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Union Pacific Reports Third Quarter Results

All-Time Best Quarterly Operating Ratio of 59.5%

OMAHA, Neb., Oct. 17, 2019 /PRNewswire/ --

Union Pacific. (PRNewsFoto/Union Pacific) (PRNewsfoto/Union Pacific)

Third Quarter Results

  • Diluted earnings per share of $2.22 increased 3 percent.
  • Operating ratio of 59.5 percent improved 2.2 points.
  • Operating income of $2.2 billion was down 2 percent.

Union Pacific Corporation (UNP) today reported 2019 third quarter net income of $1.6 billion, or $2.22 per diluted share. This compares to $1.6 billion, or $2.15 per diluted share, in the third quarter 2018.

"Given the challenging volume environment we delivered solid third quarter financial results, including an all-time best quarterly operating ratio of 59.5 percent," said Lance Fritz, Union Pacific chairman, president and chief executive officer. "The work our employees are doing as part of Unified Plan 2020 is foundational to the company's success and I am confident there are additional improvement opportunities going forward for our customers and shareholders."

Third Quarter Summary

Operating revenue of $5.5 billion was down 7 percent in third quarter 2019, compared to third quarter 2018. Third quarter business volumes, as measured by total revenue carloads, decreased 8 percent compared to 2018. Growth in industrial volumes was more than offset by declines in agricultural products, premium and energy shipments. In addition:

  • Quarterly freight revenue declined 7 percent, compared to third quarter 2018, as core pricing gains were offset by lower volumes, decreased fuel surcharge revenue and negative mix.
  • Union Pacific's 59.5 percent operating ratio was an all-time best and improved 2.2 points, compared to third quarter 2018.
  • The $2.09 per gallon average quarterly diesel fuel price in the third quarter 2019 was 12 percent lower than third quarter 2018.
  • Quarterly freight car velocity was 213 daily miles per car, a 10 percent improvement compared to the third quarter 2018.
  • Terminal dwell was 23.4 hours, a 20 percent improvement compared to third quarter 2018.
  • Union Pacific's reportable personal injury rate was 0.82 per 200,000 employee-hours for the first three quarters 2019, compared to 0.77 for the same period 2018.
  • The Company repurchased 6.4 million shares in the third quarter 2019 at an aggregate cost of $1.1 billion. Union Pacific also received 3.2 million shares to complete a $2.5 billion Accelerated Share Repurchase program initiated in February 2019.

Summary of Third Quarter Freight Revenues

  • Agricultural Products down 1 percent
  • Industrial down 1 percent
  • Premium down 9 percent
  • Energy down 20 percent

2019 Outlook

"We look forward to building on our Unified Plan 2020 successes as we provide a highly consistent and reliable service product for our customers," Fritz said. "We remain squarely focused on driving long-term shareholder value by appropriately investing in the railroad and returning excess cash to our shareholders."

Third Quarter 2019 Earnings Conference Call

Union Pacific will webcast its third quarter 2019 earnings release presentation live at www.up.com/investor and via teleconference on Thursday, October 17, 2019 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 Railroad is the principal operating company of Union Pacific Corporation (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. The railroad's diversified business mix is classified into its Agricultural Products, Energy, Industrial and Premium business groups. 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.

Union Pacific Investor contact: Mike Miller at 402-544-4227 or mvmiller@up.com

Union Pacific Media contact: Raquel Espinoza at 402-544-5034 or respinoza@up.com

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 and its ability to improve network performance and customer service. 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 2018, which was filed with the SEC on February 8, 2019. 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,

2019

2018

%



2019

2018

%


Operating Revenues














Freight revenues

$

5,146

$

5,558

(7)

%


$

15,392

$

15,997

(4)

%

Other


370


370

-




1,104


1,078

2


Total operating revenues


5,516


5,928

(7)




16,496


17,075

(3)


Operating Expenses














Compensation and benefits


1,134


1,262

(10)




3,484


3,776

(8)


Purchased services and materials


574


632

(9)




1,723


1,861

(7)


Depreciation


557


547

2




1,657


1,636

1


Fuel


504


659

(24)




1,595


1,891

(16)


Equipment and other rents


236


272

(13)




754


803

(6)


Other


277


287

(3)




829


801

3


Total operating expenses


3,282


3,659

(10)




10,042


10,768

(7)


Operating Income


2,234


2,269

(2)




6,454


6,307

2


Other income


53


48

10




187


48

F


Interest expense


(266)


(241)

10




(772)


(630)

23


Income before income taxes


2,021


2,076

(3)




5,869


5,725

3


Income taxes


(466)


(483)

(4)




(1,353)


(1,313)

3


Net Income

$

1,555

$

1,593

(2)

%


$

4,516

$

4,412

2

%















Share and Per Share














Earnings per share - basic

$

2.22

$

2.16

3

%


$

6.39

$

5.82

10

%

Earnings per share - diluted

$

2.22

$

2.15

3



$

6.36

$

5.79

10


Weighted average number of shares - basic


699.3


737.4

(5)




707.2


758.1

(7)


Weighted average number of shares - diluted


701.9


740.9

(5)




709.8


761.4

(7)


Dividends declared per share

$

0.97

$

0.80

21



$

2.73

$

2.26

21
















Operating Ratio


59.5%


61.7%

(2.2)

pts



60.9%


63.1%

(2.2)

pts

Effective Tax Rate


23.1%


23.3%

(0.2)

pts



23.1%


22.9%

0.2

pts



UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)
















3rd Quarter


Year-to-Date

For the Periods Ended September 30,

2019

2018

%



2019

2018

%


Freight Revenues (Millions)














Agricultural Products

$

1,123

$

1,133

(1)

%


$

3,345

$

3,345

-

%

Energy


975


1,214

(20)




2,923


3,498

(16)


Industrial


1,485


1,497

(1)




4,389


4,274

3


Premium


1,563


1,714

(9)




4,735


4,880

(3)


Total

$

5,146

$

5,558

(7)

%


$

15,392

$

15,997

(4)

%

Revenue Carloads (Thousands)














Agricultural Products


278


285

(2)

%



821


849

(3)

%

Energy


374


440

(15)




1,083


1,246

(13)


Industrial


467


458

2




1,356


1,321

3


Premium [a]


1,010


1,133

(11)




3,093


3,250

(5)


Total


2,129


2,316

(8)

%



6,353


6,666

(5)

%

Average Revenue per Car














Agricultural Products

$

4,042

$

3,973

2

%


$

4,073

$

3,939

3

%

Energy


2,613


2,757

(5)




2,700


2,807

(4)


Industrial


3,178


3,269

(3)




3,236


3,236

-


Premium


1,546


1,513

2




1,531


1,501

2


Average

$

2,417

$

2,399

1

%


$

2,423

$

2,400

1

%



[a]

For intermodal shipments each 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

2019

2018

Assets





Cash and cash equivalents

$

1,250

$

1,273

Short-term investments


60


60

Other current assets


2,763


2,830

Investments


2,003


1,912

Net properties


53,488


52,679

Operating lease assets


1,931


-

Other assets


483


393

Total assets

$

61,978

$

59,147






Liabilities and Common Shareholders' Equity





Debt due within one year

$

1,421

$

1,466

Other current liabilities


3,166


3,160

Debt due after one year


24,314


20,925

Operating lease liabilities


1,542


-

Deferred income taxes


11,744


11,302

Other long-term liabilities


1,775


1,871

Total liabilities


43,962


38,724

Total common shareholders' equity


18,016


20,423

Total liabilities and common shareholders' equity

$

61,978

$

59,147


UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows (unaudited)






Millions,

Year-to-Date

For the Periods Ended September 30,

2019

2018

Operating Activities





Net income

$

4,516

$

4,412

Depreciation


1,657


1,636

Deferred income taxes


297


312

Other - net


(206)


14

Cash provided by operating activities


6,264


6,374

Investing Activities





Capital investments


(2,495)


(2,428)

Maturities of short-term investments


120


90

Purchases of short-term investments


(110)


(90)

Other - net


(22)


(6)

Cash used in investing activities


(2,507)


(2,434)

Financing Activities





Common share repurchases


(5,162)


(6,304)

Debt issued


3,986


6,992

Dividends paid


(1,925)


(1,716)

Debt repaid


(642)


(1,807)

Net issuance of commercial paper


(5)


195

Accelerated share repurchase programs pending final settlement


-


(720)

Other - net


(34)


(45)

Cash used in financing activities


(3,782)


(3,405)

Net Change in Cash, Cash Equivalents and Restricted Cash


(25)


535

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


1,328


1,275

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

$

1,303

$

1,810

Free Cash Flow*





Cash provided by operating activities

$

6,264

$

6,374

Cash used in investing activities


(2,507)


(2,434)

Dividends paid


(1,925)


(1,716)

Free cash flow

$

1,832

$

2,224



*

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,

2019


2018

%



2019


2018

%


Operating/Performance Statistics












Freight car velocity (daily miles per car)

213


193

10

%


201


189

6

%

Average train speed (miles per hour)*

23.7


24.0

(1)



23.4


24.5

(4)


Average terminal dwell time (hours)*

23.4


29.3

(20)



25.1


30.6

(18)


Locomotive productivity (GTMs per horsepower day)

124


105

18



118


104

13


Gross ton-miles (GTMs) (millions)

215,487


240,183

(10)



645,815


698,050

(7)


Workforce productivity (car miles per employee)

883


852

4



853


838

2


Employees (average)

36,659


42,323

(13)



38,456


42,057

(9)














Locomotive Fuel Statistics












Average fuel price per gallon consumed

$ 2.09


$ 2.38

(12)

%


$ 2.13


$ 2.27

(6)

%

Fuel consumed in gallons (millions)

232


266

(13)



725


803

(10)


Fuel consumption rate**

1.075


1.109

(3)



1.122


1.151

(3)














Revenue Ton-Miles (Millions)












Agricultural Products

24,001


25,911

(7)

%


72,805


76,992

(5)

%

Energy

36,053


45,190

(20)



105,268


129,154

(18)


Industrial

25,080


25,899

(3)



74,934


75,939

(1)


Premium

22,973


26,313

(13)



70,494


76,264

(8)


Total

108,107


123,313

(12)

%


323,501


358,349

(10)

%



*

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)











2019

Millions, Except Per Share Amounts and Percentages,

1st Qtr

2nd Qtr

3rd Qtr

Year-to-Date

Operating Revenues









Freight revenues

$

5,010

$

5,236

$

5,146

$

15,392

Other revenues


374


360


370


1,104

Total operating revenues


5,384


5,596


5,516


16,496

Operating Expenses









Compensation and benefits


1,205


1,145


1,134


3,484

Purchased services and materials


576


573


574


1,723

Depreciation


549


551


557


1,657

Fuel


531


560


504


1,595

Equipment and other rents


258


260


236


754

Other


305


247


277


829

Total operating expenses


3,424


3,336


3,282


10,042

Operating Income


1,960


2,260


2,234


6,454

Other income


77


57


53


187

Interest expense


(247)


(259)


(266)


(772)

Income before income taxes


1,790


2,058


2,021


5,869

Income taxes


(399)


(488)


(466)


(1,353)

Net Income

$

1,391

$

1,570

$

1,555

$

4,516










Share and Per Share









Earnings per share - basic

$

1.94

$

2.23

$

2.22

$

6.39

Earnings per share - diluted

$

1.93

$

2.22

$

2.22

$

6.36

Weighted average number of shares - basic


716.8


705.5


699.3


707.2

Weighted average number of shares - diluted


719.5


708.0


701.9


709.8

Dividends declared per share

$

0.88

$

0.88

$

0.97

$

2.73










Operating Ratio


63.6%


59.6%


59.5%


60.9%

Effective Tax Rate


22.3%


23.7%


23.1%


23.1%


UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)











2019


1st Qtr

2nd Qtr

3rd Qtr

Year-to-Date

Freight Revenues (Millions)









Agricultural Products

$

1,067

$

1,155

$

1,123

$

3,345

Energy


982


966


975


2,923

Industrial


1,410


1,494


1,485


4,389

Premium


1,551


1,621


1,563


4,735

Total

$

5,010

$

5,236

$

5,146

$

15,392

Revenue Carloads (Thousands)









Agricultural Products


259


284


278


821

Energy


358


351


374


1,083

Industrial


429


460


467


1,356

Premium [a]


1,041


1,042


1,010


3,093

Total


2,087


2,137


2,129


6,353

Average Revenue per Car









Agricultural Products

$

4,123

$

4,057

$

4,042

$

4,073

Energy


2,740


2,753


2,613


2,700

Industrial


3,292


3,242


3,178


3,236

Premium


1,489


1,557


1,546


1,531

Average

$

2,401

$

2,450

$

2,417

$

2,423



[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

Sep. 30,

Dec. 31,

for the Trailing Twelve Months Ended [a]

2019

2018

Net income

$

6,070

$

5,966

Add:





Income tax expense


1,815


1,775

Depreciation


2,212


2,191

Interest expense


1,012


870

EBITDA

$

11,109

$

10,802

Adjustments:




Other income


(233)


(94)

Interest on operating lease liabilities**


71


84

Adjusted EBITDA (a)

$

10,947

$

10,792

Debt

$

25,735

$

22,391

Operating lease liabilities***


1,919


2,271

Unfunded pension and OPEB, net of taxes of $104 and $135


347


456

Adjusted debt (b)

$

28,001

$

25,118

Adjusted debt / Adjusted EBITDA (b/a)


2.6


2.3



[a]

The trailing twelve months income statement information ended September 30, 2019 is recalculated by taking the twelve months ended December 31, 2018, subtracting the nine months ended September 30, 2018, and adding the nine months ended September 30, 2019.



*

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 September 30, 2019 and December 31, 2018, 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.



***

Effective January 1, 2019, the Company adopted Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases. ASU 2016-02 requires companies to recognize lease assets and lease liabilities on the balance sheet. Prior to adoption, the present value of operating leases was used in this calculation.





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