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Rail News Home Union Pacific Railroad

1/19/2006



Rail News: Union Pacific Railroad

UP sets revenue and traffic records despite year-long series of severe storms



Despite dealing with damaged infrastructure caused by several more severe storms during the fourth quarter, Union Pacific Railroad moved a record number of carloads and registered all-time-high commodity revenue. The Class I’s quarterly carloads totaling 2.4 million units increased 1 percent and revenue totaling $3.5 billion rose 13 percent compared with fourth-quarter 2004.

UP registered significant revenue gains in several commodities, including industrial products (up 19 percent), agricultural (18 percent), intermodal (14 percent) and automotive (8 percent).

In addition, the railroad’s adjusted operating income rose 18 percent to $533 million, adjusted net income increased 27 percent to $296 million and operating ratio improved 8.4 points to 85.3 compared with 2004’s last quarter. UP also contained quarterly operating expenses, which totaled $3.1 billion, to a 2 percent year-over-year increase despite escalating fuel costs. During the quarter, the railroad paid an average diesel price of $2.08 per gallon, a 42 percent increase compared with fourth-quarter 2004.

For the full year, UP earned record commodity revenue of $13.6 billion, an 11 percent increase compared with 2004. Carloads rose 1 percent to an all-time-high 9.5 million units, operating income increased 16 percent to $1.8 billion and the Class I’s operating ratio improved 2.6 points to 86.8.

Full-year operating expenses rose 8 percent to $11.8 billion compared with 2004 primarily because UP paid an average diesel price of $1.77 per gallon, a 45 percent increase compared with 2004. The Class I also spent $100 million to repair infrastructure damaged by hurricanes Katrina and Rita, and severe storms on the West Coast, and in Kansas and the Powder River Basin.

“We faced a challenge in every quarter caused by a catastrophe,” said Jim Young, UP’s president who succeeded Chairman Dick Davidson as chief executive officer Jan. 1, during the railroad’s analyst meeting today.

However, UP managed to maintain average velocity — which dipped only 0.3 mph to 21.1 mph compared with 2004 — and, for the most part, handle the record-setting traffic because of the Unified Plan implemented last year. Designed to create more origin-to-destination trains and eliminate intermediate switches, the plan helped reduce terminal handlings 12 percent last year. Average terminal dwell time fell 6 percent last year to 28.7 hours compared with 2004’s 30.5-hour average.

UP officials expect the Unified Plan and other operating initiatives — including a Customer Inventory Management System that will be applied to 75 percent of industrial switching operations in 2006 — to further improve service performance this year.

“I’m excited about 2006 because it’ll show results from our plan that’s been in place a few years,” said Young. “Results were masked in 2005 by the challenges we faced.”

During the first quarter, UP will increase revenue 15 percent, improve its operating ratio 3 points and boost earnings between 80 cents and 90 cents per share compared with first-quarter 2005, Young said. During 2006, the railroad expects to increase revenue 10 percent, improve its operating ratio from 2.5 to 3 points and boost earnings between $4.60 and $4.80 per share.

Jeff Stagl


Contact Progressive Railroading editorial staff.

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