---

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported) : October 27, 2005

 

Union Pacific Corporation

(Exact Name of Registrant as Specified in its Charter)

 

Utah		1-6075		13-2626465
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

1400 Douglas Street, Omaha, Nebraska		68179
(Address of Principal Executive Offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (402) 544-5000

 

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(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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Item 2.02

Results of Operations and Financial Condition.

 

On October 27, 2005, Union Pacific Corporation (the “Company”) issued a press release announcing its financial results for the quarter ended September 30, 2005. A copy of the press release is furnished herewith as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Item 9.01

Financial Statements and Exhibits.

 

(c)

Exhibits.

 

99.1		Press Release of Union Pacific Corporation, dated October 27, 2005, announcing the Company’s financial results for the third quarter of 2005.

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: October 27, 2005

 

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EXHIBIT INDEX

 

Exhibit		Description
99.1		Press Release of Union Pacific Corporation, dated October 27, 2005, announcing the Company’s financial results for the third quarter of 2005.

Exhibit 99.1

 

        UNION PACIFIC REPORTS INCREASED THIRD QUARTER EARNINGS

 

Operating Income and Operating Margin Improve for the Second Straight Quarter

 

 

FOR IMMEDIATE RELEASE:

 

OMAHA, Neb., October 27, 2005 – Union Pacific Corporation (NYSE:UNP)

 

today reported 2005 third quarter net income of $369 million or $1.38 per diluted share.

 

This quarter’s results include the $118 million after-tax, or $.44 per diluted share, non-

 

cash income tax expense reduction that the company announced on October 7, 2005.

 

Excluding the tax item, net income would have been $251 million or $.94 per diluted

 

share. This compares to net income of $202 million or $.77 per diluted share in the third

 

quarter of 2004.

 

“Our quarterly earnings of $.94 per share represents a solid 22 percent

 

improvement versus last year,” said Dick Davidson, chairman and chief executive officer.

 

“In addition, operating income and operating margin improved for the second

 

consecutive quarter. Despite two hurricanes and record volumes, our operating team did

 

a tremendous job maintaining and improving network fluidity in the quarter.”

 

2005 Third Quarter Summary

 

For the quarter, Union Pacific Corporation reported operating income of $481

 

million, up 15 percent compared to $418 million for the same period in 2004.

 

•

Operating revenue grew 13 percent to $3.5 billion versus 2004

 

•

Operating margin improved to 13.9 percent in the third quarter of 2005 compared to

 

13.6 percent in 2004

 

-more-                                    

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-2-                                         

 

 

•

Total commodity revenue reached best-ever quarterly levels, reflecting a 1 percent

 

growth in carloads to a record 2.4 million loads, along with yield improvements and

 

fuel cost recovery under the company’s surcharge programs

 

•

The Railroad’s average quarterly fuel price including transportation and taxes was

 

$1.88 per gallon versus $1.25 per gallon a year ago

 

•

Two of the Railroad’s three key operating metrics, as reported to the Association of

 

American Railroads, improved in the third quarter of 2005 versus the third quarter of

 

2004. Higher train speeds, lower terminal dwell times and smaller rail car inventories

 

would all be indicators of better system fluidity. In the face of record demand,

 

average terminal dwell time decreased 7 percent from 30.1 hours to 28.1 hours and

 

rail car inventory decreased 1 percent to 318,626 cars

 

•

Average third quarter train speed fell slightly from 21.8 mph in 2004 to 21.6 mph in

 

the third quarter of 2005. Average train speeds have increased more than 1 mph

 

during the first three quarters of 2005 from an average of 20.5 mph in the fourth

 

quarter of 2004.

 

Third Quarter Railroad Business Revenue Summary versus 2004

 

    Overall, commodity revenue was up 12 percent as follows:

 

•

Agricultural up 27 percent

 

•

Industrial Products up 16 percent

 

•

Intermodal up 13 percent

 

•

Chemicals up 9 percent

 

•

Automotive up 4 percent

 

•

Energy up 4 percent

 

-more-                        

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-3-                                         

 

 

“We saw solid revenue growth in all six of our business segments in the quarter,”

 

Davidson said. “With the exception of autos, demand across the board continues to be

 

remarkably strong.”

 

Outlook

 

“Our Company has seen both financial and operational improvement through the

 

year,” Davidson said. “We continue to be challenged as we work to move record volume

 

across a system that has been stressed by hurricanes along the Gulf Coast and major

 

washouts in Kansas. Nevertheless, efforts to improve our operating efficiency are

 

beginning to show results. Our rail network is more resilient today, and we look forward

 

to continued improvements. The progress we are making, in the face of adversity, is a

 

tribute to the tenacity and hard work of the men and women of Union Pacific.”

 

The third quarter 2005 net income of $251 million and diluted earnings per share

 

of $.94, which excludes the income tax expense reduction, are non-GAAP measures.

 

Management believes these measures provide an alternative presentation of results that

 

more accurately reflects on-going Company operations, without the distorting effect of

 

the income tax expense reduction. These measures should be considered in addition to,

 

not as a substitute for, net income and diluted earnings per share. The following table

 

reconciles third quarter 2005 net income and diluted earnings per share, excluding the

 

income tax expense reduction, to net income and diluted earnings per share:

 

-more-                        

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-4-                                         

 

 

For the Quarter Ended September 30, 2005		Net Income (in millions)		Diluted Earnings Per Share
Excluding income tax expense reduction		$251		$0.94
Income tax expense reduction		$118		0.44
Total		$369		$1.38

 

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 and serves the fastest-growing U.S. population centers.

Union Pacific’s diversified business mix includes Agricultural Products, Automotive,

Chemicals, Energy, Industrial Products and Intermodal. The railroad offers competitive

long-haul 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.

Supplemental financial information is attached.

Additional information is available at our Web site: www.up.com. Our

contact for investors is Jennifer Hamann at (402) 544-4227. Our media contact is

Kathryn Blackwell at (402) 544-3753.

 

**********                                         

 

        This press release and related materials may contain statements about the Corporation’s future

that are not statements of historical fact. 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 include, without limitation, statements regarding: expectations as to continued or increasing

demand for rail transportation in excess of supply; expectations as to the timing of completion and impact

of ongoing track maintenance and restoration work being performed in the Southern Powder River Basin

of Wyoming; expectations regarding operational improvements, including the effectiveness of network

management initiatives that have been or will be implemented to improve system velocity, customer service

and shareholder returns; expectations as to increased returns, cost savings, revenue growth and earnings;

expectations regarding fuel price; the time by which certain objectives will be achieved, including expected

improvements in velocity and implementation of network management initiatives; estimates of costs

relating to environmental remediation and restoration; proposed new products and services; expectations

 

-more-                                

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-5-                                

 

 

that claims, lawsuits, environmental costs, commitments, contingent liabilities, labor negotiations or

agreements, or other matters will not have a material adverse effect on our consolidated financial position,

results of operations or liquidity; and statements concerning projections, predictions, expectations,

estimates or forecasts as to the Corporation’s and its subsidiaries’ business, financial and operational

results, and future economic performance; and statements of 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 as to operational, service and

network fluidity improvements are subject to risks and uncertainties that could cause actual performance

or results to differ materially from those expressed in the statements.

 

        Important factors that 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 include, but are not limited to: whether the Corporation and its subsidiaries are fully

successful in implementing their financial and operational initiatives, including those plans and

management initiatives to improve system velocity and network performance or otherwise improve

operations; industry competition, conditions, performance and consolidation; general legislative and

regulatory developments, including possible enactment of initiatives to re-regulate the rail business;

legislative, regulatory and legal developments involving taxation, including enactment of new federal or

state income tax rates, revisions of controlling authority and the outcome of tax claims and litigation;

changes in securities and capital markets; natural events such as severe weather, fire, floods, hurricanes

and earthquakes; the effects of adverse general economic conditions, both within the United States and

globally; any adverse economic or operational repercussions from terrorist activities and any

governmental response thereto; war or risk of war; changes in fuel prices; changes in labor costs; labor

stoppages; and the outcome of claims and litigation, including those related to environmental

contamination, personal injuries, and occupational illnesses arising from hearing loss, repetitive motion

and exposure to asbestos and diesel fumes.

 

        Forward-looking statements speak only as of 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 the website is not,

and should not be construed to be, incorporated by reference herein.

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UNION PACIFIC CORPORATION

 

STATEMENTS OF CONSOLIDATED INCOME

 

Periods Ended September 30

 

(Dollars in Millions, Except Per Share Amounts)

 

(Unaudited)

 

		Third Quarter											Year-to-Date
		2005				2004				Pct Chg			2005				2004				Pct Chg
Operating Revenues		$	3,461			$	3,076			13			$	9,957			$	8,998			11
Operating Expenses
Salaries, Wages, and Employee Benefits			1,093				1,057			3				3,267				3,116			5
Equipment and Other Rents			356				354			1				1,049				1,043			1
Depreciation			294				278			6				875				829			6
Fuel and Utilities			673				459			47				1,809				1,283			41
Materials and Supplies			140				122			15				403				359			12
Purchased Services and Other			424				388			9				1,292				1,277			1
Total Operating Expenses			2,980				2,658			12				8,695				7,907			10
Operating Income			481				418			15				1,262				1,091			16
Other Income - Net			42				30			40				91				66			38
Interest Expense			(124	)			(132	)		(6	)			(384	)			(397	)		(3	)
Income Before Income Taxes			399				316			26				969				760			28
Income Tax Expense			(30	)			(114	)		(74	)			(239	)			(235	)		2
Net Income		$	369			$	202			83			$	730			$	525			39
Basic Earnings Per Share		$	1.40			$	0.78			79			$	2.78			$	2.03			37
Diluted Earnings Per Share		$	1.38			$	0.77			79			$	2.75			$	2.00			38

 

October 27, 2005		(1)

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UNION PACIFIC RAILROAD

 

REVENUE DETAIL

 

Periods Ended September 30

 

(Unaudited)

 

		Third Quarter									Year-to-Date
		2005			2004			Pct Chg			2005			2004			Pct Chg
Commodity Revenue (000):
Agricultural		$	501,689		$	394,051		27			$	1,412,852		$	1,203,795		17
Automotive			299,345			287,777		4				921,616			910,673		1
Chemicals			474,001			433,087		9				1,373,900			1,272,035		8
Energy			650,913			628,528		4				1,948,133			1,811,686		8
Industrial Products			724,002			622,150		16				2,073,175			1,791,439		16
Intermodal			651,691			578,650		13				1,772,373			1,632,681		9
Total		$	3,301,641		$	2,944,243		12			$	9,502,049		$	8,622,309		10
Revenue Carloads:
Agricultural			224,393			209,296		7				655,405			654,932		—
Automotive			185,804			195,272		(5	)			588,442			615,465		(4	)
Chemicals			230,659			240,176		(4	)			694,290			702,257		(1	)
Energy			545,887			561,043		(3	)			1,645,344			1,641,694		—
Industrial Products			384,844			394,292		(2	)			1,140,822			1,146,162		—
Intermodal			861,241			807,869		7				2,399,717			2,303,048		4
Total			2,432,828			2,407,948		1				7,124,020			7,063,558		1
Average Revenue per Car:
Agricultural		$	2,236		$	1,883		19			$	2,156		$	1,838		17
Automotive			1,611			1,474		9				1,566			1,480		6
Chemicals			2,055			1,803		14				1,979			1,811		9
Energy			1,192			1,120		6				1,184			1,104		7
Industrial Products			1,881			1,578		19				1,817			1,563		16
Intermodal			757			716		6				739			709		4
Total		$	1,357		$	1,223		11			$	1,334		$	1,221		9

 

October 27, 2005		(2)

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UNION PACIFIC CORPORATION

 

STATEMENTS OF CONSOLIDATED FINANCIAL POSITION

 

As of September 30, 2005 and December 31, 2004

 

(Dollars in Millions)

 

(Unaudited)

 

		September 30, 2005			December 31, 2004
Assets:
Cash and Temporary Investments		$	337		$	977
Other Current Assets			1,724			1,313
Investments			780			767
Properties - Net			31,821			31,014
Other Assets			509			518
Total		$	35,171		$	34,589
Liabilities and Shareholders’ Equity:
Current Portion of Long Term Debt		$	143		$	150
Other Current Liabilities			2,628			2,366
Long Term Debt			7,323			7,981
Deferred Income Taxes			9,421			9,180
Other Long Term Liabilities			2,285			2,257
Common Shareholders’ Equity			13,371			12,655
Total		$	35,171		$	34,589

 

October 27, 2005		(3)

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UNION PACIFIC CORPORATION

 

STATEMENTS OF CONSOLIDATED CASH FLOWS

 

For the Nine Months Ended September 30

 

(Dollars in Millions)

 

(Unaudited)

 

		2005				2004
Operating Activities:
Net Income		$	730			$	525
Depreciation			875				829
Deferred Income Taxes			152				331
Other			(62	)			37
Cash Provided by Operating Activities			1,695				1,722
Investing Activities:
Capital Investments			(1,676	)			(1,348	)
Other			58				34
Cash Used in Investing Activities			(1,618	)			(1,314	)
Financing Activities:
Dividends Paid			(235	)			(232	)
Debt Repaid			(662	)			(427	)
Financings and Other - Net			180				638
Cash Used in Financing Activities			(717	)			(21	)
Net Change in Cash and Temporary Investments		$	(640	)		$	387
Non-Cash Capital Lease Financings		$	—			$	—

October 27, 2005		(4)

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APPENDIX

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UNION PACIFIC CORPORATION

 

OPERATING AND FINANCIAL STATISTICS

 

Periods Ended September 30

 

(Unaudited)

 

		Third Quarter											Year-to-Date
		2005				2004				Pct Chg			2005				2004				Pct Chg
Operating Statistics:
Revenue Carloads (Thousands)			2,433				2,408			1				7,124				7,064			1
Revenue Ton-Miles (Billions)			138.2				138.6			—				412.5				409.3			1
Gross Ton-Miles (GTMs) (Billions)			263.4				262.8			—				781.8				775.3			1
Operating Margin			13.9	%			13.6	%		0.3	pt			12.7	%			12.1	%		0.6	pt
Operating Ratio			86.1	%			86.4	%		(0.3	) pt			87.3	%			87.9	%		(0.6	) pt
Average Employees			49,388				49,021			1				49,423				48,081			3
GTMs (Millions) per Average Employee			5.33				5.36			(1	)			15.82				16.12			(2	)
Average Fuel Price Per Gallon		$	1.88			$	1.25			50			$	1.66			$	1.14			46
Fuel Consumed in Gallons (Millions)			334				340			(2	)			1,013				1,034			(2	)
Fuel Consumption Rate (Gal per 000 GTM)			1.27				1.29			(2	)			1.30				1.33			(2	)
AAR Reported Performance Measures:
Average Train Speed (Miles per Hour)			21.6				21.8			(1	)			21.3				21.7			(2	)
Average Terminal Dwell Time (Hours)			28.1				30.1			(7	)			28.3				30.3			(7	)
Average Rail Car Inventory			318,626				322,347			(1	)			319,523				323,023			(1	)
Financial:
Weighted Average Shares - Basic (Millions)			264.0				259.0			2				262.7				258.9			1
Weighted Average Shares - Diluted (Millions)			267.1				261.6			2				265.7				261.9			1
Effective Tax Rate			7.5	%			36.1	%		(28.6	) pt			24.7	%			30.9	%		(6.2	) pt
Debt to Capital (a)														35.8	%			39.1	%		(3.3	) pt
Lease Adjusted Debt to Capital (b)														44.0	%			45.1	%		(1.1	) pt
Free Cash Flow (Millions) (c)													$	(158	)		$	176			U

 

(a)	Debt to capital is computed as follows: total debt divided by total debt plus equity. The 2004 percentage is as of December 31, 2004.

 

(b)	Lease adjusted debt to capital is computed as follows: total debt plus net present value of operating leases divided by total debt plus equity plus net present value of operating leases. The 2004 percentage is as of December 31, 2004.

 

(c)

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 external financings. The following table reconciles cash provided by operating activities (GAAP measure) to free cash flow:

 

		Year-to-Date
		2005				2004
Cash Provided by Operating Activities		$	1,695			$	1,722
Cash Used in Investing Activities			(1,618	)			(1,314	)
Dividends Paid			(235	)			(232	)
Non-Cash Capital Lease Financings			—				—
Free Cash Flow		$	(158	)		$	176

 

October 27, 2005		(A-1)

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UNION PACIFIC CORPORATION

 

STATEMENTS OF CONSOLIDATED INCOME

 

By Quarter and Year-to-Date 2005

 

(Dollars in Millions, Except Per Share Amounts)

 

(Unaudited)

 

		Period Ended:												Year-to-Date September 30
		March 31				June 30				September 30
Operating Revenues		$	3,152			$	3,344			$	3,461			$	9,957
Operating Expenses
Salaries, Wages, and Employee Benefits			1,099				1,075				1,093				3,267
Equipment and Other Rents			353				340				356				1,049
Depreciation			289				292				294				875
Fuel and Utilities			539				597				673				1,809
Materials and Supplies			135				128				140				403
Purchased Services and Other			424				444				424				1,292
Total Operating Expenses			2,839				2,876				2,980				8,695
Operating Income			313				468				481				1,262
Other Income - Net			20				29				42				91
Interest Expense			(132	)			(128	)			(124	)			(384	)
Income Before Income Taxes			201				369				399				969
Income Tax Expense			(73	)			(136	)			(30	)			(239	)
Net Income		$	128			$	233			$	369			$	730
Basic Earnings Per Share		$	0.49			$	0.89			$	1.40			$	2.78
Diluted Earnings Per Share		$	0.48			$	0.88			$	1.38			$	2.75

 

October 27, 2005		(A-2)

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UNION PACIFIC RAILROAD

 

REVENUE DETAIL

 

By Quarter and Year-to-Date 2005

 

(Unaudited)

 

		Period Ended									Year-to-Date September 30
		March 31			June 30			September 30
Commodity Revenue (000):
Agricultural		$	447,902		$	463,261		$	501,689		$	1,412,852
Automotive			293,105			329,166			299,345			921,616
Chemicals			441,019			458,880			474,001			1,373,900
Energy			667,783			629,437			650,913			1,948,133
Industrial Products			630,196			718,977			724,002			2,073,175
Intermodal			523,927			596,755			651,691			1,772,373
Total		$	3,003,932		$	3,196,476		$	3,301,641		$	9,502,049
Revenue Carloads:
Agricultural			215,755			215,257			224,393			655,405
Automotive			192,317			210,321			185,804			588,442
Chemicals			227,742			235,889			230,659			694,290
Energy			573,987			525,470			545,887			1,645,344
Industrial Products			358,560			397,418			384,844			1,140,822
Intermodal			731,843			806,633			861,241			2,399,717
Total			2,300,204			2,390,988			2,432,828			7,124,020
Average Revenue per Car:
Agricultural		$	2,076		$	2,152		$	2,236		$	2,156
Automotive			1,524			1,565			1,611			1,566
Chemicals			1,936			1,945			2,055			1,979
Energy			1,163			1,198			1,192			1,184
Industrial Products			1,758			1,809			1,881			1,817
Intermodal			716			740			757			739
Total		$	1,306		$	1,337		$	1,357		$	1,334

 

October 27, 2005		(A-3)