Union Pacific Reports Second Quarter Results

Second Quarter Diluted Earnings per Share down 3 Percent

News provided by

Union Pacific Corporation

Jul 23, 2015, 08:00 ET

OMAHA, Neb., July 23, 2015 /PRNewswire/ -- 

Second Quarter Results

  • Diluted earnings per share of $1.38 declined 3 percent.
  • Operating income totaled $1.9 billion, down 11 percent.
  • Operating ratio of 64.1 percent, up 0.6 points.

Union Pacific Corporation (NYSE: UNP) today reported 2015 second quarter net income of $1.2 billion, or $1.38 per diluted share, compared to $1.3 billion, or $1.43 per diluted share, in the second quarter 2014.

"Solid core pricing gains were not enough to overcome a significant decrease in demand," said Lance Fritz, Union Pacific president and chief executive officer.  "Total volumes in the second quarter were down 6 percent, led by a sharp decline in coal. Industrial products and agricultural products also posted significant volume decreases.  However, we made meaningful progress right sizing our resources to current volumes, and I am encouraged to report that we made these improvements while posting strong safety performance."

Second Quarter Summary

Operating revenue of $5.4 billion was down 10 percent in the second quarter 2015 versus the second quarter 2014.  Second quarter business volumes, as measured by total revenue carloads, declined 6 percent compared to 2014.  Volume declines in coal, industrial products, and agricultural products more than offset the growth in automotive and intermodal.  Chemicals volume was flat compared to 2014 as growth in base chemicals carloads offset a decline in crude oil shipments.  In addition:

  • Quarterly freight revenue decreased 10 percent compared to the second quarter 2014, as the volume decline, lower fuel surcharge revenue, and negative business mix more than offset core pricing gains.
  • Union Pacific's 64.1 percent operating ratio was 0.6 points worse than the second quarter 2014.  The operating ratio benefited just under a point from the net impact of lower fuel prices in the quarter.
  • Other income of $142 million increased $120 million compared to the second quarter 2014. Included in this amount is the previously announced Fremont, California, land sale, which contributed $113 million to pre-tax income, or 8 cents per diluted share to total earnings.
  • The $1.99 per gallon average quarterly diesel fuel price in the second quarter 2015 was 36 percent lower than the second quarter 2014.
  • Quarterly train speed, as reported to the Association of American Railroads, was 24.6 mph, about 3 percent faster compared with the second quarter 2014.
  • The Company repurchased almost 8.0 million shares in the second quarter 2015 at an aggregate cost of $834 million.

Summary of Second Quarter Freight Revenues

  • Automotive up 3 percent
  • Chemicals down 1 percent
  • Intermodal down 5 percent
  • Agricultural Products down 7 percent
  • Industrial Products down 14 percent
  • Coal down 31 percent

2015 Outlook

"While the volume outlook remains uncertain, we remain laser focused on operating safely and efficiently no matter what the market environment.  We will continue to reduce costs and improve productivity as we further align resources with demand," Fritz said.  "Longer term, we continue to be optimistic about the strengths of our diverse rail franchise."

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 2005-2014, Union Pacific invested more than $31 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 Corporation's future that are not statements of historical fact, including specifically the statements regarding the Corporation'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 Corporation'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 Corporation'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 Corporation'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 Corporation's Annual Report on Form 10-K for 2014, which was filed with the SEC on February 6, 2015.  The Corporation 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 Corporation 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 Corporation does update one or more forward-looking statements, no inference should be drawn that the Corporation 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,

2015

2014

%

2015

2014

%

Operating Revenues












Freight revenues

$

5,068

$

5,661

(10)

%

$

10,319

$

10,947

(6)

%

Other revenues

361

354

2


724

706

3

Total operating revenues

5,429

6,015

(10)


11,043

11,653

(5)

Operating Expenses












Compensation and benefits

1,305

1,246

5


2,674

2,500

7

Purchased services and materials

600

636

(6)


1,243

1,243

-

Fuel

541

923

(41)


1,105

1,844

(40)

Depreciation

497

470

6


988

934

6

Equipment and other rents

312

316

(1)


623

628

(1)

Other


225

228

(1)


484

454

7

Total operating expenses

3,480

3,819

(9)


7,117

7,603

(6)

Operating Income

1,949

2,196

(11)


3,926

4,050

(3)

Other income


142

22

F




168

60

F


Interest expense

(153)

(138)

11


(301)

(271)

11

Income before income taxes

1,938

2,080

(7)


3,793

3,839

(1)

Income taxes


(734)

(789)

(7)


(1,438)

(1,460)

(2)

Net Income

$

1,204

$

1,291

(7)

%

$

2,355

$

2,379

(1)

%














Share and Per Share












Earnings per share - basic

$

1.38

$

1.43

(3)

%

$

2.69

$

2.63

2

%

Earnings per share - diluted

$

1.38

$

1.43

(3)

$

2.68

$

2.62

2

Weighted average number of shares - basic

872.2

901.5

(3)


875.8

904.8

(3)

Weighted average number of shares - diluted

875.2

905.0

(3)


879.0

908.7

(3)

Dividends declared per share

$

0.55

$

0.455

21

$

1.10

$

0.91

21














Operating Ratio

64.1%

63.5%

0.6

pts

64.4%

65.2%

(0.8)

pts

Effective Tax Rate


37.9%

37.9%

-

pts

37.9%

38.0%

(0.1)

pts

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)
















2nd Quarter

Year-to-Date

 For the Periods Ended June 30,

2015

2014

%

2015

2014

%

 Freight Revenues (Millions)












 Agricultural Products

$

867

$

934

(7)

%

$

1,806

$

1,844

(2)

%

 Automotive


560

545

3


1,076

1,033

4

 Chemicals


905

913

(1)


1,802

1,806

-

 Coal

679

989

(31)


1,594

1,950

(18)

 Industrial Products


970

1,130

(14)


1,987

2,141

(7)

 Intermodal


1,087

1,150

(5)


2,054

2,173

(5)

 Total

$

5,068

$

5,661

(10)

%

$

10,319

$

10,947

(6)

%

 Revenue Carloads (Thousands)












 Agricultural Products

225

243

(7)

%

470

482

(2)

%

 Automotive

222

208

7


424

396

7

 Chemicals

283

283

-


550

553

(1)

 Coal

309

417

(26)


708

847

(16)

 Industrial Products

308

356

(13)


614

670

(8)

 Intermodal*

942

924

2


1,754

1,757

-

 Total

2,289

2,431

(6)

%

4,520

4,705

(4)

%

 Average Revenue per Car












 Agricultural Products

$

3,844

$

3,833

-

%

$

3,840

$

3,824

-

%

 Automotive

2,528

2,619

(3)


2,540

2,606

(3)

 Chemicals

3,197

3,230

(1)


3,277

3,267

-

 Coal

2,197

2,369

(7)


2,251

2,301

(2)

 Industrial Products

3,144

3,175

(1)


3,234

3,195

1

 Intermodal*

1,154

1,246

(7)


1,171

1,237

(5)

 Average 

$

2,213

$

2,329

(5)

%

$

2,283

$

2,327

(2)

%


*

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

2015

2014

 Assets



      Cash and cash equivalents

$

2,041

$

1,586

      Other current assets


2,942

3,093

      Investments

1,375

1,390

      Net properties


47,512

46,272

      Other assets

307

375

 Total assets

$

54,177

$

52,716





 Liabilities and Common Shareholders' Equity



      Debt due within one year

$

431

$

462

      Other current liabilities

2,982

3,303

      Debt due after one year


12,908

11,018

      Deferred income taxes


14,907

14,680

      Other long-term liabilities

1,959

2,064

 Total liabilities

33,187

31,527

 Total common shareholders' equity

20,990

21,189

 Total liabilities and common shareholders' equity

$

54,177

$

52,716





 Debt to Capital

38.9%

35.1%

 Adjusted Debt to Capital*

44.2%

41.3%


*

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,

2015

2014

 Operating Activities



      Net income

$

2,355

$

2,379

      Depreciation


988

934

      Deferred income taxes


237

155

      Other - net


193

(247)

 Cash provided by operating activities


3,773

3,221





 Investing Activities



      Capital investments


(2,207)

(2,068)

      Other - net


71

(110)

 Cash used in investing activities


(2,136)

(2,178)





 Financing Activities



      Debt issued

2,243

1,895

      Common shares repurchased

(1,605)

(1,450)

      Dividends paid*

(1,401)

(776)

      Debt repaid


(396)

(640)

      Other - net


(23)

33

 Cash used in financing activities


(1,182)

(938)





 Net Change in Cash and Cash Equivalents


455

105

 Cash and cash equivalents at beginning of year


1,586

1,432

 Cash and Cash Equivalents at End of Period

$

2,041

$

1,537





 Free Cash Flow**



      Cash provided by operating activities

$

3,773

$

3,221

      Cash used in investing activities

(2,136)

(2,178)

      Dividends paid*

(1,401)

(776)

 Free cash flow

$

236

$

267


*

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, management believes that it is an important measure 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,

2015

2014

%

2015

2014

%

 Operating/Performance Statistics 








      Gross ton-miles (GTMs) (millions)

227,608

252,500

(10)

%

464,821

492,669

(6)

%

      Employees (average)

48,992

47,052

4

48,911

46,608

5

      GTMs (millions) per employee

4.65

5.37

(13)

9.50

10.57

(10)










 Locomotive Fuel Statistics








      Average fuel price per gallon consumed

$       1.99

$       3.10

(36)

%

$       1.97

$       3.11

(37)

%

      Fuel consumed in gallons (millions)

264

290

(9)

546

577

(5)

      Fuel consumption rate*

1.163

1.145

2

1.175

1.170

-










 AAR Reported Performance Measures








      Average train speed (miles per hour)

24.6

23.9

3

%

24.6

24.2

2

%

      Average terminal dwell time (hours)

28.4

29.8

(5)

29.5

30.3

(3)










 Revenue Ton-Miles (Millions)








      Agricultural Products

21,281

23,088

(8)

%

44,263

46,811

(5)

%

      Automotive

4,749

4,340

9

9,042

8,298

9

      Chemicals

18,676

18,850

(1)

36,885

37,664

(2)

      Coal

31,233

45,573

(31)

72,943

90,256

(19)

      Industrial Products

19,334

22,592

(14)

39,502

43,017

(8)

      Intermodal

20,986

21,320

(2)

40,034

41,260

(3)

 Total

116,259

135,763

(14)

%

242,669

267,306

(9)

%


*

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

Year-to-Date

 Operating Revenues





      Freight revenues

$

5,251

$

5,068

$

10,319

      Other revenues

363

361

724

 Total operating revenues

5,614

5,429

11,043

 Operating Expenses





      Compensation and benefits

1,369

1,305

2,674

      Purchased services and materials

643

600

1,243

      Fuel

564

541

1,105

      Depreciation

491

497

988

      Equipment and other rents

311

312

623

      Other


259

225

484

 Total operating expenses

3,637

3,480

7,117

 Operating Income

1,977

1,949

3,926

      Other income


26

142

168

      Interest expense

(148)

(153)

(301)

 Income before income taxes

1,855

1,938

3,793

 Income taxes


(704)

(734)

(1,438)

 Net Income

$

1,151

$

1,204

$

2,355







 Share and Per Share





      Earnings per share - basic

$

1.31

$

1.38

$

2.69

      Earnings per share - diluted

$

1.30

$

1.38

$

2.68

      Weighted average number of shares - basic

879.3

872.2

875.8

      Weighted average number of shares - diluted

882.8

875.2

879.0

      Dividends declared per share

$

0.55

$

0.55

$

1.10







 Operating Ratio

64.8%

64.1%

64.4%

 Effective Tax Rate


38.0%

37.9%

37.9%

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)









2015

1st Qtr

2nd Qtr

Year-to-Date

 Freight Revenues (Millions)





 Agricultural Products

$

939

$

867

$

1,806

 Automotive


516

560

1,076

 Chemicals


897

905

1,802

 Coal

915

679

1,594

 Industrial Products


1,017

970

1,987

 Intermodal


967

1,087

2,054

 Total

$

5,251

$

5,068

$

10,319

 Revenue Carloads (Thousands)





 Agricultural Products

245

225

470

 Automotive

202

222

424

 Chemicals

267

283

550

 Coal

399

309

708

 Industrial Products

306

308

614

 Intermodal*

812

942

1,754

 Total

2,231

2,289

4,520

 Average Revenue per Car





 Agricultural Products

$

3,838

$

3,844

$

3,840

 Automotive

2,553

2,528

2,540

 Chemicals

3,362

3,197

3,277

 Coal

2,293

2,197

2,251

 Industrial Products

3,325

3,144

3,234

 Intermodal*

1,191

1,154

1,171

 Average 

$

2,354

$

2,213

$

2,283


*

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

2015

2014

 Debt (a)

$

13,339

$

11,480

 Equity

20,990

21,189

 Capital (b)

$

34,329

$

32,669

 Debt to capital (a/b)

38.9%

35.1%


*

Total debt divided by total debt plus equity. Management believes this is an important measure 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

2015

2014

 Debt

$

13,339

$

11,480

 Net present value of operating leases

2,782

2,902

 Unfunded pension and OPEB

515

523

 Adjusted debt (a)

16,636

14,905

 Equity

20,990

21,189

 Adjusted capital (b)

$

37,626

$

36,094

 Adjusted debt to capital (a/b)

44.2%

41.3%


*

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 4.9% at June 30, 2015, and 5.3% at December 31, 2014. The discount rate reflects our effective interest rate. Management believes this is an important measure 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

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