(The following story by Virgil Larson appeared on the Omaha World-Herald website on May 4.)
SALT LAKE CITY — Shareholders are usually interested in the stock price and the dividend, not the nuts and bolts, or in this case, the rails and ties, of the business they’ve invested in.
So when Jim Young, as part of his talk to Union Pacific shareholders Thursday, said the Omaha-based railroad was going to double-track the 760-mile Sunset Corridor from Los Angeles to El Paso, Texas, it was a bit of a surprise when one person in the audience applauded loudly.
“Must be a conductor out there,” Young ad-libbed before going on with a description of the record $3.2 billion in capital outlays the company will make this year.
Young, U.P.’s chairman and chief executive, fielded questions about “slow orders,” the directives to train crews to reduce speed on certain stretches of track, and on trash left behind in locomotive cabs.
“We’re dealing with that issue,” Young responded on the “slow orders” question and, in a friendly exchange with his questioner, dismissed a suggestion that engineers take their trash with them when they leave the cab or be fined.
“I know engineers and that’s not going to happen.”
Coming off a year with strong financial results and riding a stock price 20 percent higher than at the time of last year’s annual meeting, Young was not facing a roomful of restless shareholders.
He went into Thursday’s annual meeting with the morning newspaper showing a share price that closed $1.20 higher on Wednesday than it did Tuesday.
The stock rose $3.13 Thursday, closing at $116.55.
So the usual shareholder questions went more to the upside – how things can improve even more.
Profits last year were $1.6 billion, a billion more than two years earlier, when 2004 profits of $604 million were the lowest since 1998. The company on Thursday raised the dividend 17 percent to 35 cents a share.
One shareholder suggested that with Omaha billionaire Warren Buffett known to be buying stock in railroads, U.P should add him to its board.
“To me it would be a real vote of confidence, a quality investor like that,” the shareholder said.
Young responded by pointing out that Buffett’s Berkshire Hathaway Inc. had bought a stake in U.P.’s rival, Burlington Northern Santa Fe, and that it wasn’t known whether the other two railroads Berkshire had bought shares in included U.P.
With the stock price where it is, another shareholder asked, is the board considering a stock split?
“At this point in time we’re not looking at a split,” Young said. “We’ll keep it on the radar screen.”
What about the Panama Canal, another asked. What would be the impact on railroad traffic in containers now carried across the United States from West Coast ports once the Panama Canal is widened to allow bigger container-hauling ships to go to East Coast and Gulf ports?
“Good question,” Young answered.
That’s five to seven years away, he said, and even a bigger Panama Canal would not be able to handle the biggest container ships. Besides, he said, there’s plenty of container business to go around.
After the meeting, Young sought out the shareholder concerned about messy locomotive cabs, Richard Barnes of Salt Lake City, a railroad buff who had explained he learned about the cab conditions from engineers he meets at railroad hobbyist shows. Young explained that cleaning cabs was not engineers’ work and that providing clean workspaces for employees was important.
Young took the opportunity to say he and other senior executives seek out their operating employees to find out about working conditions and problems. “Believe me, engineers are not bashful,” he said.
Young also expanded in his conversation with Barnes on efforts to improve railroad safety, a point he made in his talk to shareholders about where the railroad is going.
The Sunset Corridor applause grabber was Young’s announcement that the railroad is speeding up the double-tracking project so that it will be finished in four years rather than the seven or eight that had been planned. The project is about half done.
(Double-tracking creates two tracks where only one exists so trains headed in opposite directions can pass each other rather than one having to stop on a siding to make way for the other.)
Another capital project calls for additional trackage to serve the Powder Basin coal fields in Wyoming.
Shareholders, voting in advance by proxy, returned 10 directors to the board for new one-year terms, approved one shareholder proposal and rejected another.
The proposal approved calls on management to require that board candidates get a majority of all votes cast rather than only a plurality, as now is the rule.
The same proposal was approved last year, but the board declined to adopt it. Instead, the board set up a system that would require directors to resign if they do not get a majority vote but reserved for itself the power to decide whether to accept the resignation.
The Sheet Metal Workers National Pension Fund sponsored the proposal. That fund and other union pension funds have made similar proposals at other companies and say the idea is being widely accepted.
The proposal that was rejected for the second consecutive year would have required the company to disclose more fully its political donations. The sponsor, the New York City pension funds, argued that government disclosure rules are inadequate and that more “transparency” is needed.
Management opposed both shareholder proposals.
Omaha shareholder Lyle Bardsley and his wife, Shirley, attended their first annual meeting Thursday as special guests of the railroad. Bardsley works at U.P.’s headquarters and was one of two honored at the meeting as 50-year employees.
Bardsley works in property accounting, keeping track of everything the railroad owns, from buildings to bridges. The railroad has two other 50-year employees who did not attend.
Young said in an interview in advance of the meeting that the company, which he acknowledged has struggled to meet customer needs in recent years as it worked to absorb acquisitions, now is moving in the right direction.
Asked about an analyst’s recent opinion that U.P. had the greatest upside potential of the major railroads, Young replied, “I’ve been saying that. He’s just kind of turned my words around.”