<PAGE> COVER
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ____________________
Commission file number 1-6075
UNION PACIFIC CORPORATION
(Exact name of registrant as specified in its charter)
UTAH 13-2626465
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Martin Tower, Eighth and Eaton Avenues, Bethlehem, Pennsylvania
(Address of principal executive offices)
18018
(Zip Code)
(610) 861-3200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
----- -----
As of July 31, 1996, there were 205,901,613 shares of the Registrant's
Common Stock outstanding.
<PAGE> INDEX
UNION PACIFIC CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Page Number
-----------
Item 1: Condensed Consolidated Financial Statements:
CONDENSED STATEMENT OF CONSOLIDATED INCOME - For the
Three Months and Six Months Ended June 30, 1996 and
1995.................................................. 1
CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION -
At June 30, 1996 and December 31, 1995................ 2 - 3
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS - For
the Six Months Ended June 30, 1996 and 1995........... 4
CONDENSED STATEMENT OF CONSOLIDATED RETAINED EARNINGS -
For the Six Months Ended June 30, 1996 and 1995....... 4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.... 5 - 9
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 10 - 16
PART II. OTHER INFORMATION
Item 1: Legal Proceedings..................................... 17 - 18
Item 6: Exhibits and Reports on Form 8-K...................... 19 - 20
Signature...................................................... 21
<PAGE> 1
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
<TABLE>
<CAPTION>
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED STATEMENT OF CONSOLIDATED INCOME
For the Three Months and Six Months Ended June 30, 1996 and 1995
-----------------------------------------------------------------
(Amounts in Millions, Except Ratio and Per Share Amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- -----------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating Revenues (Note 3)................ $ 2,012 $ 1,874 $ 3,980 $ 3,538
------- ------- ------- -------
Operating Expenses:
Salaries, wages and employee benefits.... 744 730 1,517 1,386
Equipment and other rents................ 213 178 441 341
Depreciation and amortization............ 174 159 346 297
Fuel and utilities (Note 5).............. 181 144 344 270
Materials and supplies................... 111 96 227 185
Other costs.............................. 201 230 451 443
------- ------- ------- -------
Total................................. 1,624 1,537 3,326 2,922
------- ------- ------- -------
Operating Income........................... 388 337 654 616
Other Income - Net......................... 32 22 50 70
Interest Expense (Notes 2, 3, 4 and 5)..... (114) (111) (231) (201)
Corporate Expenses......................... (22) (24) (51) (54)
------- ------- ------- -------
Income Before Income Taxes................. 284 224 422 431
Income Taxes............................... (98) (74) (129) (151)
------- ------- ------- -------
Income from Continuing Operations.......... 186 150 293 280
Income from Discontinued Operations
(Note 4).................................. 58 74 107 135
------- ------- ------- -------
Net Income................................. $ 244 $ 224 $ 400 $ 415
======= ======= ======= =======
Earnings Per Share:
Income from Continuing Operations........ $ 0.90 $ 0.73 $ 1.42 $ 1.36
Income from Discontinued Operations...... 0.28 0.36 0.52 0.66
------- ------- ------- -------
Net Income............................... $ 1.18 $ 1.09 $ 1.94 $ 2.02
======= ======= ======= =======
Weighted Average Number of Shares.......... 206.4 205.6 206.4 205.6
Cash Dividends Per Share................... $ 0.43 $ 0.43 $ 0.86 $ 0.86
Ratio of Earnings to Fixed Charges (Note 6) 2.4 2.9
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
------------------------------------------------------
(Millions of Dollars)
(Unaudited)
June 30, December 31,
ASSETS 1996 1995
---------- ------------
<S> <C> <C>
Current Assets:
Cash and temporary investments............... $ 73 $ 230
Accounts receivable ......................... 417 349
Inventories.................................. 220 238
Notes receivable (Note 4).................... 653 653
Other current assets......................... 230 209
--------- ---------
Total Current Assets.................... 1,593 1,679
--------- ---------
Investments:
Investments in and advances to affiliated
companies (Note 2)........................ 1,267 1,260
Other investments............................ 154 187
--------- ---------
Total Investments....................... 1,421 1,447
--------- ---------
Properties:
Railroad:
Road and other............................. 13,245 12,888
Equipment.................................. 5,100 5,004
--------- ---------
Total Railroad.......................... 18,345 17,892
Trucking..................................... 746 744
Other........................................ 114 112
--------- ---------
Total Properties........................ 19,205 18,748
Accumulated depreciation..................... (4,866) (4,643)
--------- ---------
Properties - Net........................ 14,339 14,105
--------- ---------
Net Assets of Discontinued Operations (Note 4). 1,419 1,312
Excess Acquisition Costs - Net................. 712 730
Other Assets................................... 265 173
--------- ---------
Total Assets............................ $ 19,749 $ 19,446
========= =========
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
-------------------------------------------------------
(Amounts in Millions, Except Share and Per Share Amounts)
(Unaudited)
June 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
---------- -----------
<S> <C> <C>
Current Liabilities:
Accounts payable................................ $ 126 $ 145
Accrued wages and vacation...................... 324 284
Income and other taxes.......................... 181 178
Accrued casualty costs.......................... 188 192
Dividends and interest.......................... 202 203
Debt due within one year........................ 232 132
Other current liabilities....................... 761 765
--------- ---------
Total Current Liabilities.................... 2,014 1,899
--------- ---------
Debt Due After One Year........................... 5,923 6,232
Deferred Income Taxes............................. 3,712 3,498
Retiree Benefits Obligation ...................... 622 588
Other Long-Term Liabilities (Note 7).............. 646 649
Minority Interest in Consolidated
Subsidiary (Note 4)............................ 236 216
Stockholders' Equity:
Common stock, $2.50 par value, authorized
500,000,000 shares, 232,910,306 shares issued
in 1996, 232,317,010 shares issued in 1995.... 582 581
Paid-in surplus................................. 2,139 2,111
Retained earnings............................... 5,550 5,327
Treasury stock, at cost, 27,017,072 shares in
1996, 26,737,806 shares in 1995............... (1,675) (1,655)
--------- ---------
Total Stockholders' Equity................... 6,596 6,364
--------- ---------
Total Liabilities and Stockholders' Equity... $ 19,749 $ 19,446
========= =========
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
----------------------------------------------
For the Six Months Ended June 30, 1996 and 1995
(Millions of Dollars)
(Unaudited)
1996 1995
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income......................................... $ 400 $ 415
Non-cash charges to income:
Depreciation and amortization................... 346 297
Deferred income taxes........................... (23) 8
Other - net..................................... 69 (75)
Income from discontinued operations (Note 4)....... (107) (135)
Changes in current assets and liabilities.......... 44 161
------- -------
Cash from continuing operations....................... 729 671
------- -------
Cash flows from investing activities:
Capital investments................................ (498) (377)
Investments and acquisitions (Note 3).............. -- (1,170)
Cash provided by discontinued operations (Note 4).. 20 287
Other - net........................................ 15 110
------- -------
Cash used in investing activities............... (463) (1,150)
------- -------
Cash flows from equity and financing activities:
Dividends paid..................................... (177) (176)
Debt repaid ....................................... (1,217) (1,363)
Financings......................................... 1,008 1,986
Other - net........................................ (37) (32)
------- -------
Cash (used in) provided by equity and
financing activities........................... (423) 415
------- -------
Net decrease in cash and temporary investments.. $ (157) $ (64)
======= =======
</TABLE>
<TABLE>
<CAPTION>
CONDENSED STATEMENT OF CONSOLIDATED RETAINED EARNINGS
For the Six Months Ended June 30, 1996 and 1995
-----------------------------------------------
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
1996 1995
------- -------
<S> <C> <C>
Balance at Beginning of Year......................... $ 5,327 $ 4,734
Net Income........................................... 400 415
------- -------
Total......................................... 5,727 5,149
Dividends Declared ($0.86 per share in 1996
and 1995)....................... (177) (177)
------- -------
Balance at End of Period........................ $ 5,550 $ 4,972
======= =======
</TABLE>
<PAGE> 5
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Responsibilities for Financial Statements - The condensed consolidated
financial statements are unaudited and reflect all adjustments (consisting
only of normal and recurring adjustments) that are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the interim periods. The Condensed Statement of
Consolidated Financial Position at December 31, 1995 is derived from audited
financial statements. The condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto contained in the Union Pacific Corporation (the Corporation or
UPC) Annual Report to Stockholders incorporated by reference in the
Corporation's Annual Report on Form 10-K for the year ended December 31,
1995. The results of operations for the six months and three months ended
June 30, 1996 are not necessarily indicative of the results for the entire
year ending December 31, 1996.
2. Acquisition of Southern Pacific Rail Corporation (Southern Pacific) - In
August 1995, the Corporation and Southern Pacific entered into a definitive
merger agreement (the Agreement) providing for the acquisition of Southern
Pacific by UPC. Under the terms of the Agreement, UPC completed a first-step
cash tender offer in September 1995, pursuant to which approximately 39
million, or 25%, of the outstanding common shares of Southern Pacific were
acquired at a price of $25 per share. The cash tender offer was funded with
$976 million in borrowings under the Corporation's then existing credit
facilities. Following the effective date of final approval by the Surface
Transportation Board (STB) of the U.S. Department of Transportation--the
successor to the Interstate Commerce Commission--UPC will complete the
acquisition by exchanging the remaining Southern Pacific common shares, at
the holder's election and subject to proration, for $25 in cash or 0.4065
shares of the Corporation's common stock. The total cost of the acquisition
will be approximately $4.1 billion (comprised of $1.6 billion in cash funded
through existing credit facilities and $2.5 billion in UPC common stock)
plus the assumption of all Southern Pacific debt.
On July 3, 1996, the STB held a voting conference at which it announced its
unanimous approval of the acquisition of Southern Pacific by UPC with
certain conditions. UPC expects to receive a final written decision by the
STB regarding the acquisition of Southern Pacific by August 12, 1996 and
expects to consummate the Southern Pacific acquisition in September 1996.
The conditions announced at the STB's July 3, 1996 voting conference are not
expected to materially reduce the economic benefits projected from the
Southern Pacific acquisition. Should the final written decision of the STB
contain conditions or other terms materially different from those voted upon
by the STB at the July 3, 1996 voting conference and as a result the
Corporation elects under the terms of the Southern Pacific merger agreement
not to complete the acquisition, a subsequent disposition of the shares of
Southern Pacific common stock owned by the Corporation could result in a
significant loss. However, the Corporation believes that the STB's final
written decision approving the Southern Pacific acquisition will not contain
conditions or terms that are materially different from those voted upon by
the STB on July 3, 1996.
<PAGE> 6
The business combination with Southern Pacific will be accounted for as a
purchase. Until the consummation of the acquisition, the Corporation will
account for its 25% investment in Southern Pacific using the equity method.
Although the purchase price allocation will not be finalized until after the
STB renders its final written decision, initial estimates indicate that the
fair value of tangible assets acquired will exceed the purchase price.
3. Acquisition of Chicago and North Western Transportation Company (CNW) - In
April 1995, UPC completed the acquisition of the remaining 71.6% of CNW's
outstanding common stock not previously owned by the Corporation for
approximately $1.2 billion, funded by the issuance of additional debt.
Prior to the acquisition, CNW was the nation's eighth largest railroad. The
acquisition of CNW has been accounted for as a purchase, and CNW's financial
results were consolidated with the Corporation effective May 1, 1995.
4. Union Pacific Resources Group Inc. (Resources) - In July 1995, the
Corporation's Board of Directors approved a formal plan to divest UPC's
natural resources business through an initial public offering (IPO) by
Resources followed by a pro-rata distribution of the Resources' shares owned
by the Corporation to its stockholders. The distribution is subject to
UPC's receipt of a favorable Internal Revenue Service ruling as to the
tax-free nature of the distribution and is expected to occur in the fourth
quarter of 1996 after the completion of the acquisition of Southern Pacific.
The IPO of 42.5 million Resources' shares at $21 per share was completed in
October 1995 and generated net proceeds of $844 million. At that time,
Resources distributed to UPC a dividend of $1,621 million ($912 million in
cash, $650 million in 8.5% notes due within 90 days of the stock
distribution and a $59 million intercompany balance owed by the
Corporation). UPC used the cash proceeds to repay outstanding commercial
paper.
Resources' results have been reported as a discontinued operation in the
Corporation's condensed consolidated financial statements for all periods
presented. The Corporation's share of Resources' net income was $58 million
and $74 million for the three months ended June 30, 1996 and 1995,
respectively, and $107 million and $135 million for the six months ended
June 30, 1996 and 1995, respectively. As a result of the IPO, the
Corporation's 1996 results for all periods presented reflect 83% of
Resources' net income while 1995 results reflect 100% of Resources' net
income for all periods presented. These amounts are net of income taxes of
$30 million and $17 million for the three months ended June 30, 1996 and
1995, respectively, and $52 million and $37 million for the six months ended
June 30, 1996 and 1995, respectively.
The following summarized financial information is derived from Resources'
condensed consolidated financial statements to be contained in Resources'
second quarter 1996 Quarterly Report on Form 10-Q, which will be filed with
the Securities and Exchange Commission no later than August 14, 1996, and is
presented to provide additional information on Resources' financial results
to the Corporation's stockholders:
<PAGE> 7
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
(Millions of Dollars)
<S> <C> <C>
Current assets $ 354 $ 420
Non-current assets 2,949 2,889
Current liabilities 926 1,067
Non-current liabilities 958 930
Stockholders' equity 1,419 1,312
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
----------- ------------ ----------- -----------
(Millions of Dollars) (Millions of Dollars)
<S> <C> <C> <C> <C>
Operating revenues $428 $341 $818 $666
Operating income 120 88 218 175
Net income 70 74 130 135
</TABLE>
Financial Instruments: Resources uses swaps, futures, options and forward
contracts to protect against unfavorable hydrocarbon price movements. Credit
risk related to these activities is managed by requiring that counterparties
meet minimum credit standards. At June 30, 1996, the largest credit risk
associated with any of Resources' counterparties was approximately $5
million.
At June 30, 1996, Resources had entered into near-term futures contracts and
price swaps for August through December 1996 with respect to average natural
gas sales volumes of 389 MMcfd at $2.22/Mcf and for January through March
1997 with respect to average natural gas sales volumes of 40 MMcfd at
$1.36/Mcf (Rockies price). At June 30, 1996, these contracts had a total
deferred unrealized loss of $11 million. In addition, Resources had entered
into near-term futures contracts to hedge 9 MBbld of crude oil production
for August through December 1996 at an average price of $18.61/Bbl, which
had a total deferred unrealized loss of $1 million. Furthermore, Resources
has purchased commodity options that effectively set a minimum average crude
oil price (floor) of $18.04/Bbl for July through December 1996 volumes of 26
MBbld and a natural gas price floor of $2.04/Mcf for August through December
volumes of 178 MMcfd. At June 30, 1996, the deferred unrealized loss on
such commodity options was $3 million. Resources has also entered into swaps
and futures related to long-term fixed price commitments for 21.7 Bcf of
natural gas which had a total deferred unrealized loss of $7 million at June
30, 1996. Resources' total deferred unrealized loss as of June 30, 1996 for
all financial instruments was $22 million.
5. Financial Instruments - The Corporation uses derivative financial
instruments in limited instances for other than trading purposes to manage
risk as it relates to fuel prices and interest rates. Where the Corporation
has fixed interest rates or fuel prices through the use of swaps, futures or
forward contracts, the Corporation has mitigated the downside risk of
adverse price and rate movements; however, it has also limited future gains
from favorable movements.
The Corporation addresses market risk related to these instruments by
selecting instruments whose value fluctuations highly correlate with the
underlying item being hedged. Credit risk related to derivative financial
<PAGE> 8
instruments, which is minimal, is managed by requiring minimum credit
standards for counterparties and periodic settlements. The largest credit
risk associated with any of the Corporation's counterparties was $20 million
at June 30, 1996. The Corporation has not been required to provide, nor has
it received, any significant amount of collateral relating to its hedging
activity.
The fair market value of the Corporation's derivative financial instrument
positions at June 30, 1996 was determined based on current fair market
values as quoted by recognized dealers or developed based on the present
value of expected future cash flows discounted at the applicable zero coupon
U.S. treasury rate and swap spread.
Interest Rates - The Corporation controls its overall risk to fluctuations
in interest rates by managing the proportion of fixed and floating rate debt
instruments within its debt portfolio over a given period. Derivatives are
used in limited circumstances as one of the tools to obtain the targeted
mix. The mix of fixed and floating rate debt is largely managed through the
issuance of targeted amounts of such debt as debt maturities occur or as
incremental borrowings are required. The Corporation also obtains
additional flexibility in managing interest costs and the interest rate mix
within its debt portfolio by issuing callable fixed rate debt securities.
At June 30, 1996, the Corporation had outstanding interest rate swaps on
$305 million of notional principal amount of debt (5% of the total debt
portfolio) with a gross fair market value asset position of $21 million and
a gross fair market value liability position of $8 million. These contracts
mature over the next one to nine years. Interest rate hedging activity
increased second quarter 1996 interest expense by $2 million and year-to-
date 1996 interest expense by $4 million.
Fuel - During 1996, fuel costs approximated 10% of the Corporation's total
operating expenses. As a result of the significance of the fuel costs and
the historical volatility of fuel prices, the Corporation's transportation
subsidiaries periodically use swaps, futures and forward contracts to
mitigate the impact of fuel price volatility. The intent of this program
is to protect the Corporation's operating margins and overall profitability
from adverse fuel price changes. However, the use of these contracts also
limits the benefit of favorable fuel price changes.
At June 30, 1996, Union Pacific Railroad Company and its affiliate Missouri
Pacific Railroad Company (collectively the Railroad) had hedged 33% of its
remaining 1996 fuel consumption at $0.46 per gallon based on a Gulf Coast
market, while Overnite Transportation Company had not hedged any of its 1996
fuel requirements. At June 30, 1996, the Railroad had outstanding swap
agreements covering its fuel purchases of $63 million with a gross and net
fair market value asset position of $12 million. Fuel hedging lowered
second quarter 1996 fuel costs by $5 million and lowered fuel costs for the
six months ended June 30, 1996 by $10 million.
6. Ratio of Earnings to Fixed Charges - The ratio of earnings to fixed charges
has been computed on a total enterprise basis. Earnings represent income
from continuing operations less equity in undistributed earnings of
unconsolidated affiliates, plus income taxes and fixed charges. Fixed
charges represent interest, amortization of debt discount and expense, and
the estimated interest portion of rental charges.
<PAGE> 9
7. Commitments and Contingencies - There are various lawsuits pending against
the Corporation and certain of its subsidiaries. The Corporation is also
subject to Federal, state and local environmental laws and regulations and
is currently participating in the investigation and remediation of numerous
sites. Where the remediation costs can be reasonably determined, and where
such remediation is probable, the Corporation has recorded a liability.
In addition, the Corporation has entered into commitments and provided
guarantees for specific financial and contractual obligations of its
subsidiaries and affiliates. The Corporation does not expect that the
lawsuits, environmental costs, commitments or guarantees will have a
material adverse effect on its consolidated financial condition or its
results of operations.
Management does not anticipate that the ultimate resolution of the matters
described in Part I, Item 3. Legal Proceedings of the Corporation's 1995
Annual Report on Form 10-K and in Part II, Item 1. Legal Proceedings in this
Report will have a material adverse effect on the Corporation's consolidated
financial condition or operating results.
8. Accounting Pronouncements - In June 1996, the Financial Accounting Standards
Board issued Statement No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities," which provides
consistent standards for distinguishing transfers of financial assets that
are sales from transfers that are secured borrowings and which revises the
accounting rules for liabilities extinguished by an in-substance defeasance.
This statement is effective for transfers of financial assets and extinguish-
ments of liabilities occurring after December 31, 1996 and is not expected
to have a material impact on UPC's operating results or financial condition.
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
RESULTS OF OPERATIONS
Quarter ended June 30, 1996 Compared to June 30, 1995
CORPORATE REORGANIZATION
Chicago and North Western Transportation Company (CNW) - In April 1995, Union
Pacific Corporation (the Corporation or UPC) acquired the remaining 71.6% of
CNW's outstanding common stock not previously owned by UPC for $1.2 billion.
The acquisition of CNW was accounted for as a purchase and CNW's financial
results were consolidated with UPC beginning in May 1995 (see Note 3 to the
Condensed Consolidated Financial Statements).
Natural Resources Divestiture - In July 1995, UPC's Board of Directors approved
a formal plan to exit its natural resources business. The plan includes an
initial public offering (IPO) of Union Pacific Resources Group Inc.'s
(Resources) common stock (which occurred in October 1995) followed by the
distribution of UPC's remaining interest in Resources to the Corporation's
stockholders on a tax-free, pro-rata basis. The distribution of Resources'
common stock is subject to UPC's receipt of a favorable ruling from the Internal
Revenue Service (IRS) as to the tax-free nature of the distribution. The
distribution of Resources also cannot occur until after the completion of the
acquisition of Southern Pacific Rail Corporation (Southern Pacific)(see Note 4
to the Condensed Consolidated Financial Statements).
Southern Pacific Acquisition - On July 3, 1996, the Surface Transportation
Board (STB) of the U.S. Department of Transportation--the successor to the
Interstate Commerce Commission--held a voting conference on the proposed
acquisition of Southern Pacific by UPC. At the voting conference, the STB
unanimously approved the acquisition of Southern Pacific by UPC with certain
conditions. UPC expects to receive a final written decision by the STB
regarding the acquisition of Southern Pacific by August 12, 1996. The Southern
Pacific acquisition is expected to be consummated in September 1996 (see Note 2
to the Condensed Consolidated Financial Statements).
The conditions announced at the STB's July 3, 1996 voting conference are not
expected to materially reduce the economic benefits projected from the Southern
Pacific acquisition. Should the final written decision of the STB contain
conditions or other terms materially different from those voted upon by the STB
at the July 3, 1996 voting conference and as a result the Corporation elects
under the terms of the Southern Pacific merger agreement not to complete the
acquisition of Southern Pacific, a subsequent disposition of the shares of
Southern Pacific common stock owned by the Corporation could result in a
significant loss. However, the Corporation believes that the STB's final
written decision approving the Southern Pacific acquisition will not contain
conditions or terms that are materially different from those voted upon by the
STB on July 3, 1996. Although the final written decision of the STB is
expected by August 12, 1996, there is no assurance that STB approval will be
obtained by such date. In addition, any appeals from the STB's final decision
might not be resolved for a substantial period of time after the issuance of
the final written decision by the STB.
<PAGE> 11
FINANCIAL RESULTS
CONSOLIDATED - The Corporation reported record net income of $244 million or
$1.18 per share for the second quarter of 1996, compared to 1995 net income of
$224 million or $1.09 per share. Results for 1996 included CNW and, as a result
of the Resources' IPO, reflected approximately 83% of Resources' net income in
discontinued operations. Results for 1995 included CNW from May 1, 1995 and
reflected the Corporation's 100% ownership of Resources in discontinued
operations.
RESULTS OF CONTINUING OPERATIONS - The Corporation reported income from
continuing operations of $186 million ($0.90 per share) in the second quarter of
1996, a 24% improvement from 1995's results of $150 million ($0.73 per share).
Earnings for 1996 benefitted from improved operations at Union Pacific Railroad
Company (including CNW) and its affiliate, Missouri Pacific Railroad Company
(collectively, the Railroad), partially offset by slightly lower earnings at
Overnite Transportation Company (Overnite).
Operating revenues grew 7% to $2.01 billion from $1.87 billion in 1995,
reflecting increased volumes at the Railroad and Overnite and higher average
commodity revenue per car at the Railroad, offset by the absence of real estate
sales at the Corporation.
Operating expenses rose $87 million (6%) to $1.62 billion. Higher volumes at
the Railroad and Overnite, the addition of CNW and inflation contributed to
higher equipment and other rents ($35 million), materials and supplies
($15 million), salaries, wages and employee benefits ($14 million), and other
taxes ($7 million). Fuel and utility costs increased $37 million, reflecting
increased fuel prices and transportation volumes. Depreciation charges rose
$15 million--the result of the addition of CNW properties and UPC's continued
reinvestment in its equipment and rail infrastructure. Offsetting these expense
increases were an $18 million decline in real estate expenses--reflecting the
absence of real estate sales activity by the Corporation--and reduced car
repair accruals ($21 million), the result of increased demand from other
railroads for foreign line car repairs.
Operating income increased $51 million (15%) to $388 million for the quarter.
Interest expense increased $3 million, principally from higher debt levels
associated with strategic acquisitions offset by the favorable impact of the
Resources' IPO dividend and debt refinancing activities. Other income rose $10
million, primarily reflecting interest income on the IPO dividend notes
receivable from Resources.
Railroad - The Railroad earned $235 million for the quarter, a 7% increase from
$219 million in 1995, reflecting increased volumes and prices. Results in 1996
also included a $15 million increase in after-tax interest costs, primarily
related to the Southern Pacific first-step cash tender offer.
Operating revenues improved $147 million (9%) to $1.72 billion, as an 8% (over
105,000 carloads) increase in traffic--the result of both CNW volumes and base
business growth--combined with a 2% increase in average commodity revenue per
car, reflecting longer average length of haul, favorable traffic mix shifts and
pricing improvements.
Energy: Energy commodity revenue rose 23% to $386 million for the second quarter
of 1996 reflecting an 11% increase in carloadings and a 10% increase in average
revenue per car. Volume increases resulted from weather-related demand from
utilities to replenish stockpiles of Powder River Basin coal. Pricing
<PAGE> 12
improvements reflected a longer average length of haul, the result of the CNW
integration. The Railroad averaged 24 trains with increased tonnage per day out
of the Southern Powder River in 1996 compared to 22 trains per day in 1995,
despite an aggressive maintenance strategy which compressed a full season of
North Platte corridor repairs into five days. Energy volumes for the balance of
the year are expected to benefit from this compressed maintenance cycle.
Intermodal: Intermodal commodity revenue rose 4% to $224 million as an 8%
increase in average revenue per car--the result of aggressive pricing and a
favorable customer mix--was slightly offset by a 3% reduction in volumes--
reflecting reduced volumes from certain key customers due to a weakness in
imports.
Industrial Products: Industrial products commodity revenue increased 9% to $285
million. Revenue improvements reflected a 15% increase in carloadings--driven
primarily by growth in construction materials (stone, metallic minerals, lumber,
cement and steel)--offset by a 5% product-mix-related reduction in average
revenue per car.
Agricultural Products: Agricultural products commodity revenue grew 4% to $273
million, the result of a 9% increase in CNW-related carloadings offset by a 5%
reduction in average revenue per car--reflecting increased competition for
diminished grain supplies.
Chemicals: Chemicals commodity revenue increased 3% to $302 million, reflecting
a 3% increase in carloadings. Carloadings growth resulted from a 13% increase in
plastics volumes offset in part by reduced export fertilizer shipments and a
soft demand for liquid and dry chemicals. Average revenue per car was unchanged
for the quarter.
Automotive: Automotive commodity revenue rose 18% to $197 million primarily the
result of a 22% increase in carloadings, consisting of a 36% increase in auto
parts and a 16% increase in finished vehicles. Carloading growth reflected CNW
volumes, a 4% increase in auto industry unit sales, and strong northbound
Mexican business for both finished autos and auto parts. Average revenue per
car decreased 3% reflecting the increased mix of parts versus finished vehicles
carloadings.
Operating expenses advanced $89 million (7%) to $1.32 billion. Increased
volumes, the integration of CNW and inflation contributed to higher equipment
and other rents ($26 million), salaries, wages and employee benefits ($14
million), materials and supplies ($14 million) and other taxes ($6 million).
Fuel and utility costs rose $35 million, reflecting a 16% increase in fuel
prices and an 11% volume-related increase in fuel consumption slightly offset
by improved locomotive efficiency. Depreciation expense rose $15 million,
reflecting continued capital investment and the addition of CNW. Offsetting
these increases was reduced car repair accruals ($21 million), the result of
increased demand from other railroads for foreign line car repairs.
Operating income advanced $58 million (17%) to $407 million in 1996, while the
operating ratio improved 1.5 points to 76.4 in 1996 from 77.9 in 1995. Interest
expense increased $24 million, principally from higher debt levels associated
with the CNW and Southern Pacific acquisitions offset by the favorable impact of
debt refinancing activities.
<PAGE> 13
Trucking - During the second quarter, Overnite continued to implement its
strategic initiatives, aimed at better matching Overnite's operations to the
current trucking industry business environment. Actions taken included
workforce reductions, service center consolidations and repricing initiatives
targeting Overnite's lowest margin customers. Nonetheless, trucking industry
overcapacity and aggressive pricing from regional less-than-truckload (LTL) and
truckload carriers continued to impact Overnite's operating results. As a
result, Overnite reported a net loss of $12 million in 1996 compared to a net
loss of $10 million in 1995. Results for both periods included goodwill
amortization of $5 million.
Overnite's operating revenues advanced $15 million (6%) to $257 million as a 4%
increase in volumes combined with a 1% increase in average prices. Increased
volumes consisted of a 6% increase in LTL tonnage slightly offset by a 12%
decrease in truckload volumes, reflecting Overnite's re-emphasis of its core LTL
business.
Operating expenses increased $17 million to $274 million. Salaries, wages and
employee benefit costs increased $4 million due to wage and benefit inflation
slightly offset by workforce reductions. Overnite's efforts to balance traffic
lanes on longer-haul business through the use of intermodal rail service and
contract line-haul carriers resulted in a $9 million increase in rent and
purchased transportation expenses. Fuel costs rose $2 million, primarily
reflecting a 21% increase in fuel prices, while materials and supplies costs
also rose $2 million--largely due to volume growth. Overnite's operating loss
grew $2 million to $17 million in 1996, while Overnite's operating ratio
(including goodwill amortization) increased to 106.6 for the quarter from
106.2 in 1995.
Corporate Services and Other Operations - Expenses related to Corporate Services
and Other Operations (comprising corporate expenses, third-party interest
charges, intercompany interest allocations, other income and income taxes
related to the Corporation's holding company operations and the results of other
operating units) decreased $22 million to $37 million. This decrease largely
reflects lower Corporate interest costs, the result of the utilization of the
Resources' IPO dividend to reduce debt levels. Other operating units recorded
an operating loss of $2 million in 1996 compared to operating income of $3
million in 1995.
RESULTS OF DISCONTINUED OPERATIONS
Natural Resources - Resources' second quarter 1996 earnings declined $4 million
to $70 million, as higher average realized hydrocarbon prices and sales volumes
were more than offset by increased operating expenses and interest and
administrative costs associated with Resources' IPO. As a result of Resources'
October 1995 IPO, UPC recognized approximately 83% of Resources' 1996 net income
in discontinued operations. The Corporation's 1995 results reflected UPC's 100%
ownership of Resources in discontinued operations.
Operating revenues increased $87 million (25%) to $428 million, primarily as a
result of higher revenues from producing properties and plants, pipelines and
marketing operations. Producing property revenues increased $53 million (24%),
reflecting production volume growth in natural gas and natural gas liquids (NGL)
and increased hydrocarbon prices for all products. Natural gas production
increased 8%--primarily the result of Austin Chalk drilling success and property
acquisitions--while NGL volumes increased 40%, reflecting the processing of by-
passed Austin Chalk and Rockies gas and ethane recovery in the Rockies and
Canada. Depleted hydrocarbon storage supplies due to inclement winter weather
and
<PAGE> 14
increased demand for natural gas by utilities, resulting from severe summer
temperatures, caused natural gas, NGL and crude oil prices to rise 16%, 13% and
22%, respectively. Plants, pipelines and marketing revenues advanced $39
million, largely due to increases in plant volumes, the start-up and expansion
of pipelines in West Texas and the Austin Chalk, and higher average product
price realizations.
Operating expenses increased $55 million in 1996 to $308 million. Exploration
costs increased $10 million, largely the result of increased dry hole costs--
reflecting increased exploratory drilling activity in the current high price
environment. Plants, pipeline and marketing expenses increased $20 million to
$66 million, reflecting the expansion and start-up of West Texas and Austin
Chalk pipelines and higher gas plant hydrocarbon purchase costs. Depreciation
and depletion costs rose $14 million, primarily as a result of increased
production in the Austin Chalk. Production expenses increased $6 million
reflecting higher production volumes, while general and administrative costs
increased $4 million, principally resulting from costs associated with
operating Resources as a stand-alone company. Operating income improved to
$120 million in 1996 from $88 million a year ago. Interest expense increased
$11 million to $13 million, the result of debt incurred by Resources in
connection with its IPO dividend to UPC.
Six Months Ended June 30, 1996 Compared to June 30, 1995
CONSOLIDATED RESULTS - The Corporation reported net income for the first half
of 1996 of $400 million ($1.94 per share) compared to $415 million ($2.02 per
share) for the same period of 1995. Results for 1996 included CNW and, as a
result of the Resources' IPO, reflected approximately 83% of Resources' net
income in discontinued operations. Results for 1995 included CNW from May 1,
1995 and reflected the Corporation's 100% ownership of Resources.
RESULTS OF CONTINUING OPERATIONS - Income from continuing operations advanced
$13 million for the period to $293 million ($1.42 per share), as the positive
impact of the Railroad's CNW integration more than offset higher debt service
costs associated with the CNW and Southern Pacific acquisitions. Operating
revenues increased $442 million (12%) to $3.98 billion for the period
principally the result of the Railroad's operating revenue improvement of $444
million (15%)(reflecting the addition of CNW, increased base carloadings and a
higher average revenue per car).
Consolidated operating expenses rose $404 million (14%) to $3.33 billion. CNW
results, rail volume growth and inflation caused increases in salaries, wages
and employee benefits ($131 million), equipment and other rents ($100 million),
materials and supplies ($42 million), other taxes ($18 million), casualty
accruals ($14 million) and contracted transportation ($11 million). Increased
fuel prices and transportation volumes resulted in a $74 million increase in
fuel and utilities costs. Depreciation charges rose $49 million--reflecting
the addition of CNW properties and UPC's continued reinvestment in its equip-
ment and rail infrastructure. Offsetting these increases were a decline in real
estate expenses of $19 million reflecting the absence of real estate sales by
the Corporation and reduced car repair accruals ($26 million), the result of
increased demand by other railroads for foreign line car repairs.
Consolidated operating income advanced $38 million (6%) to $654 million for the
first half of 1996, principally reflecting a $69 million improvement at the
Railroad offset by a $22 million decline in operating results at Overnite.
Other
<PAGE> 15
income declined $20 million, primarily the result of reduced real estate sales
activity. Interest expense increased $30 million, principally from higher debt
levels associated with the CNW and Southern Pacific acquisitions offset by the
favorable impact of the Resources' IPO dividend and debt refinancing
activities. The Corporation's effective tax rate for the period decreased to
30.6% from 35.0% a year ago, reflecting a favorable first quarter 1996 IRS tax
settlement ($20 million) at the Railroad.
RESULTS OF DISCONTINUED OPERATIONS - Resources reported net income for the first
half of 1996 of $130 million compared to $135 million for the same period of
1995. As a result of Resources' October 1995 IPO, UPC recognized approximately
83% of Resources' 1996 net income in discontinued operations. The Corporation's
1995 results reflected UPC's 100% ownership of Resources in discontinued
operations. Operating revenues increased $152 million (23%) reflecting a 6%
increase in sales volumes and a 14% increase in average sales prices. Operating
expenses increased $109 million (22%), the result of higher volumes and
increased general and administrative expenses related to operating Resources as
a stand-alone company. Interest expense increased $23 million to $26 million,
the result of debt incurred by Resources in connection with its IPO dividend
to UPC.
CHANGES IN CONSOLIDATED FINANCIAL CONDITION
During the first six months of 1996, cash from continuing operations was $729
million compared to $671 million for the same period in 1995. This $58 million
increase primarily reflects lower CNW merger-related payments, improved
inventory management at the Railroad, increased income from continuing
operations and a higher proportion of non-cash expenses included in net income
offset by a volume related increase in accounts receivable.
Cash used in investing activities was $463 million in 1996 compared to $1.15
billion in 1995. This change in cash reflects the absence of the second quarter
1995 CNW acquisition, reduced proceeds from real estate sales, the absence of
$225 million in USPCI, Inc. sale proceeds collected in January 1995 and
increased capital expenditures--largely from fleet expansion and renewal at the
Railroad.
Outstanding debt levels decreased $209 million from December 31, 1995 to June
30, 1996 as cash provided by UPC's continuing and discontinued operations and
the depletion of year-end 1995 cash balances were utilized to fund capital
investments and dividends. The quarterly common stock dividend remained at
$0.43 per share in the second quarter of 1996. The ratio of debt to capital
employed improved to 48.3% at June 30, 1996 from 50.0% at December 31, 1995,
reflecting debt reduction and increased stockholders' equity, the result of
1996 earnings.
The STB's voting conference unanimous approval of the Corporation's acquisition
of Southern Pacific prompted Moody's Investors Service (Moody's) and Standard
and Poor's (S&P) to downgrade UPC's long-term debt ratings and to reduce long-
term debt ratings on the Corporation's primary subsidiaries. Moody's lowered
UPC's senior unsecured debt rating from A3 to Baa2 while S&P lowered UPC's
senior unsecured debt rating from A- to BBB. The Corporation's commercial paper
debt rating remained unchanged. Moody's and S&P's debt rating reductions are
not expected to impact UPC's annual interest expense significantly.
<PAGE> 16
OTHER DEVELOPMENTS
OTHER MATTERS
Labor Matters
Railroad: Approximately 90% of the Railroad's 35,000 employees are represented
by one of twelve national rail unions. The major freight railroads and the
United Transportation Union (representing 25% of the Railroad's unionized
workforce) and the Brotherhood of Locomotive Engineers (representing 15% of the
Railroad's unionized workforce) have reached a five-year settlement, which
includes a combination of general wage increases and lump-sum payments from 3%
to 3.5% annually, as well as increased work rule flexibility. In July 1996, the
leadership of the remaining major rail unions (including the Transportation
Communications Union, the Brotherhood of Maintenance of Way Employees and three
shop-craft unions) reached tentative labor agreements with the major freight
railroads. Ratification votes on these agreements are expected in the third
quarter of 1996. These events greatly reduce the possibility of rail strikes
during this round of negotiations. The terms of the ratified and tentative
agreements are not expected to have a material adverse affect on the
Corporation's results of operations.
Overnite: Overnite continues to resist the efforts of the International
Brotherhood of Teamsters (Teamsters) efforts to unionize Overnite service
centers. Since year-end 1995, six Overnite service centers have held union
elections--two of which voted for union representation--while the employees of
three service centers that previously voted for union representation filed
petitions with the National Labor Relations Board to decertify the Teamsters as
their union bargaining representative. Despite the Teamsters' efforts, less
than 9% of Overnite's workforce has voted for union representation. Overnite
has begun negotiations with the Teamsters at several of the unionized service
centers and is unable at this time to estimate the impact these negotiations
will have on its future operating results.
Accounting Pronouncements - In June 1996, the Financial Accounting Standards
Board issued Statement No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities," which provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings and which revises the accounting rules for
liabilities extinguished by an in-substance defeasance. This statement is
effective for transfers of financial assets and extinguishments of liabilities
occurring after December 31, 1996 and is not expected to have a material impact
on UPC's operating results or financial condition.
Commitments and Contingencies - There are various lawsuits pending against the
Corporation and certain of its subsidiaries. The Corporation is also subject to
Federal, state and local environmental laws and regulations and is currently
participating in the investigation and remediation of numerous sites. Where the
remediation costs can be reasonably determined, and where such remediation is
probable, the Corporation has recorded a liability. In addition, the Corpo-
ration has entered into commitments and provided guarantees for specific
financial and contractual obligations of its subsidiaries and affiliates. The
Corporation does not expect that the lawsuits, environmental costs, commitments
or guarantees will have a material adverse effect on its consolidated financial
condition, results of operations or liquidity.
<PAGE> 17
PART II. OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
Southern Pacific Acquisition: On November 30, 1995, Union Pacific Corporation
("UP"), Southern Pacific Rail Corporation ("SP") and various of their affiliates
filed an application (the "STB Application") seeking approval of the Interstate
Commerce Commission (which was succeeded by the Surface Transportation Board
(the "STB")) for the acquisition of control over SP and its affiliates by UP
and its affiliates, the proposed merger of SP with an affiliate of UP (the
"Merger"), and related transactions. After the filing of the STB Application,
the STB received evidentiary submissions and briefs in connection with the
proposed Merger. The STB heard oral arguments on the proposed Merger on
July 1, 1996 and held a voting conference on the proposed Merger on July 3,
1996. At the voting conference, the STB decided to approve the Merger subject
to a number of conditions, principally (a) the settlement agreement (as
described below) between UP/SP and Burlington Northern Railroad Company and the
Atchison, Topeka and Santa Fe Railroad Company (collectively, "BNSF") under
which BNSF will receive trackage rights over more than 4,100 miles of UP/SP
track and will purchase over 335 miles of UP/SP lines, augmented in a number of
ways to expand BNSF's ability to gain access to traffic (e.g., through
transloading facilities (facilities where goods are transferred between truck
and railcars) and build-ins of rail lines to exclusively-served customers,
through serving new shipper facilities on the lines over which it will have
trackage rights, and opening to BNSF of 50% of all traffic now committed under
contracts to UP or SP by shippers served by UP and SP and no other railroad),
(b) the settlement agreement between UP/SP and the Chemical Manufacturers
Association which provides certain additional protections to shippers, (c) the
settlement agreement between UP/SP and Utah Railway Company ("Utah Railway")
under which Utah Railway will receive access to certain coal mines and loading
facilities in Utah and trackage rights over SP from Utah Railway's line in Utah
to Grand Junction, Colorado, (d) the grant of trackage rights to the Texas
Mexican Railway ("Tex Mex") over UP/SP lines between Corpus Christi/Robstown,
Texas, and Beaumont, Texas, via Houston, Texas, restricted to traffic moving on
Tex Mex's Laredo-Corpus Christi/Robstown line, including terminal-area trackage
rights in Houston, (e) environmental mitigation conditions, including a
condition restricting increases in train volumes through Reno, Nevada, and
Wichita, Kansas, for 18 months following the Merger while a consultant conducts
a study of possible measures to reduce the potential adverse impact of
increased rail traffic through those communities and the STB decides upon
such measures, (f) standard labor protective conditions, and (g) a 5-year
oversight process, pursuant to which the STB will review whether the conditions
imposed on the Merger have effectively addressed competitive issues. A final
written STB decision regarding the proposed Merger is expected by August 12,
1996.
The obligations of UP and certain of its affiliates to consummate the Merger are
conditioned upon, among other things, the issuance by the STB of a decision
(which decision shall not have been stayed or enjoined) that (A) constitutes a
final order approving, exempting or otherwise authorizing consummation of the
Merger and all other transactions contemplated by the related merger agreement
(as such agreement has been amended, the "Merger Agreement") and other ancillary
agreements (or subsequently presented to the STB by agreement of UP and SP) as
may require such authorization and (B) does not (1) change or disapprove of the
merger consideration or other material provisions of the Merger Agreement or (2)
impose on UP, SP or any of their respective subsidiaries any other terms or
conditions (including, without limitation, labor protective provisions but
<PAGE> 18
excluding conditions heretofore imposed in New York Dock Railway-Control-
Brooklyn Eastern District, 360 I.C.C. 60 (1979)) that materially and adversely
affect the long-term benefits expected to be received by UP from the
transactions contemplated by the Merger Agreement. If, as expected, the final
written decision of the STB does not contain terms materially different from
those voted upon by the STB on July 3, 1996, UP has indicated that it expects
to proceed with the transaction in accordance with and subject to the terms and
conditions of the Merger Agreement.
Although the final written decision of the STB is expected by August 12, 1996,
there is no assurance that STB approval will be obtained by such date. In
addition, any appeals from the STB final order might not be resolved for a
substantial period of time after the entry of such order by the STB.
On September 25, 1995, UP and certain of its subsidiaries, SP and certain of its
subsidiaries, and BNSF entered into an agreement (the "BNSF Agreement") pursuant
to which, among other things, UP and SP, on the one hand, and BNSF, on the other
hand, agreed to grant each other various trackage rights and UP and SP agreed to
sell certain lines to BNSF following the Merger, and BNSF agreed not to oppose
UP's application to control SP in UP's case before the STB, not to seek any
conditions in such case, not to support any requests for conditions filed by
other parties and not to assist other parties in pursuing their requests. Among
other things, these rights will allow BNSF to serve shippers who would otherwise
lose a choice of two railroads as a result of the Merger. The trackage rights
and line sales pursuant to the BNSF Agreement will be effective only upon UP's
acquisition of control of SP. UP and SP agreed to ask the STB to impose the
BNSF Agreement as a condition to approval of UP's application for control of
SP. During the pendency of UP's case before the STB, UP and SP agreed not to
enter into agreements with other parties, without BNSF's written consent, which
would grant rights to other parties granted to BNSF or inconsistent with those
granted to BNSF which would substantially impair the overall economic value of
the rights granted to BNSF under the BNSF Agreement. The BNSF Agreement was
amended on June 27, 1996 to confer certain additional rights on BNSF.
Pursuant to the BNSF Agreement, UP and SP will share more than 4,100 miles of
track with BNSF under trackage rights and will sell more than 335 miles of track
to BNSF. The sale of track will total approximately $150 million. As part of
the BNSF Agreement, UP will also obtain certain trackage and access rights from
BNSF. Trackage rights are a contractual arrangement between railroads which
generally allow one railroad to operate its trains with its own crew over the
tracks of another railroad for a fee.
On July 12, 1996, the City of Reno, Nevada filed a complaint against the STB in
the U.S. District Court for the District of Nevada, seeking a writ of mandamus
directing the STB to prepare, with regard to alleged impacts of the Merger on
Reno and the surrounding area, an environmental impact statement pursuant to the
National Environmental Policy Act and a conformity determination pursuant to the
Clean Air Act. The STB would also be required to order UP/SP to maintain the
status quo with respect to rail operations in the Reno area pending
environmental review. UP believes the suit is without merit because, among
other things, the District Court lacks jurisdiction, mandamus is inappropriate
under the circumstances, and neither an environmental impact statement nor a
conformity determination is required. UP and SP intervened as parties and will
seek the suit's dismissal. UP anticipates that the STB will also seek
dismissal of the suit.
<PAGE> 19
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2 - Amended and Restated Agreement and Plan of Merger, dated as of
July 12, 1996, among the Union Pacific Corporation ("UPC"),
Union Pacific Railroad Company ("UPRR",) Southern Pacific Rail
Corporation ("SP"), UP Holding Company, Inc. ("UP Holding") and
Union Pacific Merger Co. ("UP Merger"), is incorporated herein
by reference to Annex B to the Joint Proxy Statement/Prospectus
included in Post-Effective Amendment No. 2 to Union Pacific's
Registration Statement on Form S-4 (No. 33-64707).
3 - Union Pacific's By-Laws, as Amended Effective as of
July 25, 1996.
10(a) Amended and Restated Anschutz Shareholders Agreement, dated as
of July 12, 1996, among UPC, UPRR, The Anschutz Corporation
("TAC"), Anschutz Foundation (the "Foundation"), and Mr.
Philip F. Anschutz ("Mr. Anschutz"), is incorporated herein by
referenced to Annex D to the Joint Proxy Statement/Prospectus
included in Post-Effective Amendment No. 2 to Union Pacific's
Registration Statement on Form S-4 (No. 33-64707).
10(b) Amended and Restated MSLEF Shareholder Agreement, dated as of
July 12, 1996, between UPC and The Morgan Stanley Leveraged
Equity Fund II, L.P., is incorporated herein by reference to
Annex E to the Joint Proxy Statement/Prospectus included in
Post-Effective Amendment No. 2 to Union Pacific's Registration
Statement on Form S-4 (No. 33-64707).
10(c) Amended and Restated Parent Shareholders Agreement, dated as
of July 12, 1996, among UPC, UP Merger and SP, is incorporated
herein by reference to Annex F to the Joint Proxy
Statement/Prospectus included in Post-Effective Amendment No.
2 to Union Pacific's Registration Statement on Form S-4 (No.
33-64707).
10(d) Amended and Restated Anschutz/Spinco Shareholders Agreement,
dated as of July 12, 1996, among Union Pacific Resources Group
Inc. ("Resources"), TAC, the Foundation and Mr. Anschutz, is
incorporated herein by reference to Annex G to the Joint Proxy
Statement/Prospectus included in Post-Effective Amendment No.
2 to Union Pacific's Registration Statement on Form S-4 (No.
33-64707).
10(e) Amended and Restated Registration Rights Agreement, dated as
of July 12, 1996, among UPC, TAC and the Foundation, is
incorporated herein by reference to Annex H to the Joint Proxy
Statement/Prospectus included in Post-Effective Amendment No.
2 to Union Pacific's Registration Statement on Form S-4 (No.
33-64707).
<PAGE> 20
10(f) Amended and Restated Registration Rights Agreement, dated as
of July 12, 1996, among Resources, TAC and the Foundation, is
incorporated herein by reference to Annex I to the Joint Proxy
Statement/Prospectus included in Post-Effective Amendment No.
2 to Union Pacific's Registration Statement on Form S-4 (No.
33-64707).
10(g) Amended and Restated Registration Rights Agreement, dated as
of July 12, 1996, among UPC, UP Holding, UP Merger and SP, is
incorporated herein by reference to Annex J to the Joint Proxy
Statement/Prospectus included in Post-Effective Amendment No.
2 to Union Pacific's Registration Statement on Form S-4 (No.
33-64707).
11 - Computation of earnings per share.
12 - Computation of ratio of earnings to fixed charges.
27 - Financial data schedule.
(b) Reports on Form 8-K
None.
<PAGE> 21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 9, 1996
UNION PACIFIC CORPORATION
(Registrant)
/s/ L. White Matthews, III
-----------------------------------
L. White Matthews, III,
Executive Vice President-Finance
(principal financial officer,
director and duly authorized officer)
<PAGE>
UNION PACIFIC CORPORATION
EXHIBIT INDEX
Exhibit No. Description
2 Amended and Restated Agreement and Plan of Merger, dated
as of July 12, 1996, among the Union Pacific Corporation
("UPC"), Union Pacific Railroad Company ("UPRR",)
Southern Pacific Rail Corporation ("SP"), UP Holding
Company, Inc. ("UP Holding") and Union Pacific Merger
Co. ("UP Merger"), is incorporated herein by reference
to Annex B to the Joint Proxy Statement/Prospectus
included in Post-Effective Amendment No. 2 to Union
Pacific's Registration Statement on Form S-4 (No. 33-64707).
3 Union Pacific's By-Laws, as Amended Effective as
of July 25, 1996.
10(a) Amended and Restated Anschutz Shareholders Agreement,
dated as of July 12, 1996, among UPC, UPRR, The Anschutz
Corporation ("TAC"), Anschutz Foundation (the
"Foundation"), and Mr. Philip F. Anschutz ("Mr.
Anschutz"), is incorporated herein by referenced to
Annex D to the Joint Proxy Statement/Prospectus included
in Post-Effective Amendment No. 2 to Union Pacific's
Registration Statement on Form S-4 (No. 33-64707).
10(b) Amended and Restated MSLEF Shareholder Agreement, dated
as of July 12, 1996, between UPC and The Morgan Stanley
Leveraged Equity Fund II, L.P., is incorporated herein
by reference to Annex E to the Joint Proxy
Statement/Prospectus included in Post-Effective
Amendment No. 2 to Union Pacific's Registration
Statement on Form S-4 (No. 33-64707).
10(c) Amended and Restated Parent Shareholders Agreement,
dated as of July 12, 1996, among UPC, UP Merger and SP,
is incorporated herein by reference to Annex F to the
Joint Proxy Statement/Prospectus included in Post-Effective
Amendment No. 2 to Union Pacific's Registration Statement
on Form S-4 (No. 33-64707).
10(d) Amended and Restated Anschutz/Spinco Shareholders
Agreement, dated as of July 12, 1996, among Union
Pacific Resources Group Inc. ("Resources"), TAC, the
Foundation and Mr. Anschutz, is incorporated herein by
reference to Annex G to the Joint Proxy
Statement/Prospectus included in Post-Effective
Amendment No. 2 to Union Pacific's Registration
Statement on Form S-4 (No. 33-64707).
10(e) Amended and Restated Registration Rights Agreement,
dated as of July 12, 1996, among UPC, TAC and the
Foundation, is incorporated herein by reference to Annex
H to the Joint Proxy Statement/Prospectus included in
Post-Effective Amendment No. 2 to Union Pacific's
Registration Statement on Form S-4 (No. 33-64707).
10(f) Amended and Restated Registration Rights Agreement,
dated as of July 12, 1996, among Resources, TAC and the
Foundation, is incorporated herein by reference to Annex
I to the Joint Proxy Statement/Prospectus included in
Post-Effective Amendment No. 2 to Union Pacific's
Registration Statement on Form S-4 (No. 33-64707).
10(g) Amended and Restated Registration Rights Agreement,
dated as of July 12, 1996, among UPC, UP Holding, UP
Merger and SP, is incorporated herein by reference to
Annex J to the Joint Proxy Statement/Prospectus included
in Post-Effective Amendment No. 2 to Union Pacific's
Registration Statement on Form S-4 (No. 33-64707).
11 Computation of earnings per share
12 Computation of ratio of earnings to
fixed charges
27 Financial data schedule
<PAGE> COVER
Exhibit 3
------------------------------------------
------------------------------------------
BY-LAWS
OF
UNION PACIFIC CORPORATION
As Amended Effective as of July 25, 1996
-----------------------------------------
<PAGE>
BY-LAWS
OF
UNION PACIFIC CORPORATION
(AS AMENDED EFFECTIVE AS OF JULY 25, 1996)
ARTICLE I
STOCKHOLDERS MEETINGS
SECTION 1. Annual meetings of the stockholders of this Company shall be
held in Salt Lake City, Utah. Special meetings of the stockholders of this
Company may be held at such place or places as shall be ordered by the Board of
Directors or Executive Committee, but, unless otherwise ordered, such meetings
shall be held in Salt Lake City, Utah.
SECTION 2. Annual meetings of the stockholders, for the purpose of
electing directors and transacting any other business, shall be held at such
time as shall be ordered by the Board of Directors or Executive Committee, but,
unless otherwise ordered, shall be held at 8:30 a.m. on the third Friday of
April in each year.
SECTION 3. A special meeting of the stockholders may be called by the
Board of Directors, the Executive Committee, or by any other person who, at such
time, is authorized by the Utah Revised Business Corporation Act (the "Act") to
call a special meeting of stockholders. A request by a stockholder for a
special meeting must be accompanied by a statement of purposes which includes
at least the information set out in clauses (i) through (vi) of Section 10(e)
of Article I of these By-Laws. The objects of a special meeting shall be
stated in the order therefor, and the business transacted shall be confined to
such objects.
SECTION 4. Notice of all meetings of the stockholders shall be given,
either personally or by mail, not less than ten nor more than sixty days prior
thereto. The notice of all special meetings shall state the objects thereof.
The failure to give notice of an annual meeting, or any irregularity in the
notice, shall not affect the validity of such annual meeting or of any
proceedings thereat. Any stockholder may consent in writing to the holding of
a special meeting without notice. A stockholder's attendance at a meeting: (i)
waives objection to lack of notice or defective notice of the meeting, unless
the stockholder at the beginning of the meeting objects to holding the meeting
or transacting business at the meeting because of lack of notice or defective
notice; and (ii) waives objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the stockholder objects to considering the matter when it is
presented.
SECTION 5. The Board of Directors or the Executive Committee may fix in
advance a day and hour not more than seventy days preceding any annual or
special meeting of stockholders or action of stockholders as the time for the
determination of stockholders entitled to vote at such meeting or to take such
action. Stockholders of record at the time so fixed by the Board of Directors
or the
<PAGE>
Executive Committee and only such stockholders shall be entitled to vote at such
meeting. Each share of stock shall entitle such record holder thereof to one
vote, in person or by proxy in writing.
SECTION 6. The Chairman of the Board, and in his absence the Chief
Executive Officer, and in their absence the President, and in their absence one
of the Vice Presidents, shall call meetings of the stockholders to order and act
as chairman of such meetings. In the absence of all these officers, the Board
of Directors may appoint a chairman of the meeting to act in such event; but if
the Board shall not make such appointment, then, in the absence of all of these
officers, any stockholder or proxy of any stockholder may call the meeting to
order, and a chairman shall be elected.
SECTION 7. The Secretary of the Company shall act as secretary at all
meetings of the stockholders; but the Board of Directors or Executive Committee
may designate an Assistant Secretary for that purpose before the meeting, and if
no such designation shall have been made, then the presiding officer at the
meeting may appoint any person to act as secretary of the meeting.
SECTION 8. At each meeting of the stockholders the polls shall be opened
and closed and the ballots and proxies shall be received and taken charge of by
two inspectors. Such inspectors shall be appointed before the meeting by the
Board of Directors or by the Executive Committee, and if no such appointment
shall have been made, then by the presiding officer at the meeting; and if for
any reason any of the inspectors previously appointed shall fail to attend, or
refuse or be unable to serve, then inspectors, in place of any so failing to
attend or refusing or unable to serve, shall be appointed by the presiding
officer at the meeting. Such inspectors need not be stockholders.
SECTION 9. Stockholders may take action on a matter at a meeting only if
a quorum exists with respect to that matter. Unless the articles of
incorporation or the Act provide otherwise, a majority of the votes entitled to
be cast on the matter, represented in person or by proxy, constitutes a quorum
for action on that matter. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. Once a share
is represented for any purpose at a meeting, it is deemed present for quorum
purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for that adjourned meeting.
If a quorum exists, action on a matter, other than the election of directors, by
stockholders is approved if the votes cast favoring the action exceed the votes
cast opposing the action, unless the articles of incorporation or the Act
require a greater number of affirmative votes. Directors are elected by a
plurality of the votes cast by the shares entitled to vote in the election at a
meeting at which a quorum is present.
SECTION 10. (a) At any annual meeting of stockholders, only such business
shall be conducted as shall have been brought before the meeting (i) by or at
the direction of the Board of Directors or the Executive Committee or (ii) by
any stockholder who complies with the procedures set forth in this Section 10.
(b) No business may be transacted at any annual meeting of
stockholders, other than business that is either (i) specified in the notice of
meeting (or any supplement thereto) given pursuant to Section 4 of Article I of
these By-Laws, (ii) otherwise properly brought before such meeting of
stockholders by or at the direction of the Board of Directors or (iii) otherwise
<PAGE>
properly brought before such meeting by any stockholder (A) who is a stockholder
of record on the date of the giving of the notice by the stockholder provided
for in this Section 10 and on the record date for the determination of stock-
holders entitled to vote at such annual meeting of stockholders and (B) who
complies with the notice procedures set forth in this Section 10.
(c) No business may be transacted at any special meeting of
stockholders, other than business that is specified in the notice of meeting (or
any supplement thereto) given pursuant to Section 4 of Article I of these By-
Laws.
(d) In addition to any other applicable requirements, for
business to be properly brought before a meeting of stockholders by a stock-
holder pursuant to clause (b) of this Section 10 such stockholder must have
given timely notice thereof in proper written form to the Secretary of the
Company. To be timely, a stockholder's notice to the Secretary of the Company
pursuant to clause (b) of this Section 10 must be delivered to or mailed and
received at the principal executive offices of the Company not less than sixty
(60) days nor more than ninety (90) days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided, however, that
in the event that the annual meeting of stockholders is called for a date that
is not within thirty (30) days before or after such anniversary date, notice by
the stockholder in order to be timely must be so received not later than the
close of business on the tenth (10th) day following the day on which notice of
the date of the annual meeting of stockholders was mailed or public disclosure
of the date of the meeting of stockholders was made, whichever first occurs.
(e) To be in proper written form, a stockholder's notice to
the Secretary of the Company pursuant to clause (b) of this Section 10 must set
forth as to each matter such stockholder proposes to bring before the annual
meeting of stockholders (i) a brief description of the business desired to be
brought before the meeting of stockholders and the reasons for conducting such
business at such meeting of stockholders, (ii) the name and record address of
such stockholder, (iii) the class or series and number of shares of capital
stock of the Company which are owned beneficially or of record by such stock-
holder as of the record date for the meeting (if such date shall then have been
made publicly available and shall have occurred) and as of the date of such
notice, (iv) a description of all arrangements or understandings between such
stockholder and any other person or persons (including their names) in
connection with the proposal of such business by such stockholder and any
material interest of such stockholder in such business, (v) any other
information which would be required to be disclosed in a proxy statement or
other filings required to be made in connection with the solicitation of
proxies for the proposal pursuant to Section 14 of the Securities Exchange Act
of 1934 (the "Exchange Act"), and the rules and regulations promulgated
thereunder if such stockholder were engaged in such a solicitation (other than
a solicitation described in Rules 14a-2(a) or 14a-2(b) promulgated under the
Exchange Act), and (vi) a representation that such stockholder intends to
appear in person or by proxy at the meeting of stockholders to bring such
business before the meeting.
(f) No business shall be conducted at the annual meeting of
stockholders except business brought before the meeting of stockholders in
accordance with the procedures set forth in this Section 10, provided, however,
that, once business has been properly brought before the meeting of stockholders
in accordance with such procedures, nothing in this Section 10 shall be deemed
to preclude discussion by any stockholder of any such business.
<PAGE>
(g) If the chairman of a meeting of stockholders determines
that business was not properly brought before a meeting of stockholders, the
chairman shall declare to the meeting that the business was not properly brought
before the meeting and such business shall not be transacted.
SECTION 11. (a) Subject to the rights of the holders of any series of
Preferred Stock then outstanding, only persons who are nominated in accordance
with the following procedures shall be eligible for election as directors of the
Company. Nominations of persons for election to the Board of Directors may be
made at any annual meeting of stockholders, or at any special meeting of
stockholders called for the purpose of electing directors, (i) by or at the
direction of the Board of Directors or the Executive Committee or (ii) by any
stockholder of the Company (A) who is a stockholder of record on the date of the
giving of the notice provided for in this Section 11 and on the record date for
the determination of stockholders entitled to vote at such meeting and (B) who
complies with the notice procedures set forth in this Section 11.
(b) In addition to any other applicable requirements for a
nomination to be made by a stockholder pursuant to clause (a) of this Section
11, such stockholder must have given timely notice thereof in proper written
form to the Secretary of the Company.
(c) To be timely, a stockholder's notice to the Secretary of
the Company pursuant to clause (a) of this Section 11 must be delivered to or
mailed and received at the principal executive offices of the Company (i) in the
case of an annual meeting of stockholders, not less than sixty (60) days nor
more than ninety (90) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders, provided, however, that in the event
that the annual meeting of stockholders is called for a date that is not within
thirty (30) days before or after such anniversary date, notice by the stock-
holder in order to be timely must be so received not later than the close of
business on the tenth (10th) day following the day on which notice of the date
of the annual meeting of stockholders was mailed or public disclosure of the
date of the annual meeting was made, whichever first occurs, and (ii) in the
case of a special meeting of stockholders called for the purpose of electing
directors, not later than the close of business on the tenth (10th) day
following the day on which notice of the date of the special meeting of stock-
holders was mailed or public disclosure of the date of the special meeting of
stockholders was made, whichever first occurs.
(d) To be in proper written form, a stockholder's notice to
the Secretary of the Company pursuant to clause (a) of this Section 11 must set
forth (i) as to each person whom the stockholder proposes to nominate for
election as a director (A) the name, age, business address and residence address
of the person, (B) the principal occupation or employment of the person, (C) the
class or series and number of shares of capital stock of the Company which are
owned beneficially or of record by the person as of the record date for the
meeting (if such date shall then have been made publicly available and shall
have occurred) and as of the date of such notice and (D) any other information
relating to the person that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with solicitations
of proxies for election of directors pursuant to Section 14 of the Exchange Act,
and the rules and regulations promulgated thereunder; and (ii) as to the
stockholder giving the notice (A) the name and record address of such
stockholder, (B) the class or series and number of shares of capital stock of
the Company which are owned beneficially or of record by such stockholder as of
the record date for the meeting (if such date shall then have been made publicly
available and shall have occurred) and as of the date of such notice, (C) a
<PAGE>
description of all arrangements or understandings between such stockholder and
each proposed nominee and any other person or persons (including their names)
pursuant to which the nominations are to be made by such stockholder, (D) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the persons named in its notice and (E) any other
information relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder (other than a
solicitation described in Rules 14a-2(a) or 14a-2(b) promulgated under the
Exchange Act). Such notice must be accompanied by a written consent of each
proposed nominee to being named as a nominee and to serve as a director if
elected.
(e) No person shall be eligible for election as a director
of the Company unless nominated in accordance with the procedures set forth in
this Section 11. If the chairman of the meeting determines that a nomination
was not made in accordance with the foregoing procedures, the chairman shall
declare to the meeting that the nomination was defective and such defective
nomination shall be disregarded.
SECTION 12. If and to the extent authorized by the Board in connection
with a particular meeting, stockholders may participate in a meeting of
stockholders, and such meetings may be conducted through the use of, any means
of telecommunication permitted under the Act.
<PAGE>
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. All corporate powers shall be exercised by or under the
authority of, and the business and affairs of the Company shall be managed under
the direction of, the Board of Directors, which shall consist of seventeen
members. Vacancies and newly created directorships resulting from any increase
in the authorized number of directors may be filled by a vote of the Board and,
if the directors remaining in office consist of fewer than a quorum of the
Board, a majority of the directors then in office, though less than a quorum,
may fill the vacancy. A director elected to fill a vacancy shall be elected
for the unexpired term of his predecessor in office. Any director appointed by
the Board of Directors to fill a directorship caused by an increase in the
number of directors shall serve until the next annual meeting or a special
meeting of the stockholders called for the purpose of electing directors.
SECTION 2. Regular meetings of the Board of Directors shall be held at
8:30 a.m. on such day in such months as the Board shall from time to time
designate, and no further notice of such regular meetings shall be required.
Special meetings shall be held whenever called by order of the Chairman or the
Executive Committee or any five members of the Board. Notice of Special
meetings shall be given, at least one day prior thereto, by personal service of
written notice upon the directors or by delivering the same at, or transmitting
the same by first class mail, facsimile transmission, telephone or other
electronic means to, their respective residences or offices. Any director may
consent in writing to the holding of a special meeting without notice, and the
attendance or participation of any director at a special meeting shall
constitute a waiver by him of call and notice thereof and a consent to the
holding of said meeting and the transaction of any corporate business thereat,
unless the director at the beginning of the meeting, or promptly upon the
director's arrival, objects to holding the meeting or transacting business
thereat because of lack of notice or defective notice, and does not thereafter
vote for or assent to the action taken at the meeting. Meetings of the Board
of Directors may be held at such place or places as shall be ordered by the
Executive Committee or by a majority of the directors in office, but unless
otherwise ordered, all meetings of the Board of Directors shall be held at the
principal executive offices of the Company in Bethlehem, Pennsylvania.
SECTION 3. A majority of the number of directors prescribed by Article II,
Section 1 shall constitute a quorum at all meetings of the Board. If a quorum
be not present at any meeting, a majority of the directors present may adjourn
the meeting until a later day or hour.
SECTION 4. Each director, other than active employees of the Company, or
of any subsidiary of the Company, shall be paid an annual retainer in an amount
equal to $60,000, a portion of which may be required to be deferred as
determined by the Board of Directors, and each such director who shall serve as
the Chairman or a Co-Chairman of a Committee of the Board shall receive an
additional annual retainer of $6,000, each retainer payable quarterly at the
end of the quarter, except that directors who attend fewer than 75% of the
Board and Committee meetings on which they serve will be paid 75% of the annual
retainer, plus a reasonable allowance for transportation and other expenses
incurred by such director in going to any meeting of the Board of Directors, or
of any Committee of the Board, and returning to such director's place of
residence.
<PAGE>
ARTICLE III
EXECUTIVE COMMITTEE
SECTION 1. There shall be an Executive Committee consisting of such number
of directors as shall be elected thereto by the vote of the majority of the
directors then in office, whose terms of office shall continue during the
pleasure of the Board, and in addition the Chairman of the Board, the Chief
Executive Officer, the Chairman of the Executive Committee and the President, ex
officio. The Executive Committee shall, when the Board of Directors is not in
session, have all the powers of the Board of Directors to manage and direct all
the business and affairs of the Company in all cases in which specific
directions shall not have been given by the Board of Directors.
SECTION 2. Meetings of the Executive Committee may be called at any time
by the Chairman of the Board or a majority of the members of the Committee, to
convene at such time and place as may be designated. The rules regarding notice
of meetings of the Board set forth in Section 2 of Article II of these By-Laws
shall apply to meetings of the Executive Committee.
SECTION 3. A majority of the members of the Committee shall constitute a
quorum. If a quorum be not present at any meeting, the member or members of the
Committee present may adjourn the meeting until a later day or hour.
<PAGE>
ARTICLE IV
OFFICERS AND AGENTS
SECTION 1. There may be elected by the Board of Directors from its members
a Chairman of the Board, a Chief Executive Officer, a President, a Chief
Operating Officer, one or more Vice Chairmen of the Board, and a Chairman of the
Executive Committee, and there may also be elected by the Board of Directors an
Executive Vice President-Finance, a Senior Vice President-Human Resources, a
Vice President-Taxes, a General Counsel, a Controller, a Secretary, a Treasurer
and such other Executive Vice Presidents, Senior Vice Presidents and Vice
Presidents as the Board shall determine, and there may also be appointed by the
Board of Directors or Executive Committee such Assistant Secretaries, Assistant
Treasurers, Assistant Controllers, Associate General Counsels, Assistant General
Counsels, General Tax Counsels, Associate General Tax Counsels and other
officers and agents as the Board of Directors or Executive Committee shall from
time to time determine.
SECTION 2. The Chairman of the Board shall preside, when present, at
meetings of the Board of Directors and at meetings of the Executive Committee
and shall perform such other duties and possess such powers as may be
prescribed or conferred by the Board of Directors or the Chief Executive
Officer.
SECTION 3. The Chief Executive Officer shall have general supervision of
all departments and offices of the Company and of the interest of the Company in
all companies controlled by it. He shall preside, in the absence of the
Chairman of the Board, at meetings of the Board of Directors and at meetings of
the Executive Committee.
SECTION 4. The President shall preside, in the absence of the Chairman of
the Board, at meetings of the Board of Directors and the Executive Committee and
shall perform such duties and possess such powers as may be prescribed or
conferred by the Board of Directors or the Chief Executive Officer.
SECTION 5. The Chief Operating Officer shall have day to day operating
responsibilities for the affairs of the Company, reporting to the Chief
Executive Officer, and shall perform such duties as may be prescribed or
conferred by the Board of Directors or the Chief Executive Officer.
SECTION 6. The Chairman of the Executive Committee shall preside, in the
absence of the Chairman of the Board and the President, at meetings of the Board
of Directors and the Executive Committee and shall perform such duties and
possess such powers as may be prescribed or conferred by the Board of Directors,
the Executive Committee or the Chief Executive Officer.
SECTION 7. The Vice Chairmen of the Board shall perform such duties and
possess such powers as may be prescribed or conferred by the Board of Directors
or the Chief Executive Officer.
SECTION 8. The Executive Vice Presidents and Senior Vice Presidents shall
perform such duties as may be prescribed or conferred by the Chief Executive
Officer.
SECTION 9. The Executive Vice President-Finance shall have the direction
and management of the financial affairs, investments, strategic planning and
corporate development of the Company and of the offices in charge of the
Controller, the Treasurer and the Vice President-Taxes, and shall perform such
other duties as may be prescribed or conferred by the Chief Executive Officer.
<PAGE>
SECTION 10. The Senior Vice President-Human Resources shall have the
direction and management of the human resources functions of the Company, and
shall perform such other duties as may be prescribed or conferred by the Chief
Executive Officer.
SECTION 11. The General Counsel shall have the direction and management
of all legal business of the Company except as otherwise provided in Sections 12
and 19 of this ARTICLE IV, shall perform such duties respecting legal matters as
shall be assigned to him by the Chief Executive Officer, and shall perform such
other duties as may be prescribed or conferred by the Chief Executive Officer.
SECTION 12. The Vice President-Taxes shall, under the control of the
Executive Vice President-Finance, have charge of all aspects of Federal,
foreign, state and local taxes, and shall perform such other duties as may be
assigned by the Executive Vice President-Finance.
SECTION 13. The other Vice Presidents elected from time to time shall
perform such duties and possess such powers as may be prescribed or conferred by
the Board of Directors or the Chief Executive Officer.
SECTION 14. Except as otherwise provided herein or directed by the Board
of Directors, the Controller shall have immediate charge of the general books,
accounts and statistics of the Company and shall be the custodian of all
vouchers, drafts, invoices and other evidences of payment and all bonds,
interest coupons and other evidences of indebtedness which shall have been
canceled. He is authorized to approve for payment by the Treasurer vouchers,
payrolls, drafts or other accounts. He shall be furnished by the Assistant
Controllers of the Company periodically or specially as requested by him with
the approval of and in form prescribed by the Executive Vice President-Finance,
statements of operating revenues and expenses and estimates thereof and of
expenditures and estimates on all other accounts; and copies of all statistical
data that may be compiled in regular course and also all other information in
reference to the financial affairs and operations of the Company and of any
subsidiary company that may be required by the Executive Vice President-Finance
or the Board of Directors. He shall submit for each regular meeting of the
Board of Directors, and, at such other times as may be required by said Board
or the Executive Vice President-Finance, statements of operating results, of
cash resources and requirements and of appropriations for Capital Expenditures,
and shall perform such other duties as the Executive Vice President-Finance may
from time to time direct.
The Assistant Controllers shall exercise such of the powers and perform
such of the duties of the Controller with respect to accounting and approving or
authorizing payments as shall be assigned to them by the Controller.
SECTION 15. The Secretary shall attend all meetings of the stockholders,
the Board of Directors and the Executive Committee, and keep a record of all
their proceedings. He shall procure and keep in his files copies of the minutes
of all meetings of the stockholders, boards of directors and executive
committees of all companies a majority of whose capital stock is owned by this
Company. He shall be the custodian of the seal of the Company. He shall have
power to affix the seal of the Company to instruments, the execution of which
is authorized by these By-Laws or by action of the Board of Directors or
Executive Committee, and to attest the same. He shall have supervision of the
issuance, transfer and registration of the capital stock and debt securities of
the Company. He shall perform such other duties as may be assigned to him by
the Board of Directors or the Chief Executive Officer.
<PAGE>
The Assistant Secretaries shall have power to affix the seal of the Company
to instruments, the execution of which is authorized by these By-Laws or by
action of the Board of Directors or Executive Committee, and to attest the same,
and shall exercise such of the other powers and perform such of the other duties
of the Secretary as shall be assigned to them by the Secretary.
SECTION 16. Except as otherwise provided herein or directed by the Board
of Directors, the Treasurer shall be the custodian of all moneys, stocks, bonds,
notes and other securities of the Company. He is authorized to receive and
receipt for stocks, bonds, notes and other securities belonging to the Company
or which are received for its account. All stocks, bonds, notes and other
securities in the custody of the Treasurer shall be held in the safe deposit
vaults of the Company or in one or more depositories selected by the Treasurer
or other officer authorized by the Board of Directors, in each case subject to
access thereto as shall from time to time be authorized or required by the Board
of Directors, the Chief Executive Officer, or the Treasurer. Stocks, bonds,
notes and other securities shall be deposited in the safe deposit vaults or
depositories, or withdrawn from them, only by persons and pursuant to procedures
as shall be determined by the Board of Directors, the Chief Executive Officer or
the Treasurer. The Treasurer is authorized and empowered to receive and collect
all moneys due to the Company and to receipt therefor. All moneys received by
the Treasurer shall be deposited to the credit of the Company in such
depositories as shall be designated by the Board of Directors, the Chief
Executive Officer, the Treasurer or such other officers as may be authorized by
the Board of Directors; and the Treasurer or other officer designated by the
Treasurer may endorse for deposit therein all checks, drafts, or vouchers drawn
to the order of the Company or payable to it. He is also authorized to draw
checks against any funds to the credit of the Company in any of its depositor-
ies. All such checks shall be signed by such persons, either by manual or
facsimile signature as shall be authorized by the Board of Directors, and
countersigned if required by the Board of Directors . The Treasurer is
authorized to make disbursements in settlement of vouchers, payrolls, drafts or
other accounts, when approved for payment by the Controller, or such other
person as shall be authorized by the Board of Directors, the Chief Executive
Officer or these By-Laws; for payments which have been otherwise ordered or
provided for by the Board of Directors or the Chief Executive Officer; for
interest on bonds and dividends on stock when due and payable; for vouchers,
pay checks, drafts and other accounts properly certified to by the duly
authorized officers of the Company; and for vouchers, pay checks, drafts and
other accounts approved by the officers duly authorized to approve for payment
of any company which this Company controls through the ownership of stock or
otherwise, as may be designated in writing from time to time by the Chief
Executive Officer to the Treasurer. He shall cause to be kept in his office
true and full accounts of all receipts and disbursements of his office. He
shall also perform such other duties as shall be assigned to him by the
Executive Vice President-Finance.
The Assistant Treasurers may exercise all powers of the Treasurer herein
conferred in respect of the receipt of moneys and securities, endorsement for
deposit and signature of checks.
SECTION 17. The Associate General Counsels and Assistant General Counsels
shall perform such duties respecting legal matters as shall be assigned to them
by the General Counsel.
SECTION 18. The General Tax Counsels shall be responsible for all tax-
related legal advice (including federal tax planning and research, litigation
and legislation; tax aspects of strategic, operational and financing transact-
ions;
<PAGE>
and ERISA/Benefits tax matters), and shall perform such other duties as shall be
assigned to them by the Vice President-Taxes.
SECTION 19. The Associate General Tax Counsels shall perform such duties
as shall be assigned to them by the Vice President-Taxes or the General Tax
Counsels.
<PAGE>
ARTICLE V
SUPERVISION, REMOVAL AND SALARIES OF
OFFICERS AND EMPLOYEES
SECTION 1. Any officer or employee elected or appointed by the Board of
Directors may be removed as such at any time by the affirmative vote of a
majority of the directors then in office, with or without cause. Any other
officer or employee of the Company may be removed at any time by vote of the
Board of Directors or of the Executive Committee or by the officer supervising
such officer or employee, with or without cause.
SECTION 2. All officers, agents and employees of the Company, in the
exercise of the powers conferred and the performance of the duties imposed upon
them, by these By-Laws or otherwise, shall at all times be subject to the
direction, supervision and control of the Board of Directors or the Executive
Committee.
SECTION 3. No office or position shall be created and no person shall be
employed at a salary of more than $200,000 per annum, and no salary shall be
increased to an amount in excess of $200,000 per annum, without the approval of
the Board of Directors or Executive Committee.
SECTION 4. The Board of Directors may from time to time vest general
authority in the Chairman of the Board, the Chief Executive Officer, the
President, or the Head of any department or office of the Company, or any such
other officer of the Company as any of the foregoing shall designate, for the
sole determination of disposition of any matter which otherwise should be
required to be considered by the Board of Directors or the Executive Committee
under the provisions of this Article.
<PAGE>
ARTICLE VI
CONTRACTS AND EXPENDITURES
SECTION 1. All capital expenditures, leases and property dispositions must
be authorized by the Board of Directors or Executive Committee, except that gen-
eral or specific authority with regard to such matters may be delegated to such
officers of the Company as the Board of Directors may from time to time direct.
SECTION 2. Expenditures chargeable to operating expenses may be made by
or under the direction of the Head of the department or office of the Company in
which they are required, without explicit or further authority from the Board of
Directors or Executive Committee, subject to direction, restriction or
prohibition by the Chief Executive Officer.
SECTION 3. No contract shall be made without the approval of the Board of
Directors or Executive Committee, except as authorized by the Board of Directors
or these By-Laws.
SECTION 4. Contracts for work, labor and services and materials and
supplies, the expenditures for which will be chargeable to operating expenses,
may be made in the name and on behalf of the Company by the Head of the
department or office of the Company concerned, or by such officer as he shall
designate, without further authority.
SECTION 5. All written contracts and agreements to which the Company may
become a party shall be approved as to form by or under the direction of counsel
for the Company.
SECTION 6. The Chief Executive Officer, the Chairman of the Board, the
President, the Heads of the departments and offices of the Company and the Vice
Presidents shall severally have the power to execute on behalf of the Company
any deed, bond, indenture, certificate, note, contract or other instrument
authorized or approved by, or pursuant to authority granted by, by the Board of
Directors or the Executive Committee, and to cause the corporate seal to be
thereto affixed and attested by the Secretary or an Assistant Secretary.
SECTION 7. The Board of Directors may from time to time vest general or
specific authority in such officers of the Company as the Board of Directors
shall designate for the sole determination of disposition of any matter which
otherwise would be required to be considered by the Board of Directors or the
Executive Committee under the provisions of this Article.
<PAGE>
ARTICLE VII
ISSUE AND CANCELLATION OF STOCK CERTIFICATES
SECTION 1. The Board of Directors shall provide for the issue, transfer,
and registration of the capital stock of the Company in the City and State of
New York, and in any other locality which it may designate, and shall appoint
the necessary officers, transfer agents, and registrars of transfers for that
purpose.
SECTION 2. Until otherwise provided by the Board of Directors, stock
certificates shall be signed by the Chief Executive Officer or the President or
a Vice President, and also by the Secretary or an Assistant Secretary thereunto
authorized by the Board of Directors or by the Executive Committee.
SECTION 3. The registrar of transfers shall in every case be a trust
company to be appointed by the Board of Directors, in accordance with the
requirements of the New York Stock Exchange, and such registration shall be
performed in accordance with the rules and regulations of said Exchange.
<PAGE>
ARTICLE VIII
FINAL
SECTION 1. The Company shall indemnify to the full extent permitted by law
any person made or threatened to be made a party to any action, suit or
proceeding, whether criminal, civil, administrative or investigative, by reason
of the fact that such person is or was a director, officer or employee of the
Company or serves or served at the request of the Company any other enterprise
as a director, officer, fiduciary or employee. The indemnification provided in
this section shall include the right to receive payment in advance of any final
disposition of any expenses incurred by any such person in connection with any
such action, suit or proceeding, consistent with the provisions of then
applicable law. For purposes of this By-Law, the term "other enterprise" shall
include any corporation, partnership, joint venture, trust or employee benefit
plan; service "at the request of the Company" shall include service as a
director, officer or employee of the Company which imposes duties on, or
involves services by, such director, officer or employee with respect to an
employee benefit plan, its participants or beneficiaries; any excise taxes
assessed on a person with respect to an employee benefit plan shall be deemed
to be indemnifiable expenses; and action by a person with respect to an
employee benefit plan in good faith which such person reasonably believes to be
in the interest of the participants and beneficiaries of such plan shall be
deemed to be action not opposed to the best interests of the corporation. This
Section 1 shall not apply to any action, suit or proceeding pending or
threatened on the date of adoption hereof provided that the right of the
Company to indemnify any person with respect thereto shall not be limited
hereby.
SECTION 2. Any indemnification under Section 1 of this Article VIII
(unless ordered by a court) shall be made by the Company only as authorized in
the specific case upon a determination that indemnification of the director,
officer or employee is proper in the circumstances because such person has met
the applicable standard of conduct required by law. Such determination shall be
made by the persons authorized by the Act.
SECTION 3. Notwithstanding Sections 1 and 2 of this Article VIII, except
for proceedings to enforce indemnification, the Company shall not be obligated
to indemnify any director, officer or employee in connection with a proceeding
(or part thereof) initiated by such person unless such proceeding (or part
thereof) was authorized or consented to by the Board of Directors. The
indemnification and advancement of expenses provided by Section 1 of this
Article VIII shall not be deemed exclusive of any other rights to which any
person seeking indemnification may be entitled under any law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a director,
officer or employee and shall inure to the benefit of the heirs, executors and
administrators of such a person. Any amendment or repeal of Section 1 or
Section 2 of this ARTICLE VIII or this Section 3 shall not limit the right of
any person to indemnity with respect to actions taken or omitted to be taken by
such person prior to such amendment or repeal.
SECTION 4. The Common corporate seal is, and, until otherwise ordered by
the Board of Directors, shall be, an impression upon paper or wax, circular in
form, with the words "Union Pacific Corporation" on the outer edge thereof, and
the words and figures "Corporate Seal", "1969", "Utah" in the center thereof.
<PAGE>
SECTION 5. Except as otherwise provided by the Act, these By-Laws may be
altered, amended or repealed at a meeting of the stockholders by a majority vote
of those present in person or by proxy or at any meeting of the Board of
Directors by a majority vote of the directors then in office.
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER SHARE
(Amounts in Thousands, Except Share and Per Share Amounts)
(Unaudited)
Six Months
Ended June 30,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
Average number of shares outstanding........... 205,281 204,914
Average shares issuable on exercise of stock
options less shares repurchasable from
proceeds..................................... 1,147 663
-------- --------
Total average number of common and common
equivalent shares............................ 206,428 205,577
======== ========
Income from Continuing Operations.............. $292,824 $280,024
Income from Discontinued Operations............ 107,094 134,805
-------- --------
Net Income..................................... $399,918 $414,829
======== ========
Earnings per share:
Income from Continuing Operations............ $ 1.42 $ 1.36
Income from Discontinued Operations.......... 0.52 0.66
-------- --------
Net Income................................... $ 1.94 $ 2.02
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in Thousands, Except Ratios)
(Unaudited)
Six Months
Ended June 30,
---------------------
1996 1995
-------- ---------
<S> <C> <C>
Earnings:
Income from continuing operations.............. $292,824 $280,024
Undistributed equity earnings.................. (21,158) (8,184)
-------- --------
Total................................ 271,666 271,840
-------- --------
Income Taxes..................................... 129,629 150,989
-------- --------
Fixed Charges:
Interest expense including amortization of
debt discount.............................. 230,845 201,120
Portion of rentals representing an interest
factor..................................... 54,089 25,281
-------- --------
Total................................ 284,934 226,401
======== ========
Earnings available for fixed charges............. $686,229 $649,230
======== ========
Fixed Charges -- as above........................ $284,934 $226,401
Interest capitalized............................. -- --
-------- --------
Total fixed charges.................. $284,934 $226,401
======== ========
Ratio of earnings to fixed charges............... 2.4 2.9
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
UNION PACIFIC CORPORATION
FINANCIAL DATA SCHEDULE - EXHIBIT 27
($ in millions except per share amounts)
Schedule contains summary financial information extracted from the Statements
of Consolidated Income and Consolidated Financial Position and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 73
<SECURITIES> 0
<RECEIVABLES> 1,070
<ALLOWANCES> 0
<INVENTORY> 220
<CURRENT-ASSETS> 1,593
<PP&E> 19,205
<DEPRECIATION> 4,866
<TOTAL-ASSETS> 19,749
<CURRENT-LIABILITIES> 2,014
<BONDS> 5,923
<COMMON> 582
0
0
<OTHER-SE> 6,014
<TOTAL-LIABILITY-AND-EQUITY> 19,749
<SALES> 0
<TOTAL-REVENUES> 3,980
<CGS> 0
<TOTAL-COSTS> 3,326
<OTHER-EXPENSES> 51
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 231
<INCOME-PRETAX> 422
<INCOME-TAX> 129
<INCOME-CONTINUING> 293
<DISCONTINUED> 107
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 400
<EPS-PRIMARY> 1.94
<EPS-DILUTED> 0
</TABLE>
