Union Pacific Reports Second Quarter 2016 Results

Second Quarter Operating Ratio of 65.2 percent

News provided by

Union Pacific Corporation

Jul 21, 2016, 08:00 ET

OMAHA, Neb., July 21, 2016 /PRNewswire/ -- Union Pacific Corporation (NYSE: UNP) today reported 2016 second quarter net income of nearly $1.0 billion, or $1.17 per diluted share compared to about $1.2 billion, or $1.38 per diluted share, in the second quarter 2015.

Second Quarter Results

  • Diluted earnings per share of $1.17 declined 15 percent.
  • Operating income totaled $1.7 billion, down 15 percent.
  • Operating ratio of 65.2 percent, up 1.1 points.

"While the second quarter was again challenging from a volume perspective, we continued focusing on initiatives that are squarely in our control, such as being productive with our resources, providing our customers with excellent service, and improving our safety performance," said Lance Fritz, Union Pacific chairman, president and chief executive officer.

Second Quarter Summary

Operating revenue of $4.8 billion was down 12 percent in the second quarter 2016 compared to the second quarter 2015.  Second quarter business volumes, as measured by total revenue carloads, declined 11 percent compared to 2015.  Volume declines in coal, intermodal, industrial products, chemicals, and automotive more than offset growth in agricultural products.  In addition:

  • Quarterly freight revenue decreased 13 percent compared to the second quarter 2015, as volume declines and lower fuel surcharge revenue more than offset core pricing gains.
  • Union Pacific's 65.2 percent operating ratio was unfavorable by 1.1 points compared to the second quarter 2015. 
  • The $1.45 per gallon average quarterly diesel fuel price in the second quarter 2016 was 27 percent lower than the second quarter 2015.
  • Quarterly train speed, as reported to the Association of American Railroads, was 26.6 mph, 8 percent faster than the second quarter 2015.
  • The Company repurchased 7 million shares in the second quarter 2016 at an aggregate cost of $602 million.

Summary of Second Quarter Freight Revenues

  • Agricultural Products down 3 percent
  • Chemicals down 5 percent
  • Automotive down 13 percent
  • Industrial Products down 14 percent
  • Intermodal down 16 percent
  • Coal down 27 percent

2016 Outlook

"A soft global economy, the negative impact of the strong U.S. dollar on exports, and relatively weak demand for consumer goods will continue to pressure volumes through the second half of the year," Fritz said.  "However, we see potential bright spots in certain segments of our business if key economic drivers continue to strengthen as they have in recent weeks.  Beyond the impact of the current macro environment, we are implementing a strategy that will make us a stronger company for the future.  In the months and years ahead we will continue to create competitive advantages for our customers, enhanced safety and satisfaction for our employees, strength in our communities, and solid returns for our shareholders."

Second Quarter 2016 Earnings Conference Call

Union Pacific will host its second quarter 2016 earnings release presentation live over the Internet and via teleconference on Thursday, July 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; its ability to generate financial returns, improve network performance and customer service, resource productivity and cost efficiency; implementation of corporate strategies; new business development opportunities; and providing 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 2015, which was filed with the SEC on February 5, 2016.  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,

2nd Quarter

Year-to-Date

 For the Periods Ended June 30,

2016

2015

%

2016

2015

%

 Operating Revenues












        Freight revenues

$

4,430

$

5,068

(13)

%

$

8,932

$

10,319

(13)

%

        Other revenues

340

361

(6)


667

724

(8)

 Total operating revenues

4,770

5,429

(12)


9,599

11,043

(13)

 Operating Expenses












        Compensation and benefits

1,160

1,305

(11)


2,373

2,674

(11)

        Purchased services and materials

570

600

(5)


1,139

1,243

(8)

        Depreciation

504

497

1


1,006

988

2

        Fuel

346

541

(36)


666

1,105

(40)

        Equipment and other rents

286

312

(8)


575

623

(8)

        Other


244

225

8


493

484

2

 Total operating expenses

3,110

3,480

(11)


6,252

7,117

(12)

 Operating Income

1,660

1,949

(15)


3,347

3,926

(15)

        Other income


77

142

(46)


123

168

(27)

        Interest expense

(173)

(153)

13


(340)

(301)

13

 Income before income taxes

1,564

1,938

(19)


3,130

3,793

(17)

 Income taxes

(585)

(734)

(20)


(1,172)

(1,438)

(18)

 Net Income

$

979

$

1,204

(19)

%

$

1,958

$

2,355

(17)

%












 Share and Per Share












        Earnings per share - basic

$

1.17

$

1.38

(15)

%

$

2.33

$

2.69

(13)

%

        Earnings per share - diluted

$

1.17

$

1.38

(15)

$

2.32

$

2.68

(13)

        Weighted average number of shares - basic

837.4

872.2

(4)


840.7

875.8

(4)

        Weighted average number of shares - diluted

840.1

875.2

(4)


843.4

879.0

(4)

        Dividends declared per share

$

0.55

$

0.55

-

$

1.10

$

1.10

-














 Operating Ratio

65.2%

64.1%

1.1

pts

65.1%

64.4%

0.7

pts

 Effective Tax Rate


37.4%

37.9%

(0.5)

pts

37.4%

37.9%

(0.5)

pts

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)



























2nd Quarter

Year-to-Date

 For the Periods Ended June 30,

2016

2015

%

2016

2015

%

 Freight Revenues (Millions)












 Agricultural Products

$

845

$

867

(3)

%

$

1,727

$

1,806

(4)

%

 Automotive


488

560

(13)


998

1,076

(7)

 Chemicals


864

905

(5)


1,742

1,802

(3)

 Coal

494

679

(27)


1,013

1,594

(36)

 Industrial Products


830

970

(14)


1,664

1,987

(16)

 Intermodal


909

1,087

(16)


1,788

2,054

(13)

 Total

$

4,430

$

5,068

(13)

%

$

8,932

$

10,319

(13)

%

 Revenue Carloads (Thousands)












 Agricultural Products

229

225

2

%

464

470

(1)

%

 Automotive

217

222

(2)


434

424

2

 Chemicals

275

283

(3)


543

550

(1)

 Coal

243

309

(21)


505

708

(29)

 Industrial Products

275

308

(11)


549

614

(11)

 Intermodal*

809

942

(14)


1,597

1,754

(9)

 Total

2,048

2,289

(11)

%

4,092

4,520

(9)

%

 Average Revenue per Car












 Agricultural Products

$

3,692

$

3,844

(4)

%

$

3,721

$

3,840

(3)

%

 Automotive

2,247

2,528

(11)


2,298

2,540

(10)

 Chemicals

3,146

3,197

(2)


3,208

3,277

(2)

 Coal

2,026

2,197

(8)


2,005

2,251

(11)

 Industrial Products

3,025

3,144

(4)


3,033

3,234

(6)

 Intermodal*

1,124

1,154

(3)


1,120

1,171

(4)

 Average 

$

2,163

$

2,213

(2)

%

$

2,183

$

2,283

(4)

%

*    

Each intermodal 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

2016

2015

 Assets



        Cash and cash equivalents

$

1,830

$

1,391

        Short-term investments

330

-

        Other current assets


2,406

2,739

        Investments

1,408

1,410

        Net properties


49,461

48,866

        Other assets

255

194

 Total assets

$

55,690

$

54,600



 Liabilities and Common Shareholders' Equity



        Debt due within one year

$

409

$

594

        Other current liabilities

2,686

2,612

        Debt due after one year


14,777

13,607

        Deferred income taxes


15,593

15,241

        Other long-term liabilities

1,803

1,844

 Total liabilities

35,268

33,898

 Total common shareholders' equity

20,422

20,702

 Total liabilities and common shareholders' equity

$

55,690

$

54,600



 Debt to Capital

42.6%

40.7%

 Adjusted Debt to Capital*

47.1%

45.7%

*   

Adjusted Debt to Capital is a non-GAAP measure; however, management believes that it is an important measure in evaluating our financial performance. See page 8 for a reconciliation to GAAP.


UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows (unaudited)








 Millions,

Year-to-Date

 For the Periods Ended June 30,

2016

2015

 Operating Activities



        Net income

$

1,958

$

2,355

        Depreciation


1,006

988

        Deferred income taxes


349

237

        Other - net


212

193

 Cash provided by operating activities


3,525

3,773



 Investing Activities



        Capital investments


(1,590)

(2,207)

        Purchase of short-term investments

(330)

-

        Other - net


82

71

 Cash used in investing activities


(1,838)

(2,136)



 Financing Activities



        Debt issued

1,428

2,243

        Common shares repurchased

(1,252)

(1,605)

        Dividends paid*

(925)

(1,401)

        Debt repaid


(449)

(396)

        Other - net


(50)

(23)

 Cash used in financing activities


(1,248)

(1,182)



 Net Change in Cash and Cash Equivalents


439

455

 Cash and cash equivalents at beginning of year


1,391

1,586

 Cash and Cash Equivalents at End of Period

$

1,830

$

2,041



 Free Cash Flow**



        Cash provided by operating activities

$

3,525

$

3,773

        Cash used in investing activities

(1,838)

(2,136)

        Dividends paid

(925)

(1,401)

 Free cash flow

$

762

$

236

*    

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, as well as the second quarter 2015 dividend of $479 million, which was paid on June 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)





















2nd Quarter

Year-to-Date

 For the Periods Ended June 30,

2016

2015

%

2016

2015

%

 Operating/Performance Statistics 









        Gross ton-miles (GTMs) (millions)

202,943

227,608

(11)

%

408,423

464,821

(12)

%

        Employees (average)

43,053

48,992

(12)

43,354

48,911

(11)

        GTMs (millions) per employee

4.71

4.65

1

9.42

9.50

(1)











 Locomotive Fuel Statistics









        Average fuel price per gallon consumed

$       1.45

$       1.99

(27)

%

$       1.35

$       1.97

(31)

%

        Fuel consumed in gallons (millions)

232

264

(12)

479

546

(12)

        Fuel consumption rate*

1.144

1.163

(2)

1.174

1.175

-











 AAR Reported Performance Measures









        Average train speed (miles per hour)

26.6

24.6

8

%

27.0

24.6

10

%

        Average terminal dwell time (hours)

27.1

28.4

(5)

27.8

29.5

(6)











 Revenue Ton-Miles (Millions)









        Agricultural Products

21,565

21,281

1

%

43,856

44,263

(1)

%

        Automotive

4,528

4,749

(5)

9,106

9,042

1

        Chemicals

16,841

18,676

(10)

34,113

36,885

(8)

        Coal

23,811

31,233

(24)

48,584

72,943

(33)

        Industrial Products

16,904

19,334

(13)

33,945

39,502

(14)

        Intermodal

19,226

20,986

(8)

37,934

40,034

(5)

 Total

102,875

116,259

(12)

%

207,538

242,669

(14)

%

*   

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)













2016

 Millions, Except Per Share Amounts and Percentages,

1st Qtr

2nd Qtr

Year-to-Date

 Operating Revenues





        Freight revenues

$

4,502

$

4,430

$

8,932

        Other revenues

327

340

667

 Total operating revenues

4,829

4,770

9,599

 Operating Expenses





        Compensation and benefits

1,213

1,160

2,373

        Purchased services and materials

569

570

1,139

        Depreciation

502

504

1,006

        Fuel

320

346

666

        Equipment and other rents

289

286

575

        Other


249

244

493

 Total operating expenses

3,142

3,110

6,252

 Operating Income

1,687

1,660

3,347

        Other income


46

77

123

        Interest expense

(167)

(173)

(340)

 Income before income taxes

1,566

1,564

3,130

 Income taxes


(587)

(585)

(1,172)

 Net Income

$

979

$

979

$

1,958





 Share and Per Share





        Earnings per share - basic

$

1.16

$

1.17

$

2.33

        Earnings per share - diluted

$

1.16

$

1.17

$

2.32

        Weighted average number of shares - basic

844.0

837.4

840.7

        Weighted average number of shares - diluted

846.7

840.1

843.4

        Dividends declared per share

$

0.55

$

0.55

$

1.10





 Operating Ratio

65.1%

65.2%

65.1%

 Effective Tax Rate


37.5%

37.4%

37.4%


UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)













2016

1st Qtr

2nd Qtr

Year-to-Date

 Freight Revenues (Millions)





 Agricultural Products

$

882

$

845

$

1,727

 Automotive


510

488

998

 Chemicals


878

864

1,742

 Coal

519

494

1,013

 Industrial Products


834

830

1,664

 Intermodal


879

909

1,788

 Total

$

4,502

$

4,430

$

8,932

 Revenue Carloads (Thousands)





 Agricultural Products

235

229

464

 Automotive

217

217

434

 Chemicals

268

275

543

 Coal

262

243

505

 Industrial Products

274

275

549

 Intermodal*

788

809

1,597

 Total

2,044

2,048

4,092

 Average Revenue per Car





 Agricultural Products

$

3,749

$

3,692

$

3,721

 Automotive

2,350

2,247

2,298

 Chemicals

3,272

3,146

3,208

 Coal

1,985

2,026

2,005

 Industrial Products

3,041

3,025

3,033

 Intermodal*

1,116

1,124

1,120

 Average 

$

2,202

$

2,163

$

2,183

*  

Each intermodal container or trailer equals one carload.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Non-GAAP Measures Reconciliation to GAAP








 Debt to Capital*




Jun. 30,

Dec. 31,

 Millions, Except Percentages

2016

2015

 Debt (a)

$

15,186

$

14,201

 Equity

20,422

20,702

 Capital (b)

$

35,608

$

34,903

 Debt to capital (a/b)

42.6%

40.7%

*    

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.



 Adjusted Debt to Capital, Reconciliation to GAAP*






Jun. 30,

Dec. 31,

 Millions, Except Percentages

2016

2015

 Debt

$

15,186

$

14,201

 Net present value of operating leases

2,606

2,726

 Unfunded pension and OPEB

416

463

 Adjusted debt (a)

18,208

17,390

 Equity

20,422

20,702

 Adjusted capital (b)

$

38,630

$

38,092

 Adjusted debt to capital (a/b)

47.1%

45.7%

*    

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 4.7% at June 30, 2016, and 4.8% at December 31, 2015. 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.

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SOURCE Union Pacific Corporation