Union Pacific Reports Third Quarter 2017 Results

Third Quarter Diluted Earnings per Share up 10 percent

News provided by

Union Pacific Corporation

Oct 26, 2017, 08:00 ET

OMAHA, Neb., Oct. 26, 2017 /PRNewswire/ --

Third Quarter Results

  • Diluted earnings per share of $1.50 increased 10 percent.
  • Operating income totaled $2.0 billion, up 3 percent.
  • Operating ratio of 62.8 percent, up 0.7 points.

Union Pacific Corporation (NYSE: UNP) today reported 2017 third quarter net income of $1.2 billion, or a $1.50 per diluted share.  This compares to $1.1 billion, or $1.36 per diluted share, in the third quarter 2016. 

"During the quarter, our company faced the unprecedented challenge of Hurricane Harvey," said Lance Fritz, Union Pacific chairman, president and chief executive officer.  "I want to thank the men and women of Union Pacific who worked tirelessly and heroically to quickly and safely restore our network and operations from the storm and related flooding.  Given these challenges, I am pleased with our results and look forward to continuing to build on the foundation provided by our six-track value strategy."

Third Quarter Summary

Operating revenue of $5.4 billion was up 5 percent in the third quarter 2017 compared to the third quarter 2016.  Third quarter business volumes, as measured by total revenue carloads, declined 1 percent compared to 2016.  Volume increases in industrial products were more than offset by declines in agricultural products, automotive, chemicals and coal.  Intermodal volume was flat compared to 2016.  In addition:

  • Quarterly freight revenue improved 4 percent compared to the third quarter 2016, as increased fuel surcharge revenue, core pricing gains and positive mix of traffic all contributed to the increase.
  • Union Pacific's third quarter operating ratio of 62.8 percent increased 0.7 points compared to the third quarter 2016.  Higher fuel prices negatively impacted the operating ratio by 0.3 points.
  • The $1.77 per gallon average quarterly diesel fuel price in the third quarter 2017 was 13 percent higher than the third quarter 2016.
  • Quarterly train speed, as reported to the Association of American Railroads, was 25.4 mph, 2 percent slower than the third quarter 2016.
  • The year-to-date reportable personal injury rate of 0.78 per 200,000 employee-hours increased from the record year-to-date rate of 0.77 achieved in 2016.
  • Union Pacific repurchased 11.8 million shares in the third quarter 2017 at an aggregate cost of nearly $1.3 billion.
  • Included in the third quarter results are the following previously disclosed items:

EPS

Impact

Operating Ratio
Impact

Favorable / (Unfavorable)

Favorable / (Unfavorable)

Workforce Reduction Charge

($0.06)

    (1.55) pts

Hurricane Harvey Impact

($0.04)

    (0.75) pts

Illinois State Income Tax Adjustment

($0.04)

N/A

Land Sale

$0.04

N/A

Resolution of a Litigation Matter

$0.05

N/A

Summary of Third Quarter Freight Revenues

  • Automotive down 3 percent
  • Agricultural Products down 2 percent
  • Coal down 2 percent
  • Chemicals up 2 percent
  • Intermodal up 3 percent
  • Industrial Products up 26 percent

2017 Outlook

"As the economy continues to ebb and flow, we will focus on executing our value strategy.  We will use innovation to enhance our customer experience while continuing to drive resource productivity throughout the organization as we progress our G55 + 0 initiatives," Fritz said.  "Looking ahead to 2018, our engaged team is laser focused on building upon our recent success.  Our goal is to continue creating long-term enterprise value for all of our stakeholders as we improve our top-line and progress toward our margin improvement targets."

Third Quarter 2017 Earnings Conference Call

Union Pacific will host its third quarter 2017 earnings release presentation live over the Internet and via teleconference on Thursday, October 26, 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; its ability to generate financial returns, improve resource productivity and use innovation to enhance customer experience; implementing 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,

3rd Quarter

Year-to-Date

 For the Periods Ended September 30,

2017

2016

%

2017

2016

%

 Operating Revenues












      Freight revenues

$

5,050

$

4,837

4

%

$

14,750

$

13,769

7

%

      Other revenues

358

337

6


1,040

1,004

4

 Total operating revenues

5,408

5,174

5


15,790

14,773

7

 Operating Expenses












      Compensation and benefits

1,298

1,191

9


3,752

3,564

5

      Purchased services and materials

615

566

9


1,778

1,705

4

      Depreciation

528

512

3


1,573

1,518

4

      Fuel

450

392

15


1,344

1,058

27

      Equipment and other rents

275

282

(2)


824

857

(4)

      Other


230

271

(15)


709

764

(7)

 Total operating expenses

3,396

3,214

6


9,980

9,466

5

 Operating Income

2,012

1,960

3


5,810

5,307

9

      Other income


151

29

F




261

152

72

      Interest expense

(180)

(184)

(2)


(531)

(524)

1

 Income before income taxes

1,983

1,805

10


5,540

4,935

12

 Income taxes

(789)

(674)

17


(2,106)

(1,846)

14

 Net Income

$

1,194

$

1,131

6

%

$

3,434

$

3,089

11

%














 Share and Per Share












      Earnings per share - basic

$

1.50

$

1.36

10

%

$

4.27

$

3.69

16

%

      Earnings per share - diluted

$

1.50

$

1.36

10

$

4.26

$

3.68

16

      Weighted average number of shares - basic

794.5

829.0

(4)


803.4

836.8

(4)

      Weighted average number of shares - diluted

797.6

832.2

(4)


806.5

839.6

(4)

      Dividends declared per share

$

0.605

$

0.55

10

$

1.815

$

1.65

10














 Operating Ratio

62.8%

62.1%

0.7

pts

63.2%

64.1%

(0.9)

pts

 Effective Tax Rate


39.8%

37.3%

2.5

pts

38.0%

37.4%

0.6

pts

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)















3rd Quarter

Year-to-Date

 For the Periods Ended September 30,

2017

2016

%

2017

2016

%

 Freight Revenues (Millions)












 Agricultural Products

$

914

$

937

(2)

%

$

2,763

$

2,664

4

%

 Automotive


469

485

(3)


1,486

1,483

-

 Chemicals


896

875

2


2,679

2,617

2

 Coal

711

728

(2)


1,978

1,741

14

 Industrial Products


1,079

855

26


3,016

2,519

20

 Intermodal


981

957

3


2,828

2,745

3

 Total

$

5,050

$

4,837

4

%

$

14,750

$

13,769

7

%

 Revenue Carloads (Thousands)












 Agricultural Products

232

258

(10)

%

719

722

-

%

 Automotive

200

210

(5)


627

644

(3)

 Chemicals

259

274

(5)


785

817

(4)

 Coal

331

341

(3)


920

846

9

 Industrial Products

325

283

15


918

832

10

 Intermodal*

841

838

-


2,452

2,435

1

 Total

2,188

2,204

(1)

%

6,421

6,296

2

%

 Average Revenue per Car












 Agricultural Products

$

3,951

$

3,637

9

%

$

3,844

$

3,691

4

%

 Automotive

2,341

2,310

1


2,370

2,302

3

 Chemicals

3,457

3,201

8


3,412

3,206

6

 Coal

2,143

2,134

-


2,150

2,057

5

 Industrial Products

3,325

3,019

10


3,287

3,028

9

 Intermodal*

1,166

1,141

2


1,153

1,127

2

 Average 

$

2,307

$

2,195

5

%

$

2,297

$

2,187

5

%


*

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

2017

2016

 Assets



      Cash and cash equivalents

$

1,847

$

1,277

      Short-term investments

90

60

      Other current assets


2,512

2,259

      Investments

1,566

1,457

      Net properties


51,036

50,389

      Other assets

346

276

 Total assets

$

57,397

$

55,718





 Liabilities and Common Shareholders' Equity



      Debt due within one year

$

903

$

758

      Other current liabilities

2,928

2,882

      Debt due after one year


15,930

14,249

      Deferred income taxes


16,524

15,996

      Other long-term liabilities

1,961

1,901

 Total liabilities

38,246

35,786

 Total common shareholders' equity

19,151

19,932

 Total liabilities and common shareholders' equity

$

57,397

$

55,718





 Debt to Capital

46.8%

43.0%

 Adjusted Debt to Capital*

50.4%

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 September 30,

2017

2016

 Operating Activities



      Net income

$

3,434

$

3,089

      Depreciation


1,573

1,518

      Deferred income taxes


514

519

      Other - net


(123)

341

 Cash provided by operating activities


5,398

5,467





 Investing Activities



      Capital investments


(2,379)

(2,604)

      Purchases of short-term investments

(90)

(580)

      Maturities of short-term investments

60

250

      Other - net


149

115

 Cash used in investing activities


(2,260)

(2,819)





 Financing Activities



      Common shares repurchased

(2,882)

(2,100)

      Debt issued

2,285

1,883

      Dividends paid

(1,460)

(1,382)

      Debt repaid


(471)

(481)

      Other - net


(40)

(50)

 Cash used in financing activities


(2,568)

(2,130)





 Net Change in Cash and Cash Equivalents


570

518

 Cash and cash equivalents at beginning of year


1,277

1,391

 Cash and Cash Equivalents at End of Period

$

1,847

$

1,909





 Free Cash Flow*



      Cash provided by operating activities

$

5,398

$

5,467

      Cash used in investing activities

(2,260)

(2,819)

      Dividends paid

(1,460)

(1,382)

 Free cash flow

$

1,678

$

1,266


*

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)













3rd Quarter

Year-to-Date

 For the Periods Ended September 30,

2017

2016

%

2017

2016

%

 Operating/Performance Statistics 










      Gross ton-miles (GTMs) (millions)

229,791

224,633

2

%

671,547

633,056

6

%

      Employees (average)

42,056

42,756

(2)

42,127

43,154

(2)

      GTMs (millions) per employee

5.46

5.25

4

15.94

14.67

9












 Locomotive Fuel Statistics










      Average fuel price per gallon consumed

$       1.77

$       1.57

13

%

$       1.74

$       1.42

23

%

      Fuel consumed in gallons (millions)

245

242

1

744

721

3

      Fuel consumption rate*

1.063

1.075

(1)

1.107

1.139

(3)












 AAR Reported Performance Measures










      Average train speed (miles per hour)

25.4

26.0

(2)

%

25.5

26.6

(4)

%

      Average terminal dwell time (hours)

30.0

28.0

7

29.6

27.9

6












 Revenue Ton-Miles (Millions)










      Agricultural Products

21,943

24,235

(9)

%

67,491

68,091

(1)

%

      Automotive

4,353

4,381

(1)

13,707

13,487

2

      Chemicals

16,358

16,719

(2)

49,259

50,832

(3)

      Coal

34,865

35,030

-

97,144

83,614

16

      Industrial Products

22,040

17,552

26

62,200

51,497

21

      Intermodal

19,411

19,566

(1)

58,070

57,500

1

 Total

118,970

117,483

1

%

347,871

325,021

7

%


*

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

3rd Qtr

Year-to-Date

 Operating Revenues







      Freight revenues

$

4,794

$

4,906

$

5,050

$

14,750

      Other revenues

338

344

358

1,040

 Total operating revenues

5,132

5,250

5,408

15,790

 Operating Expenses







      Compensation and benefits

1,257

1,197

1,298

3,752

      Purchased services and materials

566

597

615

1,778

      Depreciation

520

525

528

1,573

      Fuel

460

434

450

1,344

      Equipment and other rents

276

273

275

824

      Other


260

219

230

709

 Total operating expenses

3,339

3,245

3,396

9,980

 Operating Income

1,793

2,005

2,012

5,810

      Other income


67

43

151

261

      Interest expense

(172)

(179)

(180)

(531)

 Income before income taxes

1,688

1,869

1,983

5,540

 Income taxes


(616)

(701)

(789)

(2,106)

 Net Income

$

1,072

$

1,168

$

1,194

$

3,434









 Share and Per Share







      Earnings per share - basic

$

1.32

$

1.45

$

1.50

$

4.27

      Earnings per share - diluted

$

1.32

$

1.45

$

1.50

$

4.26

      Weighted average number of shares - basic

811.5

804.1

794.5

803.4

      Weighted average number of shares - diluted

814.8

807.2

797.6

806.5

      Dividends declared per share

$

0.605

$

0.605

$

0.605

$

1.815









 Operating Ratio

65.1%

61.8%

62.8%

63.2%

 Effective Tax Rate


36.5%

37.5%

39.8%

38.0%

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)










2017

1st Qtr

2nd Qtr

3rd Qtr

Year-to-Date

 Freight Revenues (Millions)







 Agricultural Products

$

942

$

907

$

914

$

2,763

 Automotive


504

513

469

1,486

 Chemicals


885

898

896

2,679

 Coal

648

619

711

1,978

 Industrial Products


907

1,030

1,079

3,016

 Intermodal


908

939

981

2,828

 Total

$

4,794

$

4,906

$

5,050

$

14,750

 Revenue Carloads (Thousands)







 Agricultural Products

250

237

232

719

 Automotive

212

215

200

627

 Chemicals

257

269

259

785

 Coal

304

285

331

920

 Industrial Products

278

315

325

918

 Intermodal*

787

824

841

2,452

 Total

2,088

2,145

2,188

6,421

 Average Revenue per Car







 Agricultural Products

$

3,773

$

3,813

$

3,951

$

3,844

 Automotive

2,373

2,393

2,341

2,370

 Chemicals

3,448

3,334

3,457

3,412

 Coal

2,134

2,173

2,143

2,150

 Industrial Products

3,261

3,271

3,325

3,287

 Intermodal*

1,154

1,140

1,166

1,153

 Average 

$

2,297

$

2,287

$

2,307

$

2,297


*

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

2017

2016

 Debt (a)

$

16,833

$

15,007

 Equity

19,151

19,932

 Capital (b)

$

35,984

$

34,939

 Debt to capital (a/b)

46.8%

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*






Sep. 30,

Dec. 31,

 Millions, Except Percentages

2017

2016

 Debt

$

16,833

$

15,007

 Net present value of operating leases

2,186

2,435

 Unfunded pension and OPEB, net of taxes of $256 and $261

417

436

 Adjusted debt (a)

19,436

17,878

 Equity

19,151

19,932

 Adjusted capital (b)

$

38,587

$

37,810

 Adjusted debt to capital (a/b)

50.4%

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 September 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

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