Union Pacific Reports Second Quarter 2020 Results

News provided by

Union Pacific Corporation

Jul 23, 2020, 08:00 ET

OMAHA, Neb., July 23, 2020 /PRNewswire/ -- Union Pacific Corporation (NYSE: UNP) today reported 2020 second quarter net income of $1.1 billion, or $1.67 per diluted share. This compares to $1.6 billion, or $2.22 per diluted share, in the second quarter 2019.

"The Second Quarter proved very challenging as we faced a volume decline of 20 percent due to the economic impact of the COVID-19 pandemic.  Demonstrating the transformation our Company is experiencing through the implementation of Unified Plan 2020, we were able to largely mitigate the impact of that volume loss," said Lance Fritz, Union Pacific chairman, president and chief executive officer. "Our dedicated employees are feeling a very real impact from this pandemic, making tangible sacrifices. Despite this adversity, they continue to make strides to improve the safety of our railroad, while providing our customers an uninterrupted, enhanced service product."

Second Quarter Summary

Operating revenue of $4.2 billion was down 24 percent in second quarter 2020, compared to second quarter 2019. Second quarter business volumes, as measured by total revenue carloads, decreased 20 percent compared to 2019. Volumes for all three business teams – bulk, industrial, and premium – declined in the quarter due to the deteriorating economic conditions brought on by the COVID-19 pandemic. In addition:

  • Quarterly freight revenue declined 24 percent, compared to second quarter 2019, as core pricing gains were offset by lower volumes, negative business mix and decreased fuel surcharge revenue.
  • Union Pacific's 61 percent operating ratio increased 1.4 points compared to second quarter 2019.




Operating Ratio

Earnings Per
Diluted Share

Second Quarter 2019

59.6%

$2.22

2019 Weather / Insurance Recovery

      0.9  pts

$0.05

2019 Payroll Tax Refund

         (0.7) pts

($0.04)

Fuel Impact

    2.7  pts

$0.09

Core Results

         (4.3) pts

($0.72)

Illinois Tollway Real Estate Sale

N/A

$0.07

Second Quarter 2020

61.0%

$1.67

  • Union Pacific recognized a $69 million gain from a real estate sale to the Illinois State Toll Highway Authority.
  • The $1.26 per gallon average quarterly diesel fuel price in second quarter 2020 was 43 percent lower than second quarter 2019.
  • Union Pacific's first half reportable personal injury rate of 0.83 incidents per 200,000 employee hours improved 5 percent compared to first half 2019.
  • Quarterly freight car velocity was 225 daily miles per car, an 11 percent improvement compared to second quarter 2019.
  • Quarterly locomotive productivity was 136 GTMs per horsepower day, a 12 percent improvement compared to second quarter 2019.
  • Average maximum train length was 8,664 feet, a 13 percent increase compared to second quarter 2019.

Summary of Second Quarter Freight Revenues

  • Bulk down 17 percent
  • Industrial down 23 percent
  • Premium down 33 percent

2020 Outlook

Although the state of global economy is somewhat uncertain given the lingering impact of the COVID-19 pandemic, Union Pacific currently expects full year 2020 carload volumes to be down around 10 percent or so compared to 2019.

"Our first priority continues to be the health and safety of our employees during the pandemic, as they perform critical service to support economic recovery," Fritz said. "Our ability to be nimble and flexible in adjusting our resources to rapidly changing volumes, while providing a high level service product, demonstrates the strength of our service model.  We remain focused on providing our customers with a safe, reliable and efficient service product."

Second Quarter 2020 Earnings Conference Call

Union Pacific will webcast its second quarter 2020 earnings release presentation live at www.up.com/investor and via teleconference on Thursday, July 23, 2020 at 8:45 a.m. Eastern Time. 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 (NYSE: UNP) delivers the goods families and businesses use every day with safe, reliable and efficient service. Operating in 23 western states, the company connects its customers and communities to the global economy. Trains are the most environmentally responsible way to move freight, helping Union Pacific protect future generations. More information about Union Pacific is available at www.up.com.

Supplemental financial information is attached.

This news release 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 improve network performance, its results of operations, and potential impacts of the COVID-19 pandemic.  These statements are, or will be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of 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 2019, which was filed with the SEC on February 7, 2020, and the Company's Quarterly Report on Form 10-Q which was filed with the SEC on April 23, 2020. 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,

2020

2019

%



2020

2019

%


 Operating Revenues














      Freight revenues

$

3,972

$

5,236

(24)

%


$

8,852

$

10,246

(14)

%

      Other


272


360

(24)




621


734

(15)


 Total operating revenues


4,244


5,596

(24)




9,473


10,980

(14)


 Operating Expenses














      Compensation and benefits


905


1,145

(21)




1,964


2,350

(16)


      Depreciation


551


551

-




1,098


1,100

-


      Purchased services and materials


441


573

(23)




962


1,149

(16)


      Fuel


247


560

(56)




681


1,091

(38)


      Equipment and other rents


211


260

(19)




438


518

(15)


      Other


235


247

(5)




533


552

(3)


 Total operating expenses


2,590


3,336

(22)




5,676


6,760

(16)


 Operating Income


1,654


2,260

(27)




3,797


4,220

(10)


      Other income


131


57

F




184


134

37


      Interest expense


(289)


(259)

12




(567)


(506)

12


 Income before income taxes


1,496


2,058

(27)




3,414


3,848

(11)


 Income taxes


(364)


(488)

(25)




(808)


(887)

(9)


 Net Income

$

1,132

$

1,570

(28)

%


$

2,606

$

2,961

(12)

%















 Share and Per Share














      Earnings per share - basic

$

1.67

$

2.23

(25)

%


$

3.83

$

4.16

(8)

%

      Earnings per share - diluted

$

1.67

$

2.22

(25)



$

3.82

$

4.15

(8)


      Weighted average number of shares - basic


677.7


705.5

(4)




681.0


711.2

(4)


      Weighted average number of shares - diluted


679.2


708.0

(4)




682.7


713.8

(4)


      Dividends declared per share

$

0.97

$

0.88

10



$

1.94

$

1.76

10
















 Operating Ratio


61.0%


59.6%

1.4

pts



59.9%


61.6%

(1.7)

pts

 Effective Tax Rate


24.3%


23.7%

0.6

pts



23.7%


23.1%

0.6

pts


UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)
















2nd Quarter


Year-to-Date

 For the Periods Ended June 30,

2020

2019

%



2020

2019

%


 Freight Revenues (Millions)














      Grain & grain products

$

644

$

711

(9)

%


$

1,333

$

1,376

(3)

%

      Fertilizer


168


172

(2)




342


331

3


      Food & refrigerated


205


272

(25)




455


514

(11)


      Coal & renewables


369


523

(29)




790


1,077

(27)


    Bulk


1,386


1,678

(17)




2,920


3,298

(11)


      Industrial chemicals & plastics


435


482

(10)




930


934

-


      Metals & minerals


368


557

(34)




837


1,093

(23)


      Forest products


266


303

(12)




569


588

(3)


      Energy & specialized markets


431


595

(28)




1,058


1,161

(9)


    Industrial


1,500


1,937

(23)




3,394


3,776

(10)


      Automotive


189


554

(66)




713


1,074

(34)


      Intermodal


897


1,067

(16)




1,825


2,098

(13)


    Premium


1,086


1,621

(33)




2,538


3,172

(20)


 Total

$

3,972

$

5,236

(24)

%


$

8,852

$

10,246

(14)

%

 Revenue Carloads (Thousands)














      Grain & grain products


167


178

(6)

%



342


347

(1)

%

      Fertilizer


53


54

(2)




99


97

2


      Food & refrigerated


41


52

(21)




89


99

(10)


      Coal & renewables


186


244

(24)




394


500

(21)


    Bulk


447


528

(15)




924


1,043

(11)


      Industrial chemicals & plastics


141


157

(10)




295


305

(3)


      Metals & minerals


162


199

(19)




336


379

(11)


      Forest products


50


56

(11)




106


112

(5)


      Energy & specialized markets


115


156

(26)




277


303

(9)


    Industrial


468


568

(18)




1,014


1,099

(8)


      Automotive


79


218

(64)




287


428

(33)


      Intermodal [a]


724


823

(12)




1,433


1,654

(13)


    Premium


803


1,041

(23)




1,720


2,082

(17)


 Total


1,718


2,137

(20)

%



3,658


4,224

(13)

%

 Average Revenue per Car














      Grain & grain products

$

3,861

$

3,993

(3)

%


$

3,901

$

3,959

(1)

%

      Fertilizer


3,181


3,182

-




3,456


3,419

1


      Food & refrigerated


4,986


5,211

(4)




5,142


5,215

(1)


      Coal & renewables


1,979


2,147

(8)




2,001


2,155

(7)


    Bulk


3,099


3,179

(3)




3,161


3,163

-


      Industrial chemicals & plastics


3,086


3,081

-




3,148


3,064

3


      Metals & minerals


2,276


2,806

(19)




2,494


2,883

(13)


      Forest products


5,256


5,324

(1)




5,361


5,236

2


      Energy & specialized markets


3,739


3,807

(2)




3,813


3,835

(1)


    Industrial


3,201


3,408

(6)




3,345


3,436

(3)


      Automotive


2,388


2,546

(6)




2,487


2,510

(1)


      Intermodal [a]


1,241


1,295

(4)




1,274


1,268

-


    Premium


1,354


1,557

(13)




1,476


1,523

(3)


 Average 

$

2,312

$

2,450

(6)

%


$

2,420

$

2,425

-

%



[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

2020

2019

 Assets





      Cash and cash equivalents

$

2,706

$

831

      Short-term investments


60


60

      Other current assets


2,317


2,568

      Investments


2,042


2,050

      Net properties


54,270


53,916

      Operating lease assets


1,700


1,812

      Other assets


460


436

 Total assets

$

63,555

$

61,673






 Liabilities and Common Shareholders' Equity





      Debt due within one year

$

1,990

$

1,257

      Other current liabilities


3,289


3,094

      Debt due after one year


26,439


23,943

      Operating lease liabilities


1,320


1,471

      Deferred income taxes


12,171


11,992

      Other long-term liabilities


1,894


1,788

 Total liabilities


47,103


43,545

 Total common shareholders' equity


16,452


18,128

 Total liabilities and common shareholders' equity

$

63,555

$

61,673

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows (unaudited)






 Millions,

Year-to-Date

 For the Periods Ended June 30,

2020

2019

 Operating Activities





      Net income

$

2,606

$

2,961

      Depreciation


1,098


1,100

      Deferred income taxes


171


209

      Other - net


517


(370)

 Cash provided by operating activities


4,392


3,900

 Investing Activities





      Capital investments


(1,599)


(1,560)

      Maturities of short-term investments


75


105

      Purchases of short-term investments


(75)


(100)

      Other - net


182


(55)

 Cash used in investing activities


(1,417)


(1,610)

 Financing Activities





      Debt issued


4,004


2,992

      Share repurchase programs


(2,556)


(3,629)

      Dividends paid


(1,319)


(1,248)

      Debt repaid


(770)


(604)

      Accelerated share repurchase programs pending final settlement


(400)


(500)

      Net issuance of commercial paper


(1)


471

      Other - net


(65)


(29)

 Cash used in financing activities


(1,107)


(2,547)

 Net Change in Cash, Cash Equivalents and Restricted Cash


1,868


(257)

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


856


1,328

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

$

2,724

$

1,071

 Free Cash Flow*





      Cash provided by operating activities

$

4,392

$

3,900

      Cash used in investing activities


(1,417)


(1,610)

      Dividends paid


(1,319)


(1,248)

 Free cash flow

$

1,656

$

1,042



*

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,

2020


2019

%



2020


2019

%


 Operating/Performance Statistics 












      Freight car velocity (daily miles per car) [a]

225


202

11

%


216


198

9

%

      Average train speed (miles per hour) [a] *

26.9


24.5

10



26.0


24.6

6


      Average terminal dwell time (hours) [a] *

21.6


25.7

(16)



22.8


26.2

(13)


      Locomotive productivity (GTMs per horsepower day)

136


121

12



133


116

15


      Gross ton-miles (GTMs) (millions)

170,626


220,009

(22)



371,923


430,328

(14)


      Train length (feet)

8,664


7,652

13



8,517


7,472

14


      Intermodal car trip plan compliance (%)

82


69

13

pts


83


68

15

pts

      Manifest/Automotive car trip plan compliance (%)

76


59

17

pts


69


61

8

pts

      Workforce productivity (car miles per employee)

868


866

-



882


839

5


      Total employees (average)

30,059


38,657

(22)



31,965


39,355

(19)














 Locomotive Fuel Statistics












      Average fuel price per gallon consumed

$ 1.26


$ 2.21

(43)

%


$ 1.59


$ 2.14

(26)

%

      Fuel consumed in gallons (millions)

189


245

(23)



414


493

(16)


      Fuel consumption rate**

1.107


1.112

-



1.112


1.146

(3)














 Revenue Ton-Miles (Millions)












      Grain & grain products

16,242


17,244

(6)

%


32,353


33,421

(3)

%

      Fertilizer

3,116


3,099

1



6,160


5,985

3


      Food & refrigerated

3,752


4,851

(23)



8,258


9,358

(12)


      Coal & renewables

18,188


24,855

(27)



38,193


51,184

(25)


    Bulk

41,298


50,049

(17)



84,964


99,948

(15)


      Industrial chemicals & plastics

6,286


7,215

(13)



13,460


14,027

(4)


      Metals & minerals

6,402


10,260

(38)



14,935


20,179

(26)


      Forest products

5,398


6,083

(11)



11,439


11,927

(4)


      Energy & specialized markets

7,276


11,147

(35)



19,322


21,792

(11)


    Industrial

25,362


34,705

(27)



59,156


67,925

(13)


      Automotive

1,740


4,672

(63)



6,229


9,197

(32)


      Intermodal

17,514


19,318

(9)



35,248


38,324

(8)


    Premium

19,254


23,990

(20)



41,477


47,521

(13)


 Total

85,914


108,744

(21)

%


185,597


215,394

(14)

%



[a]

Prior years have been realigned to conform to the current year presentation.



*

Surface Transportation Board 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)









2020

 Millions, Except Per Share Amounts and Percentages,

1st Qtr 

2nd Qtr 

Year-to-Date

 Operating Revenues







      Freight revenues

$

4,880

$

3,972

$

8,852

      Other revenues


349


272


621

 Total operating revenues


5,229


4,244


9,473

 Operating Expenses







      Compensation and benefits


1,059


905


1,964

      Depreciation


547


551


1,098

      Purchased services and materials


521


441


962

      Fuel


434


247


681

      Equipment and other rents


227


211


438

      Other


298


235


533

 Total operating expenses


3,086


2,590


5,676

 Operating Income


2,143


1,654


3,797

      Other income


53


131


184

      Interest expense


(278)


(289)


(567)

 Income before income taxes


1,918


1,496


3,414

 Income taxes


(444)


(364)


(808)

 Net Income

$

1,474

$

1,132

$

2,606








 Share and Per Share







      Earnings per share - basic

$

2.15

$

1.67

$

3.83

      Earnings per share - diluted

$

2.15

$

1.67

$

3.82

      Weighted average number of shares - basic


684.3


677.7


681.0

      Weighted average number of shares - diluted


686.2


679.2


682.7

      Dividends declared per share

$

0.97

$

0.97

$

1.94








 Operating Ratio


59.0%


61.0%


59.9%

 Effective Tax Rate


23.1%


24.3%


23.7%

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)









2020


1st Qtr 

2nd Qtr 

Year-to-Date

 Freight Revenues (Millions)







      Grain & grain products

$

689

$

644

$

1,333

      Fertilizer


174


168


342

      Food & refrigerated


250


205


455

      Coal & renewables


421


369


790

    Bulk


1,534


1,386


2,920

      Industrial chemicals & plastics


495


435


930

      Metals & minerals


469


368


837

      Forest products


303


266


569

      Energy & specialized markets


627


431


1,058

    Industrial


1,894


1,500


3,394

      Automotive


524


189


713

      Intermodal


928


897


1,825

    Premium


1,452


1,086


2,538

 Total

$

4,880

$

3,972

$

8,852

 Revenue Carloads (Thousands)







      Grain & grain products


175


167


342

      Fertilizer


46


53


99

      Food & refrigerated


48


41


89

      Coal & renewables


208


186


394

    Bulk


477


447


924

      Industrial chemicals & plastics


154


141


295

      Metals & minerals


174


162


336

      Forest products


56


50


106

      Energy & specialized markets


162


115


277

    Industrial


546


468


1,014

      Automotive


208


79


287

      Intermodal [a]


709


724


1,433

    Premium


917


803


1,720

 Total


1,940


1,718


3,658

 Average Revenue per Car







      Grain & grain products

$

3,940

$

3,861

$

3,901

      Fertilizer


3,768


3,181


3,456

      Food & refrigerated


5,277


4,986


5,142

      Coal & renewables


2,022


1,979


2,001

    Bulk


3,219


3,099


3,161

      Industrial chemicals & plastics


3,205


3,086


3,148

      Metals & minerals


2,697


2,276


2,494

      Forest products


5,457


5,256


5,361

      Energy & specialized markets


3,866


3,739


3,813

    Industrial


3,469


3,201


3,345

      Automotive


2,525


2,388


2,487

      Intermodal [a]


1,307


1,241


1,274

    Premium


1,583


1,354


1,476

 Average 

$

2,516

$

2,312

$

2,420



[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]

2020

2019

 Net income

$

5,564

$

5,919

 Add:





 Income tax expense


1,749


1,828

 Depreciation


2,214


2,216

 Interest expense


1,111


1,050

 EBITDA

$

10,638

$

11,013

 Adjustments:




 Other income


(293)


(243)

 Interest on operating lease liabilities**


61


68

 Adjusted EBITDA

$

10,406

$

10,838

 Debt

$

28,429

$

25,200

 Operating lease liabilities


1,639


1,833

 Unfunded pension and OPEB,  net of taxes of $115 and $124


370


400

 Adjusted debt

$

30,438

$

27,433

 Adjusted debt / Adjusted EBITDA


2.9


2.5



[a]

The trailing twelve months income statement information ended June 30, 2020 is recalculated by taking the twelve months ended December 31, 2019, subtracting the six months ended June 30, 2019, and adding the six months ended June 30, 2020.



*

Total debt plus operating lease liabilities plus after-tax unfunded pension and OPEB obligation divided by net income plus income tax expense, depreciation, amortization, interest expense and adjustments for other income and interest on operating lease liabilities. Adjusted debt to adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, other income 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, 2020 and December 31, 2019, 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.

SOURCE Union Pacific Corporation