(The Associated Press circulated the following article on April 29.)
OMAHA, Neb. — A train crew shortage and a charge of $35.8 million to pay for a court judgment hurt profits in Union Pacific Corp.’s first quarter, but demand for its services continued to grow, executives said Thursday.
Burgeoning demand is more evidence of an improving U.S. economy, chief executive Dick Davidson said.
Union Pacific, which owns the nation’s largest railroad, had net income of $165 million, or 63 cents per share, on revenue of $2.89 billion for the quarter ended March 31. Net income in last year’s first quarter came to $429 million, or $1.67 per share, on $2.73 billion in revenue.
Excluding discontinued operations and an accounting charge, the company had earnings of 57 cents a share from continuing operations in last year’s first quarter.
Helping this year’s first quarter was a one-time reduction of $38.6 million in tax liabilities out of operations in Missouri and Texas, the company said. But Union Pacific was hurt by a $30 million jury verdict against the railroad upheld by the Arkansas Supreme Court for a 1998 grade crossing accident that injured a man. With interest, the damages came to $35.8 million, Union Pacific said.
The company warned last month that it would not meet its earnings forecast for the first quarter because of the court judgment, severe winter weather, high fuel costs and the train crew shortage.
Union Pacific’s first quarter results beat Wall Street’s adjusted expectations. The consensus estimate of analysts surveyed by Thomson First Call was for earnings of 59 cents a share.
Shares in Union Pacific fell 59 cents to close at $59.30 Thursday on the New York Stock Exchange.
“The first quarter of 2004 challenged us both operationally and financially,” Davidson said. “We saw exceptionally strong demand for our services, setting records for both first quarter carloads and operating revenue. Unfortunately, several factors, including our service challenges and the impact of truly adverse weather conditions, eroded the strong revenue gain.”
Revenue from agricultural and industrial products were both up 10 percent for the quarter, revenue from hauling television sets, toys and other goods was up 9 percent and revenue from hauling chemicals and coal were both up 4 percent. Automotive revenue was down 2 percent, Union Pacific said.
Union Pacific stretches across 23 states in the western two-thirds of the country. Its service problems began as business surged and trains slowed along the Sunset Corridor, which runs from Los Angeles to El Paso, Texas, the company said earlier this month. Union Pacific has given some business away, including express contracts with UPS, as it felt it could not meet time or other specifications for deliveries.
The railroad has been purchasing more locomotives and has been hiring more train crews to deal with the increased demand, Davidson said. It expects to bring in 4,000 train crew workers through this year, with about half in new positions and half covering normal attrition.
The railroad employs about 20,000 engineers and conductors.
Improvement has been uncertain and more progress must be made, particularly along the West Coast, Davidson said Thursday.
“Demand for our service is very strong and we will work diligently to develop the resources necessary to take advantage of the opportunities ahead,” Davidson said.