Union Pacific Reports Record Fourth Quarter and Full Year

Jan 24, 2013, 08:00 ET from Union Pacific Corporation

OMAHA, Neb., Jan. 24, 2013 /PRNewswire/ --

Fourth Quarter Records

  • Diluted earnings per share of $2.19 improved 10 percent.
  • Operating revenues totaled $5.25 billion, up 3 percent.
  • Operating income totaled $1.7 billion, up 7 percent.
  • Operating ratio of 67.1 percent improved 1.2 points.

2012 Full Year Records

  • Diluted earnings per share of $8.27 improved 23 percent.
  • Operating revenues totaled $20.9 billion, up 7 percent.
  • Operating income totaled $6.7 billion, up 18 percent.
  • Operating ratio of 67.8 percent improved 2.9 points.
  • Customer satisfaction index reached 93, up 1 point.

(Logo:  http://photos.prnewswire.com/prnh/20110304/LA59497LOGO)

Union Pacific Corporation (NYSE: UNP) today reported 2012 fourth quarter net income of $1 billion, or $2.19 per diluted share, compared to $964 million, or $1.99 per diluted share, in the fourth quarter 2011. 

"Our diverse portfolio of business, solid core pricing gains, and efficient network operations drove these results despite significantly weaker coal and grain markets,"  said Jack Koraleski, Union Pacific chief executive officer.  "Although it was a challenging year on many fronts, 2012 was Union Pacific's most profitable year in our 150-year history.  It's a testament to the strength and diversity of our franchise, the dedication and commitment of our employees, and our unrelenting focus on creating value for our customers."

Fourth Quarter Summary

Fourth quarter business volumes, as measured by total revenue carloads, were down 2 percent compared to 2011.  Volume declines in coal and agricultural products more than offset growth in chemicals, automotive and intermodal shipments.  Volumes for industrial products were flat versus 2011.  Quarterly operating revenue increased 3 percent in the fourth quarter 2012 to $5.25 billion versus $5.1 billion in the fourth quarter 2011.  In addition:

  • Quarterly freight revenue increased 2 percent compared to the fourth quarter 2011, mainly driven by core pricing gains and fuel surcharge recoveries.
  • Union Pacific's operating ratio of 67.1 percent was a fourth quarter record, 1.2 points better than the fourth quarter 2011. 
  • Average quarterly diesel fuel prices increased 3 percent to $3.25 per gallon in the fourth quarter 2012 compared to $3.16 per gallon in the fourth quarter 2011. 
  • The Customer Satisfaction Index of 93 set a fourth quarter record, 1 point better than the fourth quarter 2011.
  • Quarterly train speed, as reported to the Association of American Railroads, was 26.7 mph, up 4 percent from the fourth quarter 2011. 
  • The Company repurchased 2.0 million shares in the fourth quarter 2012 at an average share price of $121.81 and an aggregate cost of $248 million.

Summary of Fourth Quarter Freight Revenues

  • Chemicals up 15 percent
  • Automotive up 14 percent
  • Intermodal up 6 percent
  • Industrial Products up 3 percent
  • Coal down 7 percent
  • Agricultural down 8 percent

2012 Full Year Summary

For the full year 2012, Union Pacific reported net income of $3.9 billion or $8.27 per diluted share.  This compares to $3.3 billion or $6.72 per diluted share in 2011, 20 and 23 percent increases, respectively. Operating revenue totaled a record $20.9 billion versus $19.6 billion in 2011.  Operating income increased 18 percent to $6.7 billion, up from $5.7 billion in 2011.

  • Four of the six business groups reported freight revenue and volume growth in 2012.  Freight revenue grew 6 percent to $19.7 billion compared to $18.5 billion in 2011.  Carloadings were flat versus 2011.
  • UP's operating ratio in 2012 was 67.8 percent, improving 2.9 points compared to 2011. 
  • Average diesel fuel prices increased 3 percent to $3.22 per gallon in 2012 from $3.12 per gallon in 2011. 
  • The Company increased its quarterly dividend per share by 15 percent to $0.69 cents per share.  Total dividends declared for the full year 2012 grew 29 percent compared to the full year 2011.
  • The Company repurchased more than 12.8 million shares in 2012 at an average share price of $115.01, and an aggregate cost of $1.5 billion.

2013 Outlook "For 2013, we're expecting to see many of the same challenges we faced last year," Koraleski said.  "We'll also be watching to see what happens in Washington and how it impacts potential economic growth.  That said, we successfully navigated through the complexities of 2012, and we'll continue to follow that same strategy going forward.  We'll remain agile and leverage the strengths of our diverse franchise with a focus on creating value for our customers and generating strong returns for our shareholders again in 2013."

About Union Pacific

Union Pacific Railroad is the principal operating company of Union Pacific Corporation (NYSE: UNP). One of America's most recognized companies, Union Pacific Railroad links 23 states in the western two-thirds of the country by rail, providing a critical link in the global supply chain. From 2007-2012, Union Pacific invested $18 billion in its network and operations to support America's transportation infrastructure.  The railroad's diversified business mix includes Agricultural Products, Automotive, Chemicals, Coal, Industrial Products and Intermodal. Union Pacific  serves many of the fastest-growing U.S. population centers, operates from all major West Coast and Gulf Coast ports to eastern gateways, connects with Canada's rail systems and is the only railroad serving all six major Mexico gateways. Union Pacific provides value to its roughly 10,000 customers by delivering products in a safe, reliable, fuel-efficient and environmentally responsible manner.

Supplemental financial information is attached.

This press release and related materials contain statements about the Corporation's future that are not statements of historical fact, including specifically the statements regarding the Corporation's expectations with respect to general economic conditions and financial returns; its business strategy for the upcoming year; and legislative activity.  These statements are, or will be, forward-looking statements as defined by the Securities Act of 1933 and the Securities Exchange Act of 1934.  Forward-looking statements also generally include, without limitation, information or statements regarding:  projections, predictions, expectations, estimates or forecasts as to the Corporation's and its subsidiaries' business, financial, and operational results, and future economic performance;  and management's beliefs, expectations, goals, and objectives and other similar expressions concerning matters that are not historical facts.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times that, or by which, such performance or results will be achieved.  Forward-looking information, including expectations regarding operational and financial improvements and the Corporation's future performance or results are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statement.  Important factors, including risk factors, could affect the Corporation's and its subsidiaries' future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements.  Information regarding risk factors and other cautionary information are available in the Corporation's Annual Report on Form 10-K for 2011, which was filed with the SEC on February 3, 2012.  The Corporation updates information regarding risk factors if circumstances require such updates in its periodic reports on Form 10-Q and its subsequent Annual Reports on Form 10-K (or such other reports that may be filed with the SEC).  

Forward-looking statements speak only as of, and are based only upon information available on, the date the statements were made.  The Corporation assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information.  If the Corporation does update one or more forward-looking statements, no inference should be drawn that the Corporation will make additional updates with respect thereto or with respect to other forward-looking statements.  References to our website are provided for convenience and, therefore, information on or available through the website is not, and should not be deemed to be, incorporated by reference herein.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

 Condensed Consolidated Statements of Income (unaudited)

 Millions, Except Per Share Amounts and Percentages,

4th Quarter

Full Year

 For the Periods Ended December 31,

2012

2011

%

2012

2011

%

 Operating Revenues

      Freight revenues

$

4,931

$

4,829

2%

$

19,686

$

18,508

6%

      Other revenues

319

279

14

1,240

1,049

18

            Total operating revenues

5,250

5,108

3

20,926

19,557

7

 Operating Expenses

      Compensation and benefits

1,135

1,155

(2)

4,685

4,681

-

      Fuel

920

935

(2)

3,608

3,581

1

      Purchased services and materials

533

508

5

2,143

2,005

7

      Depreciation

453

413

10

1,760

1,617

9

      Equipment and other rents

302

289

4

1,197

1,167

3

      Other

182

191

(5)

788

782

1

            Total operating expenses

3,525

3,491

1

14,181

13,833

3

 Operating Income

1,725

1,617

7

6,745

5,724

18

      Other income

43

54

(20)

108

112

(4)

      Interest expense

(128)

(141)

(9)

(535)

(572)

(6)

 Income before income taxes

1,640

1,530

7

6,318

5,264

20

 Income taxes

(604)

(566)

7

(2,375)

(1,972)

20

 Net Income

$

1,036

$

964

7%

$

3,943

$

3,292

20%

 Share and Per Share

      Earnings per share - basic

$

2.21

$

2.01

10%

$

8.33

$

6.78

23%

      Earnings per share - diluted

$

2.19

$

1.99

10

$

8.27

$

6.72

23

      Weighted average number of shares - basic

468.8

480.7

(2)

473.1

485.7

(3)

      Weighted average number of shares - diluted

472.0

484.7

(3)

476.5

489.8

(3)

      Dividends declared per share

$

0.69

$

0.60

15

$

2.49

$

1.93

29

 Operating Ratio

67.1%

68.3%

(1.2)

pts

67.8%

70.7%

(2.9)

pts

 Effective Tax Rate

36.8%

37.0%

(0.2)

pts

37.6%

37.5%

0.1

pts

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)

4th Quarter

Full Year

For the Periods Ended December 31,

2012

2011

%

2012

2011

%

Freight Revenues (Millions)

Agricultural

$

785

$

854

(8)

%

$

3,280

$

3,324

(1)

%

Automotive

466

408

14

1,807

1,510

20

Chemicals

834

728

15

3,238

2,815

15

Coal

990

1,070

(7)

3,912

4,084

(4)

Industrial Products

835

810

3

3,494

3,166

10

Intermodal

1,021

959

6

3,955

3,609

10

Total

$

4,931

$

4,829

2

%

$

19,686

$

18,508

6

%

Revenue Carloads (Thousands)

Agricultural

215

236

(9)

%

900

934

(4)

%

Automotive

187

171

9

738

653

13

Chemicals

265

232

14

1,042

921

13

Coal

463

558

(17)

1,871

2,164

(14)

Industrial Products

280

281

-

1,185

1,146

3

Intermodal *

831

817

2

3,312

3,254

2

Total

2,241

2,295

(2)

%

9,048

9,072

-

%

Average Revenue per Car

Agricultural

$

3,647

$

3,630

-

%

$

3,644

$

3,561

2

%

Automotive

2,487

2,378

5

2,448

2,311

6

Chemicals

3,146

3,131

-

3,107

3,055

2

Coal

2,141

1,917

12

2,092

1,888

11

Industrial Products

2,978

2,878

3

2,947

2,762

7

Intermodal *

1,229

1,175

5

1,194

1,109

8

Average

$

2,200

$

2,103

5

%

$

2,176

$

2,040

7

%

* Each intermodal container or trailer equals one carload.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Financial Position (unaudited)

Dec. 31,

Dec. 31,

Millions, Except Percentages

2012

2011

Assets

   Cash and cash equivalents

$

1,063

$

1,217

   Other current assets

2,551

2,510

   Investments

1,259

1,175

   Net properties

41,997

39,934

   Other assets

283

260

Total assets

$

47,153

$

45,096

Liabilities and Common Shareholders' Equity

   Debt due within one year

$

196

$

209

   Other current liabilities

2,923

3,108

   Debt due after one year

8,801

8,697

   Deferred income taxes

13,108

12,368

   Other long-term liabilities

2,248

2,136

Total liabilities

27,276

26,518

Total common shareholders' equity

19,877

18,578

Total liabilities and common shareholders' equity

$

47,153

$

45,096

Debt to Capital

31.2%

32.4%

Adjusted Debt to Capital*

39.1%

40.7%

Return on Invested Capital*

14.0%

12.4%

 

*

Adjusted Debt to Capital and Return on Invested Capital are non-GAAP measures; however, we believe that they are important in evaluating our financial performance. See pages 8 and 9 for a reconciliation to GAAP.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows (unaudited)

Millions,

Full Year

For the Periods Ended December 31,

2012

2011

Operating Activities

   Net income

$

3,943

$

3,292

   Depreciation

1,760

1,617

   Deferred income taxes

887

986

   Other - net

(429)

(22)

Cash provided by operating activities

6,161

5,873

Investing Activities

   Capital investments

(3,738)

(3,176)

   Other - net

105

57

   Cash used in investing activities

(3,633)

(3,119)

Financing Activities

   Common shares repurchased

(1,474)

(1,418)

   Dividends paid

(1,146)

(837)

   Debt repaid

(758)

(690)

   Debt issued

695

486

   Debt exchange

-

(272)

   Other - net

1

108

Cash used in financing activities

(2,682)

(2,623)

Net Change in Cash and Cash Equivalents

(154)

131

Cash and cash equivalents at beginning of year

1,217

1,086

Cash and Cash Equivalents End of Period

$

1,063

$

1,217

Free Cash Flow*

   Cash provided by operating activities

$

6,161

$

5,873

   Cash used in investing activities

(3,633)

(3,119)

   Dividends paid

(1,146)

(837)

Free cash flow

$

1,382

$

1,917

 

*

Free cash flow is a non-GAAP measure; however, we believe that it is important to management and investors in evaluating our financial performance and measures our ability to generate cash without incurring additional financing.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Operating and Performance Statistics (unaudited)

4th Quarter

Full Year

For the Periods Ended December 31,

2012

2011

%

2012

2011

%

Operating/Performance Statistics

   Gross ton-miles (GTMs) (millions)

238,898

252,686

(5)

%

959,280

978,163

(2)

%

   Employees (average)

46,067

44,922

3

45,928

44,861

2

   GTMs (millions) per employee

5.19

5.62

(8)

20.89

21.80

(4)

   Customer satisfaction index

93

92

1

pts

93

92

1

pts

Locomotive Fuel Statistics

   Average fuel price per gallon consumed

$ 3.25

$ 3.16

3

%

$ 3.22

$ 3.12

3

%

   Fuel consumed in gallons (millions)

274

286

(4)

1,085

1,106

(2)

   Fuel consumption rate*

1.148

1.135

1

1.131

1.131

-

AAR Reported Performance Measures

   Average train speed (miles per hour)

26.7

25.6

4

%

26.5

25.6

4

%

   Average terminal dwell time (hours)

26.8

26.5

1

26.2

26.2

-

   Average rail car inventory (thousands)

264.4

274.1

(4)

269.1

272.9

(1)

Revenue Ton-Miles (Millions)

   Agricultural

18,937

21,949

(14)

%

81,407

88,094

(8)

%

   Automotive

3,829

3,404

12

14,942

13,004

15

   Chemicals

17,649

15,166

16

68,095

59,542

14

   Coal

51,297

62,293

(18)

207,466

238,567

(13)

   Industrial Products

17,009

16,971

-

70,924

66,823

6

   Intermodal

19,748

19,641

1

78,277

78,367

-

Total

128,469

139,424

(8)

%

521,111

544,397

(4)

%

 

*

Fuel consumption is computed as follows: gallons of fuel consumed divided by gross ton-miles in thousands.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Income (unaudited)

2012

Millions, Except Per Share Amounts and Percentages

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Full Year

Operating Revenues

   Freight revenues

$

4,823

$

4,913

$

5,019

$

4,931

$

19,686

   Other revenues

289

308

324

319

1,240

Total operating revenues

5,112

5,221

5,343

5,250

20,926

Operating Expenses

   Compensation and benefits

1,211

1,151

1,188

1,135

4,685

   Fuel

926

882

880

920

3,608

   Purchased services and materials

526

542

542

533

2,143

   Depreciation

427

433

447

453

1,760

   Equipment and other rents

296

299

300

302

1,197

   Other

216

190

200

182

788

Total operating expenses

3,602

3,497

3,557

3,525

14,181

Operating Income

1,510

1,724

1,786

1,725

6,745

   Other income

16

21

28

43

108

   Interest expense

(135)

(135)

(137)

(128)

(535)

Income before income taxes

1,391

1,610

1,677

1,640

6,318

Income tax expense

(528)

(608)

(635)

(604)

(2,375)

Net Income

$

863

$

1,002

$

1,042

$

1,036

$

3,943

Share and Per Share

   Earnings per share - basic

$

1.81

$

2.11

$

2.21

$

2.21

$

8.33

   Earnings per share - diluted

$

1.79

$

2.10

$

2.19

$

2.19

$

8.27

   Weighted average number of shares - basic

477.8

473.8

472.0

468.8

473.1

   Weighted average number of shares - diluted

481.4

477.2

475.2

472.0

476.5

   Dividends declared per share

$

0.60

$

0.60

$

0.60

$

0.69

$

2.49

Operating Ratio

70.5%

67.0%

66.6%

67.1%

67.8%

Effective Tax Rate

38.0%

37.8%

37.9%

36.8%

37.6%

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)

2012

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Full Year

Freight Revenues (Millions)

Agricultural

$

858

$

854

$

783

$

785

$

3,280

Automotive

430

475

436

466

1,807

Chemicals

768

795

841

834

3,238

Coal

995

869

1,058

990

3,912

Industrial Products

863

917

879

835

3,494

Intermodal

909

1,003

1,022

1,021

3,955

Total

$

4,823

$

4,913

$

5,019

$

4,931

$

19,686

Revenue Carloads (Thousands)

Agricultural

234

233

218

215

900

Automotive

180

190

181

187

738

Chemicals

241

261

275

265

1,042

Coal

495

412

501

463

1,871

Industrial Products

290

316

299

280

1,185

Intermodal *

778

846

857

831

3,312

Total

2,218

2,258

2,331

2,241

9,048

Average Revenue per Car

Agricultural

$

3,664

$

3,665

$

3,596

$

3,647

$

3,644

Automotive

2,390

2,505

2,407

2,487

2,448

Chemicals

3,184

3,044

3,064

3,146

3,107

Coal

2,010

2,109

2,111

2,141

2,092

Industrial Products

2,977

2,907

2,933

2,978

2,947

Intermodal *

1,169

1,185

1,192

1,229

1,194

Average

$

2,175

$

2,176

$

2,153

$

2,200

$

2,176

* Each intermodal container or trailer equals one carload.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Non-GAAP Measures Reconciliation to GAAP

Debt to Capital*

Dec. 31,

Dec. 31,

Millions, Except Percentages

2012

2011

Debt (a)

$

8,997

$

8,906

Equity

19,877

18,578

Capital (b)

$

28,874

$

27,484

Debt to capital (a/b)

31.2%

32.4%

 

*

Total debt divided by total debt plus equity. Management believes this is an important measure in evaluating our balance sheet strength and is important in managing our credit ratios and financing relationships.

 

Adjusted Debt to Capital, Reconciliation to GAAP*

Dec. 31,

Dec. 31,

Millions, Except Percentages

2012

2011

Debt

8,997

8,906

Net present value of operating leases

3,096

3,224

Unfunded pension and OPEB

679

623

Adjusted debt (a)

$

12,772

$

12,753

Equity

19,877

18,578

Adjusted capital (b)

$

32,649

$

31,331

Adjusted debt to capital (a/b)

39.1%

40.7%

 

*

Total debt plus net present value of operating leases plus after-tax unfunded pension and OPEB obligation divided by total debt plus net present value of operating leases plus after-tax unfunded pension and OPEB obligation plus equity. Operating leases were discounted using 6.0% at December 31, 2012 and 6.2% at December 31, 2011. Management believes this is an important measure to management and investors in evaluating the total amount of leverage in our capital structure including off-balance sheet obligations.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Non-GAAP Measures Reconciliation to GAAP

Return on Invested Capital as Adjusted (ROIC)*

Dec. 31,

Dec. 31,

Millions, Except Percentages

2012

2011

Net income

$

3,943

$

3,292

Add: Interest expense

535

572

Add: Interest on present value of operating leases

190

208

Less: Taxes on interest

(273)

(293)

Net operating profit after taxes as adjusted (a)

$

4,395

$

3,779

Average equity

$

19,228

$

18,171

Add: Average debt

8,952

9,074

Add: Average present value of operating leases

3,160

3,350

Average invested capital as adjusted (b)

$

31,340

$

30,595

Return on invested capital as adjusted (a/b)

14.0%

12.4%

 

*

ROIC is considered a non-GAAP financial measure by SEC Regulation G and Item 10 of SEC Regulation S-K, and may not be defined and calculated by other companies in the same manner. We believe this measure is important in evaluating the efficiency and effectiveness of the Corporation's long-term capital investments, and we currently use ROIC as a performance criteria in determining certain elements of equity compensation for our executives. ROIC should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP. The most comparable GAAP measure is Return on Average Common Shareholders' Equity.

 

SOURCE Union Pacific Corporation