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): July 19, 2007
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
(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)) |
Item 2.02 Results of Operations and Financial Condition.
On July 19, 2007, Union Pacific Corporation (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2007. 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 July 19, 2007, announcing the Company’s financial results for the second quarter of 2007. |
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: July 19, 2007
| UNION PACIFIC CORPORATION | ||
| By: | /S/ ROBERT M. KNIGHT, JR. | |
| Robert M. Knight, Jr. Executive Vice President – Finance and Chief Financial Officer | ||
Exhibit 99.1
RECORD OPERATING REVENUE DRIVES 15 PERCENT EARNINGS
GROWTH FOR UNION PACIFIC
FOR IMMEDIATE RELEASE
OMAHA, Neb., July 19, 2007
Second Quarter 2007 Highlights
| • | Second quarter 2007 earnings per share grew 15 percent to $1.65 per diluted share. |
| • | Operating revenue was an all-time quarterly record of $4 billion, up 3 percent. |
| • | Operating income increased 10 percent to $787 million. |
| • | Second quarter 2007 operating ratio improved by 1.2 points to 80.5 percent. |
Union Pacific Corporation (NYSE: UNP) today reported second quarter 2007 net income of $446 million or $1.65 per diluted share, compared to $390 million, or $1.44 per diluted share in the same quarter last year. Operating income during the second quarter of 2007 was $787 million, up from $717 million reported in the second quarter of 2006.
“Union Pacific topped the $4 billion quarterly revenue mark for the first time in our history,” said Jim Young, Chairman and Chief Executive Officer. “More importantly, in the face of economic and weather challenges, we improved our operating efficiency, posting the best second quarter operating ratio in four years. In addition, our customer satisfaction scores improved 11 points year-over-year.”
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Second Quarter 2007 Overview
| • | Commodity revenue set an all-time quarterly record, up 3 percent to $3.9 billion. Four of the six business groups posted revenue increases in the quarter as total average revenue per car (ARC) grew 7 percent. |
| • | Second quarter 2007 carloads declined 3 percent versus the second quarter of 2006 to 2.4 million. Severe weather in the Midwest, a softer housing market and decreased auto sales all contributed to the decline. |
| • | The second quarter 2007 operating ratio improved to 80.5 percent compared to 81.7 percent in the second quarter of 2006. This was the best second quarter operating ratio in four years. |
| • | Quarterly operating metrics, as reported to the Association of American Railroads, improved. Average terminal dwell time improved 11 percent to 24.7 hours versus 27.6 hours reported in the second quarter of 2006. Average quarterly train speed was 21.6 mph versus 21.2 mph in the second quarter of 2006, a two percent increase. |
| • | The Company repurchased more than 3.6 million common shares at an average share price of $116.40 in the second quarter of 2007. Year-to-date purchases total 5.7 million common shares or 28 percent of the 20 million share repurchase program. |
Second Quarter Railroad Commodity Revenue Summary versus 2006
| • | Chemicals up 8 percent |
| • | Agricultural up 7 percent |
| • | Energy up 4 percent |
| • | Intermodal up 3 percent |
| • | Automotive was flat |
| • | Industrial Products down 1 percent |
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Looking Forward
“Although the economic outlook remains uncertain, our continued focus on yield and productivity improvements should drive better service for our customers and strong financial results for our shareholders in the second half of 2007,” Young said.
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.
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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 statements regarding the economic outlook and improving the Corporation’s financial returns through productivity initiatives and operational efficiency. 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 include, without limitation, information or statements regarding: expectations as to continued or increasing demand for rail transportation services; expectations regarding operational improvements, including the effectiveness of network management initiatives that have been or will be implemented to improve operations, customer service, and shareholder returns; expectations as to increased returns, cost savings, revenue growth, and earnings; expectations regarding fuel price and our ability to mitigate fuel costs; the time by which certain objectives will be achieved, including expected improvements in operations and implementation of network management initiatives; estimates of costs relating to environmental remediation and restoration; proposed new products and services; expectations 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; 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 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 2006, which was filed with the SEC on February 23, 2007. 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 Web site 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.
UNION PACIFIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Periods Ended June 30
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)
| Second Quarter | Year-to-Date | |||||||||||||||||||||
| 2007 |
2006 |
Pct Chg |
2007 |
2006 |
Pct Chg |
|||||||||||||||||
| Operating Revenue |
$ | 4,046 | $ | 3,923 | 3 | $ | 7,895 | $ | 7,633 | 3 | ||||||||||||
| Operating Expenses |
||||||||||||||||||||||
| Salaries, Wages, and Employee Benefits |
1,163 | 1,140 | 2 | 2,343 | 2,269 | 3 | ||||||||||||||||
| Fuel and Utilities |
766 | 794 | (4 | ) | 1,449 | 1,486 | (2 | ) | ||||||||||||||
| Equipment and Other Rents |
370 | 371 | — | 723 | 738 | (2 | ) | |||||||||||||||
| Depreciation |
327 | 308 | 6 | 652 | 611 | 7 | ||||||||||||||||
| Materials and Supplies |
186 | 178 | 4 | 362 | 342 | 6 | ||||||||||||||||
| Purchased Services and Other |
447 | 415 | 8 | 860 | 865 | (1 | ) | |||||||||||||||
| Total Operating Expenses |
3,259 | 3,206 | 2 | 6,389 | 6,311 | 1 | ||||||||||||||||
| Operating Income |
787 | 717 | 10 | 1,506 | 1,322 | 14 | ||||||||||||||||
| Other Income |
36 | 29 | 24 | 51 | 39 | 31 | ||||||||||||||||
| Interest Expense |
(120 | ) | (120 | ) | — | (233 | ) | (240 | ) | (3 | ) | |||||||||||
| Income Before Income Taxes |
703 | 626 | 12 | 1,324 | 1,121 | 18 | ||||||||||||||||
| Income Tax Expense |
(257 | ) | (236 | ) | 9 | (492 | ) | (420 | ) | 17 | ||||||||||||
| Net Income |
$ | 446 | $ | 390 | 14 | $ | 832 | $ | 701 | 19 | ||||||||||||
| Basic Earnings Per Share |
$ | 1.66 | $ | 1.45 | 14 | $ | 3.09 | $ | 2.61 | 18 | ||||||||||||
| Diluted Earnings Per Share |
$ | 1.65 | $ | 1.44 | 15 | $ | 3.06 | $ | 2.58 | 19 | ||||||||||||
| July 19, 2007 |
(1 | ) |
UNION PACIFIC RAILROAD
REVENUE DETAIL
For the Periods Ended June 30
(Unaudited)
| Second Quarter | Year-to-Date | |||||||||||||||||
| 2007 |
2006 |
Pct Chg |
2007 |
2006 |
Pct Chg |
|||||||||||||
| Commodity Revenue (Millions): |
||||||||||||||||||
| Agricultural |
$ | 604 | $ | 565 | 7 | $ | 1,211 | $ | 1,128 | 7 | ||||||||
| Automotive |
389 | 390 | — | 744 | 751 | (1 | ) | |||||||||||
| Chemicals |
578 | 537 | 8 | 1,122 | 1,038 | 8 | ||||||||||||
| Energy |
761 | 733 | 4 | 1,491 | 1,432 | 4 | ||||||||||||
| Industrial Products |
815 | 822 | (1 | ) | 1,562 | 1,596 | (2 | ) | ||||||||||
| Intermodal |
718 | 695 | 3 | 1,387 | 1,340 | 4 | ||||||||||||
| Total |
$ | 3,865 | $ | 3,742 | 3 | $ | 7,517 | $ | 7,285 | 3 | ||||||||
| Revenue Carloads (Thousands): |
||||||||||||||||||
| Agricultural |
212 | 225 | (6 | ) | 431 | 459 | (6 | ) | ||||||||||
| Automotive |
221 | 225 | (2 | ) | 422 | 435 | (3 | ) | ||||||||||
| Chemicals |
239 | 234 | 2 | 463 | 452 | 2 | ||||||||||||
| Energy |
551 | 575 | (4 | ) | 1,102 | 1,125 | (2 | ) | ||||||||||
| Industrial Products |
349 | 386 | (10 | ) | 667 | 751 | (11 | ) | ||||||||||
| Intermodal |
861 | 865 | — | 1,682 | 1,681 | — | ||||||||||||
| Total |
2,433 | 2,510 | (3 | ) | 4,767 | 4,903 | (3 | ) | ||||||||||
| Average Revenue per Car: |
||||||||||||||||||
| Agricultural |
$ | 2,855 | $ | 2,510 | 14 | $ | 2,812 | $ | 2,456 | 14 | ||||||||
| Automotive |
1,767 | 1,735 | 2 | 1,764 | 1,729 | 2 | ||||||||||||
| Chemicals |
2,410 | 2,285 | 5 | 2,422 | 2,294 | 6 | ||||||||||||
| Energy |
1,382 | 1,273 | 9 | 1,353 | 1,272 | 6 | ||||||||||||
| Industrial Products |
2,334 | 2,133 | 9 | 2,342 | 2,126 | 10 | ||||||||||||
| Intermodal |
834 | 804 | 4 | 824 | 797 | 3 | ||||||||||||
| Average |
$ | 1,589 | $ | 1,490 | 7 | $ | 1,577 | $ | 1,486 | 6 | ||||||||
| July 19, 2007 |
(2 | ) |
UNION PACIFIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of June 30, 2007 and December 31, 2006
(Dollars in Millions)
(Unaudited)
| June 30, 2007 |
December 31, 2006 | |||||
| Assets: |
||||||
| Cash and Cash Equivalents |
$ | 522 | $ | 827 | ||
| Other Current Assets |
1,750 | 1,584 | ||||
| Investments |
906 | 877 | ||||
| Properties - Net |
33,359 | 32,873 | ||||
| Other Assets |
765 | 354 | ||||
| Total |
$ | 37,302 | $ | 36,515 | ||
| Liabilities and Shareholders’ Equity: |
||||||
| Current Portion of Long Term Debt |
$ | 138 | $ | 780 | ||
| Other Current Liabilities |
2,997 | 2,759 | ||||
| Long Term Debt |
7,098 | 6,000 | ||||
| Deferred Income Taxes |
9,794 | 9,696 | ||||
| Other Long Term Liabilities |
1,830 | 1,968 | ||||
| Common Shareholders’ Equity |
15,445 | 15,312 | ||||
| Total |
$ | 37,302 | $ | 36,515 | ||
| July 19, 2007 |
(3 | ) |
UNION PACIFIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Month Periods Ended June 30
(Dollars in Millions)
(Unaudited)
| 2007 |
2006 |
|||||||
| Operating Activities: |
||||||||
| Net Income |
$ | 832 | $ | 701 | ||||
| Depreciation |
652 | 611 | ||||||
| Deferred Income Taxes |
99 | 81 | ||||||
| Other - Net |
(99 | ) | (160 | ) | ||||
| Cash Provided by Operating Activities |
1,484 | 1,233 | ||||||
| Investing Activities: |
||||||||
| Capital Investments |
(1,101 | ) | (1,131 | ) | ||||
| Other - Net |
(406 | ) | (253 | ) | ||||
| Cash Used in Investing Activities |
(1,507 | ) | (1,384 | ) | ||||
| Financing Activities: |
||||||||
| Common Shares Repurchased |
(604 | ) | — | |||||
| Dividends Paid |
(178 | ) | (160 | ) | ||||
| Debt Repaid |
(84 | ) | (342 | ) | ||||
| Debt Issued |
494 | — | ||||||
| Other - Net |
90 | 142 | ||||||
| Cash Used in Financing Activities |
(282 | ) | (360 | ) | ||||
| Net Change in Cash and Cash Equivalents |
$ | (305 | ) | $ | (511 | ) | ||
| July 19, 2007 |
(4 | ) |
APPENDIX
UNION PACIFIC CORPORATION
OPERATING AND FINANCIAL STATISTICS
For the Periods Ended June 30
(Unaudited)
| Second Quarter | Year-to-Date | |||||||||||||||||||||
| 2007 |
2006 |
Pct Chg |
2007 |
2006 |
Pct Chg |
|||||||||||||||||
| Operating/Performance Statistics: |
||||||||||||||||||||||
| Revenue Carloads (Thousands) |
2,433 | 2,510 | (3 | ) | 4,767 | 4,903 | (3 | ) | ||||||||||||||
| Revenue Ton-Miles (Billions) |
139.2 | 143.4 | (3 | ) | 274.3 | 282.7 | (3 | ) | ||||||||||||||
| Gross Ton-Miles (GTMs) (Billions) |
260.7 | 272.1 | (4 | ) | 515.6 | 535.1 | (4 | ) | ||||||||||||||
| Operating Margin |
19.5 | % | 18.3 | % | 1.2 | pt | 19.1 | % | 17.3 | % | 1.8 | pt | ||||||||||
| Operating Ratio |
80.5 | % | 81.7 | % | (1.2 | ) pt | 80.9 | % | 82.7 | % | (1.8 | ) pt | ||||||||||
| Average Employees |
50,755 | 51,085 | (1 | ) | 50,764 | 50,673 | — | |||||||||||||||
| GTMs (Millions) per Average Employee |
5.14 | 5.33 | (4 | ) | 10.16 | 10.56 | (4 | ) | ||||||||||||||
| Average Fuel Price Per Gallon Consumed |
$ | 2.17 | $ | 2.15 | 1 | $ | 2.04 | $ | 2.01 | 1 | ||||||||||||
| Fuel Consumed in Gallons (Millions) |
332 | 346 | (4 | ) | 664 | 691 | (4 | ) | ||||||||||||||
| Fuel Consumption Rate (Gal per 000 GTM) |
1.27 | 1.27 | — | 1.29 | 1.29 | — | ||||||||||||||||
| Customer Satisfaction Index |
80 | 69 | 11 | pt | 80 | 69 | 11 | pt | ||||||||||||||
| AAR Reported Performance Measures: |
||||||||||||||||||||||
| Average Train Speed (Miles per Hour) |
21.6 | 21.2 | 2 | 21.7 | 21.3 | 2 | ||||||||||||||||
| Average Terminal Dwell Time (Hours) |
24.7 | 27.6 | (11 | ) | 25.0 | 28.3 | (12 | ) | ||||||||||||||
| Average Rail Car Inventory |
310,663 | 324,833 | (4 | ) | 310,090 | 326,220 | (5 | ) | ||||||||||||||
| Financial Statistics: |
||||||||||||||||||||||
| Weighted Average Shares - Basic (Millions) |
268.2 | 269.3 | — | 269.4 | 268.8 | — | ||||||||||||||||
| Weighted Average Shares - Diluted (Millions) |
270.7 | 272.1 | (1 | ) | 271.8 | 271.6 | — | |||||||||||||||
| Effective Income Tax Rate |
36.6 | % | 37.7 | % | (1.1 | ) pt | 37.2 | % | 37.5 | % | (0.3 | ) pt | ||||||||||
| Debt to Capital (a) |
31.9 | % | 30.7 | % | 1.2 | pt | ||||||||||||||||
| Lease Adjusted Debt to Capital (b) |
41.8 | % | 41.6 | % | 0.2 | pt | ||||||||||||||||
| Free Cash Flow (Millions) (c) |
$ | (201 | ) | $ | (311 | ) | F | |||||||||||||||
| (a) | Debt to capital is computed as follows: total debt divided by total debt plus equity. 2006 percentages are as of December 31, 2006. |
| (b) | Lease adjusted debt to capital, a non-GAAP measure, is computed as follows: total debt plus net present value of operating leases plus investors’ undivided interest in sale of receivables divided by total debt plus net present value of operating leases plus investors’ undivided interest in sale of receivables plus equity. See Union Pacific web site under Investor Relations for a reconciliation to GAAP. 2006 percentages are as of December 31, 2006. |
| (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. See Union Pacific web site under Investor Relations for a reconciliation to GAAP. |
| Year-to-Date | ||||||||
| 2007 |
2006 |
|||||||
| Cash Provided by Operating Activities |
$ | 1,484 | $ | 1,233 | ||||
| Cash Used in Investing Activities |
(1,507 | ) | (1,384 | ) | ||||
| Dividends Paid |
(178 | ) | (160 | ) | ||||
| Free Cash Flow |
$ | (201 | ) | $ | (311 | ) | ||
| July 19, 2007 |
(A-1 | ) |
UNION PACIFIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
By Quarter and Year-to-Date 2007
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)
| Quarter Ended |
Year-to-Date June 30 |
|||||||||||
| March 31 |
June 30 |
|||||||||||
| Operating Revenue |
$ | 3,849 | $ | 4,046 | $ | 7,895 | ||||||
| Operating Expenses |
||||||||||||
| Salaries, Wages, and Employee Benefits |
1,180 | 1,163 | 2,343 | |||||||||
| Fuel and Utilities |
683 | 766 | 1,449 | |||||||||
| Equipment and Other Rents |
353 | 370 | 723 | |||||||||
| Depreciation |
325 | 327 | 652 | |||||||||
| Materials and Supplies |
176 | 186 | 362 | |||||||||
| Purchased Services and Other |
413 | 447 | 860 | |||||||||
| Total Operating Expenses |
3,130 | 3,259 | 6,389 | |||||||||
| Operating Income |
719 | 787 | 1,506 | |||||||||
| Other Income |
15 | 36 | 51 | |||||||||
| Interest Expense |
(113 | ) | (120 | ) | (233 | ) | ||||||
| Income Before Income Taxes |
621 | 703 | 1,324 | |||||||||
| Income Tax Expense |
(235 | ) | (257 | ) | (492 | ) | ||||||
| Net Income |
$ | 386 | $ | 446 | $ | 832 | ||||||
| Basic Earnings Per Share |
$ | 1.43 | $ | 1.66 | $ | 3.09 | ||||||
| Diluted Earnings Per Share |
$ | 1.41 | $ | 1.65 | $ | 3.06 | ||||||
| July 19, 2007 |
(A-2 | ) |
UNION PACIFIC RAILROAD
REVENUE DETAIL
By Quarter and Year-to-Date 2007
(Unaudited)
| Quarter Ended |
Year-to-Date June 30 | ||||||||
| March 31 |
June 30 |
||||||||
| Commodity Revenue (Millions): |
|||||||||
| Agricultural |
$ | 607 | $ | 604 | $ | 1,211 | |||
| Automotive |
355 | 389 | 744 | ||||||
| Chemicals |
544 | 578 | 1,122 | ||||||
| Energy |
730 | 761 | 1,491 | ||||||
| Industrial Products |
747 | 815 | 1,562 | ||||||
| Intermodal |
669 | 718 | 1,387 | ||||||
| Total |
$ | 3,652 | $ | 3,865 | $ | 7,517 | |||
| Revenue Carloads (Thousands): |
|||||||||
| Agricultural |
219 | 212 | 431 | ||||||
| Automotive |
201 | 221 | 422 | ||||||
| Chemicals |
224 | 239 | 463 | ||||||
| Energy |
551 | 551 | 1,102 | ||||||
| Industrial Products |
318 | 349 | 667 | ||||||
| Intermodal |
821 | 861 | 1,682 | ||||||
| Total |
2,334 | 2,433 | 4,767 | ||||||
| Average Revenue per Car: |
|||||||||
| Agricultural |
$ | 2,771 | $ | 2,855 | $ | 2,812 | |||
| Automotive |
1,761 | 1,767 | 1,764 | ||||||
| Chemicals |
2,434 | 2,410 | 2,422 | ||||||
| Energy |
1,325 | 1,382 | 1,353 | ||||||
| Industrial Products |
2,351 | 2,334 | 2,342 | ||||||
| Intermodal |
815 | 834 | 824 | ||||||
| Average |
$ | 1,565 | $ | 1,589 | $ | 1,577 | |||
| July 19, 2007 |
(A-3 | ) |