Union Pacific Reports Second Quarter 2017 Results

Second Quarter Diluted Earnings per Share up 24 percent

News provided by

Union Pacific Corporation

Jul 20, 2017, 08:00 ET

OMAHA, Neb., July 20, 2017 /PRNewswire/ -- Union Pacific Corporation (NYSE: UNP) today reported 2017 second quarter net income of nearly $1.2 billion, a second quarter record of $1.45 per diluted share.  This compares to about $1.0 billion, or $1.17 per diluted share, in the second quarter 2016.  Union Pacific also reported a second quarter record operating ratio of 61.8 percent, a 3.4 point improvement compared to the second quarter 2016 operating ratio.

Second Quarter Results

  • Diluted earnings per share of $1.45 increased 24 percent.
  • Operating income totaled $2.0 billion, up 21 percent.
  • Operating ratio of 61.8 percent improved 3.4 points.

"I am pleased with our results through the first six months, and look forward to continuing our momentum through the remainder of the year," said Lance Fritz, Union Pacific chairman, president and chief executive officer.  "Guided by our strategic value tracks, our entire team is focused on providing an excellent customer experience while safely and efficiently delivering on our innovative productivity initiatives."

Second Quarter Summary

Operating revenue of $5.3 billion was up 10 percent in the second quarter 2017 compared to the second quarter 2016.  Second quarter business volumes, as measured by total revenue carloads, increased 5 percent compared to 2016.  Volume increases in coal, industrial products, agricultural products and intermodal more than offset declines in chemicals and automotive.  In addition:

  • Quarterly freight revenue improved 11 percent compared to the second quarter 2016, as volume growth, increased fuel surcharge revenue, core pricing gains and positive mix of traffic all contributed to the increase.
  • Union Pacific's second quarter record operating ratio of 61.8 percent improved 3.4 points compared to the second quarter 2016.  Higher fuel prices positively impacted the operating ratio by a half of a point. 
  • The $1.69 per gallon average quarterly diesel fuel price in the second quarter 2017 was 17 percent higher than the second quarter 2016.
  • Quarterly train speed, as reported to the Association of American Railroads, was 25.4 mph, 5 percent slower than the second quarter 2016.
  • Union Pacific's first half reportable personal injury rate of 0.76 per 200,000 employee-hours increased from the record first half rate of 0.70 achieved in 2016.
  • The Company repurchased 7.8 million shares in the second quarter 2017 at an aggregate cost of $850 million.

Summary of Second Quarter Freight Revenues

  • Intermodal up 3 percent
  • Chemicals up 4 percent
  • Automotive up 5 percent
  • Agricultural Products up 7 percent
  • Industrial Products up 24 percent
  • Coal up 25 percent

2017 Outlook

"Absolute business volumes should be stronger in the second half than the first half, although year-over-year comparisons will be more challenging.  In this environment we will focus on our growth opportunities.  In addition, we will continue to make progress on our G55 + 0 initiatives as we work to make Union Pacific a stronger, more efficient company," Fritz said.  "We are confident these efforts will generate top-line growth, margin improvement and greater returns for our shareholders."

Second Quarter 2017 Earnings Conference Call

Union Pacific will host its second quarter 2017 earnings release presentation live over the Internet and via teleconference on Thursday, July 20, 2017 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. In the past 10 years, 2007-2016, Union Pacific invested approximately $34 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; implementation of corporate strategies; and providing excellent service to its customers and 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 2016, which was filed with the SEC on February 3, 2017.  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,

2017

2016

%

2017

2016

%

 Operating Revenues












      Freight revenues

$

4,906

$

4,430

11%

$

9,700

$

8,932

9%

      Other revenues

344

340

1


682

667

2

 Total operating revenues

5,250

4,770

10


10,382

9,599

8

 Operating Expenses












      Compensation and benefits

1,197

1,160

3


2,454

2,373

3

      Purchased services and materials

597

570

5


1,163

1,139

2

      Depreciation

525

504

4


1,045

1,006

4

      Fuel

434

346

25


894

666

34

      Equipment and other rents

273

286

(5)


549

575

(5)

      Other


219

244

(10)


479

493

(3)

 Total operating expenses

3,245

3,110

4


6,584

6,252

5

 Operating Income

2,005

1,660

21


3,798

3,347

13

      Other income


43

77

(44)


110

123

(11)

      Interest expense

(179)

(173)

3


(351)

(340)

3

 Income before income taxes

1,869

1,564

20


3,557

3,130

14

 Income taxes

(701)

(585)

20


(1,317)

(1,172)

12

 Net Income

$

1,168

$

979

19%

$

2,240

$

1,958

14%














 Share and Per Share












      Earnings per share - basic

$

1.45

$

1.17

24%

$

2.77

$

2.33

19%

      Earnings per share - diluted

$

1.45

$

1.17

24

$

2.76

$

2.32

19

      Weighted average number of shares - basic

804.1

837.4

(4)


807.8

840.7

(4)

      Weighted average number of shares - diluted

807.2

840.1

(4)


811.0

843.4

(4)

      Dividends declared per share

$

0.605

$

0.55

10

$

1.21

$

1.10

10














 Operating Ratio

61.8%

65.2%

(3.4)pts


63.4%

65.1%

(1.7)pts

 Effective Tax Rate


37.5%

37.4%

0.1pts


37.0%

37.4%

(0.4)pts

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)






























2nd Quarter

Year-to-Date

For the Periods Ended June 30,

2017

2016

%

2017

2016

%

 Freight Revenues (Millions)












 Agricultural Products

$

907

$

845

7%

$

1,849

$

1,727

7%

 Automotive


513

488

5


1,017

998

2

 Chemicals


898

864

4


1,783

1,742

2

 Coal

619

494

25


1,267

1,013

25

 Industrial Products


1,030

830

24


1,937

1,664

16

 Intermodal


939

909

3


1,847

1,788

3

 Total

$

4,906

$

4,430

11%

$

9,700

$

8,932

9%

 Revenue Carloads (Thousands)












 Agricultural Products

237

229

3%


487

464

5%

 Automotive

215

217

(1)


427

434

(2)

 Chemicals

269

275

(2)


526

543

(3)

 Coal

285

243

17


589

505

17

 Industrial Products

315

275

15


593

549

8

 Intermodal*

824

809

2


1,611

1,597

1

 Total

2,145

2,048

5%


4,233

4,092

3%

 Average Revenue per Car












 Agricultural Products

$

3,813

$

3,692

3%

$

3,793

$

3,721

2%

 Automotive

2,393

2,247

6


2,383

2,298

4

 Chemicals

3,334

3,146

6


3,390

3,208

6

 Coal

2,173

2,026

7


2,153

2,005

7

 Industrial Products

3,271

3,025

8


3,266

3,033

8

 Intermodal*

1,140

1,124

1


1,147

1,120

2

 Average 

$

2,287

$

2,163

6%

$

2,292

$

2,183

5%


*  

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

2017

2016

 Assets



      Cash and cash equivalents

$

1,286

$

1,277

      Short-term investments

90

60

      Other current assets


2,493

2,259

      Investments

1,504

1,457

      Net properties


50,814

50,389

      Other assets

291

276

 Total assets

$

56,478

$

55,718





 Liabilities and Common Shareholders' Equity



      Debt due within one year

$

531

$

758

      Other current liabilities

2,875

2,882

      Debt due after one year


15,229

14,249

      Deferred income taxes


16,329

15,996

      Other long-term liabilities

1,899

1,901

 Total liabilities

36,863

35,786

 Total common shareholders' equity

19,615

19,932

 Total liabilities and common shareholders' equity

$

56,478

$

55,718





 Debt to Capital

44.6%

43.0%

 Adjusted Debt to Capital*

48.5%

47.3%


*     

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,

2017

2016

 Operating Activities



      Net income

$

2,240

$

1,958

      Depreciation


1,045

1,006

      Deferred income taxes


298

349

      Other - net


(124)

212

 Cash provided by operating activities


3,459

3,525





 Investing Activities



      Capital investments


(1,589)

(1,590)

      Purchases of short-term investments

(90)

(330)

      Maturities of short-term investments

60

-

      Other - net


55

82

 Cash used in investing activities


(1,564)

(1,838)





 Financing Activities



      Common shares repurchased

(1,611)

(1,252)

      Debt issued

1,186

1,428

      Dividends paid

(980)

(925)

      Debt repaid


(444)

(449)

      Other - net


(37)

(50)

 Cash used in financing activities


(1,886)

(1,248)





 Net Change in Cash and Cash Equivalents


9

439

 Cash and cash equivalents at beginning of year


1,277

1,391

 Cash and Cash Equivalents at End of Period

$

1,286

$

1,830





 Free Cash Flow*



      Cash provided by operating activities

$

3,459

$

3,525

      Cash used in investing activities

(1,564)

(1,838)

      Dividends paid

(980)

(925)

 Free cash flow

$

915

$

762


* 

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,

2017

2016

%

2017

2016

%

 Operating/Performance Statistics 










      Gross ton-miles (GTMs) (millions)

222,842

202,943

10%

441,756

408,423

8%

      Employees (average)

42,256

43,053

(2)

42,162

43,354

(3)

      GTMs (millions) per employee

5.27

4.71

12

10.48

9.42

11












 Locomotive Fuel Statistics










      Average fuel price per gallon consumed

$       1.69

$       1.45

17%

$       1.72

$       1.35

27%

      Fuel consumed in gallons (millions)

246

232

6

499

479

4

      Fuel consumption rate*

1.105

1.144

(3)

1.130

1.174

(4)












 AAR Reported Performance Measures










      Average train speed (miles per hour)

25.4

26.6

(5)%

25.6

27.0

(5)%

      Average terminal dwell time (hours)

28.3

27.1

4

29.4

27.8

6












 Revenue Ton-Miles (Millions)










      Agricultural Products

22,089

21,565

2%

45,548

43,856

4%

      Automotive

4,692

4,528

4

9,354

9,106

3

      Chemicals

16,631

16,841

(1)

32,901

34,113

(4)

      Coal

30,446

23,811

28

62,279

48,584

28

      Industrial Products

21,321

16,904

26

40,160

33,945

18

      Intermodal

19,643

19,226

2

38,659

37,934

2

 Total

114,822

102,875

12%

228,901

207,538

10%


*    

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)
















2017

Millions, Except Per Share Amounts and Percentages,

1st Qtr

2nd Qtr

Year-to-Date

 Operating Revenues





      Freight revenues

$

4,794

$

4,906

$

9,700

      Other revenues

338

344

682

 Total operating revenues

5,132

5,250

10,382

 Operating Expenses





      Compensation and benefits

1,257

1,197

2,454

      Purchased services and materials

566

597

1,163

      Depreciation

520

525

1,045

      Fuel

460

434

894

      Equipment and other rents

276

273

549

      Other


260

219

479

 Total operating expenses

3,339

3,245

6,584

 Operating Income

1,793

2,005

3,798

      Other income


67

43

110

      Interest expense

(172)

(179)

(351)

 Income before income taxes

1,688

1,869

3,557

 Income taxes


(616)

(701)

(1,317)

 Net Income

$

1,072

$

1,168

$

2,240







 Share and Per Share





      Earnings per share - basic

$

1.32

$

1.45

$

2.77

      Earnings per share - diluted

$

1.32

$

1.45

$

2.76

      Weighted average number of shares - basic

811.5

804.1

807.8

      Weighted average number of shares - diluted

814.8

807.2

811.0

      Dividends declared per share

$

0.605

$

0.605

$

1.21







 Operating Ratio

65.1%

61.8%

63.4%

 Effective Tax Rate


36.5%

37.5%

37.0%

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)
















2017

1st Qtr

2nd Qtr

Year-to-Date

Freight Revenues (Millions)





 Agricultural Products

$

942

$

907

$

1,849

 Automotive


504

513

1,017

 Chemicals


885

898

1,783

 Coal

648

619

1,267

 Industrial Products


907

1,030

1,937

 Intermodal


908

939

1,847

 Total

$

4,794

$

4,906

$

9,700

 Revenue Carloads (Thousands)





 Agricultural Products

250

237

487

 Automotive

212

215

427

 Chemicals

257

269

526

 Coal

304

285

589

 Industrial Products

278

315

593

 Intermodal*

787

824

1,611

 Total

2,088

2,145

4,233

 Average Revenue per Car





 Agricultural Products

$

3,773

$

3,813

$

3,793

 Automotive

2,373

2,393

2,383

 Chemicals

3,448

3,334

3,390

 Coal

2,134

2,173

2,153

 Industrial Products

3,261

3,271

3,266

 Intermodal*

1,154

1,140

1,147

 Average 

$

2,297

$

2,287

$

2,292


*   

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

2017

2016

 Debt (a)

$

15,760

$

15,007

 Equity

19,615

19,932

 Capital (b)

$

35,375

$

34,939

 Debt to capital (a/b)

44.6%

43.0%


*    

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.

 Adjusted Debt to Capital, Reconciliation to GAAP*






Jun. 30,

Dec. 31,

Millions, Except Percentages

2017

2016

 Debt

$

15,760

$

15,007

 Net present value of operating leases

2,267

2,435

 Unfunded pension and OPEB, net of taxes of $248 and $261

413

436

 Adjusted debt (a)

18,440

17,878

 Equity

19,615

19,932

 Adjusted capital (b)

$

38,055

$

37,810

 Adjusted debt to capital (a/b)

48.5%

47.3%


*  

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 4.6% at June 30, 2017, and 4.7% at December 31, 2016. 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.

SOURCE Union Pacific Corporation