Jennifer Hamann
Executive Vice President and Chief Financial Officer at Union Pacific
Thanks, Jim, and good morning, everyone. Let's start on slide five with the walk down of our second quarter income statement, where operating revenue of $6 billion increased 1% versus last year on slightly positive volumes. As Kenny will highlight, this strong top line performance was supported by solid pricing gains and business wins against the backdrop of weak coal demand. Second quarter freight revenue totaled $5.6 billion, a 1% gain. Digging into the revenue components, strong core pricing gains, partially offset by an unfavorable business mix, added 150 basis points to freight revenue. Double-digit growth in international intermodal volume was the primary contributor to the negative mix dynamic and further compounded by an overall decline in our higher average revenue per car industrial business. Slightly positive volumes in the quarter added 50 basis points to freight revenue. And lastly, fuel surcharge revenue of $669 million declined 5%, as lower fuel prices impacted freight revenue 75 basis points. Excluding fuel surcharge, freight revenue grew 2%, as the team continues to pace revenue growth faster than volume. Wrapping up the top line, other revenue declined 6% as a result of lower intermodal accessorials and less demand for auto parts shipments at our Loop subsidiary.
Switching to expenses. Second quarter operating expense of $3.6 billion decreased $152 million versus 2023, as we drove productivity across most cost categories. We have more details in the appendix, but let me highlight some of the performance drivers. Compensation and benefits expense declined 6% versus last year as we reduced headcount 5% and generated positive productivity. Although our training pipeline is significantly reduced compared to 2023, train service employees increased 1% as we continue to carry more train service employees as a buffer for our operations and to offset the impact of new labor agreements. The remainder of the workforce decreased 9% as we continue to focus on delayering and pushing work down in the organization. And as you'll recall, last year's expenses included a $67 million onetime ratification payment. Following up on an item we highlighted at our first quarter report, last month, we completed the transfer of around 350 mechanical employees to Metro in Chicago. Going forward, this transfer will lower both other revenue and our expenses by roughly $15 million a quarter.
Excluding last year's onetime labor payment, cost per employee in the second quarter increased 4%, as we continue to drive for better overall efficiency. Fuel expense in the quarter declined 6% on a 5% decrease in fuel prices from $2.86 per gallon to $2.73 per gallon. We overcame a challenging operating environment and less fuel-efficient freight mix to improve our fuel consumption rate 1%, largely by locomotive productivity. Equipment and other rents declined 12%, reflecting improved cycle times and lower lease expense, partially offset by business mix. Finally, other expense decreased 4%, as we recorded a couple of onetime items in the quarter. On the positive side, we added a $46 million gain from an intermodal equipment sale. Conversely, we recognized $23 million of additional environmental expense at a legacy California remediation site. Second quarter operating income of $2.4 billion increased 9% versus last year. Below the line, other income increased 11%, as a result of interest received on tax refund claims, while interest expense declined 6% on lower average debt levels. Second quarter net income of $1.7 billion and earnings per share of $2.74 both improved 7% versus 2023. Our quarterly operating ratio of 60% improved 300 basis points year-over-year.
As I just discussed, there were several puts and takes in the quarter. Key here is that our core operations drove 160 basis points of OR improvement and $0.21 of EPS growth year-over-year. This is a great continuation of the momentum we've created these past three quarters. Turning to shareholder returns on the balance sheet on slide six. Second quarter cash from operations totaled $4 billion, up $175 million versus last year. Growth in operating income and 2023 labor agreement payments, partially offset by higher income tax payments, resulted in increasing cash from operations and our free cash flow improvement, up 43% to $853 million. As stated back in April, we restarted share repurchases late in the second quarter. Although we plan to ramp up repurchases through the year, we started slowly with just over $100 million repurchased in June. Combined with our dividend payments, we've returned $1.7 billion to shareholders year-to-date. Finally, our adjusted debt-to-EBITDA ratio finished the quarter at 2.8 times, and we continue to be A rated by our three credit rating agencies.
Wrapping up on slide seven, as we've reached the midway point of 2024, there remains some uncertainty about the second half recovery that many were forecasting. As Kenny will detail, there are definitely markets where we're seeing growth, and much of that growth is being driven by our business development efforts. There also are some challenged markets, particularly coal. Operationally, the team is making great progress towards our long-term goals to be the best in safety, service and operational excellence. This is reflected in the progress in our safety and performance metrics, including our margins. Importantly, we believe the trend is indicative of where we can get to long term, and each successive quarter is a step on our way to winning. We are highly confident in our ability to generate price dollars in excess of inflation dollars, and still expect freight revenue to pace ahead of volume in 2024.
We also remain committed to our long-term capital allocation strategy. This includes last week's announcement of a 3% increase in our dividend as we drive higher returns to our owners. This increase represents the 18th year in a row of annual dividend increases. With share repurchases, we expect to repurchase around $1.5 billion in 2024 as we maintain our current leverage. Before I turn it over to Kenny, I'd summarize our second quarter financial performance as strong and our confidence in the future stronger as we continue to unlock the potential of our great franchise. We're excited to execute on our strategy in the second half and lay out more of our long-term thoughts at our Investor Day in September. Kenny?
