Union Pacific Reports Third Quarter 2016 Results

Third Quarter Operating Ratio of 62.1 percent

News provided by

Union Pacific

Oct 20, 2016, 08:00 ET

OMAHA, Neb., Oct. 20, 2016 /PRNewswire/ -- Union Pacific Corporation (NYSE: UNP) today reported 2016 third quarter net income of $1.1 billion, or $1.36 per diluted share compared to $1.3 billion, or $1.50 per diluted share, in the third quarter 2015.

Third Quarter Results

  • Diluted earnings per share of $1.36 declined 9 percent.
  • Operating income totaled $2.0 billion, down 11 percent.
  • Operating ratio of 62.1 percent, up 1.8 points.

"Continued momentum from our productivity initiatives, as well as positive core pricing, helped partially offset the decline in total carload volumes.  While many of the same volume challenges have continued throughout the year, we are keeping a laser focus on our six value tracks.  This strategy ensures we provide our customers with an excellent value proposition and service experience, while efficiently and safely managing our resources," said Lance Fritz, Union Pacific chairman, president and chief executive officer.

Third Quarter Summary

Operating revenue of nearly $5.2 billion was down 7 percent in the third quarter 2016 compared to the third quarter 2015.  Third quarter business volumes, as measured by total revenue carloads, declined 6 percent compared to 2015.  While shipments of agricultural products grew 11 percent, volumes declined in the remaining five business groups.  In addition:

  • Quarterly freight revenue decreased 7 percent compared to the third quarter 2015, as volume declines and lower fuel surcharge revenue more than offset core pricing gains.
  • Union Pacific's 62.1 percent operating ratio was unfavorable by 1.8 points compared to the record third quarter 2015, but improved 3.1 points sequentially. 
  • The $1.57 per gallon average quarterly diesel fuel price in the third quarter 2016 was 13 percent lower than the third quarter 2015.
  • Quarterly train speed, as reported to the Association of American Railroads, was 26.0 mph, 2 percent faster than the third quarter 2015.
  • The Company repurchased 9 million shares in the third quarter 2016 at an aggregate cost of $851 million.

Summary of Third Quarter Freight Revenues

  • Agricultural Products up 6 percent
  • Chemicals down 1 percent
  • Automotive down 8 percent
  • Intermodal down 9 percent
  • Industrial Products down 13 percent
  • Coal down 19 percent

2016 Outlook

"The macroeconomic environment still has its challenges - an unstable global economy, the relatively strong U.S. dollar, and continued soft demand for consumer goods.  However, certain segments of the economy, such as grain and energy, are showing signs of life," Fritz said.  "Closing out 2016 and heading into next year, we are optimistic about the opportunities that lie ahead.  In the coming months we will continue to do what Union Pacific does best - operate a safe, efficient, and productive network while providing an excellent customer experience and delivering solid shareholder returns."  

Third Quarter 2016 Earnings Conference Call

Union Pacific will host its third quarter 2016 earnings release presentation live over the Internet and via teleconference on Thursday, October 20, 2016 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 2006-2015, Union Pacific invested approximately $33 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 positive core pricing, financial returns, improve network performance and customer service, resource productivity and cost efficiency; 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 2015, which was filed with the SEC on February 5, 2016.  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,

2016

2015

%

2016

2015

%

 Operating Revenues












      Freight revenues

$

4,837

$

5,215

(7)

%

$

13,769

$

15,534

(11)

%

      Other revenues

337

347

(3)


1,004

1,071

(6)

 Total operating revenues

5,174

5,562

(7)


14,773

16,605

(11)

 Operating Expenses












      Compensation and benefits

1,191

1,267

(6)


3,564

3,941

(10)

      Purchased services and materials

566

589

(4)


1,705

1,832

(7)

      Depreciation

512

507

1


1,518

1,495

2

      Fuel

392

484

(19)


1,058

1,589

(33)

      Equipment and other rents

282

302

(7)


857

925

(7)

      Other


271

205

32


764

689

11

 Total operating expenses

3,214

3,354

(4)


9,466

10,471

(10)

 Operating Income

1,960

2,208

(11)


5,307

6,134

(13)

      Other income


29

30

(3)


152

198

(23)

      Interest expense

(184)

(157)

17


(524)

(458)

14

 Income before income taxes

1,805

2,081

(13)


4,935

5,874

(16)

 Income taxes

(674)

(781)

(14)


(1,846)

(2,219)

(17)

 Net Income

$

1,131

$

1,300

(13)

%

$

3,089

$

3,655

(15)

%














 Share and Per Share












      Earnings per share - basic

$

1.36

$

1.51

(10)

%

$

3.69

$

4.19

(12)

%

      Earnings per share - diluted

$

1.36

$

1.50

(9)

$

3.68

$

4.18

(12)

      Weighted average number of shares - basic

829.0

862.9

(4)


836.8

871.5

(4)

      Weighted average number of shares - diluted

832.2

865.8

(4)


839.6

874.6

(4)

      Dividends declared per share

$

0.55

$

0.55

-

$

1.65

$

1.65

-














 Operating Ratio

62.1%

60.3%

1.8

pts

64.1%

63.1%

1.0

pts

 Effective Tax Rate


37.3%

37.5%

(0.2)

pts

37.4%

37.8%

(0.4)

pts

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)















3rd Quarter

Year-to-Date

For the Periods Ended September 30,

2016

2015

%

2016

2015

%

 Freight Revenues (Millions)












 Agricultural Products

$

937

$

880

6

%

$

2,664

$

2,686

(1)

%

 Automotive


485

529

(8)


1,483

1,605

(8)

 Chemicals


875

882

(1)


2,617

2,684

(2)

 Coal

728

898

(19)


1,741

2,492

(30)

 Industrial Products


855

979

(13)


2,519

2,966

(15)

 Intermodal


957

1,047

(9)


2,745

3,101

(11)

 Total

$

4,837

$

5,215

(7)

%

$

13,769

$

15,534

(11)

%

 Revenue Carloads (Thousands)












 Agricultural Products

258

232

11

%

722

702

3

%

 Automotive

210

214

(2)


644

638

1

 Chemicals

274

278

(1)


817

828

(1)

 Coal

341

398

(14)


846

1,106

(24)

 Industrial Products

283

319

(11)


832

933

(11)

 Intermodal*

838

898

(7)


2,435

2,652

(8)

 Total

2,204

2,339

(6)

%

6,296

6,859

(8)

%

 Average Revenue per Car












 Agricultural Products

$

3,637

$

3,793

(4)

%

$

3,691

$

3,825

(4)

%

 Automotive

2,310

2,469

(6)


2,302

2,516

(9)

 Chemicals

3,201

3,165

1


3,206

3,239

(1)

 Coal

2,134

2,259

(6)


2,057

2,254

(9)

 Industrial Products

3,019

3,073

(2)


3,028

3,179

(5)

 Intermodal*

1,141

1,166

(2)


1,127

1,169

(4)

 Average 

$

2,195

$

2,229

(2)

%

$

2,187

$

2,265

(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

2016

2015

 Assets



      Cash and cash equivalents

$

1,909

$

1,391

      Short-term investments

330

-

      Other current assets


2,363

2,739

      Investments

1,446

1,410

      Net properties


49,939

48,866

      Other assets

318

194

 Total assets

$

56,305

$

54,600





 Liabilities and Common Shareholders' Equity



      Debt due within one year

$

407

$

594

      Other current liabilities

2,850

2,612

      Debt due after one year


15,205

13,607

      Deferred income taxes


15,774

15,241

      Other long-term liabilities

1,785

1,844

 Total liabilities

36,021

33,898

 Total common shareholders' equity

20,284

20,702

 Total liabilities and common shareholders' equity

$

56,305

$

54,600





 Debt to Capital

43.5%

40.7%

 Adjusted Debt to Capital*

47.7%

45.7%


*

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,

2016

2015

 Operating Activities



      Net income

$

3,089

$

3,655

      Depreciation


1,518

1,495

      Deferred income taxes


519

355

      Other - net


341

120

 Cash provided by operating activities


5,467

5,625





 Investing Activities



      Capital investments


(2,604)

(3,323)

      Purchases of short-term investments

(580)

-

      Maturities of short-term investments

250

-

      Other - net


115

73

 Cash used in investing activities


(2,819)

(3,250)





 Financing Activities



      Common shares repurchased

(2,100)

(2,795)

      Debt issued

1,883

2,243

      Dividends paid*

(1,382)

(1,877)

      Debt repaid


(481)

(436)

      Other - net


(50)

(18)

 Cash used in financing activities


(2,130)

(2,883)





 Net Change in Cash and Cash Equivalents


518

(508)

 Cash and cash equivalents at beginning of year


1,391

1,586

 Cash and Cash Equivalents at End of Period

$

1,909

$

1,078





 Free Cash Flow**



      Cash provided by operating activities

$

5,467

$

5,625

      Cash used in investing activities

(2,819)

(3,250)

      Dividends paid

(1,382)

(1,877)

 Free cash flow

$

1,266

$

498


* 

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, 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,

2016

2015

%

2016

2015

%

 Operating/Performance Statistics 










      Gross ton-miles (GTMs) (millions)

224,633

238,001

(6)

%

633,056

702,822

(10)

%

      Employees (average)

42,756

47,515

(10)

43,154

48,446

(11)

      GTMs (millions) per employee

5.25

5.01

5

14.67

14.51

1












 Locomotive Fuel Statistics










      Average fuel price per gallon consumed

$       1.57

$       1.81

(13)

%

$       1.42

$       1.92

(26)

%

      Fuel consumed in gallons (millions)

242

261

(7)

721

807

(11)

      Fuel consumption rate*

1.075

1.097

(2)

1.139

1.149

(1)












 AAR Reported Performance Measures










      Average train speed (miles per hour)

26.0

25.6

2

%

26.6

24.9

7

%

      Average terminal dwell time (hours)

28.0

28.7

(2)

27.9

29.2

(4)












 Revenue Ton-Miles (Millions)










      Agricultural Products

24,235

22,095

10

%

68,091

66,358

3

%

      Automotive

4,381

4,446

(1)

13,487

13,489

-

      Chemicals

16,719

17,697

(6)

50,832

54,583

(7)

      Coal

35,030

42,215

(17)

83,614

115,157

(27)

      Industrial Products

17,552

19,280

(9)

51,497

58,782

(12)

      Intermodal

19,566

19,915

(2)

57,500

59,948

(4)

 Total

117,483

125,648

(6)

%

325,021

368,317

(12)

%

*

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)










2016

 Millions, Except Per Share Amounts and Percentages,

1st Qtr

2nd Qtr

3rd Qtr

Year-to-Date

 Operating Revenues







      Freight revenues

$

4,502

$

4,430

$

4,837

$

13,769

      Other revenues

327

340

337

1,004

 Total operating revenues

4,829

4,770

5,174

14,773

 Operating Expenses







      Compensation and benefits

1,213

1,160

1,191

3,564

      Purchased services and materials

569

570

566

1,705

      Depreciation

502

504

512

1,518

      Fuel

320

346

392

1,058

      Equipment and other rents

289

286

282

857

      Other


249

244

271

764

 Total operating expenses

3,142

3,110

3,214

9,466

 Operating Income

1,687

1,660

1,960

5,307

      Other income


46

77

29

152

      Interest expense

(167)

(173)

(184)

(524)

 Income before income taxes

1,566

1,564

1,805

4,935

 Income taxes


(587)

(585)

(674)

(1,846)

 Net Income

$

979

$

979

$

1,131

$

3,089









 Share and Per Share







      Earnings per share - basic

$

1.16

$

1.17

$

1.36

$

3.69

      Earnings per share - diluted

$

1.16

$

1.17

$

1.36

$

3.68

      Weighted average number of shares - basic

844.0

837.4

829.0

836.8

      Weighted average number of shares - diluted

846.7

840.1

832.2

839.6

      Dividends declared per share

$

0.55

$

0.55

$

0.55

$

1.65









 Operating Ratio

65.1%

65.2%

62.1%

64.1%

 Effective Tax Rate


37.5%

37.4%

37.3%

37.4%

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)










2016

1st Qtr

2nd Qtr

3rd Qtr

Year-to-Date

 Freight Revenues (Millions)







 Agricultural Products

$

882

$

845

$

937

$

2,664

 Automotive


510

488

485

1,483

 Chemicals


878

864

875

2,617

 Coal

519

494

728

1,741

 Industrial Products


834

830

855

2,519

 Intermodal


879

909

957

2,745

 Total

$

4,502

$

4,430

$

4,837

$

13,769

 Revenue Carloads (Thousands)







 Agricultural Products

235

229

258

722

 Automotive

217

217

210

644

 Chemicals

268

275

274

817

 Coal

262

243

341

846

 Industrial Products

274

275

283

832

 Intermodal*

788

809

838

2,435

 Total

2,044

2,048

2,204

6,296

 Average Revenue per Car







 Agricultural Products

$

3,749

$

3,692

$

3,637

$

3,691

 Automotive

2,350

2,247

2,310

2,302

 Chemicals

3,272

3,146

3,201

3,206

 Coal

1,985

2,026

2,134

2,057

 Industrial Products

3,041

3,025

3,019

3,028

 Intermodal*

1,116

1,124

1,141

1,127

 Average 

$

2,202

$

2,163

$

2,195

$

2,187


* 

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

2016

2015

 Debt (a)

$

15,612

$

14,201

 Equity

20,284

20,702

 Capital (b)

$

35,896

$

34,903

 Debt to capital (a/b)

43.5%

40.7%


*

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

2016

2015

 Debt

$

15,612

$

14,201

 Net present value of operating leases

2,517

2,726

 Unfunded pension and OPEB

367

463

 Adjusted debt (a)

18,496

17,390

 Equity

20,284

20,702

 Adjusted capital (b)

$

38,780

$

38,092

 Adjusted debt to capital (a/b)

47.7%

45.7%


*

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 4.7% at September 30, 2016, and 4.8% at December 31, 2015. 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.

Logo - http://photos.prnewswire.com/prnh/20110304/LA59497LOGO

SOURCE Union Pacific

Related Links

http://www.up.com

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