Union Pacific Reports Third Quarter 2016 Results

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Third Quarter Operating Ratio of 62.1 percent

OMAHA, Neb., Oct. 20, 2016 /PRNewswire/ -- Union Pacific Corporation 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 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

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/union-pacific-reports-third-quarter-2016-results-300348084.html

SOURCE Union Pacific

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