Union Pacific Reports Record Third Quarter Earnings
Operating Income Gains 56 Percent
Omaha, Neb., October 19, 2006
- Third quarter 2006 commodity revenue was an all-time quarterly record of $3.8 billion, up 15 percent.
- Operating income increased 56 percent to an all-time quarterly record of $752 million.
- Third quarter 2006 operating ratio improved by 5.0 points versus third quarter 2005 to 81.1 percent.
"Quarterly operating revenue and income were the best ever in the history of the Railroad," said Jim Young, President and Chief Executive Officer. "This quarter marks the sixth consecutive quarter of operating income growth. Unlike last year’s results, which were affected by hurricanes, this quarter we converted the demand for our services and greater operational efficiency into strong performance."
2006 Third Quarter Summary
- Operating revenue set an all-time quarterly record, growing 15 percent to $4.0 billion compared to $3.5 billion in the third quarter 2005. Five of six business teams achieved all-time record results in the quarter. The sixth business team, Automotive, posted its best third quarter ever.
- Operating ratio improved 5.0 points versus the third quarter 2005 to 81.1 percent.
- The Railroad’s average quarterly fuel price increased 21 percent from $1.88 per gallon in 2005 to $2.27 per gallon in the third quarter of 2006. The fuel surcharge recovered approximately 89 percent of the cost in excess of the Railroad’s $.75 per gallon base fuel price.
- The Company’s fuel consumption rate, as measured by gallons per thousand gross ton-miles, was a best ever-quarterly rate of 1.26 versus 1.27 in the third quarter 2005.
- While quarterly carload volume grew 3 percent, average terminal dwell, as reported to the Association of American Railroads, improved 7 percent year-over-year to 26.2 hours and average third quarter train speed decreased only slightly to 21.3 mph from 21.6 mph in 2005.
- Union Pacific settled all insurance claims related to the 2005 January West Coast Storm, which reduced operating expense by $23 million in the third quarter 2006.
Third Quarter Railroad Commodity Revenue Summary versus 2005
- Agricultural up 19 percent
- Energy up 17 percent
- Industrial Products up 15 percent
- Chemicals and Intermodal each up 14 percent
- Automotive up 10 percent
"We are optimistic about the fourth quarter," Young said. "We anticipate that continued revenue growth and operational improvements will be converted into strong bottom line results."
The third quarter 2005 adjusted 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 reflect 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:
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) 319-4288 or (402) 544-3753.
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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; the impact of ongoing track maintenance and restoration work being performed in the Southern Powder River Basin of Wyoming; 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; legislative and regulatory developments, including possible enactment of initiatives to re-regulate the rail industry; the impact of a rail accident involving the release of hazardous materials; natural events such as severe weather, fire, floods, hurricanes and earthquakes; changes in fuel prices or changes to our ability to recover fuel costs; changes in labor costs, labor stoppages, and the availability of qualified personnel required for our operations; industry competition, conditions, performance and consolidation; 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; 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; and war or risk of war. More information regarding risk factors is available in the Corporation’s Annual Report on Form 10-K for 2005, which was filed with the SEC on February 24, 2006. The Corporation updates information regarding risk factors if circumstances require such updates in its periodic reports on Form 10-Q (or such other reports that may be filed with the SEC).
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