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Rail News Home Union Pacific Railroad

4/23/2009



Rail News: Union Pacific Railroad

UP sets operating ratio record in 'most challenging' business environment


Despite lower revenue and income, Union Pacific Corp. produced what it terms "solid" first-quarter results in a tough business environment because expenses dropped substantially and the Class I's operating ratio fell slightly to a record level.

Net income declined 18 percent to $362 million, or 72 cents per diluted share, compared with $443 million, or 85 cents per diluted share, in first-quarter 2008. Operating income dropped 15 percent to $672 million.

Freight revenue decreased 20 percent to $3.2 billion as total revenue carloads dropped 21 percent to 1.85 million units. Operating revenue fell 20 percent from $4.3 billion in first-quarter 2008 to $3.4 billion.

Automotive revenue plunged 55 percent to $162 million, industrial products revenue plummeted 29 percent to $546 million, intermodal revenue fell 22 percent to $551 million, chemical revenue dropped 15 percent to $513 million, agricultural revenue declined 13 percent to $661 million and energy revenue decreased 6 percent to $807 million.

"We faced one of the most challenging business environments we've ever seen," said UP Chairman, President and Chief Executive Officer Jim Young during the Class I's earnings conference held this morning. "We took decisive steps to improve our safety performance, operating productivity and customer service. We're taking advantage of lower volumes to increase fluidity and efficiency."

UP's operating ratio improved 1.2 points to a record 80.3 percent compared with first-quarter 2008 primarily because of lower fuel prices, rate increase and improved productivity, said Executive Vice President and Chief Financial Officer Rob Knight.

Quarterly operating expenses totaled $2.7 billion, down 21 percent year over year. Fuel costs dropped 60 percent to $386 million as quarterly diesel prices decreased 47 percent to an average price of $1.51 per gallon and the railroad reduced fuel consumption by 78 million gallons, said Knight. Purchased services/material costs fell 15 percent to $399 million and compensation/benefits expenses dropped 5 percent to $1 billion as UP's workforce decreased 8 percent.

There were faint signs of improving business conditions during the quarter, said EVP of Marketing and Sales Jack Koraleski.

"Even a seasonal upturn is encouraging to us," he said.

Jeff Stagl


Contact Progressive Railroading editorial staff.

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