UNP » Topics » Non-Operating Items

This excerpt taken from the UNP 10-K filed Feb 5, 2010.

Non-Operating Items

 

Millions of Dollars    2009    2008     2007    

 

% Change
2009 v 2008

   % Change
2008 v 2007

Other income

   $     195     $ 92     $     116     112 %    (21)%

Interest expense

     (600)      (511     (482   17         6     

Income taxes

     (1,089)      (1,318     (1,154   (17)        14     

Other Income – Other income increased $103 million in 2009 compared to 2008 primarily due to higher gains from real estate sales, which included the $116 million pre-tax gain from a land sale to the Regional Transportation District (RTD) in Colorado and lower interest expense on our sale of receivables program, resulting from lower interest rates and a lower outstanding balance. Reduced rental and licensing income and lower returns on cash investments, reflecting lower interest rates, partially offset these increases.

Other income decreased in 2008 compared to 2007 due to lower gains from real estate sales and decreased returns on cash investments reflecting lower interest rates. Higher rental and licensing income and lower interest expense on our sale of receivables program partially offset the decreases.

Interest Expense – Interest expense increased in 2009 versus 2008 due primarily to higher weighted-average debt levels. In 2009, the weighted-average debt level was $9.6 billion (including the restructuring of locomotive leases in May of 2009), compared to $8.3 billion in 2008. Our effective interest rate was 6.3% in 2009, compared to 6.1% in 2008.

Interest expense increased in 2008 versus 2007 due to a higher weighted-average debt level of $8.3 billion, compared to $7.3 billion in 2007. A lower effective interest rate of 6.1% in 2008, compared to 6.6% in 2007, partially offset the effects of the higher weighted-average debt level.

Income Taxes – Income taxes were lower in 2009 compared to 2008, driven by lower pre-tax income. Our effective tax rate for the year was 36.5% compared to 36.1% in 2008.

Income taxes were higher in 2008 compared to 2007, driven by higher pre-tax income. Our effective tax rates were 36.1% and 38.4% in 2008 and 2007, respectively. The lower effective tax rate in 2008 resulted from several reductions in tax expense related to federal audits and state tax law changes. In addition, the effective tax rate in 2007 was increased by Illinois legislation that increased deferred tax expense in the third quarter of 2007.

 

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This excerpt taken from the UNP 10-Q filed Apr 24, 2009.

Non-Operating Items

 

      Three Months Ended
March 31,
   %
Millions of Dollars    2009    2008    Change

Other income

   $ 23     $ 25     (8)% 

Interest expense

     (141)      (126)    12     

Income taxes

     (192)      (244)    (21)% 

Other Income – Other income decreased in the first quarter of 2009 compared to 2008 due to lower gains from real estate sales, decreased returns on cash investments reflecting lower interest rates, and reduced rental and licensing income. Lower interest expense on our sale of receivables program partially offset the decreases.

Interest Expense – Interest expense increased in the first quarter 2009 versus 2008 due to a higher weighted-average debt level of $9.0 billion, compared to $7.9 billion in 2008, partially offset by a lower effective interest rate of 6.2% in the first quarter of 2009, compared to 6.3% in the first quarter of 2008.

Income Taxes – Income taxes were $52 million lower in the first quarter 2009 compared to 2008, driven by lower pre-tax income. Our effective tax rates were 34.7% and 35.5% in the first quarter of 2009 and 2008, respectively.

This excerpt taken from the UNP 10-K filed Feb 6, 2009.

Non-Operating Items

 

           
Millions of Dollars    2008     2007     2006     % Change
2008 v 2007
   % Change
2007 v 2006

Other income

   $ 92     $     116     $     118     (21)%    (2)%

Interest expense

     (511 )     (482 )     (477 )   6          1     

Income taxes

     (1,318 )     (1,154 )     (919 )   14  %    26  %

Other Income – Other income decreased in 2008 compared to 2007 due to lower gains from real estate sales and decreased returns on cash investments reflecting lower interest rates. Higher rental and licensing income and lower interest expense on our sale of receivables program partially offset the decreases.

Lower net gains from non-operating asset sales (primarily real estate) drove the reduction in other income in 2007. Recognition of rental income in 2006 from the settlement of a rent dispute also contributed to the year-over-year decrease in other income. Cash investment returns increased $21 million due to larger cash balances and higher interest rates.

Interest Expense – Interest expense increased in 2008 versus 2007 due to a higher weighted-average debt level of $8.3 billion, compared to $7.3 billion in 2007. A lower effective interest rate of 6.1% in 2008, compared to 6.6% in 2007, partially offset the effects of the higher weighted-average debt level.

An increase in the weighted-average debt levels to $7.3 billion from $7.1 billion in 2006 generated higher interest expense in 2007. A lower effective interest rate of 6.6% in 2007, compared to 6.7% in 2006, partially offset the effects of the higher debt level.

Income Taxes – Income taxes were higher in 2008 compared to 2007, driven by higher pre-tax income. Our effective tax rates were 36.1% and 38.4% in 2008 and 2007, respectively. The lower effective tax rate in 2008 resulted from several reductions in tax expense related to federal audits and state tax law changes. In addition, the effective tax rate in 2007 was increased by Illinois legislation that increased deferred tax expense in the third quarter of 2007.

Income taxes were $235 million higher in 2007 compared to 2006, due primarily to higher pre-tax income and the effect of new tax legislation in the State of Illinois that changed how we determine the amount of our income subject to Illinois tax. The Illinois legislation increased our deferred tax expense by $27 million in 2007. Our effective tax rates were 38.4% and 36.4% in 2007 and 2006, respectively.

 

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This excerpt taken from the UNP 10-Q filed Oct 23, 2008.

Non-Operating Items

 

      Three Months Ended
September 30,
    %     Nine Months Ended
September 30,
    %  
Millions of Dollars    2008     2007     Change     2008     2007     Change  

Other income

   $   23     $   25     (8 )%   $   67     $   76     (12 )%

Interest expense

   (130 )   (124 )   5     (384 )   (357 )   8  

Income taxes

   (405 )   (374 )   8     (940 )   (866 )   9  

Other Income – Other income decreased in the third quarter and year-to-date periods of 2008 compared to 2007 due to lower gains from real estate sales and decreased returns on cash investments reflecting lower interest rates. Higher environmental expense with respect to our non-operating properties also drove the decline in other income for the year-to-date period versus 2007. Higher rental and licensing income in the third quarter and year-to-date periods partially offset the decreases.

Interest Expense – Interest expense increased in the third quarter and year-to-date periods of 2008 versus 2007 due to higher weighted-average debt levels. In the third quarter, the weighted-average debt level was

 

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$8.4 billion, compared to $7.6 billion in 2007. Year-to-date, the weighted-average debt level was $8.2 billion, compared to $7.2 billion in 2007. A lower effective interest rate of 6.2% and 6.3% in the third quarter and year-to-date periods of 2008, respectively, compared to 6.5% and 6.6% in both periods of 2007 partially offset the higher weighted-average debt levels in both periods.

Income Taxes – Income taxes were higher in the third quarter and year-to-date periods of 2008 compared to 2007, driven by higher pre-tax income. Our effective tax rates for the third quarter and year-to-date periods of 2008 were 36.6% and 35.9% compared to 41.3% and 38.8% for the corresponding periods of 2007. The lower effective tax rates in 2008 result from several reductions in tax expense related to federal audits and state tax law changes. In addition, the effective tax rates in 2007 were increased by Illinois legislation that increased deferred tax expense in the third quarter of 2007.

This excerpt taken from the UNP 10-Q filed Jul 24, 2008.

Non-Operating Items

 

      Three Months Ended
June 30,
    %     Six Months Ended
June 30,
    %  
Millions of Dollars    2008     2007     Change     2008     2007     Change  

Other income

   $   19     $   36     (47 )%   $   44     $   51     (14 )%

Interest expense

   (128 )   (120 )   7     (254 )   (233 )   9  

Income taxes

   (291 )   (257 )   13     (535 )   (492 )   9  

Other Income – Other income decreased in the second quarter and year-to-date periods of 2008 compared to 2007 due to lower returns on cash investments reflecting lower interest rates and higher environmental expense with respect to our non-operating properties. Higher rental and licensing income in the second quarter and year-to-date periods partially offset the decreases.

Interest Expense – Interest expense increased in the second quarter and year-to-date periods of 2008 versus 2007 due to higher weighted-average debt levels. In the second quarter, the weighted-average debt level was $8.2 billion, compared to $7.1 billion in 2007. Year-to-date, the weighted-average debt level was $8.0 billion, compared to $7.0 billion in 2007. A lower effective interest rate of 6.3% in both the second quarter and year-to-date periods of 2008 compared to 6.7% in both periods of 2007 partially offset the higher weighted-average debt levels in both periods.

Income Taxes – Income taxes were higher in the second quarter and year-to-date periods of 2008 compared to 2007, due primarily to higher pre-tax income. These higher income taxes were partially offset by reductions in 2008 tax expense for benefits derived from federal tax audits and state tax law changes. Our effective tax rates for the second quarter and year-to-date periods of 2008 were 35.4% and 35.5%, compared to 36.6% and 37.2% for the corresponding periods of 2007.

 

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This excerpt taken from the UNP 10-Q filed Apr 24, 2008.

Non-Operating Items

 

      Three Months Ended
March 31,
    %  
Millions of Dollars    2008     2007     Change  

Other income

   $   25     $   15     67 %

Interest expense

   (126 )   (113 )   12  

Income taxes

   (244 )   (235 )   4  

Other Income – Other income increased in the first quarter 2008 compared to 2007 due to increased gains on real estate sales and license and rental income. Conversely, higher 2008 environmental expense associated with our non-operating properties partially offset the first quarter increases.

 

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Interest Expense – Interest expense increased in the first quarter of 2008 versus 2007. A higher weighted average debt level of $7.9 billion compared to $6.8 billion in 2007, partially offset by a lower effective interest rate of 6.3% in 2008 compared to 6.7% in 2007, drove the increase of interest expense.

Income Taxes – Income taxes were $9 million higher in the first quarter 2008 compared to the same period in 2007. Higher pre-tax income in 2008 increased tax expense by $25 million, which was partially offset by the effect of state tax legislation that reduced tax expense by $16 million. This legislation also lowered our effective tax rate for the first quarter of 2008 to 35.5%, compared to 37.8% for the first quarter of 2007.

These excerpts taken from the UNP 10-K filed Feb 28, 2008.

Non-Operating Items

 

Millions of Dollars

   2007     2006     2005     % Change
2007 v 2006
 
 
  % Change
2006 v 2005
 
 

Other income

   $      116     $      118     $      145     (2 )%   (19 )%

Interest expense

   (482 )   (477 )   (504 )   1     (5 )

Income taxes

   (1,154 )   (919 )   (410 )   26     124  

Other Income – Lower net gains from non-operating asset sales (primarily real estate) drove the reduction in other income in 2007. Recognition of rental income in 2006 from the settlement of a rent dispute also contributed to the year-over-year decrease in other income. Cash investment returns increased $21 million due to larger cash balances and higher interest rates.

Lower net gains from non-operating asset sales (primarily real estate) and higher expenses due to rising interest rates associated with our sale of receivables program resulted in a reduction in other income in 2006, which was partially offset by higher rental income for the use of our right-of-way (including 2006 settlements of rate disputes from prior years) and cash investment returns due to higher interest rates.

Interest Expense – Higher interest expense in 2007 was driven by an increase in the weighted-average debt levels of $7.3 billion, compared to $7.1 billion in 2006. A lower effective interest rate of 6.6% in 2007, compared to 6.7% in 2006, partially offset the effects of the higher debt level.

Lower interest expense in 2006 was due to a decline in the weighted-average debt level from $7.8 billion in 2005 to $7.1 billion in 2006. A higher effective interest rate of 6.7% in 2006, compared to 6.5% in 2005, partially offset the effects of the declining debt level.

Income Taxes – Income taxes were $235 million higher in 2007, due primarily to higher pre-tax income and the effect of new tax legislation in the State of Illinois that changed how we determine the amount of our income subject to Illinois tax. The Illinois legislation increased our deferred tax expense by $27 million in 2007. Our effective tax rates were 38.4% and 36.4% in 2007 and 2006, respectively.

Income tax expense was $509 million higher in 2006 than 2005. Higher pre-tax income resulted in additional taxes of $414 million and $118 million of the increase resulted from a reduction of deferred tax expense in 2005. Final settlements of pre-1995 tax years and Internal Revenue Service Examination Reports for 1995

 

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through 2002, among other things, resulted in the $118 million reduction in 2005. Our effective tax rate was 36.4% and 28.6% in 2006 and 2005, respectively.

Non-Operating Items

STYLE="font-size:12px;margin-top:0px;margin-bottom:0px"> 

























































































Millions of Dollars

  2007  2006  2005  % Change
2007 v 2006
 
 
 % Change
2006 v 2005
 
 

Other income

  $      116  $      118  $      145  (2)% (19)%

Interest expense

  (482) (477) (504) 1  (5)

Income taxes

  (1,154) (919) (410) 26  124 

Other Income – Lower net gains from non-operating asset sales (primarily real estate)
drove the reduction in other income in 2007. Recognition of rental income in 2006 from the settlement of a rent dispute also contributed to the year-over-year decrease in other income. Cash investment returns increased $21 million due to larger cash
balances and higher interest rates.

Lower net gains from non-operating asset sales (primarily real estate) and higher expenses due to
rising interest rates associated with our sale of receivables program resulted in a reduction in other income in 2006, which was partially offset by higher rental income for the use of our right-of-way (including 2006 settlements of rate disputes
from prior years) and cash investment returns due to higher interest rates.

Interest Expense – Higher interest expense in 2007
was driven by an increase in the weighted-average debt levels of $7.3 billion, compared to $7.1 billion in 2006. A lower effective interest rate of 6.6% in 2007, compared to 6.7% in 2006, partially offset the effects of the higher debt level.

Lower interest expense in 2006 was due to a decline in the weighted-average debt level from $7.8 billion in 2005 to $7.1 billion in 2006.
A higher effective interest rate of 6.7% in 2006, compared to 6.5% in 2005, partially offset the effects of the declining debt level.

SIZE="2">Income Taxes – Income taxes were $235 million higher in 2007, due primarily to higher pre-tax income and the effect of new tax legislation in the State of Illinois that changed how we determine the amount of our income subject
to Illinois tax. The Illinois legislation increased our deferred tax expense by $27 million in 2007. Our effective tax rates were 38.4% and 36.4% in 2007 and 2006, respectively.

ALIGN="justify">Income tax expense was $509 million higher in 2006 than 2005. Higher pre-tax income resulted in additional taxes of $414 million and $118 million of the increase resulted from a reduction of
deferred tax expense in 2005. Final settlements of pre-1995 tax years and Internal Revenue Service Examination Reports for 1995

 


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through 2002, among other things, resulted in the $118 million reduction in 2005. Our effective tax rate was 36.4% and 28.6% in 2006 and 2005, respectively.

This excerpt taken from the UNP 10-Q filed Oct 24, 2007.

Non-Operating Items

 

     Three Months Ended
September 30,
 
 
  %     Nine Months Ended
September 30,
 
 
  %  
Millions of Dollars    2007     2006     Change     2007     2006     Change  

Other income

   $     25     $     22     14 %   $     76     $     61     25 %

Interest expense

   (124 )   (119 )   4     (357 )   (359 )   (1 )

Income taxes

   (374 )   (235 )   59     (866 )   (655 )   32  

Other Income – Other income increased in the third quarter and nine-month periods of 2007 compared to 2006 due to increased gains on real estate sales and higher cash balances combined with higher interest rates, which generated an additional $7 million and $21 million, respectively. Conversely, higher 2007 environmental expense associated with our non-operating properties partially offset the third quarter increases. The comparative impact of the recognition of $14 million of rental income in 2006 resulting from the settlement of a rent dispute covering the period 1994 to 2003 partially offset the higher year-to-date increase in other income.

Interest Expense – Interest expense was higher in the third quarter of 2007 compared to the same period in 2006 driven by an increase in the weighted average debt level of $7.6 billion compared to $7.1 billion in 2006, partially offset by a lower effective interest rate of 6.5% in 2007 compared to 6.8% in 2006. Year-to-date, lower interest expense resulted from a lower effective interest rate of 6.6% in 2007 versus 6.7% in 2006. The weighted average debt level was $7.2 billion in both periods.

Income Taxes – Income taxes were $139 million and $211 million higher in the third quarter and year-to-date periods of 2007 versus 2006 primarily due to higher pre-tax income and the effect of new tax legislation in the State of Illinois that changed how we determine the amount of our income subject to Illinois tax. The Illinois legislation increased our deferred tax expense by $27 million in the third quarter of 2007. Our effective tax rate was 41.3% and 38.8% in the third quarter and year-to-date periods of 2007, respectively, compared to 35.9% and 36.9% in the corresponding periods of 2006.

This excerpt taken from the UNP 10-Q filed Jul 26, 2007.

Non-Operating Items

 

     Three Months Ended
June 30,
 
 
  %     Six Months Ended
June 30,
 
 
  %  
Millions of Dollars    2007     2006     Change     2007     2006     Change  

Other income

   $     36     $     29     24 %   $     51     $     39     31 %

Interest expense

   (120 )   (120 )   -     (233 )   (240 )   (3 )

Income taxes

   (257 )   (236 )   9     (492 )   (420 )   17  

Other Income – Other income increased in the second quarter of 2007 compared to 2006 due to higher interest rates on higher cash balances that generated cash investment returns of $7 million. Lower 2007 environmental expense of $7 million associated with our non-operating properties and higher 2007 lease and track rental income of $4 million were offset by the comparative impact of the recognition of $14 million of rental income in 2006 resulting from the settlement of a rent dispute covering the period 1994 to 2003.

Interest Expense – Interest expense was flat in the second quarter of 2007 compared to the same period in 2006 driven by weighted average debt levels of $7.1 billion and effective interest rates of 6.7% in both periods. Year-to-date, lower interest expense resulted from a lower weighted average debt level of $7.0 billion in 2007 compared to $7.2 in 2006. The effective interest rate was 6.7% in both periods.

Income Taxes – Income taxes were $21 million and $72 million higher in the second quarter and year-to-date periods of 2007 primarily due to higher pre-tax income, partially offset by additional tax benefits recognized in the second quarter under FIN 48 (See note 11 to the Condensed Financial Statements). Our effective tax rate was 36.6% and 37.2% in the second quarter and year-to-date periods of 2007, respectively, compared to 37.7% and 37.5% in the corresponding periods of 2006, respectively.

 

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