Union Pacific Reports Record Second Quarter Results

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Income (unaudited)

 Millions, Except Per Share Amounts and Percentages,

2nd Quarter

Year-to-Date

 For the Periods Ended June 30,

2019

2018

%

2019

2018

%

 Operating Revenues

      Freight revenues

$

5,236

$

5,317

%

$

10,246

$

10,439

(2)

%

      Other

360

355

1

734

708

4

 Total operating revenues

5,596

5,672

10,980

11,147

(1)

 Operating Expenses

      Compensation and benefits

1,145

1,241

2,350

2,514

(7)

      Purchased services and materials

573

630

(9)

1,149

1,229

(7)

      Depreciation

551

546

1

1,100

1,089

1

      Fuel

560

643

(13)

1,091

1,232

(11)

      Equipment and other rents

260

265

(2)

518

531

(2)

      Other

247

248

-

552

514

7

 Total operating expenses

3,336

3,573

(7)

6,760

7,109

(5)

 Operating Income

2,260

2,099

8

4,220

4,038

5

      Other income

57

42

36

134

-

F

      Interest expense

(259)

(203)

28

(506)

(389)

30

 Income before income taxes

2,058

1,938

6

3,848

3,649

5

 Income taxes

(488)

(429)

14

(887)

(830)

7

 Net Income

$

1,570

$

1,509

4

%

$

2,961

$

2,819

5

%

 Share and Per Share

      Earnings per share - basic

$

2.23

$

1.98

13

%

$

4.16

$

3.67

13

%

      Earnings per share - diluted

$

2.22

$

1.98

12

$

4.15

$

3.65

14

      Weighted average number of shares - basic

705.5

760.5

(7)

711.2

768.4

(7)

      Weighted average number of shares - diluted

708.0

763.7

(7)

713.8

771.6

(7)

      Dividends declared per share

$

0.88

$

0.73

21

$

1.76

$

1.46

21

 Operating Ratio

59.6%

63.0%

(3.4)

pts

61.6%

63.8%

(2.2)

pts

 Effective Tax Rate

23.7%

22.1%

1.6

pts

23.1%

22.7%

0.4

pts

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)

2nd Quarter

Year-to-Date

 For the Periods Ended June 30,

2019

2018

%

2019

2018

%

 Freight Revenues (Millions)

 Agricultural Products

$

1,155

$

1,114

4

%

$

2,222

$

2,212

-

%

 Energy

966

1,111

(13)

1,948

2,284

(15)

 Industrial

1,494

1,437

4

2,904

2,777

5

 Premium

1,621

1,655

(2)

3,172

3,166

-

 Total

$

5,236

$

5,317

(2)

%

$

10,246

$

10,439

(2)

%

 Revenue Carloads (Thousands)

 Agricultural Products

284

285

-

%

543

564

(4)

%

 Energy

351

387

(9)

709

806

(12)

 Industrial

460

452

2

889

863

3

 Premium [a]

1,042

1,101

(5)

2,083

2,117

(2)

 Total

2,137

2,225

(4)

%

4,224

4,350

(3)

%

 Average Revenue per Car

 Agricultural Products

$

4,057

$

3,903

4

%

$

4,088

$

3,922

4

%

 Energy

2,753

2,874

(4)

2,746

2,835

(3)

 Industrial

3,242

3,178

2

3,266

3,218

1

 Premium

1,557

1,503

4

1,523

1,495

2

 Average 

$

2,450

$

2,389

3

%

$

2,425

$

2,400

1

%

[a]

For intermodal shipments each container or trailer equals one carload.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Financial Position (unaudited)

Jun. 30,

Dec. 31,

 Millions, Except Percentages

2019

2018

 Assets

      Cash and cash equivalents

$

1,049

$

1,273

      Short-term investments

60

60

      Other current assets

2,977

2,830

      Investments

1,989

1,912

      Net properties

53,115

52,679

      Operating lease assets

2,076

-

      Other assets

442

393

 Total assets

$

61,708

$

59,147

 Liabilities and Common Shareholders' Equity

      Debt due within one year

$

2,297

$

1,466

      Other current liabilities

3,368

3,160

      Debt due after one year

22,955

20,925

      Operating lease liabilities

1,612

-

      Deferred income taxes

11,574

11,302

      Other long-term liabilities

1,731

1,871

 Total liabilities

43,537

38,724

 Total common shareholders' equity

18,171

20,423

 Total liabilities and common shareholders' equity

$

61,708

$

59,147

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows (unaudited)

 Millions,

Year-to-Date

 For the Periods Ended June 30,

2019

2018

 Operating Activities

      Net income

$

2,961

$

2,819

      Depreciation

1,100

1,089

      Deferred income taxes

209

204

      Other - net

(370)

(79)

 Cash provided by operating activities

3,900

4,033

 Investing Activities

      Capital investments

(1,560)

(1,614)

      Maturities of short-term investments

105

60

      Purchases of short-term investments

(100)

(60)

      Other - net

(55)

(11)

 Cash used in investing activities

(1,610)

(1,625)

 Financing Activities

      Common share repurchases

(3,629)

(5,973)

      Debt issued

2,992

6,892

      Dividends paid

(1,248)

(1,125)

      Debt repaid

(604)

(1,295)

      Accelerated share repurchase programs pending final settlement

(500)

(720)

      Net issuance of commercial paper

471

196

      Other - net

(29)

(54)

 Cash used in financing activities

(2,547)

(2,079)

 Net Change in Cash, Cash Equivalents and Restricted Cash

(257)

329

 Cash, cash equivalents, and restricted cash at beginning of year

1,328

1,275

 Cash, Cash Equivalents, and Restricted Cash at End of Period

$

1,071

$

1,604

 Free Cash Flow*

      Cash provided by operating activities

$

3,900

$

4,033

      Cash used in investing activities

(1,610)

(1,625)

      Dividends paid

(1,248)

(1,125)

 Free cash flow

$

1,042

$

1,283

*

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)

2nd Quarter

Year-to-Date

 For the Periods Ended June 30,

2019

2018

%

2019

2018

%

 Operating/Performance Statistics 

      Freight car velocity (daily miles per car)

195

188

4

%

191

181

6

%

      Average train speed (miles per hour)*

23.1

24.7

(6)

23.2

24.8

(6)

      Average terminal dwell time (hours)*

25.5

29.5

(14)

26.0

31.2

(17)

      Locomotive productivity (GTMs per horsepower day)

121

102

19

116

103

13

      Gross ton-miles (GTMs) (millions)

220,009

230,938

(5)

430,328

457,867

(6)

      Workforce productivity (car miles per employee)

866

836

4

839

831

1

      Employees (average)

38,657

42,114

(8)

39,355

41,925

(6)

 Locomotive Fuel Statistics

      Average fuel price per gallon consumed

$ 2.21

$ 2.30

(4)

%

$ 2.14

$ 2.22

(4)

%

      Fuel consumed in gallons (millions)

245

270

(9)

493

537

(8)

      Fuel consumption rate**

1.112

1.170

(5)

1.146

1.173

(2)

 Revenue Ton-Miles (Millions)

      Agricultural Products

25,218

25,908

(3)

%

48,804

51,081

(4)

%

      Energy

34,000

40,002

(15)

69,215

83,964

(18)

      Industrial

25,536

25,750

(1)

49,854

50,040

-

      Premium

23,990

25,976

(8)

47,521

49,951

(5)

 Total

108,744

117,636

(8)

%

215,394

235,036

(8)

%

*

AAR reported performance measures. 

**

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)

 Millions, Except Per Share Amounts and Percentages,

2nd Qtr 

Year-to-Date

 Operating Revenues

      Freight revenues

$

5,010

$

5,236

$

10,246

      Other revenues

374

360

734

 Total operating revenues

5,384

5,596

10,980

 Operating Expenses

      Compensation and benefits

1,205

1,145

2,350

      Purchased services and materials

576

573

1,149

      Depreciation

549

551

1,100

      Fuel

531

560

1,091

      Equipment and other rents

258

260

518

      Other

305

247

552

 Total operating expenses

3,424

3,336

6,760

 Operating Income

1,960

2,260

4,220

      Other income

77

57

134

      Interest expense

(247)

(259)

(506)

 Income before income taxes

1,790

2,058

3,848

 Income taxes

(399)

(488)

(887)

 Net Income

$

1,391

$

1,570

$

2,961

 Share and Per Share

      Earnings per share - basic

$

1.94

$

2.23

$

4.16

      Earnings per share - diluted

$

1.93

$

2.22

$

4.15

      Weighted average number of shares - basic

716.8

705.5

711.2

      Weighted average number of shares - diluted

719.5

708.0

713.8

      Dividends declared per share

$

0.88

$

0.88

$

1.76

 Operating Ratio

63.6%

59.6%

61.6%

 Effective Tax Rate

22.3%

23.7%

23.1%

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)

2019

1st Qtr 

2nd Qtr 

Year-to-Date

 Freight Revenues (Millions)

 Agricultural Products

$

1,067

$

1,155

$

2,222

 Energy

982

966

1,948

 Industrial

1,410

1,494

2,904

 Premium

1,551

1,621

3,172

 Total

$

5,010

$

5,236

$

10,246

 Revenue Carloads (Thousands)

 Agricultural Products

259

284

543

 Energy

358

351

709

 Industrial

429

460

889

 Premium [a]

1,041

1,042

2,083

 Total

2,087

2,137

4,224

 Average Revenue per Car

 Agricultural Products

$

4,123

$

4,057

$

4,088

 Energy

2,740

2,753

2,746

 Industrial

3,292

3,242

3,266

 Premium

1,489

1,557

1,523

 Average

$

2,401

$

2,450

$

2,425

[a]

For intermodal shipments each container or trailer equals one carload.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Non-GAAP Measures Reconciliation to GAAP

Adjusted Debt / Adjusted EBITDA*

Millions, Except Ratios

Jun. 30,

Dec. 31,

for the Trailing Twelve Months Ended [a]

2019

2018

 Net income

$

6,108

$

5,966

 Less:

 Other income

228

94

 Add:

 Income tax expense

1,832

1,775

 Depreciation

2,202

2,191

 Interest expense

987

870

 EBITDA

$

10,901

$

10,708

 Interest on operating lease liabilities**

76

84

 Adjusted EBITDA (a)

$

10,977

$

10,792

 Debt

$

25,252

$

22,391

 Operating lease liabilities***

2,054

2,271

 Unfunded pension and OPEB,  net of taxes of $108 and $135

359

456

 Adjusted debt (b)

$

27,665

$

25,118

 Adjusted debt / Adjusted EBITDA (b/a)

2.5

2.3

[a]

The trailing twelve months income statement information ended June 30, 2019 is recalculated by taking the twelve months ended December 31, 2018, subtracting the six months ended June 30, 2018, and adding the six months ended June 30, 2019.

*

Total debt plus operating lease liabilities plus after-tax unfunded pension and OPEB obligation divided by net income less other income plus income tax expense, depreciation, interest expense, and interest on operating lease liabilities. Adjusted debt to adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and interest on operating lease liabilities) 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 Company's ability to sustain given debt levels (including leases) with the cash generated from operations. In addition, a comparable measure is used by rating agencies when reviewing the Company's credit rating. Adjusted debt to Adjusted EBITDA should be considered in addition to, rather than as a substitute for, net income. The table above provides reconciliations from net income to adjusted debt to adjusted EBITDA. At both June 30, 2019 and December 31, 2018, the incremental borrowing rate on operating lease liabilities was 3.7%.

**

Represents the hypothetical interest expense we would incur (using the incremental borrowing rate) if the property under our operating leases were owned or accounted for as finance leases.

***

Effective January 1, 2019, the Company adopted Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases. ASU 2016-02 requires companies to recognize lease assets and lease liabilities on the balance sheet. Prior to adoption, the present value of operating leases was used in this calculation.