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

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8-K - FORM 8-K - UNION PACIFIC CORP	d8k.htm

Exhibit 99.1

UNION PACIFIC REPORTS RECORD FOURTH QUARTER AND FULL YEAR

FOR IMMEDIATE RELEASE

Fourth Quarter Records

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Diluted earnings per share improved 44 percent to $1.56.

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Operating income totaled $1.3 billion, up 31 percent.

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Net income increased 41 percent to $775 million.

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Operating ratio was 70.2 percent, 3.2 points of improvement.

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Customer Satisfaction Index improved to 90, up 2 points.

2010 Full Year Records

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Diluted earnings per share improved 48 percent to $5.53.

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Operating income totaled $5.0 billion, up 47 percent.

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Net income increased 47 percent to $2.8 billion.

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Operating ratio was 70.6 percent, 5.5 points of improvement.

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Return on invested capital grew 2.6 points to 10.8 percent.

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Customer Satisfaction Index reached 89, up 1 point.

Omaha, Neb., January 20, 2011 – Union Pacific Corporation (NYSE: UNP) today reported 2010 fourth quarter net income of $775 million, or $1.56 per diluted share, compared to $549 million, or $1.08 per diluted share, in the fourth quarter 2009.

“Our strong fourth quarter results are indicative of the great performance we’ve achieved throughout 2010, setting numerous records as we report the most

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profitable year in Union Pacific’s nearly 150-year history,” said Jim Young, Union Pacific chairman and chief executive officer. “As business volumes increased during the year, we kept our customer commitments by ensuring consistent, safe and reliable service. Shareholders also were rewarded as we completed strategic investments designed to further improve financial returns, increased the quarterly dividend more than 40 percent, and repurchased nearly $1.25 billion in shares.”

Fourth Quarter Summary

Fourth quarter business volumes, as measured by total revenue carloads, grew 9 percent versus 2009, as all six Union Pacific (UP) business groups reported volume growth for the third consecutive quarter. Quarterly operating revenue increased 17 percent in the fourth quarter 2010 to $4.4 billion versus $3.8 billion in the fourth quarter 2009. In addition:

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Each of UP’s six business groups reported freight revenue growth in the fourth quarter, up 18 percent versus 2009 to a total of $4.2 billion. Strong volume growth, increased fuel cost recoveries, and core pricing gains contributed to the increase.

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Quarterly diesel fuel prices increased from an average of $2.05 per gallon in the fourth quarter 2009 to an average of $2.46 per gallon in the fourth quarter 2010.

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Union Pacific’s operating ratio of 70.2 percent was a fourth-quarter best, 3.2 points better than the previous fourth-quarter record set in 2009. Volume growth, improved operating efficiency, and quarterly pricing gains all contributed to this record performance, offsetting the impact of a 20 percent increase in diesel fuel prices.

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The Customer Satisfaction Index of 90 tied a quarterly best and was 2 points better than the fourth quarter 2009.

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Quarterly train speed, as reported to the Association of American Railroads, was 26.5 mph, the highest quarterly speed of 2010, down 2 percent versus record velocity in the fourth quarter 2009.

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The Company repurchased more than 2.5 million shares in the fourth quarter 2010 at an average share price of $89.39, and an aggregate cost of approximately $224 million.

Summary of Fourth Quarter Freight Revenues

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Industrial Products up 27 percent.

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Intermodal up 25 percent.

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Energy up 16 percent.

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Agricultural up 14 percent.

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Chemicals up 14 percent.

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Automotive up 7 percent.

2010 Full Year Summary

For the full year 2010, Union Pacific reported net income of $2.8 billion or $5.53 per diluted share. This compares to $1.9 billion or $3.74 per diluted share in 2009, 47 and 48 percent increases, respectively. The Company’s operating revenue totaled $17 billion versus $14.1 billion in 2009. Operating income increased 47 percent to $5 billion, up from $3.4 billion in 2009.

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All six business groups reported volume and freight revenue growth in 2010. Business volumes increased 13 percent versus 2009 and freight revenue grew 20 percent to $16.1 billion. This compares to freight revenue of $13.4 billion in 2009.

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Average diesel fuel prices increased 31 percent from an average of $1.75 per gallon in 2009 to an average of $2.29 per gallon in 2010.

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UP’s operating ratio in 2010 was a record 70.6 percent, 5.5 points of improvement versus the previous annual record of 76.1 percent set in 2009.

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The Company repurchased more than 16.6 million shares in 2010 at an average share price of $75.06, and an aggregate cost of approximately $1.25 billion.

2011 Outlook

“As we look ahead to 2011, we are encouraged by signs of a slowly strengthening economy,” Young said. “Union Pacific is well-positioned to serve the total transportation needs of our customers as we focus on becoming a more fully integrated part of our customers’ supply chains. Excellent service is the key to our future success, supporting our pricing initiatives and helping us improve asset utilization. This strategy will enable us to further increase our overall profitability, invest for the future, and drive strong shareholder returns.”

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 Jennifer Hamann, (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 under the caption “2011 Outlook” in this press release, which include statements regarding the Corporation’s expectations with respect to economic conditions; its ability to fulfill the total transportation needs of its customers and its expectations regarding strategy, pricing, asset utilization, profitability, investment and shareholder 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 2009, which was filed with the SEC on February 5, 2010. 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,	*4th Quarter*									*Full Year*
For the Periods Ended December 31,	*2010*			2009			%			*2010*			2009			%
Operating Revenues
Freight revenues	$	4,171		$	3,541			18	%	$	16,069		$	13,373			20	%
Other revenues		239			213			12			896			770			16
Total operating revenues		4,410			3,754			17			16,965			14,143			20
Operating Expenses
Compensation and benefits		1,112			1,018			9			4,314			4,063			6
Fuel		687			541			27			2,486			1,763			41
Purchased services and materials		467			428			9			1,836			1,644			12
Depreciation		380			373			2			1,487			1,427			4
Equipment and other rents		278			266			5			1,142			1,180			(3	)
Other		173			129			34			719			687			5
Total operating expenses		3,097			2,755			12			11,984			10,764			11
Operating Income		1,313			999			31			4,981			3,379			47
Other income		9			23			(61	)		54			195			(72	)
Interest expense		(142	)		(153	)		(7	)		(602	)		(600	)		-
Income before income taxes		1,180			869			36			4,433			2,974			49
Income taxes		(405	)		(320	)		27			(1,653	)		(1,084	)		52
Net Income	$	775		$	549			41	%	$	2,780		$	1,890			47	%


Share and Per Share
Earnings per share - basic	$	1.58		$	1.09			45	%	$	5.58		$	3.76			48	%
Earnings per share - diluted	$	1.56		$	1.08			44		$	5.53		$	3.74			48
Weighted average number of shares - basic		491.3			503.5			(2	)		498.2			503.0			(1	)
Weighted average number of shares - diluted		496.3			507.8			(2	)		502.9			505.8			(1	)
Dividends declared per share	$	0.38		$	0.27			41		$	1.31		$	1.08			21


Operating Ratio		70.2	%		73.4	%		(3.2	)pts		70.6	%		76.1	%		(5.5	)pts
Effective Tax Rate		34.3	%		36.8	%		(2.5	)pts		37.3	%		36.4	%		0.9	pts

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)


	*4th Quarter*							*Full Year*
For the Periods Ended December 31,	*2010*		2009		%			*2010*		2009		%
*Freight Revenues (Millions)*
Agricultural	$	840	$	738		14	%	$	3,018	$	2,666		13	%
Automotive		323		302		7			1,271		854		49
Chemicals		617		539		14			2,425		2,102		15
Energy		887		765		16			3,489		3,118		12
Industrial Products		652		513		27			2,639		2,147		23
Intermodal		852		684		25			3,227		2,486		30
Total	$	4,171	$	3,541		18	%	$	16,069	$	13,373		20	%
*Revenue Carloads (Thousands)*
Agricultural		248		235		6	%		918		865		6	%
Automotive		155		151		3			611		465		31
Chemicals		211		191		10			844		761		11
Energy		519		499		4			2,056		2,021		2
Industrial Products		263		213		23			1,073		899		19
Intermodal		841		763		10			3,313		2,775		19
Total		2,237		2,052		9	%		8,815		7,786		13	%
*Average Revenue per Car*
Agricultural	$	3,386	$	3,129		8	%	$	3,286	$	3,080		7	%
Automotive		2,100		2,004		5			2,082		1,838		13
Chemicals		2,923		2,815		4			2,874		2,761		4
Energy		1,709		1,536		11			1,697		1,543		10
Industrial Products		2,483		2,412		3			2,461		2,388		3
Intermodal		1,012		896		13			974		896		9
Average	$	1,865	$	1,726		8	%	$	1,823	$	1,718		6	%

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Financial Position (unaudited)


Millions, Except Percentages	Dec. 31, 2010		Dec. 31, 2009
Assets
Cash and cash equivalents	$	1,086	$	1,850
Other current assets		2,346		1,830
Investments		1,137		1,036
Net properties		38,253		37,202
Other assets		266		266
Total assets	$	43,088	$	42,184


Liabilities and Common Shareholders’ Equity
Debt due within one year	$	239	$	212
Other current liabilities		2,713		2,470
Debt due after one year		9,003		9,636
Deferred income taxes		11,557		11,044
Other long-term liabilities		1,813		2,021
Total liabilities		25,325		25,383
Total common shareholders’ equity		17,763		16,801
Total liabilities and common shareholders’ equity	$	43,088	$	42,184


Debt to Capital		34.2%		37.0%
Adjusted Debt to Capital*		42.5%		46.1%
Return on Invested Capital*		10.8%		8.2%

*	Adjusted Debt to Capital and Return on Invested Capital are non-GAAP measures; however, we believe that they are important in evaluating our financial performance. See pages 8 and 9 for a reconciliation to GAAP

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows (unaudited)


Millions,	*Full Year*
For the Periods Ended December 31,	*2010*			2009
Operating Activities
Net income	$	2,780		$	1,890
Depreciation		1,487			1,427
Deferred income taxes		672			718
Other - net		(834	)		(831	)
Cash provided by operating activities		4,105			3,204


Investing Activities
Capital investments		(2,482	)		(2,354	)
Other - net		(6	)		209
Cash used in investing activities		(2,488	)		(2,145	)


Financing Activities
Debt issued		894			843
Common shares repurchased		(1,249	)		-
Debt repaid		(1,412	)		(871	)
Dividends paid		(602	)		(544	)
Other - net		(12	)		114
Cash used in financing activities		(2,381	)		(458	)


Net Change in Cash and Cash Equivalents		(764	)		601
Cash and cash equivalents at beginning of year		1,850			1,249
Cash and Cash Equivalents End of Year	$	1,086		$	1,850


Free Cash Flow*
Cash provided by operating activities	$	4,105		$	3,204
Receivables securitization facility**		400			184
Cash provided by operating activities adjusted for the receivables securitization facility		4,505			3,388
Cash used in investing activities		(2,488	)		(2,145	)
Dividends paid		(602	)		(544	)
Free cash flow	$	1,415		$	699

*	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 required 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)


	*4th Quarter*							*Full Year*
For the Periods Ended December 31,	*2010*		2009		%			*2010*		2009		%
Operating/Performance Statistics
Gross ton-miles (GTMs) (millions)		240,087		220,231		9	%		932,400		846,473		10	%
Employees (average)		43,462		42,157		3			42,884		43,531		(1	)
GTMs (millions) per employee		5.52		5.22		6			21.74		19.44		12
Customer satisfaction index		90		88		2	pts		89		88		1	pts


Locomotive Fuel Statistics
Average fuel price per gallon consumed	$	2.46	$	2.05		20	%	$	2.29	$	1.75		31	%
Fuel consumed in gallons (millions)		270		256		5			1,051		979		7
Fuel consumption rate*		1.123		1.162		(3	)		1.127		1.156		(3	)


AAR Reported Performance Measures
Average train speed (miles per hour)		26.5		27.0		(2	) %		26.2		27.3		(4	) %
Average terminal dwell time (hours)		25.8		25.8		-			25.4		24.8		2
Average rail car inventory (thousands)		270.6		282.8		(4	)		274.4		283.1		(3	)


Revenue Ton-Miles (Millions)
Agricultural		23,976		22,723		6	%		88,237		81,207		9	%
Automotive		3,101		3,174		(2	)		12,542		9,740		29
Chemicals		13,619		12,031		13			54,233		48,055		13
Energy		57,237		54,093		6			225,583		218,227		3
Industrial Products		14,840		12,429		19			60,347		51,873		16
Intermodal		20,001		19,077		5			79,458		70,086		13
Total		132,774		123,527		7	%		520,400		479,188		9	%

*	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)


	*2010*
Millions, Except Per Share Amounts and Percentages	*1st Qtr*		*2nd Qtr*		*3rd Qtr*		*4th Qtr*		*Full Year*
Operating Revenues
Freight revenues	$	3,755	$	3,956	$	4,187	$	4,171	$	16,069
Other revenues		210		226		221		239		896
Total operating revenues		3,965		4,182		4,408		4,410		16,965
Operating Expenses
Compensation and benefits		1,059		1,051		1,092		1,112		4,314
Fuel		583		608		608		687		2,486
Purchased services and materials		432		472		465		467		1,836
Depreciation		367		368		372		380		1,487
Equipment and other rents		290		282		292		278		1,142
Other		246		122		178		173		719
Total operating expenses		2,977		2,903		3,007		3,097		11,984
Operating Income		988		1,279		1,401		1,313		4,981
Other income		1		19		25		9		54
Interest expense		(155)		(152)		(153)		(142)		(602)
Income before income taxes		834		1,146		1,273		1,180		4,433
Income tax expense		(318)		(435)		(495)		(405)		(1,653)
Net Income	$	516	$	711	$	778	$	775	$	2,780


Share and Per Share
Earnings per share - basic	$	1.02	$	1.42	$	1.58	$	1.58	$	5.58
Earnings per share - diluted	$	1.01	$	1.40	$	1.56	$	1.56	$	5.53
Weighted average number of shares - basic		504.5		501.8		493.0		491.3		498.2
Weighted average number of shares - diluted		508.7		506.5		497.7		496.3		502.9
Dividends declared per share	$	0.27	$	0.33	$	0.33	$	0.38	$	1.31


Operating Ratio		75.1%		69.4%		68.2%		70.2%		70.6%
Effective Tax Rate		38.1%		38.0%		38.9%		34.3%		37.3%

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)


	*2010*
	*1st Qtr*		*2nd Qtr*		*3rd Qtr*		*4th Qtr*		*Full Year*
*Freight Revenues (Millions)*
Agricultural	$	730	$	698	$	750	$	840	$	3,018
Automotive		305		334		309		323		1,271
Chemicals		587		592		629		617		2,425
Energy		844		836		922		887		3,489
Industrial Products		598		692		697		652		2,639
Intermodal		691		804		880		852		3,227
Total	$	3,755	$	3,956	$	4,187	$	4,171	$	16,069
*Revenue Carloads (Thousands)*
Agricultural		228		213		229		248		918
Automotive		151		159		146		155		611
Chemicals		203		209		221		211		844
Energy		516		486		535		519		2,056
Industrial Products		242		286		282		263		1,073
Intermodal		742		827		903		841		3,313
Total		2,082		2,180		2,316		2,237		8,815
*Average Revenue per Car*
Agricultural	$	3,202	$	3,277	$	3,271	$	3,386	$	3,286
Automotive		2,022		2,094		2,114		2,100		2,082
Chemicals		2,893		2,826		2,858		2,923		2,874
Energy		1,636		1,722		1,721		1,709		1,697
Industrial Products		2,474		2,420		2,470		2,483		2,461
Intermodal		930		974		974		1,012		974
Average	$	1,804	$	1,815	$	1,807	$	1,865	$	1,823

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Non-GAAP Measures Reconciliation to GAAP


Debt to Capital*
Millions, Except Percentages	Dec. 31, 2010		Dec. 31, 2009
Debt (a)	$	9,242	$	9,848
Equity		17,763		16,801
Capital (b)	$	27,005	$	26,649
Debt to capital (a/b)		34.2%		37.0%

*	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	Dec. 31, 2010		Dec. 31, 2009
Debt	$	9,242	$	9,848
Value of sold receivables		-		400
Debt including value of sold receivables		9,242		10,248
Net present value of operating leases		3,476		3,672
Unfunded pension and OPEB		421		456
Adjusted debt (a)	$	13,139	$	14,376
Equity		17,763		16,801
Adjusted capital (b)	$	30,902	$	31,177
Adjusted debt to capital (a/b)		42.5%		46.1%

Total debt plus value of sold receivables plus net present value of operating leases plus after-tax unfunded pension and OPEB obligation divided by total debt plus value of sold receivables plus net present value of operating leases plus after-tax unfunded pension and OPEB obligation plus equity. Effective January 1, 2010, the value of the outstanding undivided interest held by investors under our receivables securitization facility is included in our Condensed Consolidated Statements of Financial Position as debt due after one year. At December 31, 2010, that amount was $100 million. Operating leases were discounted using 6.2% at December 31, 2010 and 6.3% at December 31, 2009. The lower discount rate reflects changes to interest rates and our current financing costs. Management believes this is an important measure in evaluating the total amount of leverage in our capital structure including off-balance sheet obligations.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Non-GAAP Measures Reconciliation to GAAP

Return on Invested Capital as Adjusted (ROIC)*


Millions, Except Percentages	Dec. 31, 2010			Dec. 31, 2009
Net income	$	2,780		$	1,890
Add: Interest expense		602			600
Add: Interest on present value of operating leases		222			232
Add: Sale of receivables fees		-			9
Less: Taxes on interest and fees		(307	)		(306	)
Net operating profit after taxes as adjusted (a)	$	3,297		$	2,425
Average equity	$	17,282		$	16,058
Add: Average debt		9,545			9,388
Add: Average value of sold receivables		200			492
Add: Average present value of operating leases		3,574			3,681
Average invested capital as adjusted (b)	$	30,601		$	29,619
Return on invested capital as adjusted (a/b)		10.8%			8.2%

ROIC is considered a non-GAAP financial measure by SEC Regulation G and Item 10 of SEC Regulation S-K, and may not be defined and calculated by other companies in the same manner. We believe this measure is important in evaluating the efficiency and effectiveness of the Corporation’s long-term capital investments, and we currently use ROIC as a performance criteria in determining certain elements of equity compensation for our executives. ROIC should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP. The most comparable GAAP measure is Return on Average Common Shareholders’ Equity.

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