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Rail News: Financials

Year-end financials: UP sees income fall and operating ratio soar; prepares 'Unified Plan' network redesign for 2Q roll out

A manpower and rolling stock shortage, network congestion exacerbated by unprecedented demand and high fuel prices continued to hit Union Pacific Corp. in the pocketbook through 2004's end. Yesterday, the Class I reported fourth-quarter net income of $79 million, an 86 percent decline compared with fourth-quarter 2003.

Total quarterly operating expenses rose 27 percent to $3 billion and the railroad's quarterly operating ratio worsened 13.6 points to 93.7. In addition, UP's average system train speed declined 1.3 mph compared with the third quarter and 2.2 mph compared with fourth-quarter 2003.

In the good news department, quarterly operating revenue rose 8 percent to $3.2 billion compared with a similar 2003 period.

For all of 2004, operating revenue increased 6 percent to a record $12.2 billion — the first time UP eclipsed the $12 billion mark. But net income fell 62 percent to $604 million, total operating expenses rose 16 percent to $10.9 billion, the railroad's full-year operating ratio worsened 7.9 points to 89.4 and average train speed declined 2.2 mph to 21.4 mph compared with 2003.

"At the top of our list for 2005 is improving service to our customers," said UP Chairman and Chief Executive Officer Dick Davidson in a prepared statement. "Over the past year, efforts to increase our train crew and locomotive resources have been successful."

Now, UP is concentrating on improving network management processes to make its resources more productive through the "Unified Plan," a comprehensive operating network redesign, said Davidson.

"We expect to implement this plan by the end of the second quarter," he said. "Through these efforts, we believe we can simplify our operations, improve velocity and better manage the volume flowing onto our network in the face of continued strong demand."

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More News from 1/25/2005