EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

UNION PACIFIC REPORTS RECORD QUARTER

Establishes New “Bests” for Operating Income and Operating Ratio

FOR IMMEDIATE RELEASE

All-Time Quarterly Records

 

  •  

Diluted earnings per share improved 54 percent to $1.56.

 

  •  

Operating income totaled $1.4 billion, up 46 percent.

 

  •  

Net income increased 51 percent to $778 million.

 

  •  

Operating ratio was 68.2 percent, 5.6 points better than third quarter 2009 and 1.2 points better than the previous record set in the second quarter 2010.

 

  •  

Customer Satisfaction Index of 90, up 2 points.

Omaha, Neb., October 21, 2010 – Union Pacific Corporation (NYSE: UNP) today reported 2010 third quarter net income of $778 million, or $1.56 per diluted share, compared to $514 million, or $1.01 per diluted share, in the third quarter 2009. Third quarter Operating Revenue grew 20 percent to $4.4 billion versus $3.7 billion in the third quarter 2009.

“Strong volume growth, pricing gains and operating efficiency combined to produce another record quarter for our Company,” said Jim Young, Union Pacific chairman and chief executive officer. “New ‘bests’ in both Customer Satisfaction and Operating Ratio demonstrate the solid performance of our operations. As business levels increase on our railroad, we are leveraging our capital investments, delivering on customer commitments and realizing the potential of the UP franchise.”

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Third Quarter Summary

Third quarter business volumes, as measured by total revenue carloads, grew 14 percent versus 2009’s recession-affected levels as all six Union Pacific business groups reported volume growth. Quarterly operating revenue increased 20 percent in the third quarter 2010 to $4.4 billion versus $3.7 billion in the third quarter 2009. In addition:

 

  •  

All six business groups reported freight revenue growth in the quarter, up 21 percent versus third quarter 2009 to a total of $4.2 billion. Double-digit volume growth, increased fuel cost recoveries and core pricing gains all contributed to the increase.

 

  •  

Quarterly diesel fuel prices increased 20 percent from an average of $1.87 per gallon in the third quarter 2009 to an average of $2.24 per gallon in the third quarter 2010.

 

  •  

Union Pacific’s operating ratio was a best-ever 68.2 percent, 5.6 points of improvement versus 2009. Strong volume growth, ongoing efficiency initiatives and quarterly pricing gains drove this record performance.

 

  •  

A Customer Satisfaction Index of 90 was a quarterly best and 2 points better than the third quarter 2009.

 

  •  

Quarterly train speed, as reported to the Association of American Railroads, was 25.7 mph, down 6 percent versus record velocity in the third quarter 2009, reflecting the effects of Hurricane Alex and subsequent flooding in Mexico, which closed the Laredo gateway for nearly the entire month of July.

 

  •  

The Company repurchased more than 7.6 million shares in the third quarter 2010 at an average share price of $73.19, and an aggregate cost of approximately $560 million.

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Summary of Third Quarter Freight Revenues

 

  •  

Automotive up 36 percent.

 

  •  

Intermodal up 34 percent.

 

  •  

Industrial Products up 25 percent.

 

  •  

Agricultural up 16 percent.

 

  •  

Chemicals up 14 percent.

 

  •  

Energy up 11 percent.

Outlook

“As the economy continues to recover, we stand ready to safely and reliably haul more freight,” Young said. “Longer term, we believe Union Pacific is positioned to provide strong value for our customers and shareholders, as the long-standing need for freight rail transportation in our nation provides us with a stable foundation as well as a platform for future growth.”

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.

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Supplemental financial information is attached.

Investor contact is Jennifer Hamann, (402) 544-4227.

Media contact is Donna Kush, (402) 544-3753.

****

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 “Outlook” in this press release, which include statements regarding the Corporation’s expectations with respect to economic conditions; operating performance; future revenue growth; delivering value to its customers and shareholders; and moving customer traffic safely, and reliably. 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,

   3rd Quarter            Year-to-Date  

For the Periods Ended September 30,

   2010     2009     %            2010     2009     %  
   

(Adjusted)*

 

          

(Adjusted)*

 

  

Operating Revenues

              

 Freight revenues

   $     4,187      $     3,471        21  %      $     11,898      $     9,832        21   % 

 Other revenues

     221        200        11          657        557        18   

 

  Total operating revenues

 

 

    

 

 4,408

 

   

 

    

 

 3,671

 

   

 

    

 

 20

 

   

 

            

 

 12,555

 

   

 

    

 

 10,389

 

   

 

    

 

 21

 

   

 

Operating Expenses

              

 Compensation and benefits

     1,092        999        9          3,202        3,045        5   

 Fuel

     608        466        30          1,799        1,222        47   

 Purchased services and materials

     465        413        13          1,369        1,216        13   

 Depreciation

     372        363        2          1,107        1,054        5   

 Equipment and other rents

     292        290        1          864        914        (5 ) 

 Other

     178        179        (1 )        546        558        (2 ) 

 

  Total operating expenses

 

    

 

 3,007

 

   

 

    

 

 2,710

 

   

 

    

 

 11

 

   

 

            

 

 8,887

 

   

 

    

 

 8,009

 

   

 

    

 

 11

 

   

 

Operating Income

     1,401        961        46          3,668        2,380        54   

 Other income

     25        14        79          45        172        (74 ) 

 Interest expense

     (153 )      (156 )      (2 )        (460 )      (447 )      3   

Income before income taxes

     1,273        819        55                3,253        2,105        55   

Income taxes

     (495 )      (305 )      62                (1,248 )      (764 )      63   

 

Net Income

 

   $

 

 778

 

   

 

   $

 

 514

 

   

 

    

 

 51

 

  % 

 

           $

 

 2,005

 

   

 

   $

 

 1,341

 

   

 

    

 

 50

 

   % 

 

             
                                                         

Share and Per Share

              

 Earnings per share - basic

   $ 1.58      $ 1.02        55  %      $ 4.01      $ 2.67        50   % 

 Earnings per share - diluted

   $ 1.56      $ 1.01        54        $ 3.98      $ 2.66        50   

 Weighted average number of shares - basic

     493.0        503.1        (2 )        499.8        502.9        (1 ) 

 Weighted average number of shares - diluted

     497.7        507.0        (2 )        504.3        505.4        -   

 Dividends declared per share

   $ 0.33      $ 0.27        22              $ 0.93      $ 0.81        15   
             
                                                         

Operating Ratio

     68.2%        73.8%        (5.6 )pts        70.8%        77.1%        (6.3 )pts 

Effective Tax Rate

     38.9%        37.2%        1.7  pts              38.4%        36.3%        2.1  pts 

 

*

Certain amounts have been adjusted for the retrospective change in accounting principle for rail grinding. See page 9 for effects of the adjustments.

 

1

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)

 

      3rd Quarter             Year-to-Date  
For the Periods Ended September 30,    2010      2009              %             2010      2009              %  

Freight Revenues (Millions)

                    

 Agricultural

    $ 750       $ 649         16   %       $ 2,178       $ 1,928         13   % 

 Automotive

      309         227         36           948         552         72   

 Chemicals

      629         551         14           1,808         1,563         16   

 Energy

      922         831         11           2,602         2,353         11   

 Industrial Products

      697         557         25           1,987         1,634         22   

 Intermodal

      880         656         34           2,375         1,802         32   

 

Total

 

    $

 

     4,187

 

   

 

    $

 

     3,471

 

   

 

     

 

 21

 

   % 

 

            $

 

     11,898

 

   

 

    $

 

     9,832

 

   

 

     

 

 21

 

   % 

 

Revenue Carloads (Thousands)

                    

 Agricultural

      229         215         7   %         670         630         6   % 

 Automotive

      146         124         18           456         314         45   

 Chemicals

      221         202         9           633         570         11   

 Energy

      535         531         1           1,537         1,522         1   

 Industrial Products

      282         235         20           810         686         18   

 Intermodal

      903         728         24           2,472         2,012         23   

 

Total

 

     

 

 2,316

 

   

 

     

 

 2,035

 

   

 

     

 

 14

 

   % 

 

             

 

 6,578

 

   

 

     

 

 5,734

 

   

 

     

 

 15

 

   % 

 

Average Revenue per Car

                    

 Agricultural

    $ 3,271       $ 3,026         8   %       $ 3,249       $ 3,062         6   % 

 Automotive

      2,114         1,827         16           2,076         1,759         18   

 Chemicals

      2,858         2,730         5           2,858         2,742         4   

 Energy

      1,721         1,564         10           1,692         1,546         9   

 Industrial Products

      2,470         2,367         4           2,453         2,381         3   

 Intermodal

      974         901         8           961         896         7   

 

Average

 

    $

 

 1,807

 

   

 

    $

 

 1,706

 

   

 

     

 

 6

 

   % 

 

            $

 

 1,809

 

   

 

    $

 

 1,715

 

   

 

     

 

 5

 

   % 

 

 

2

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Financial Position (unaudited)

 

Millions, Except Percentages

   

Sep. 30,

2010

           

Dec. 31,

2009

  
                

(Adjusted)*

 

  

Assets

         

 Cash and cash equivalents

    $ 1,358          $ 1,850   

 Other current assets

      2,552            1,830   

 Investments

      1,104            1,036   

 Net properties

      37,749            37,202   

 Other assets

      238            266   

 

Total assets

 

    $

 

 43,001

 

   

 

         $

 

 42,184

 

   

 

        
                        

Liabilities and Common Shareholders’ Equity

         

 Debt due within one year

    $ 659          $ 212   

 Other current liabilities

      2,526            2,470   

 Debt due after one year

      9,060            9,636   

 Deferred income taxes

      11,480            11,044   

 Other long-term liabilities

      1,840            2,021   

 

Total liabilities

 

     

 

 25,565

 

   

 

          

 

 25,383

 

   

 

 

Total common shareholders’ equity

 

     

 

 17,436

 

   

 

        

 

 16,801

 

   

 

 

Total liabilities and common shareholders’ equity

 

    $

 

     43,001

 

   

 

         $

 

     42,184

 

   

 

        
                        

Debt to Capital

      35.8%            37.0%   

Adjusted Debt to Capital**

      44.0%              46.1%   

 

*

Certain amounts have been adjusted for the retrospective change in accounting principle for rail grinding. See page 9 for the effects of the adjustments.

 

**

Adjusted Debt to Capital is a non-GAAP measure; however, we believe that it is important in evaluating our financial performance. See page 8 for a reconciliation to GAAP.

 

3

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows (unaudited)

 

Millions,

   Year-to-Date  

For the Periods Ended September 30,

   2010            2009  
               

(Adjusted)*

 

  

Operating Activities

      

 Net income

   $     2,005        $     1,341   

 Depreciation

     1,107          1,054   

 Deferred income taxes and unrecognized tax benefits

     433          310   

 Other - net

     (825 )        (506 ) 

 

Cash provided by operating activities

 

    

 

 2,720

 

   

 

            

 

 2,199

 

   

 

       
                         

Investing Activities

      

 Capital investments

     (1,686 )        (1,808 ) 

 Other - net

     13                90   

 

Cash used in investing activities

 

    

 

 (1,673

 

 ) 

 

      

 

 (1,718

 

 ) 

 

       
                         

Financing Activities

      

 Debt issued

     894          843   

 Common shares repurchased

     (1,019 )        -   

 Debt repaid

     (933 )        (826 ) 

 Dividends paid

     (438 )        (408 ) 

 Other - net

     (43 )        96   

 

Cash used in financing activities

 

    

 

 (1,539

 

 ) 

 

            

 

 (295

 

 ) 

 

       
                         

Net Change in Cash and Cash Equivalents

     (492 )        186   

Cash and cash equivalents at beginning of year

     1,850                1,249   

 

Cash and Cash Equivalents End of Period

 

   $

 

 1,358

 

   

 

     $

 

 1,435

 

   

 

       
                         

Free Cash Flow**

      

 Cash provided by operating activities

   $ 2,720        $ 2,199   

 Receivables securitization facility***

     400                184   

 

 Cash provided by operating activities excluding receivables securitization facility

 

    

 

 3,120

 

   

 

            

 

 2,383

 

   

 

 Cash used in investing activities

     (1,673 )        (1,718 ) 

 Dividends paid

     (438 )        (408 ) 

 

Free cash flow

 

   $

 

 1,009

 

   

 

           $

 

 257

 

   

 

 

*

Certain amounts have been adjusted for the retrospective change in accounting principle for rail grinding. See page 9 for the effects of the adjustment.

 

**

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 requires 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.

 

4

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Operating and Performance Statistics (unaudited)

 

      3rd Quarter             Year-to-Date  
For the Periods Ended September 30,    2010      2009      %             2010      2009      %  

Operating/Performance Statistics

                    

 Gross ton-miles (GTMs) (millions)

      239,541         218,810         9   %         692,313         626,242         11   % 

 Employees (average)

      43,375         43,248         -           42,692         43,989         (3 ) 

 GTMs (millions) per employee

      5.52         5.06         9           16.22         14.24         14   

 Customer satisfaction index

      90         88         2   pts         89         87         2   pts 
               
                                                               

Locomotive Fuel Statistics

                    

 Average fuel price per gallon consumed

    $ 2.24       $ 1.87         20   %       $ 2.23       $ 1.65         35   % 

 Fuel consumed in gallons (millions)

      261         242         8           781         723         8   

 Fuel consumption rate*

      1.092         1.107         (1 )         1.129         1.155         (2 ) 
               
                                                               

AAR Reported Performance Measures

                    

 Average train speed (miles per hour)

      25.7         27.4         (6 )  %         26.1         27.3         (4 )  % 

 Average terminal dwell time (hours)

      25.0         24.5         2           25.3         24.4         4   

 Average rail car inventory (thousands)

      274.4         281.5         (3 )         275.7         283.2         (3 ) 
               
                                                               

Revenue Ton-Miles (Millions)

                    

 Agricultural

      22,062         19,563         13   %         64,261         58,484         10   % 

 Automotive

      2,984         2,619         14           9,441         6,566         44   

 Chemicals

      13,956         12,544         11           40,614         36,024         13   

 Energy

      59,331         57,391         3           168,346         164,134         3   

 Industrial Products

      15,687         13,479         16           45,507         39,444         15   

 Intermodal

      20,489         18,411         11           59,457         51,009         17   

 

Total

 

     

 

 134,509

 

   

 

     

 

 124,007

 

   

 

     

 

 8

 

   % 

 

             

 

 387,626

 

   

 

     

 

 355,661

 

   

 

     

 

 9

 

   % 

 

 

* Fuel consumption is computed as follows: gallons of fuel consumed divided by gross ton-miles in thousands.

 

5

 

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    

Year-to-Date

  

Operating Revenues

           

 Freight revenues

    $     3,755      $     3,956      $     4,187        $     11,898   

 Other revenues

      210        226        221          657   

 

  Total operating revenues

 

     

 

 3,965

 

   

 

    

 

 4,182

 

   

 

    

 

 4,408

 

   

 

        

 

 12,555

 

   

 

Operating Expenses

           

 Compensation and benefits

      1,059        1,051        1,092          3,202   

 Fuel

      583        608        608          1,799   

 Purchased services and materials

      432        472        465          1,369   

 Depreciation

      367        368        372          1,107   

 Equipment and other rents

      290        282        292          864   

 Other

      246        122        178          546   

 

  Total operating expenses

 

     

 

 2,977

 

   

 

    

 

 2,903

 

   

 

    

 

 3,007

 

   

 

        

 

 8,887

 

   

 

Operating Income

      988        1,279        1,401          3,668   

Other income

      1        19        25          45   

Interest expense

      (155 )      (152 )      (153 )          (460 ) 

Income before income taxes

      834        1,146        1,273          3,253   

Income tax expense

      (318 )      (435 )      (495 )        (1,248 ) 

 

Net Income

 

    $

 

 516

 

   

 

   $

 

 711

 

   

 

   $

 

 778

 

   

 

       $

 

 2,005

 

   

 

           
                                      

Share and Per Share

           

 Earnings per share - basic

    $ 1.02      $ 1.42      $ 1.58        $ 4.01   

 Earnings per share - diluted

    $ 1.01      $ 1.40      $ 1.56        $ 3.98   

 Weighted average number of shares - basic

      504.5        501.8        493.0          499.8   

 Weighted average number of shares - diluted

      508.7        506.5        497.7          504.3   

 Dividends declared per share

    $ 0.27      $ 0.33      $ 0.33        $ 0.93   
           
                                      

Operating Ratio

      75.1%        69.4%        68.2%          70.8%   

Effective Tax Rate

      38.1%        38.0%        38.9%            38.4%   

 

6

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)

 

      2010  
      1st Qtr      2nd Qtr      3rd Qtr      Year-to-Date  

Freight Revenues (Millions)

            

 Agricultural

    $ 730       $ 698       $ 750         $      2,178   

 Automotive

      305         334         309         948   

 Chemicals

      587         592         629         1,808   

 Energy

      844         836         922         2,602   

 Industrial Products

      598         692         697         1,987   

 Intermodal

      691         804         880         2,375   

 

Total

 

   

 

$

 

 

    3,755

 

 

  

 

   

 

$

 

 

    3,956

 

 

  

 

   

 

$

 

 

    4,187

 

 

  

 

   

 

 

 

 

$    11,898

 

 

  

 

Revenue Carloads (Thousands)

            

 Agricultural

      228         213         229         670   

 Automotive

      151         159         146         456   

 Chemicals

      203         209         221         633   

 Energy

      516         486         535         1,537   

 Industrial Products

      242         286         282         810   

 Intermodal

      742         827         903         2,472   

 

 

Total

   

 

 

 

 

2,082

 

 

  

 

   

 

 

 

 

2,180

 

 

  

 

   

 

 

 

 

2,316

 

 

  

 

   

 

 

 

 

6,578

 

 

  

 

Average Revenue per Car

            

 Agricultural

    $ 3,202       $ 3,277       $ 3,271         $      3,249   

 Automotive

      2,022         2,094         2,114         2,076   

 Chemicals

      2,893         2,826         2,858         2,858   

 Energy

      1,636         1,722         1,721         1,692   

 Industrial Products

      2,474         2,420         2,470         2,453   

 Intermodal

      930         974         974         961   

 

Average

 

   

 

$

 

 

1,804

 

 

  

 

   

 

$

 

 

1,815

 

 

  

 

   

 

$

 

 

1,807

 

 

  

 

   

 

 

 

 

$      1,809

 

 

  

 

 

7

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Non-GAAP Measures Reconciliation to GAAP

Debt to Capital*

Millions, Except Percentages

   

Sep. 30,

2010

     

Dec. 31,

2009

  
            (Adjusted)**  

Debt (a)

    $ 9,719         $          9,848   

Equity

      17,436         16,801   

 

 Capital (b)

 

   

 

$

 

 

      27,155

 

 

  

 

   

 

 

 

 

$        26,649

 

 

  

 

 

 Debt to capital (a/b)

 

   

 

 

 

 

35.8%

 

 

  

 

   

 

 

 

 

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.

 

**

Certain amounts have been adjusted for the retrospective change in accounting principle for rail grinding. See page 9 for the effects of the adjustments

Adjusted Debt to Capital, Reconciliation to GAAP*

Millions, Except Percentages

   

Sep. 30,

2010

     

Dec. 31,

2009

  
            (Adjusted)**  

Debt

    $ 9,719       $ 9,848   

Value of sold receivables

      -        
 400
   

 

Debt including value of sold receivables

 

   

 

 

 

 

9,719

 

 

  

 

   

 

 

 

 

10,248

 

 

  

 

 

Net present value of operating leases

   

 

 

 

3,520

 

  

   

 

 

 

3,672

 

  

Unfunded pension and OPEB

      456         456   

 

 Adjusted debt (a)

   

 

$

 

      13,695

 

  

   

 

$

 

    14,376

 

  

Equity

      17,436         16,801   

 

 Adjusted capital (b)

 

   

 

$

 

 

31,131

 

 

  

 

   

 

$

 

 

31,177

 

 

  

 

 

 Adjusted debt to capital (a/b)

 

   

 

 

 

 

44.0%

 

 

  

 

   

 

 

 

 

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 September 30, 2010, that amount was $100 million. Operating leases were discounted using 6.3% at September 30, 2010 and 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.

 

**

Certain amounts have been adjusted for the retrospective change in accounting principle for rail grinding. See page 9 for the effects of the adjustments

 

8

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Impact of Retrospective Change in Accounting Principle for Rail Grinding (unaudited)

Condensed Consolidated Statements of Income

     

 

For the Three Months Ended

September 30, 2009

          

 

For the Nine Months Ended

September 30, 2009

  

Millions,

Except Per Share Amounts

   

 

As
Originally
Reported

     Impact of
Adjustment		     As
Adjusted		          

 

As
Originally
Reported

     Impact of
Adjustment		     As
Adjusted		  

Purchased services & materials

    $ 403      $ 10      $ 413         $ 1,193      $ 23      $ 1,216   

Depreciation

    $ 367      $ (4 )    $ 363         $ 1,067      $ (13 )    $ 1,054   

Total operating expenses

    $ 2,704      $ 6      $ 2,710         $ 7,999      $ 10      $ 8,009   

Operating income

    $ 967      $ (6 )    $ 961         $ 2,390      $ (10 )    $ 2,380   

Income before income taxes

    $ 825      $ (6 )    $ 819         $ 2,115      $ (10 )    $ 2,105   

Income taxes

    $ (308 )    $ 3      $ (305 )       $ (768 )    $ 4      $ (764 ) 

Net income

    $ 517      $ (3 )    $ 514         $ 1,347      $ (6 )    $ 1,341   

Earnings per share - basic

    $ 1.03      $ (0.01 )    $ 1.02         $ 2.68      $ (0.01 )    $ 2.67   

Earnings per share - diluted

    $ 1.02      $ (0.01 )    $ 1.01           $ 2.67      $ (0.01 )    $ 2.66   

Condensed Consolidated Statement of Financial Position

Millions,

December 31, 2009

   

 

As
Originally
Reported

    Impact of
Adjustment		     As
Adjusted

Net properties

    $   37,428    $ (226 )    $ 37,202

Total assets

    $ 42,410    $ (226 )    $ 42,184

Deferred income taxes

    $ 11,130    $ (86 )    $ 11,044

Total liabilities

    $ 25,469    $ (86 )    $ 25,383

Total common shareholders’ equity

    $ 16,941    $ (140 )    $ 16,801

Total liabilities and common shareholders’ equity

    $ 42,410    $ (226 )    $     42,184

Condensed Consolidated Statement of Cash Flows

     

 

For the Nine Months Ended
September 30, 2009

  

Millions,

   

 

As
Originally
Reported

     Impact of
Adjustment		     As
Adjusted		  

Net income

    $ 1,347      $ (6 )    $       1,341   

Depreciation

    $ 1,067      $ (13 )    $ 1,054   

Deferred income taxes and unrecognized tax benefits

    $ 314      $ (4 )    $ 310   

Cash provided by operating activities

    $ 2,222      $ (23 )    $ 2,199   

Capital investments

    $ (1,831 )    $ 23      $ (1,808 ) 

Cash used in investing activities

    $ (1,741 )    $ 23      $ (1,718 ) 

 

9