to move new and existing business safely, efficiently and more profitably. We’re also planning for tomorrow, investing for growth as we deliver higher shareholder returns.”