Union Pacific Reports Third Quarter 2015 Results

Third Quarter Diluted Earnings per Share down 2 Percent

News provided by

Union Pacific Corporation

Oct 22, 2015, 08:00 ET

OMAHA, Neb., Oct. 22, 2015 /PRNewswire/ --  

Third Quarter Results

  • Diluted earnings per share of $1.50 declined 2 percent.
  • Operating income totaled $2.2 billion, down 5 percent.
  • Operating ratio of 60.3 percent, improved 2 points.

Union Pacific Corporation (NYSE: UNP) today reported 2015 third quarter net income of $1.3 billion, or $1.50 per diluted share, compared to $1.4 billion, or $1.53 per diluted share, in the third quarter 2014.

"Total volumes decreased about 6 percent in the quarter, more than offsetting another quarter of solid core pricing gains," said Lance Fritz, Union Pacific chairman, president and chief executive officer.  "On the cost side, we've made significant progress aligning our resources to current demand, and I am pleased to report a quarterly record operating ratio of 60.3 percent."

Third Quarter Summary

Operating revenue of $5.6 billion was down 10 percent in the third quarter 2015 compared to the third quarter 2014.  Third quarter business volumes, as measured by total revenue carloads, declined about 6 percent compared to 2014.  Volume declined in each of the Company's business groups with the exception of automotive.  In addition:

  • Quarterly freight revenue decreased 10 percent compared to the third quarter 2014, as volume declines, lower fuel surcharge revenue, and negative business mix more than offset core pricing gains.
  • Union Pacific's 60.3 percent operating ratio was an all-time quarterly record, 2 points better than the third quarter 2014 and 1.1 points better than the previous all-time quarterly record set in the fourth quarter 2014.  The operating ratio benefited by about 1.5 points from the net impact of lower fuel prices during the quarter.
  • The $1.81 per gallon average quarterly diesel fuel price in the third quarter 2015 was 40 percent lower than the third quarter 2014.
  • Quarterly train speed, as reported to the Association of American Railroads, was 25.6 mph, 8 percent faster compared with the third quarter 2014.
  • The Company repurchased 13.8 million shares in the third quarter 2015 at an aggregate cost of more than $1.2 billion.

Summary of Third Quarter Freight Revenues

  • Automotive flat
  • Agricultural Products down 4 percent
  • Chemicals down 6 percent
  • Intermodal down 11 percent
  • Industrial Products down 16 percent
  • Coal down 18 percent

2015 Outlook

"We've made great progress in meeting this year's challenges," Fritz said.  "As we finish 2015 and head toward next year, we continue to face many uncertainties.  Energy prices, the consumer economy, grain markets and the strength of the U.S. dollar will all be key to future demand.  Over the long term, we are well positioned to safely provide our customers with excellent service, while delivering strong value to our shareholders."

Third Quarter 2015 Earnings Conference Call

Union Pacific will host its third quarter 2015 earnings release presentation live over the Internet and via teleconference on Thursday, October 22, 2015 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 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, government regulation, 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,

3rd Quarter

Year-to-Date

 For the Periods Ended September 30,

2015

2014

%

2015

2014

%

 Operating Revenues










      Freight revenues

$

5,215

$

5,819

(10)%

$

15,534

$

16,766

(7)%

      Other revenues

347

363

(4)

1,071

1,069

-

 Total operating revenues

5,562

6,182

(10)

16,605

17,835

(7)

 Operating Expenses










      Compensation and benefits

1,267

1,287

(2)

3,941

3,787

4

      Purchased services and materials

589

650

(9)

1,832

1,893

(3)

      Fuel

484

882

(45)

1,589

2,726

(42)

      Depreciation

507

481

5

1,495

1,415

6

      Equipment and other rents

302

310

(3)

925

938

(1)

      Other


205

242

(15)

689

696

(1)

 Total operating expenses

3,354

3,852

(13)

10,471

11,455

(9)

 Operating Income

2,208

2,330

(5)

6,134

6,380

(4)

      Other income


30

20

50

198

80

F  

      Interest expense

(157)

(144)

9

(458)

(415)

10

 Income before income taxes

2,081

2,206

(6)

5,874

6,045

(3)

 Income taxes


(781)

(836)

(7)

(2,219)

(2,296)

(3)

 Net Income

$

1,300

$

1,370

(5)%

$

3,655

$

3,749

(3)%










 Share and Per Share










      Earnings per share - basic

$

1.51

$

1.53

(1)%

$

4.19

$

4.16

1%

      Earnings per share - diluted

$

1.50

$

1.53

(2)

$

4.18

$

4.14

1

      Weighted average number of shares - basic

862.9

893.2

(3)

871.5

900.9

(3)

      Weighted average number of shares - diluted

865.8

896.9

(3)

874.6

904.8

(3)

      Dividends declared per share

$

0.55

$

0.50

10

$

1.65

$

1.41

17










 Operating Ratio

60.3%

62.3%

(2.0) pts

63.1%

64.2%

(1.1) pts

 Effective Tax Rate


37.5%

37.9%

(0.4) pts

37.8%

38.0%

(0.2) pts

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
Freight Revenues Statistics (unaudited)











3rd Quarter

Year-to-Date

For the Periods Ended September 30,

2015

2014

%

2015

2014

%

 Freight Revenues (Millions)










 Agricultural Products

$

880

$

915

(4)%

$

2,686

$

2,759

(3)%

 Automotive


529

527

-

1,605

1,560

3

 Chemicals


882

936

(6)

2,684

2,742

(2)

 Coal

898

1,099

(18)

2,492

3,049

(18)

 Industrial Products


979

1,161

(16)

2,966

3,302

(10)

 Intermodal


1,047

1,181

(11)

3,101

3,354

(8)

 Total

$

5,215

$

5,819

(10)%

$

15,534

$

16,766

(7)%

 Revenue Carloads (Thousands)










 Agricultural Products

232

239

(3)%

702

721

(3)%

 Automotive

214

204

5

638

600

6

 Chemicals

278

288

(3)

828

841

(2)

 Coal

398

466

(15)

1,106

1,313

(16)

 Industrial Products

319

363

(12)

933

1,033

(10)

 Intermodal*

898

936

(4)

2,652

2,693

(2)

 Total

2,339

2,496

(6)%

6,859

7,201

(5)%

 Average Revenue per Car










 Agricultural Products

$

3,793

$

3,836

(1)%

$

3,825

$

3,828

-%

 Automotive

2,469

2,590

(5)

2,516

2,600

(3)

 Chemicals

3,165

3,249

(3)

3,239

3,261

(1)

 Coal

2,259

2,362

(4)

2,254

2,323

(3)

 Industrial Products

3,073

3,195

(4)

3,179

3,195

(1)

 Intermodal*

1,166

1,260

(7)

1,169

1,245

(6)

 Average 

$

2,229

$

2,331

(4)%

$

2,265

$

2,328

(3)%


*

 Each intermodal container or trailer equals one carload.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Financial Position (unaudited)




Sep. 30,

Dec. 31,

 Millions, Except Percentages

2015

2014

 Assets



      Cash and cash equivalents

$

1,078

$

1,586

      Other current assets


2,864

3,093

      Investments

1,373

1,390

      Net properties


48,149

46,272

      Other assets

299

375

 Total assets

$

53,763

$

52,716



 Liabilities and Common Shareholders' Equity



      Debt due within one year

$

521

$

462

      Other current liabilities

2,987

3,303

      Debt due after one year


12,798

11,018

      Deferred income taxes


15,062

14,680

      Other long-term liabilities

1,796

2,064

 Total liabilities

33,164

31,527

 Total common shareholders' equity

20,599

21,189

 Total liabilities and common shareholders' equity

$

53,763

$

52,716



 Debt to Capital

39.3%

35.1%

 Adjusted Debt to Capital*

44.5%

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 September 30,

2015

2014

 Operating Activities



      Net income

$

3,655

$

3,749

      Depreciation


1,495

1,415

      Deferred income taxes


355

289

      Other - net


120

(95)

 Cash provided by operating activities


5,625

5,358



 Investing Activities



      Capital investments


(3,323)

(3,226)

      Other - net


73

(99)

 Cash used in investing activities


(3,250)

(3,325)



 Financing Activities



      Debt issued

2,243

2,588

      Common shares repurchased

(2,795)

(2,312)

      Dividends paid*

(1,877)

(1,186)

      Debt repaid


(436)

(678)

      Other - net


(18)

10

 Cash used in financing activities


(2,883)

(1,578)



 Net Change in Cash and Cash Equivalents


(508)

455

 Cash and cash equivalents at beginning of year


1,586

1,432

 Cash and Cash Equivalents at End of Period

$

1,078

$

1,887



 Free Cash Flow**



      Cash provided by operating activities

$

5,625

$

5,358

      Cash used in investing activities

(3,250)

(3,325)

      Dividends paid*

(1,877)

(1,186)

 Free cash flow

$

498

$

847


*

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, the second quarter 2015 dividend of $479 million, which was paid on June 30, 2015, as well as the third quarter 2015 dividend of $476 million, which was paid on September 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)







3rd Quarter

Year-to-Date

For the Periods Ended September 30,

2015

2014

%

2015

2014

%

 Operating/Performance Statistics 






      Gross ton-miles (GTMs) (millions)

238,001

259,969

(8)%

702,822

752,638

(7)%

      Employees (average)

47,515

47,550

-

48,446

46,922

3

      GTMs (millions) per employee

5.01

5.47

(8)

14.51

16.04

(10)






 Locomotive Fuel Statistics






      Average fuel price per gallon consumed

$       1.81

$       3.01

(40)%

$       1.92

$       3.08

(38)%

      Fuel consumed in gallons (millions)

261

283

(8)

807

860

(6)

      Fuel consumption rate*

1.097

1.091

1

1.149

1.143

1






 AAR Reported Performance Measures






      Average train speed (miles per hour)

25.6

23.8

8%

24.9

24.1

3%

      Average terminal dwell time (hours)

28.7

29.7

(3)

29.2

30.1

(3)






 Revenue Ton-Miles (Millions)






      Agricultural Products

22,095

22,552

(2)%

66,358

69,363

(4)%

      Automotive

4,446

4,183

6

13,489

12,481

8

      Chemicals

17,697

19,159

(8)

54,583

56,823

(4)

      Coal

42,215

50,660

(17)

115,157

140,916

(18)

      Industrial Products

19,280

22,859

(16)

58,782

65,876

(11)

      Intermodal

19,915

21,192

(6)

59,948

62,452

(4)

 Total

125,648

140,605

(11)%

368,317

407,911

(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)








2015

 Millions, Except Per Share Amounts and Percentages,

1st Qtr

2nd Qtr

3rd Qtr

Year-to-Date

 Operating Revenues







      Freight revenues

$

5,251

$

5,068

$

5,215

$

15,534

      Other revenues

363

361

347

1,071

 Total operating revenues

5,614

5,429

5,562

16,605

 Operating Expenses







      Compensation and benefits

1,369

1,305

1,267

3,941

      Purchased services and materials

643

600

589

1,832

      Fuel

564

541

484

1,589

      Depreciation

491

497

507

1,495

      Equipment and other rents

311

312

302

925

      Other


259

225

205

689

 Total operating expenses

3,637

3,480

3,354

10,471

 Operating Income

1,977

1,949

2,208

6,134

      Other income


26

142

30

198

      Interest expense

(148)

(153)

(157)

(458)

 Income before income taxes

1,855

1,938

2,081

5,874

 Income taxes


(704)

(734)

(781)

(2,219)

 Net Income

$

1,151

$

1,204

$

1,300

$

3,655







 Share and Per Share







      Earnings per share - basic

$

1.31

$

1.38

$

1.51

$

4.19

      Earnings per share - diluted

$

1.30

$

1.38

$

1.50

$

4.18

      Weighted average number of shares - basic

879.3

872.2

862.9

871.5

      Weighted average number of shares - diluted

882.8

875.2

865.8

874.6

      Dividends declared per share

$

0.55

$

0.55

$

0.55

$

1.65







 Operating Ratio

64.8%

64.1%

60.3%

63.1%

 Effective Tax Rate


38.0%

37.9%

37.5%

37.8%

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)








2015

1st Qtr

2nd Qtr

3rd Qtr

Year-to-Date

 Freight Revenues (Millions)







 Agricultural Products

$

939

$

867

$

880

$

2,686

 Automotive


516

560

529

1,605

 Chemicals


897

905

882

2,684

 Coal

915

679

898

2,492

 Industrial Products


1,017

970

979

2,966

 Intermodal


967

1,087

1,047

3,101

 Total

$

5,251

$

5,068

$

5,215

$

15,534

 Revenue Carloads (Thousands)







 Agricultural Products

245

225

232

702

 Automotive

202

222

214

638

 Chemicals

267

283

278

828

 Coal

399

309

398

1,106

 Industrial Products

306

308

319

933

 Intermodal*

812

942

898

2,652

 Total

2,231

2,289

2,339

6,859

 Average Revenue per Car







 Agricultural Products

$

3,838

$

3,844

$

3,793

$

3,825

 Automotive

2,553

2,528

2,469

2,516

 Chemicals

3,362

3,197

3,165

3,239

 Coal

2,293

2,197

2,259

2,254

 Industrial Products

3,325

3,144

3,073

3,179

 Intermodal*

1,191

1,154

1,166

1,169

 Average 

$

2,354

$

2,213

$

2,229

$

2,265


*

Each intermodal container or trailer equals one carload.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Non-GAAP Measures Reconciliation to GAAP



 Debt to Capital*




Sep. 30,

Dec. 31,

 Millions, Except Percentages

2015

2014

 Debt (a)

$

13,319

$

11,480

 Equity

20,599

21,189

 Capital (b)

$

33,918

$

32,669

 Debt to capital (a/b)

39.3%

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*






Sep. 30,

Dec. 31,

 Millions, Except Percentages

2015

2014

 Debt

$

13,319

$

11,480

 Net present value of operating leases

2,719

2,902

 Unfunded pension and OPEB

455

523

 Adjusted debt (a)

16,493

14,905

 Equity

20,599

21,189

 Adjusted capital (b)

$

37,092

$

36,094

 Adjusted debt to capital (a/b)

44.5%

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 September 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