Union Pacific Reports Fourth Quarter and Full Year 2015 Results

Fourth Quarter Operating Ratio of 63.2 percent

News provided by

Union Pacific Corporation

Jan 21, 2016, 08:00 ET

OMAHA, Neb., Jan. 21, 2016 /PRNewswire/ --

Fourth Quarter Results

  • Diluted earnings per share of $1.31 declined 19 percent.
  • Operating income totaled $1.9 billion, down 19 percent.
  • Operating ratio of 63.2 percent, up 1.8 points.

Full Year 2015 Results

  • Diluted earnings per share of $5.49 declined 5 percent.
  • Operating income totaled $8.1 billion, down 8 percent.
  • Operating ratio of 63.1 percent, improved 0.4 points.

Union Pacific Corporation (NYSE: UNP) today reported 2015 fourth quarter net income of $1.1 billion, or $1.31 per diluted share compared to $1.4 billion, or $1.61 per diluted share, in the fourth quarter 2014.

"Total volumes decreased 9 percent in the quarter, more than offsetting another quarter of solid core pricing gains," said Lance Fritz, Union Pacific chairman, president and chief executive officer.  "On the cost side, we continued to adjust resources throughout the quarter and also made solid progress with our productivity initiatives.  As a result of these efforts, we achieved a quarterly operating ratio of 63.2 percent."

Fourth Quarter Summary

Operating revenue of $5.2 billion was down 15 percent in the fourth quarter 2015 compared to the fourth quarter 2014.  Fourth quarter business volumes, as measured by total revenue carloads, declined 9 percent compared to 2014.  Volumes declined in each of the Company's business groups with the exception of automotive.  In addition:

  • Quarterly freight revenue decreased 16 percent compared to the fourth quarter 2014, as volume declines, lower fuel surcharge revenue, and negative business mix more than offset core pricing gains.
  • Union Pacific's 63.2 percent operating ratio was unfavorable by 1.8 points compared to the fourth quarter 2014.
  • The $1.61 per gallon average quarterly diesel fuel price in the fourth quarter 2015 was 39 percent lower than the fourth quarter 2014.
  • Quarterly train speed, as reported to the Association of American Railroads, was 27.0 mph, 13 percent faster than the fourth quarter 2014.
  • The Company repurchased 6.6 million shares in the fourth quarter 2015 at an aggregate cost of $586 million.

Summary of Fourth Quarter Freight Revenues

  • Automotive up 1 percent
  • Chemicals down 7 percent
  • Agricultural Products down 12 percent
  • Intermodal down 14 percent
  • Industrial Products down 23 percent
  • Coal down 31 percent

2015 Full Year Summary

For the full year 2015, Union Pacific reported net income of $4.8 billion or $5.49 per diluted share versus $5.2 billion or $5.75 per diluted share in 2014, representing 8 and 5 percent decreases, respectively.  Operating revenue totaled $21.8 billion as compared to $24.0 billion in 2014.  Operating income totaled $8.1 billion, an 8 percent decrease compared to 2014.  In addition:

  • Freight revenue decreased to $20.4 billion, a 10 percent decrease when compared to 2014.  Carloadings were down 6 percent versus 2014, with declines in each of the Company's business groups with the exception of automotive.
  • Average diesel fuel prices decreased 38 percent to $1.84 per gallon in 2015 from $2.97 per gallon in 2014.
  • Union Pacific's operating ratio of 63.1 percent was a full year record, improving 0.4 points from the previous record set in 2014.
  • Train speed, as reported to the Association of American Railroads, was 25.4 mph, 6 percent faster compared to the full year 2014.
  • Union Pacific's reportable personal injury rate of 0.87 incidents per 200,000 employee-hours was a full year record, improving 11 percent compared to the full year 2014.
  • Union Pacific's capital program in 2015 totaled $4.3 billion, an increase of approximately $200 million compared to the full year 2014.
  • The Company repurchased 35.3 million shares in 2015 at an aggregate cost of almost $3.5 billion.

2016 Outlook

"This past year was a difficult one in many respects, but our team did outstanding work in the face of dramatic declines in volumes and shifts in our business mix," Fritz said.  "Overall economic conditions, uncertainty in the energy markets, commodity prices, and the strength of the U.S. dollar will continue to have a major impact on our business this year.  However, we are well-positioned to efficiently serve customers in existing markets as they rebound.  The strength and diversity of the Union Pacific franchise also will provide tremendous opportunities for new business development as both domestic and global markets evolve.  When combined with our unrelenting focus on safety, productivity, and service, these opportunities will translate into an excellent experience for our customers and strong value for our shareholders in the years ahead."

Fourth Quarter 2015 Earnings Conference Call

Union Pacific will host its fourth quarter 2015 earnings release presentation live over the Internet and via teleconference on Thursday, January 21, 2016 at 8:45 a.m. Eastern Time.  The presentation will be webcast live over the internet on Union Pacific's website at www.up.com/investor.  Alternatively, the webcast can be accessed directly through the following link.  Participants may join the conference call by dialing 877-407-8293 (or for international participants, 201/689-8349).

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 connects 23 states in the western two-thirds of the country by rail, providing a critical link in the global supply chain. From 2006-2015, Union Pacific invested approximately $33 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 presentation and related materials contain statements about the Company's future that are not statements of historical fact, including specifically the statements regarding the Company's expectations with respect to economic conditions and demand levels; and its ability to generate financial returns, improve network performance and cost efficiency, and provide returns to its shareholders.  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 Company'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 Company'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 Company'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 Company's Annual Report on Form 10-K for 2014, which was filed with the SEC on February 6, 2015.  The Company 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 Company 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 Company does update one or more forward-looking statements, no inference should be drawn that the Company 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,

2015

2014

%

2015

2014

%

 Operating Revenues












      Freight revenues

$

4,863

$

5,794

(16)

%

$

20,397

$

22,560

(10)

%

      Other revenues

345

359

(4)


1,416

1,428

(1)

 Total operating revenues

5,208

6,153

(15)


21,813

23,988

(9)

 Operating Expenses












      Compensation and benefits

1,220

1,289

(5)


5,161

5,076

2

      Purchased services and materials

589

665

(11)


2,421

2,558

(5)

      Fuel

424

813

(48)


2,013

3,539

(43)

      Depreciation

517

489

6


2,012

1,904

6

      Equipment and other rents

305

296

3


1,230

1,234

-

      Other


235

228

3


924

924

-

 Total operating expenses

3,290

3,780

(13)


13,761

15,235

(10)

 Operating Income

1,918

2,373

(19)


8,052

8,753

(8)

      Other income


28

71

(61)


226

151

50

      Interest expense

(164)

(146)

12


(622)

(561)

11

 Income before income taxes

1,782

2,298

(22)


7,656

8,343

(8)

 Income taxes


(665)

(867)

(23)


(2,884)

(3,163)

(9)

 Net Income

$

1,117

$

1,431

(22)

%

$

4,772

$

5,180

(8)

%












 Share and Per Share












      Earnings per share - basic

$

1.31

$

1.62

(19)

%

$

5.51

$

5.77

(5)

%

      Earnings per share - diluted

$

1.31

$

1.61

(19)

$

5.49

$

5.75

(5)

      Weighted average number of shares - basic

850.6

885.7

(4)


866.2

897.1

(3)

      Weighted average number of shares - diluted

853.7

889.8

(4)


869.4

901.1

(4)

      Dividends declared per share

$

0.55

$

0.50

10

$

2.20

$

1.91

15














 Operating Ratio

63.2%

61.4%

1.8

pts

63.1%

63.5%

(0.4)

pts

 Effective Tax Rate


37.3%

37.7%

(0.4)

pts

37.7%

37.9%

(0.2)

pts


UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)

4th Quarter

Full Year

For the Periods Ended December 31,

2015

2014

%

2015

2014

%

 Freight Revenues (Millions)












 Agricultural Products

$

895

$

1,018

(12)

%

$

3,581

$

3,777

(5)

%

 Automotive


549

543

1


2,154

2,103

2

 Chemicals


859

922

(7)


3,543

3,664

(3)

 Coal

745

1,078

(31)


3,237

4,127

(22)

 Industrial Products


842

1,098

(23)


3,808

4,400

(13)

 Intermodal


973

1,135

(14)


4,074

4,489

(9)

 Total

$

4,863

$

5,794

(16)

%

$

20,397

$

22,560

(10)

%

 Revenue Carloads (Thousands)












 Agricultural Products

239

252

(5)

%

941

973

(3)

%

 Automotive

225

209

8


863

809

7

 Chemicals

270

275

(2)


1,098

1,116

(2)

 Coal

353

455

(22)


1,459

1,768

(17)

 Industrial Products

280

335

(16)


1,213

1,368

(11)

 Intermodal*

836

898

(7)


3,488

3,591

(3)

 Total

2,203

2,424

(9)

%

9,062

9,625

(6)

%

 Average Revenue per Car












 Agricultural Products

$

3,745

$

4,031

(7)

%

$

3,805

$

3,881

(2)

%

 Automotive

2,447

2,607

(6)


2,498

2,602

(4)

 Chemicals

3,188

3,344

(5)


3,227

3,282

(2)

 Coal

2,107

2,366

(11)


2,218

2,334

(5)

 Industrial Products

3,004

3,283

(8)


3,139

3,217

(2)

 Intermodal*

1,165

1,265

(8)


1,168

1,250

(7)

 Average 

$

2,208

$

2,390

(8)

%

$

2,251

$

2,344

(4)

%

*   

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

2015

2014

 Assets



      Cash and cash equivalents

$

1,391

$

1,586

      Other current assets*

2,739

2,815

      Investments

1,410

1,390

      Net properties


48,866

46,272

      Other assets*

194

309

 Total assets

$

54,600

$

52,372



 Liabilities and Common Shareholders' Equity



      Debt due within one year

$

594

$

461

      Other current liabilities

2,612

3,303

      Debt due after one year*

13,607

10,952

      Deferred income taxes*

15,241

14,403

      Other long-term liabilities

1,844

2,064

 Total liabilities

33,898

31,183

 Total common shareholders' equity

20,702

21,189

 Total liabilities and common shareholders' equity

$

54,600

$

52,372



 Debt to Capital

40.7%

35.0%

 Adjusted Debt to Capital**

45.7%

41.2%

 Return on Invested Capital**

14.3%

16.2%

*  

Certain prior period amounts have been adjusted for the retrospective adoption of Accounting Standard Updates 2015-03 and 2015-17 related to the presentation of deferred debt issuance costs and current deferred taxes.

**  

Adjusted Debt to Capital and Return on Invested Capital are non-GAAP measures; however, management believes that they are important measures 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,

2015

2014

 Operating Activities



      Net income

$

4,772

$

5,180

      Depreciation


2,012

1,904

      Deferred income taxes


765

895

      Other - net


(205)

(594)

 Cash provided by operating activities


7,344

7,385



 Investing Activities



      Capital investments*


(4,650)

(4,346)

      Other - net


174

97

 Cash used in investing activities


(4,476)

(4,249)



 Financing Activities



      Common shares repurchased

(3,465)

(3,225)

      Debt issued

3,328

2,588

      Dividends paid**

(2,344)

(1,632)

      Debt repaid


(556)

(710)

      Other - net


(26)

(3)

 Cash used in financing activities


(3,063)

(2,982)



 Net Change in Cash and Cash Equivalents


(195)

154

 Cash and cash equivalents at beginning of year


1,586

1,432

 Cash and Cash Equivalents at End of Year

$

1,391

$

1,586



 Free Cash Flow***



      Cash provided by operating activities

$

7,344

$

7,385

      Cash used in investing activities

(4,476)

(4,249)

      Dividends paid**

(2,344)

(1,632)

 Free cash flow

$

524

$

1,504

*  

Capital investments include $327 million of locomotive and freight car early lease buyouts.

**  

The 2015 dividends paid amount includes the fourth quarter 2014 dividend of $438 million, which was paid on January 2, 2015, the first quarter 2015 dividend of $484 million, which was paid on March 30, 2015, the second quarter 2015 dividend of $479 million, which was paid on June 30, 2015, the third quarter 2015 dividend of $476 million, which was paid on September 30, 2015, as well as the fourth quarter 2015 dividend of $467 million, which was paid on December 30, 2015. Beginning in 2015, the timing of the dividend declaration and payable dates was aligned to occur within the same quarter.

***

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


UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Operating and Performance Statistics (unaudited)

4th Quarter

Full Year

For the Periods Ended December 31,

2015

2014

%

2015

2014

%

 Operating/Performance Statistics 








      Gross ton-miles (GTMs) (millions)

224,855

262,267

(14)

%

927,677

1,014,905

(9)

%

      Employees (average)

44,490

48,037

(7)

47,457

47,201

1

      GTMs (millions) per employee

5.05

5.46

(8)

19.55

21.50

(9)










 Locomotive Fuel Statistics








      Average fuel price per gallon consumed

$       1.61

$          2.66

(39)

%

$       1.84

$          2.97

(38)

%

      Fuel consumed in gallons (millions)

257

298

(14)

1,064

1,158

(8)

      Fuel consumption rate*

1.143

1.135

1

1.147

1.141

1










 AAR Reported Performance Measures








      Average train speed (miles per hour)

27.0

23.8

13

%

25.4

24.0

6

%

      Average terminal dwell time (hours)

29.4

31.0

(5)

29.3

30.3

(3)










 Revenue Ton-Miles (Millions)








      Agricultural Products

22,695

24,910

(9)

%

89,053

94,273

(6)

%

      Automotive

4,704

4,316

9

18,193

16,797

8

      Chemicals

17,124

18,696

(8)

71,707

75,519

(5)

      Coal

35,953

50,443

(29)

151,110

191,359

(21)

      Industrial Products

17,120

22,178

(23)

75,902

88,054

(14)

      Intermodal

19,122

21,175

(10)

79,070

83,627

(5)

 Total

116,718

141,718

(18)

%

485,035

549,629

(12)

%

*  

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)

2015

 Millions, Except Per Share Amounts and Percentages,

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Full Year

 Operating Revenues









      Freight revenues

$

5,251

$

5,068

$

5,215

$

4,863

$

20,397

      Other revenues

363

361

347

345

1,416

 Total operating revenues

5,614

5,429

5,562

5,208

21,813

 Operating Expenses









      Compensation and benefits

1,369

1,305

1,267

1,220

5,161

      Purchased services and materials

643

600

589

589

2,421

      Fuel

564

541

484

424

2,013

      Depreciation

491

497

507

517

2,012

      Equipment and other rents

311

312

302

305

1,230

      Other


259

225

205

235

924

 Total operating expenses

3,637

3,480

3,354

3,290

13,761

 Operating Income

1,977

1,949

2,208

1,918

8,052

      Other income


26

142

30

28

226

      Interest expense

(148)

(153)

(157)

(164)

(622)

 Income before income taxes

1,855

1,938

2,081

1,782

7,656

 Income taxes


(704)

(734)

(781)

(665)

(2,884)

 Net Income

$

1,151

$

1,204

$

1,300

$

1,117

$

4,772









 Share and Per Share









      Earnings per share - basic

$

1.31

$

1.38

$

1.51

$

1.31

$

5.51

      Earnings per share - diluted

$

1.30

$

1.38

$

1.50

$

1.31

$

5.49

      Weighted average number of shares - basic

879.3

872.2

862.9

850.6

866.2

      Weighted average number of shares - diluted

882.8

875.2

865.8

853.7

869.4

      Dividends declared per share

$

0.55

$

0.55

$

0.55

$

0.55

$

2.20









 Operating Ratio

64.8%

64.1%

60.3%

63.2%

63.1%

 Effective Tax Rate


38.0%

37.9%

37.5%

37.3%

37.7%


UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)

2015

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Full Year

 Freight Revenues (Millions)









 Agricultural Products

$

939

$

867

$

880

$

895

$

3,581

 Automotive


516

560

529

549

2,154

 Chemicals


897

905

882

859

3,543

 Coal

915

679

898

745

3,237

 Industrial Products


1,017

970

979

842

3,808

 Intermodal


967

1,087

1,047

973

4,074

 Total

$

5,251

$

5,068

$

5,215

$

4,863

$

20,397

 Revenue Carloads (Thousands)









 Agricultural Products

245

225

232

239

941

 Automotive

202

222

214

225

863

 Chemicals

267

283

278

270

1,098

 Coal

399

309

398

353

1,459

 Industrial Products

306

308

319

280

1,213

 Intermodal*

812

942

898

836

3,488

 Total

2,231

2,289

2,339

2,203

9,062

 Average Revenue per Car









 Agricultural Products

$

3,838

$

3,844

$

3,793

$

3,745

$

3,805

 Automotive

2,553

2,528

2,469

2,447

2,498

 Chemicals

3,362

3,197

3,165

3,188

3,227

 Coal

2,293

2,197

2,259

2,107

2,218

 Industrial Products

3,325

3,144

3,073

3,004

3,139

 Intermodal*

1,191

1,154

1,166

1,165

1,168

 Average 

$

2,354

$

2,213

$

2,229

$

2,208

$

2,251

*    

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

2015

2014

 Debt** (a)

$

14,201

$

11,413

 Equity

20,702

21,189

 Capital (b)

$

34,903

$

32,602

 Debt to capital (a/b)

40.7%

35.0%

*   

Total debt divided by total debt plus equity. We believe this measure is important to management and investors in evaluating our balance sheet strength and is important in managing our credit ratios and financing relationships.

**   

The prior period amount has been adjusted for the retrospective adoption of Accounting Standard Update 2015-03 related to the presentation of deferred debt issuance costs.


 Adjusted Debt to Capital, Reconciliation to GAAP*






Dec. 31,

Dec. 31,

 Millions, Except Percentages

2015

2014

 Debt**

$

14,201

$

11,413

 Net present value of operating leases

2,726

2,902

 Unfunded pension and OPEB, after tax

463

523

 Adjusted debt (a)

17,390

14,838

 Equity

20,702

21,189

 Adjusted capital (b)

$

38,092

$

36,027

 Adjusted debt to capital (a/b)

45.7%

41.2%

*  

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 4.8% at December 31, 2015, and 5.3% at December 31, 2014. The discount rate reflects our effective interest rate. We believe this measure is important to management and investors in evaluating the total amount of leverage in our capital structure including off-balance sheet lease obligations.

**  

The prior period amount has been adjusted for the retrospective adoption of Accounting Standard Update 2015-03 related to the presentation of deferred debt issuance costs.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Non-GAAP Measures Reconciliation to GAAP


 Return on Invested Capital as Adjusted (ROIC)*









 Millions, Except Percentages

2015

2014

2013

 Net income

$

4,772

$

5,180

$

4,388

 Interest expense

622

561

526

 Interest on average present value of operating leases

135

158

175

 Taxes on interest

(285)

(273)

(264)

 Net operating profit after taxes as adjusted (a)

$

5,244

$

5,626

$

4,825

 Average equity

$

20,946

$

21,207

$

20,551

 Average debt**

12,807

10,469

9,237

 Average present value of operating leases

2,814

2,980

3,077

 Average invested capital as adjusted (b)

$

36,567

$

34,656

$

32,865

 Return on invested capital as adjusted (a/b)

14.3%

16.2%

14.7%

*   

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 to management and investors 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.

**   

The prior period amounts have been adjusted for the retrospective adoption of Accounting Standard Update 2015-03   related to the presentation of deferred debt issuance costs.

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SOURCE Union Pacific Corporation