Union Pacific Corp. enjoyed another record overall year in 1989 although not all of its operating units joined equally in the prosperity.
U.P. reported consolidated net income of $595 million in 1989, a 6 percent increase over the $559 million from continuing operations the previous year. Earnings per share increased 15 percent to $5.62 cents up from $4.90 from continuing operations in 1988, a reflection of U.P. buying 11 million shares of its own common stock last year.According to U.P.'s annual report, published this week, the diversified company logged earnings increases in its rail, natural resources and real estate operations that offset declines in its trucking operations as well as significantly higher interest costs.
According to U.P. Chairman Drew Lewis, the increase of $51 million in interest expense was mostly due to debt incurred to finance the company's stock "Dutch auction" offer last June in which U.P. repurchased 11 million shares at $73 per share - a 10 percent premium over the market price at the time.
The original offer was to buy 14.5 million shares and the fact that all were not proffered, said Lewis, "reflects the stockholders' confidence in (U.P.'s) potential for growth."
With the auction, and an ongoing program to repurchase an additional 2.3 million shares, the number of shares outstanding has been reduced to about 100 million - a "long standing goal" of the chairman.
Consolidated operating income increased 4 percent to $1.24 billion, with increases of $23 million, $16 million and $18 million at U.P. Railroad Co., U.P. Resources Co. and U.P. Realty Co., respectively.
Total sales and revenues were $6.49 billion for 1989, an increase of $424 million (7 percent) over 1988. All business segments increased their 1989 revenues over '88 levels, including $182 million at the Railroad, $74 million at Resources, $61 million at Overnite Transportation Co., $25 million at USPCI Inc. and $82 million at Realty.
In his letter to shareholders, Lewis said it is easy to achieve records - as the company did in 1988 - while "riding a tide of relative prosperity" of strong markets and a buoyant economy.
"But it takes extra resourcefulness to surmount the more difficult operating environment we are now experiencing. I am therefore very proud of the corporation's record-breaking progress in 1989."
Commenting on Overnite's performance last year, Lewis said the trucking company had revenue increases of nearly 10 percent in 1989, due to higher tonnage and improved prices. But a "very competitive pricing environment" and increased costs of providing higher levels of service, lowered income 17 percent to $48 million.
He said a reorganized management group and new computer programs should help improve Overnite's earnings in 1990.
Commenting on U.P. Resources, the energy company, Lewis said management is considering a public offering for less than 20 percent of Resources which is believed would enhance shareholders' values. Also, the company is selling most of the assets of its real estate operations as part of a plan to "focus our energies on our core businesses."
While no company can shield itself from a downturn in the economy, Lewis said everything possible is being done to protect U.P. from a recession. "Our budget is predicated on modest GNP growth, which should result in a solid earnings improvement in 1990."
Union Pacific Corp.'s annual meeting is scheduled for April 20, 9 a.m., at Little America Hotel, Salt Lake City.