FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ______________________
Commission file number 1-6075
UNION PACIFIC CORPORATION
(Exact name of registrant as specified in its charter)
UTAH 13-2626465
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Martin Tower, Eighth and Eaton Avenues, Bethlehem, Pennsylvania
(Address of principal executive offices)
18018
(Zip Code)
(610) 861-3200
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
------- -------
As of April 29, 1994, there were 205,084,208 shares of the Registrant's
Common Stock outstanding.
UNION PACIFIC CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Page Number
-----------
Item 1: Condensed Consolidated Financial Statements:
CONDENSED STATEMENT OF CONSOLIDATED INCOME - For the
Three Months Ended March 31, 1994 and 1993............ 1
CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION -
At March 31, 1994 and December 31, 1993............... 2 - 3
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS - For
the Three Months Ended March 31, 1994 and 1993........ 4
CONDENSED STATEMENT OF CONSOLIDATED RETAINED EARNINGS -
For the Three Months Ended March 31, 1994 and 1993.... 4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.... 5 - 7
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 8 - 12
PART II. OTHER INFORMATION
Item 1: Legal Proceedings....................................... 13
Item 4: Submission of Matters to a Vote of Security
Holders............................................... 13
Item 6: Exhibits and Reports on Form 8-K........................ 14
Signature.......................................................... 15
1
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED STATEMENT OF CONSOLIDATED INCOME
For the Three Months Ended March 31, 1994 and 1993
--------------------------------------------------
(Amounts in Millions, Except Ratio and Per Share Amounts)
(Unaudited)
1994 1993
-------- --------
Operating Revenues............................ $ 1,928 $ 1,830
-------- --------
Operating Expenses:
Salaries, wages and employee benefits.... 651 627
Depreciation, depletion, amortization
and retirements........................ 248 235
Equipment and other rents................ 160 140
Fuel and utilities....................... 125 121
Materials and supplies................... 105 99
Other costs.............................. 293 265
-------- --------
Total................................. 1,582 1,487
-------- --------
Operating Income.............................. 346 343
Other Income - Net (Note 3)................... 172 20
Interest Expense.............................. (79) (84)
Corporate Expenses............................ (12) (24)
-------- --------
Income Before Income Taxes.................... 427 255
Income Taxes.................................. (144) (91)
-------- --------
Income before Cumulative Effect of
Changes in Accounting Principles......... 283 164
Cumulative Effect to January 1, 1993 of
Changes in Accounting Principles (Note 6) -- (175)
-------- --------
Net Income (Loss)............................. $ 283 $ (11)
======== ========
Earnings (Loss) Per Share:
Income Before Cumulative Effect of
Changes in Accounting Principles......... $ 1.38 $ 0.80
Cumulative Effect to January 1, 1993 of
Changes in Accounting Principles....... -- (0.86)
-------- --------
Net Income (Loss)........................ $ 1.38 $ (0.06)
======== ========
Weighted Average Number of Shares............. 205.7 205.1
Cash Dividends Per Share...................... $ 0.40 $ 0.37
Ratio of Earnings to Fixed Charges (Note 4)... 5.3 3.5
2
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANY
CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
------------------------------------------------------
(Millions of Dollars)
(Unaudited)
March 31, December 31,
ASSETS 1994 1993
--------- ------------
Current Assets:
Cash and temporary investments............... $ 255 $ 113
Accounts receivable ......................... 689 651
Inventories.................................. 261 252
Deferred income taxes........................ 119 117
Other current assets......................... 313 249
--------- ---------
Total Current Assets.................... 1,637 1,382
--------- ---------
Investments:
Investments in and advances to affiliated
companies................................. 449 455
Other investments............................ 158 170
--------- ---------
Total Investments....................... 607 625
--------- ---------
Properties:
Railroad:
Road and other............................. 8,047 7,935
Equipment.................................. 4,593 4,575
--------- ---------
Total Railroad.......................... 12,640 12,510
--------- ---------
Natural resources (Notes 2 and 3)............ 4,725 4,144
--------- ---------
Trucking..................................... 657 621
--------- ---------
Waste management............................. 527 464
--------- ---------
Other........................................ 119 121
--------- ---------
Total Properties........................ 18,668 17,860
Accumulated depreciation, depletion and
amortization............................... (6,374) (6,419)
--------- ---------
Properties - Net........................ 12,294 11,441
--------- ---------
Cost in Excess of Net Assets of Acquired
Businesses - Net................................ 1,313 1,322
Other Assets...................................... 304 231
--------- ---------
Total Assets............................ $ 16,155 $ 15,001
========= =========
3
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
------------------------------------------------------
(Amounts in Millions, Except Share and Per Share Amounts)
(Unaudited)
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
--------- ------------
Current Liabilities:
Accounts payable................................ $ 443 $ 477
Accrued wages and vacation...................... 233 253
Income and other taxes.......................... 221 162
Dividends and interest.......................... 153 176
Accrued casualty costs.......................... 136 135
Debt due within one year........................ 130 115
Other current liabilities....................... 689 771
--------- ---------
Total Current Liabilities....................... 2,005 2,089
--------- ---------
Debt Due After One Year.............................. 4,853 4,069
Deferred Income Taxes ............................... 2,747 2,676
Retiree Benefits Obligation ......................... 618 599
Other Liabilities (Note 3)........................... 844 683
Stockholders' Equity:
Common stock, $2.50 par value, authorized
500,000,000 shares, 230,942,882 shares issued
in 1994, 230,788,175 shares issued in 1993.... 577 577
Paid in surplus................................. 1,389 1,383
Retained earnings............................... 4,730 4,529
Treasury stock, at cost, 25,858,991 shares in
1994, 25,626,946 shares in 1993.............. (1,608) (1,604)
--------- ---------
Total Stockholders' Equity................... 5,088 4,885
--------- ---------
Total Liabilities and Stockholders' Equity... $ 16,155 $ 15,001
========= =========
4
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
For the Three Months Ended March 31, 1994 and 1993
--------------------------------------------------
(Millions of Dollars)
(Unaudited)
1994 1993
------- --------
Cash flows from operating activities:
Net Income (Loss).................................. $ 283 $ (11)
Non-cash charges to income:
Depreciation, depletion and amortization........ 248 235
Cumulative effect of changes in accounting
principles (Note 6)........................... -- 175
Other - Net..................................... (47) (22)
Changes in current assets and liabilities.......... (197) (159)
Cash used for special charges...................... (24) (39)
------- -------
Cash from operations............................ 263 179
------- -------
Cash flows from investing activities:
Capital investments................................ (355) (235)
AMAX acquisition - Net (Note 2).................... (725) --
Wilmington sale (Note 3)........................... 280 --
Other - Net........................................ (7) 11
------- -------
Cash used in investing activities............... (807) (224)
------- -------
Cash flows from equity and financing activities:
Dividends paid..................................... (82) (75)
Debt repaid (Note 7)............................... (117) (166)
Financings (Note 2)................................ 885 208
------- -------
Cash generated (used) in equity and financing
activities...................................... 686 (33)
------- -------
Net change in cash and temporary investments.... $ 142 $ (78)
======= =======
CONDENSED STATEMENT OF CONSOLIDATED RETAINED EARNINGS
For the Three Months Ended March 31, 1994 and 1993
--------------------------------------------------
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
1994 1993
------- -------
Balance at Beginning of Year......................... $ 4,529 $ 4,338
Net Income (Loss).................................... 283 (11)
------- -------
Total........................................... 4,812 4,327
Dividends Declared ($0.40 per share in 1994;
$0.37 per share in 1993)......... (82) (76)
Exchangeable Note Conversion (Note 7)................ -- (24)
------- -------
Balance at End of Period........................ $ 4,730 $ 4,227
======= =======
5
[TEXT]
UNION PACIFIC CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
1. Responsibilities for Financial Statements - The condensed consolidated
financial statements are unaudited and reflect all adjustments (consisting
only of normal and recurring adjustments) that are, in the opinion of
management, necessary for a fair presentation of the financial position
and operating results for the interim periods. The Condensed Statement of
Consolidated Financial Position at December 31, 1993 is derived from
audited financial statements. The condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto contained in the Union Pacific
Corporation (the Corporation) Annual Report to Stockholders incorporated
by reference in the Corporation's Annual Report on Form 10-K for the
year ended December 31, 1993. The results of operations for the
three months ended March 31, 1994 are not necessarily indicative of the
results for the entire year ending December 31, 1994.
2. AMAX Acquisition - In March 1994, Union Pacific Resources Company
(Resources) acquired AMAX Oil & Gas Inc. (AMAX) from Cyprus AMAX
Minerals Company for a net purchase price of $725 million. Resources
purchased all of the outstanding capital stock of AMAX for $819 million
in cash and immediately upon closing sold certain of AMAX's assets
to Universal Resources Corporation for $94 million.
AMAX's retained operations primarily consist of natural gas producing,
transportation and processing properties in West, East and South Texas,
Louisiana and Arkansas. These properties include interests in 14 major
fields, encompassing approximately 600,000 acres and 2,000 producing
wells. Resources recorded 92 million barrels of oil equivalent (MMBOE)
of proved reserves related to the AMAX acquisition.
3. California Property Dispositions - Pursuant to its plan to
dispose of its oil and gas operations in California, Resources sold its
Wilmington oil field and announced its plan to dispose of its interest in
the Point Arguello oil field. In March 1994, Resources sold its
interest in the Wilmington oil field's surface rights and hydrocarbon
reserves, and its interest in the Harbor Cogeneration Plant to the
City of Long Beach, California, for $405 million in cash and notes.
The Wilmington sale resulted in a $184 million ($116 million after-tax)
gain--$159 million ($100 million after tax) at Resources and
$25 million ($16 million after tax) at Union Pacific Railroad Company
(the Railroad), the latter related to land and trackage rights. In
addition, Resources recorded a $24 million ($15 million after-tax) charge
for the disposition of the Point Arguello offshore oil field. Wilmington
and Point Arguello reserves represent approximately 26 MMBOE (6%)
of Resources' year-end 1993 proved reserves and their sale will not
significantly impact ongoing operating results.
As part of the Wilmington sales agreement, Resources has agreed to
participate with the City of Long Beach in funding site preparation and
environmental remediation. As a result, the calculation of the gain on
the sale of the Wilmington properties reflects $112 million of reserves
for such future costs.
6
4. Ratio of Earnings to Fixed Charges - The ratio of earnings to fixed
charges has been computed on a total enterprise basis. Earnings
represent income before the cumulative effect of accounting changes less
equity in undistributed earnings of unconsolidated affiliates, plus
income taxes and fixed charges. Fixed charges represent interest,
amortization of debt discount and expense, and the estimated interest
portion of rental charges.
5. Price Risk Management - Resources utilizes futures contracts, option
contracts and swap agreements as hedges to manage volatility related to
oil and gas price fluctuations, whereas Overnite Transportation Company
(Overnite) and the Railroad utilize such contracts as hedges to manage
variability of diesel fuel costs. Gains and losses on these contracts are
recognized upon delivery of the commodity.
Resources has purchased fixed price contracts to hedge 1994 natural gas
sales volumes of 359 mmcf/day at $2.23/mcf, approximately 50% of its
remaining 1994 natural gas production. The Railroad purchased fixed price
contracts to hedge approximately 80% of its remaining 1994 diesel fuel
consumption at $0.44 per gallon, while Overnite purchased fixed price
contracts to hedge virtually all of its remaining 1994 diesel fuel
consumption at $0.48 per gallon. Credit risk related to these
activities is minimal.
6. Accounting Changes - In January 1993, the Corporation adopted the
Financial Accounting Standards Board's pronouncements covering the
recognition of postretirement benefits other than pensions and
accounting for income taxes, as well as a pro-rata method of recognizing
transportation revenues and expenses. The cumulative effect of adopting
these accounting changes was a one-time, after-tax charge to earnings of
$175 million or $0.86 per share. Prior years' financial statements
were not restated.
7. Exchangeable Debt Conversion - In February 1993, the remaining $25 million
of the 7.50% Exchangeable Guaranteed Notes, due 2003, which were issued to
Katy Industries, Inc. in conjunction with the acquisition of the Missouri-
Kansas-Texas Railroad, were exchanged for approximately 774,000 shares of
the Corporation's common stock. The Corporation issued common shares from
its treasury in exchange for these Notes.
8. Commitments and Contingencies - There are various lawsuits pending against
the Corporation and certain of its subsidiaries. The Corporation is also
subject to Federal, state and local environmental laws and regulations and
is currently participating in the investigation and remediation of
numerous sites. Where the remediation costs can be reasonably
determined, and where such remediation is probable, the Corporation has
recorded a liability. In addition, the Corporation has entered into
commitments and provided guarantees for specific financial and
contractual obligations of its subsidiaries and affiliates. The
Corporation does not expect that the lawsuits, environmental costs,
commitments or guarantees will have a material adverse effect on its
consolidated financial position or its results of operations.
7
Management does not anticipate that the ultimate resolution of the matters
described in Part I, Item 3 Legal Proceedings of the Corporation's 1993
Annual Report on Form 10-K and in Part II, Item 1 Legal Proceedings
in this report will have a material adverse effect on the Corporation's
consolidated financial condition or operating results.
8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
RESULTS OF OPERATIONS
Quarter Ended March 31, 1994 Compared to March 31, 1993
CONSOLIDATED - Union Pacific Corporation (the Corporation) reported net income
of $283 million or $1.38 per share, including the one-time benefit of a $101
million ($0.49 per share) after-tax gain resulting from the disposition of the
Corporation's oil and gas operations in California (see Note 3 to the Condensed
Consolidated Financial Statements) and a $10 million ($0.05 per share) after-tax
gain on the sale of an investment. This compares to a net loss of $11 million
or a $0.06 loss per share in 1993, which included a $175 million ($0.86 per
share) after-tax cumulative charge for changes in accounting methods (see Note
6 to the Condensed Consolidated Financial Statements). Income before the
cumulative effect of changes in accounting principles improved $119 million from
$164 million ($0.80 per share) a year ago. Income before accounting changes
improved at Union Pacific Railroad Company (the Railroad), Union Pacific
Resources Company (Resources) and USPCI, Inc. (USPCI), while Overnite
Transportation Company (Overnite) posted a slight earnings decline reflecting
higher operating costs caused by the severe winter in the East.
Operating revenues grew 5% to $1.93 billion from $1.83 billion in 1993, as
increased transportation volumes at the Railroad and Overnite, and the second
quarter 1993 addition of Skyway Freight Systems, Inc. (Skyway) were partially
offset by hydrocarbon price declines at Resources. Operating expenses rose $95
million (6%) to $1.58 billion during the quarter. Higher volumes, severe winter
weather and benefit cost inflation accounted for a $24 million increase in
salaries, wages and employee benefit costs. Higher transportation volumes
caused increases in equipment and other rents ($20 million), third party
transportation ($18 million), other taxes ($13 million), materials and
supplies ($6 million) and fuel and utilities ($4 million). In addition,
employee injury expense rose $14 million and depreciation charges increased
$13 million--the result of the Corporation's continued commitment to upgrade
equipment and technology, and expand capacity. Higher operating costs were
partially offset by lower costs associated with pipeline and gas plant product
purchases for resale, lower mining costs and additional cost offsets associated
with rail car repairs for other carriers.
Operating income advanced $3 million to $346 million for the period. Corporate
expenses declined $12 million, the result of lower expenses related to stock
appreciation rights and incentive compensation accruals.
RAILROAD - Income before the cumulative effect of changes in accounting
principles at the Railroad grew $28 million to $168 million for the quarter.
First quarter 1994 earnings include a one-time $16 million after-tax gain on the
sale of land and trackage rights in California (see Note 3 to the Condensed
Consolidated Financial Statements).
9
Operating revenues improved 6% to $1.29 billion. Higher revenues were generated
by an 8% (over 86,000 loads) rise in first quarter 1994 carloadings (1993 first
quarter carloadings were hampered by severe winter weather). New coal
contracts, inventory replenishment by major utilities and improved exports
accounted for a 17% increase in energy carloadings. Automotive traffic
climbed 15%, the result of higher carloadings for both assembled autos
and auto parts, reflecting improving economic conditions in the automotive
industry. Intermodal volumes improved 9% largely because of business
expansion with the Railroad's trucking partners and growing container
traffic, while chemical carloadings advanced 7% due to volume growth in
fertilizer, liquid and dry chemicals, and petroleum. Metals, minerals and
forest, and food, consumer and government carloadings were
unchanged from a year ago, while grain traffic declined 6% as a result of lower
export shipments of wheat and corn. The positive effect of higher volumes was
partially offset by a 1% decline in average revenue per car, largely the result
of volume growth of lower-rated commodities--mainly energy and intermodal.
Operating expenses increased to $1.03 billion for the quarter compared to $991
million last year. Employee injury expense rose $13 million as continuing
declines in the number of injuries were more than offset by higher settlement
costs per injury. Growing volumes accounted for an $11 million rise in
equipment and other rents, while other taxes increased $7 million because
of the absence of first quarter 1993 property and other tax credits.
Depreciation expense grew $6 million because of the Railroad's continued
investment in equipment and capacity. Wages and benefit costs rose
$3 million as higher volumes and benefit inflation were largely offset by
continued improvements in labor productivity. Materials and supplies costs
also rose $3 million, while fuel costs increased $1 million as a 9% rise in
gross ton-miles was largely offset by an 8% decrease in fuel cost.
These cost increases were partially mitigated by $8 million of
additional cost offsets associated with car repairs for other carriers.
Operating income at the Railroad improved $35 million during the quarter to $260
million. The Railroad's operating ratio declined to 79.8 from 81.5 a year ago.
NATURAL RESOURCES - Resources' income before the cumulative effect of changes in
accounting principles improved $72 million to $155 million in the first quarter
of 1994, including the one-time benefit of an $85 million after-tax gain
resulting from the disposition of oil and gas operations in California (see Note
3 to the Condensed Consolidated Financial Statements).
Operating revenues (inclusive of hedging activities) declined $40 million to
$301 million as price declines in crude oil and natural gas liquids, and
other revenue declines (caused by the absence of first quarter 1993
insurance settlements and a reclassification of pipeline revenues) were only
partially countered by an 11% increase in overall hydrocarbon production.
Natural gas sales volumes rose 14% to 684 mmcf/day, largely the result
of production improvements in the Austin Chalk and the southwestern Wyoming
portion of the Land Grant, while natural gas liquids sales volumes improved
9% to 39,621 bbl/day because of increased ownership in the Carthage
gas plant and improved production in the Chalk. Crude oil sales volumes
grew 6% to 69,536 bbl/day, reflecting the application of horizontal drilling
technology in the Silo field in eastern Wyoming. Natural gas
average prices increased 3% to $1.96/mcf. Average prices for crude oil fell
$4.32/bbl (26%) to $12.19/bbl (reflecting the market's response to OPEC
overproduction and higher North Sea production), while natural gas liquids
prices declined $2.46/bbl (22%) to $8.66/bbl.
10
Operating expenses declined to $224 million for the quarter from $229 million a
year ago. The cost of pipeline and gas plant product purchases for resale
decreased $15 million, reflecting lower volumes and a reclassification of
pipeline revenues. Mining costs declined $12 million due to lower operating
costs stemming from the ongoing effects of a favorable 1992 contract settlement
at Resources' joint venture coal mine. These cost reductions were largely
offset by volume-related cost increases. Depreciation and depletion charges
rose $7 million reflecting higher production levels and the addition of the
Brookeland gas processing facility in southwestern Wyomingand the George Gray
facility in East Texas, while employee benefit costs rose $6 million.
Joint venture costs grew $5 million as a result of higher drilling
activity, while increased exploration activities generated a $2 million
expansion in geological and geophysical costs. Operating income for all of
Resources' operations declined to $77 million in the first quarter of 1994
compared to $112 million in 1993.
Operating income from Resources' minerals operations improved $2 million during
the first three months of 1994 to $27 million. This improvement was the result
of a one-time lease bonus on trona lands.
TRUCKING - Income before the cumulative effect of changes in accounting
principles at Overnite was $6 million, down $1 million from a year ago. These
results included goodwill amortization of $6 million and a one-time $1 million
(after Federal tax) reduction in state taxes resulting from a favorable
settlement with the state of Mississippi.
Overnite's operating revenues advanced $22 million (10%) to $242 million as a 2%
rise in average prices combined with an 8% volume improvement--despite the
severe winter weather conditions in the East. Higher volumes were generated
by a 10% increase in less-than-truckload (LTL) business caused by the third
quarter 1993 bankruptcy of a major eastern carrier and continued business
expansion. Higher LTL volumes were partially offset by truckload traffic
declines reflecting Overnite's focus on its core LTL business.
Operating expenses increased $24 million to $234 million. The severe winter
weather in the East and volume growth accounted for a $14 million rise in
salaries, wages and employee benefit costs, a $5 million increase in equipment
and other rents and a $1 million rise in materials and supplies costs. Other
taxes increased $2 million, largely the result of increased Federal highway use
taxes caused by growing volumes and higher tax rates. In addition, depreciation
expense grew by $1 million due to Overnite's continuing investment in equipment
and technology. Operating income declined to $8 million in 1994 from
$10 million in 1993. Overnite's operating ratio, excluding goodwill
amortization, increased to 94.5 for the quarter from 92.7 in 1993.
On April 6, 1994, the Teamsters Union went on strike when negotiations with 24
unionized LTL carriers broke down. As a result of the strike, Overnite (a non-
union carrier) experienced a significant rise in business levels, nearly
doubling daily shipments. These dramatic volume increases put a strain on
Overnite's distribution systems, causing higher than normal operating costs
during the strike period. A final agreement was reached between the carriers
and the Teamsters Union on April 29, 1994.
11
WASTE MANAGEMENT - In the first quarter of 1994, USPCI's net loss declined $1
million to a net loss of $2 million, including goodwill amortization of $2
million. Operating revenues improved $15 million to $68 million in the first
quarter of 1994. Revenue growth was stimulated by higher disposal volumes
(reflecting the consolidation of USPCI's investment in ECDC Environmental, L.C.
and volume growth at USPCI's Echo Mountain, North Dakota facility), business
expansion in recycling and higher transportation volumes. Operating expenses
rose $12 million to $67 million as volume-related increases in transportation
and hauling costs, maintenance and equipment rents were partially offset by the
positive effects of administrative restructuring. USPCI's operating income
improved $2.8 million, to operating income of $0.4 million in the first quarter
of 1994.
The Corporation is continuing its re-evaluation of USPCI's operations and is
considering several strategic options, including the divestiture of USPCI. A
determination is pending the result of an independent evaluation and a review of
the operational capability of the hazardous waste incinerator USPCI is
constructing in Clive, Utah.
CORPORATE SERVICES AND OTHER OPERATIONS - Expenses related to Corporate Services
and Other Operations--which include corporate expenses, interest expense, other
income and income taxes that are not related to other segments, and the results
of other operating units--declined $19 million (before the effect of the 1993
accounting changes) to $44 million. This decline is largely the result of lower
expenses related to outstanding stock appreciation rights, smaller incentive
compensation accruals, increased interest charges to subsidiaries (mainly the
result of subsidiaries' capital spending and pension funding at Overnite) and
improved operating results from the Corporation's Other Operations. Operating
income was $0.4 million for the first three months of 1994 compared to losses of
$1.5 million a year ago, reflecting improvements at the Corporation's Other
Operations and the second quarter 1993 addition of Skyway.
12
CHANGES IN FINANCIAL CONDITION AND OTHER DEVELOPMENTS
Since December 31, 1993
During the first three months of 1994, cash from operations was $263 million, an
improvement of $84 million from 1993. This improvement was the result of higher
non-cash charges reflecting higher employee injury accruals, lower cash dry hole
charges, increased depreciation, lower non-cash equity earnings and the absence
in 1994 of Section 29 drilling charges. In addition, cash from operations
benefited from improvements in working capital--excluding the effects of the
Wilmington sale and the acquisition of AMAX Oil & Gas Inc. (AMAX)--and lower
cash outlays related to the 1991 special charge.
Cash used in investing activities of $807 million reflects a $583 million
increase over 1993. Capital expenditures grew $120 million over 1993, largely
due to higher capacity and equipment expenditures at the Railroad, increased
development activities in the Austin Chalk and fleet expansion and renewal at
Overnite. In addition, the Corporation acquired AMAX in March 1994 for $725
million in cash (see Note 2 to the Condensed Consolidated Financial
Statements). As a result, first quarter 1994 financings increased
$677 million to $885 million, despite the $280 million of cash proceeds
generated by the Wilmington sale (see Note 3 to the Condensed Consolidated
Financial Statements).
The ratio of debt to total capital employed increased to 38.9% at March 31, 1994
from 35.6% at December 31, 1993. This increase reflects the higher debt levels
incurred to finance the AMAX acquisition partially offset by 1994 earnings
(including the sale of the Wilmington properties). The Corporation's debt
rating was not affected by the acquisition of AMAX.
13
PART II. OTHER INFORMATION
- - ---------------------------
Item 1. Legal Proceedings
As previously reported in the Corporation's Annual Report on Form 10-K for the
year ended December 31, 1993 (the 1993 10-K Report), Union Pacific Railroad
Company (UPRR) and Missouri Pacific Railroad Company (MPRR) received Complaints
and Notices of Opportunity for Hearing from Region VIII of the Environmental
Protection Agency (EPA) alleging various violations of the Toxic Substances
Control Act at USPCI, Inc.'s Clive, Utah and Timpe, Utah transfer facilities,
including the failure to properly mark railcars containing polychlorinated
biphenyls (PCBs), failure to properly dispose of PCB waste, failure to properly
contain or store PCB waste and failure to properly manifest PCB waste. The
Complaints included proposed penalties totalling $95,000 and $295,000, for UPRR
and MPRR, respectively. UPRR and MPRR have agreed to settle these alleged
violations with the EPA for a total penalty payment of $20,000.
As previously reported in the 1993 10-K Report, UPRR received a notice from the
San Bernardino, California, County District Attorney indicating an intent to
file a civil penalty action against UPRR for a penalty of up to $225,000 for
certain alleged violations of the California Fish and Game Code. This matter
involved UPRR's alleged failure to obtain a necessary permit from the California
Department of Fish and Game prior to performing certain maintenance work in
stream beds and banks in order to restore desert tortoise habitat in Nipton,
California. UPRR has agreed to settle this matter by paying a penalty of
$75,000.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The annual meeting of shareholders of the Corporation was held on May
11, 1994.
(b) At the Annual Meeting, the Corporation's shareholders voted for the
election of Spencer F. Eccles (168,044,553 shares in favor; 880,899
shares withheld), William H. Gray, III (167,913,431 shares in favor;
1,012,021 shares withheld), Judith Richards Hope (168,020,146 shares
in favor; 905,306 shares withheld), John R. Meyer (168,050,393 shares
in favor; 875,059 shares withheld), Robert W. Roth (167,692,319
shares in favor; 1,233,133 shares withheld) and Richard D. Simmons
(168,059,728 shares in favor; 865,724 shares withheld) as
directors of the Corporation. In addition, the Corporation's
shareholders voted to engage Deloitte & Touche as the Corporation's
independent auditors. The vote on this item was 168,157,902
shares in favor, 319,431 shares against and 448,119 shares
abstained.
14
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 - Computation of earnings per share.
12 - Computation of ratio of earnings to fixed charges.
(b) Reports on Form 8-K
On January 20, 1994, the Corporation filed a Current Report on Form
8-K, which contained a press release discussing the Corporation's
results for the year ended December 31, 1993.
On March 9, 1994, the Corporation filed a Current Report on Form
8-K, which contained excerpts from a press release discussing the
acquisition of AMAX Oil & Gas, Inc. by Union Pacific Resources
Company.
15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 12, 1994
UNION PACIFIC CORPORATION
(Registrant)
/s/ Charles E. Billingsley
------------------------------
Charles E. Billingsley,
Vice President and Controller
(chief accounting officer and
duly authorized officer)
UNION PACIFIC CORPORATION
EXHIBIT INDEX
Exhibit No. Description
- - ----------- -----------
11 Computation of earnings per share
12 Computation of ratio of earnings to
fixed charges
Exhibit 11 UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES COMPUTATION OF EARNINGS PER SHARE --------------------------------- (In Thousands, Except Share and Per Share Amounts) (Unaudited) Three Months Ended March 31, ------------------------- 1994 1993 -------- -------- Average number of shares outstanding........... 205,108 204,406 Average shares issuable on exercise of stock options less shares repurchasable from proceeds..................................... 592 691 -------- -------- Total average number of common and common equivalent shares............................ 205,700 205,097 ======== ======== Income before cumulative effect of changes in accounting principles........................ $283,298 $163,747 Cumulative effect to January 1, 1993 of changes in accounting principles (Note 6).... -- (175,226) -------- --------- Net Income (Loss).............................. $283,298 $(11,479) ======== ======== Earnings (Loss) per share: Income before cumulative effect of changes in accounting principles................... $ 1.38 $ 0.80 Cumulative effect to January 1, 1993 of changes in accounting principles........... -- (0.86) -------- -------- Net Income (Loss)............................ $ 1.38 $ (0.06) ======== ========
Exhibit 12 UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (In Thousands, Except Ratios) (Unaudited) Three Months Ended March 31, ------------------------- 1994 1993 -------- -------- Earnings: Income before cumulative effect of changes in accounting principles (Note 6).......... $283,298 $163,747 Add (deduct) distributions greater (to extent less) than income of unconsolidated affiliates................................. (13,809) (15,911) -------- -------- Total................................ 269,489 147,836 -------- -------- Income Taxes: Federal, state and local....................... 143,729 90,821 -------- -------- Fixed Charges: Interest expense including amortization of debt discount.............................. 79,333 84,065 Portion of rentals representing an interest factor..................................... 12,424 9,530 -------- -------- Total................................ 91,757 93,595 -------- -------- Earnings available for fixed charges............. $504,975 $332,252 ======== ======== Fixed Charges -- as above........................ $ 91,757 $ 93,595 Interest capitalized............................. 3,218 2,322 -------- -------- Total fixed charges.................. $ 94,975 $ 95,917 ======== ======== Ratio of earnings to fixed charges (Note 3)...... 5.3 3.5 ======== ========