Union Pacific Announces Fourth Quarter Results
21 January 1999
Union Pacific Announces Fourth Quarter Results
DALLAS, Jan. 21 -- Union Pacific Corporation
today reported continued improvement in operating results at its Union Pacific
Railroad and Overnite Transportation Company subsidiaries. These results,
however, were offset by fourth quarter accounting changes related to Overnite
(discussed below). Excluding this net after-tax charge of $285 million, net
income would have totaled $96 million, or $.39 per diluted share. This
includes $85 million for the Railroad/Corporate Services and $11 million for
Overnite, and compares to a loss of $158 million and net income of $6 million
(before goodwill), respectively, in the fourth quarter of 1997. Including
these adjustments, the Corporation reported a net loss of $189 million, or
$.77 per diluted share, in the fourth quarter of 1998. This compares to a net
loss of $152 million, or $.62 per diluted share, in the fourth quarter of
1997.
In the second quarter of 1998, Union Pacific took a charge in discontinued
operations to reflect the anticipated proceeds from a planned divestiture of
Overnite. Because of softness in the market for trucking stocks, the Company
subsequently decided to postpone the sale and has reclassified Overnite, in
the fourth quarter, as continuing operations. The Company also took a fourth
quarter $547 million pre-tax and after-tax charge to continuing operations to
record the revaluation of Overnite goodwill. As a result of reversing the
$262 million after-tax loss on discontinued operations and recording the
$547 million goodwill charge, fourth quarter earnings decreased $285 million.
Union Pacific Railroad showed continued improvement in service levels and
operating performance during the fourth quarter, reporting operating income of
$256 million, compared to an operating loss of $72 million for the same period
in 1997. Both periods include Corporate Services. Commodity revenues were up
4 percent, with strength in coal, autos and agricultural products. Despite
the effect of flooding in Kansas City and Texas in late October and November,
the fourth quarter operating ratio decreased nearly 14 percentage points to
89.4, reflecting improvements in key operating indicators including train
velocity, car inventory and terminal dwell time.
Overnite Transportation completed another strong quarter, reporting net
income of $11 million (before accounting adjustments), compared to net income
of $6 million in 1997 (before goodwill). Revenues increased 5 percent,
reflecting industry-wide rate increases as well as an ongoing focus on
profitable freight mix. With continued emphasis on quality service and cost
reduction, Overnite's fourth quarter operating ratio decreased 3.8 percentage
points to 93.6, the lowest for any quarter since 1994.
For the total year 1998, Union Pacific Corporation reported a net loss of
$633 million, or $2.57 per share, as the Railroad continued its efforts to
restore service levels, and reflecting the $547 million write-down of Overnite
goodwill. This compares with net income of $432 million, or $1.74 per diluted
share, for 1997.
"We are encouraged by our fourth quarter operating results, which were the
best in the last 15 months," said Dick Davidson, chief executive officer.
"1999 will still be a transition year. We have a great deal of work ahead of
us, but our indicators are headed in the right direction. There has been
significant progress made with our merger integration, and our customers are
bringing their business back. We are gaining momentum and I'm optimistic
about the future of our company."
A fourth quarter and full-year income statement follows.
Media inquires should be directed to John Bromley at Union Pacific
Railroad, 402-271-3475.
(This press release contains forward-looking statements within the meaning
of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such
forward-looking information is based on facts available at this time and is
subject to risks and uncertainties that could cause actual results to differ
materially from those expressed in the statements. Important factors that
could cause such differences include, but are not limited to: whether Union
Pacific Railroad is fully successful in recovering from the effects of its
congestion-related problems and implementing its financial and operational
initiatives; industry competition and legislative and/or regulatory
developments; natural events such as severe weather, floods and earthquakes;
the effects of adverse general economic conditions; changes in fuel prices;
labor strikes; the impact of year 2000 systems problems; and the ultimate
outcome of shipper claims related to congestion, environmental investigations
or proceedings and other types of claims and litigations.)
UNION PACIFIC CORPORATION
STATEMENT OF CONSOLIDATED INCOME
For the Three Months Ended December 31
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
As Reported Pro Forma As Reported
1998 (a) 1998 (c) 1997 Pct Chg
$ 2,684 Operating Revenue $ 2,684 $ 2,561 + 5
2,412 Operating Expense (b) 2,412 2,632 - 8
547 Goodwill Impairment -- -- --
(275) Operating Income (Loss) 272 (71) F
76 Other Income -- Net 76 (22) F
188 Interest Expense 188 153 + 23
(387) Income (Loss) before 160 (246) F
Income Taxes
(64) Income Tax (Expense) Benefit (64) 94 U
(451) Income (Loss) from 96 (152) F
Continuing Operations
262 Income (Loss) from -- -- --
Discontinuing Operations
$ (189) Net Income (Loss) $ 96 $ (152) F
Diluted Earnings Per Share:
$ (1.83) Income (Loss) from $ 0.39 $ (0.62) F
Continuing Operations
1.06 Income (Loss) from -- -- --
Discontinued Operations
$ (0.77) Net Income (Loss) $ 0.39 $ (0.62) F
246.1 Average Basic Shares 246.1 245.9
Outstanding (MM)
246.1 Average Diluted Shares 247.0 245.9
Outstanding (MM) (d)
(a) As Reported results for the 4th quarter include Overnite classified as
continuing operations.
(b) Includes one-time merger expenses of $11 million pre-tax ($7 million
after-tax or $.03 per diluted share) in 1998, $22 million pre-tax
($13 million after-tax or $.05 per share) in 1997. Merger expenses
include severance, relocation and certain other costs related to
Union Pacific employees affected by the merger. Also includes
$5 million of Overnite goodwill amortization in 1997.
(c) Pro Forma results for 1998 exclude the one-time charge for the
revaluation of Overnite's goodwill of $547 million pre and after-tax
and the $262 million reversal of the loss from reclassifying Overnite
from discontinued operations to continuing operations.
(d) 1998 As Reported excludes 22.7 million anti-dilutive common stock
equivalents, 1998 Pro Forma excludes 21.8 million anti-dilutive
common stock equivalents, and 1997 excludes 2.1 million anti-dilutive
common stock equivalents.
UNION PACIFIC CORPORATION
STATEMENT OF CONSOLIDATED INCOME
For the Year Ended December 31
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
As Reported Pro Forma As Reported
1998 (a) 1998 (c) 1997 Pct Chg
$10,553 Operating Revenue $10,553 $11,079 - 5
10,177 Operating Expense (b) 10,177 9,935 + 2
547 Goodwill Impairment -- -- --
(171) Operating Income (Loss) 376 1,144 - 67
189 Other Income -- Net 189 137 + 38
714 Interest Expense 714 605 + 18
(696) Income (Loss) before (149) 676 U
Income Taxes
63 Income Tax (Expense) Benefit 63 (244) F
$ (633) Net Income (Loss) $ (86) $ 432 U
Diluted Earnings Per Share:
$ (2.57) Net Income (Loss) $ (0.35) $ 1.74 U
246.0 Average Basic Shares 246.0 245.7
Outstanding (MM)
246.0 Average Diluted Shares 246.0 248.1
Outstanding (MM) (d)
(a) As Reported results for 1998 include Overnite results reclassified as
continuing operations for the full year.
(b) Includes one-time merger expenses of $69 million pre-tax ($43 million
after-tax or $.17 per diluted share) in 1998, $97 million pre-tax
($60 million after-tax or $.24 per share) in 1997. Merger expenses
include severance, relocation and certain other costs related to
Union Pacific employees affected by the merger. Also includes
$15 million and $20 million of Overnite goodwill amortization in 1998
(As Reported and Pro Forma) and 1997, respectively.
(c) Pro Forma results for 1998 exclude the one-time charge for the
revaluation of Overnite's goodwill of $547 million pre and after-tax.
(d) Excludes anti-dilutive common stock equivalents in 1998.