Union Pacific Reports Third Quarter 2020 Results - Union Pacific (NYSE:UNP)

OMAHA, Neb., Oct. 22, 2020 /PRNewswire/ -- Union Pacific Corporation UNP today reported 2020 third quarter net income of $1.4 billion, or $2.01 per diluted share. This compares to $1.6 billion, or $2.22 per diluted share, in the third quarter 2019.

"Our third quarter results represent another step in our company's transformation. We demonstrated our ability to efficiently adjust to a sharp rebound in volume, which increased 19% from the second quarter, while operating expenses, excluding fuel price changes, increased only 11% sequentially," said Lance Fritz, Union Pacific chairman, president and chief executive officer. "The strong financial results and quality service product delivered in the quarter are a testament to the women and men of Union Pacific as they continue to exhibit their commitment and resilience through safe operations."

Third Quarter Summary

Operating revenue of $4.9 billion was down 11% in third quarter 2020, compared to third quarter 2019. Third quarter business volumes, as measured by total revenue carloads, decreased 4% compared to 2019. Premium volumes increased compared to 2019, while industrial and bulk declined. In addition:

Quarterly freight revenue declined 11%, compared to third quarter 2019, as core pricing gains were more than offset by lower volumes, a less favorable business mix, and decreased fuel surcharge revenue.
Union Pacific's 58.7% operating ratio, an all-time quarterly record, improved 0.8 points compared to the third quarter 2019. Lower fuel prices positively impacted the operating ratio by 100 basis points.
The $1.36 per gallon average quarterly diesel fuel price in third quarter 2020 was 35% lower than third quarter 2019.
Union Pacific's reportable personal injury rate was 0.90 per 200,000 employee-hours for the first three quarters 2020, compared to 0.82 for the same period 2019.
Quarterly freight car velocity was 220 daily miles per car, a 3% improvement compared to third quarter 2019.
Quarterly locomotive productivity was 138 gross ton-miles per horsepower day, an all-time quarterly record and an 11% improvement compared to third quarter 2019.
Quarterly workforce productivity was 998 car miles per employee, an all-time quarterly record and a 13% improvement compared to third quarter 2019.
Average maximum train length was 8,984 feet, a 13% increase compared to third quarter 2019.

Summary of Third Quarter Freight Revenues

Bulk down 12%
Industrial down 18%
Premium down 1%

2020 Outlook

"The results we are delivering, both operationally and financially, deepen our conviction that the changes we're making to transform our railroad are on target and on track," said Fritz. "An improved customer experience, coupled with a lower cost structure, is opening up new markets and opportunities to grow our business as we win with customers and convert more freight to rail."

Third Quarter 2020 Earnings Conference Call

Union Pacific will webcast its third quarter 2020 earnings release presentation live at www.up.com/investor and via teleconference on Thursday, October 22, 2020 at 8:45 a.m. Eastern Time. Participants may join the conference call by dialing 877-407-8293 (or for international participants, 201-689-8349).

ABOUT UNION PACIFIC

Union Pacific UNP delivers the goods families and businesses use every day with safe, reliable and efficient service. Operating in 23 western states, the company connects its customers and communities to the global economy. Trains are the most environmentally responsible way to move freight, helping Union Pacific protect future generations. More information about Union Pacific is available at www.up.com.

Supplemental financial information is attached.

****

This news release 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 improve network performance, its results of operations, and potential impacts of the COVID-19 pandemic. These statements are, or will be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of 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 2019, which was filed with the SEC on February 7, 2020 and the Company's Quarterly Report on Form 10-Q which was filed with the SEC on July 23, 2020. 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,	2020		2019		%		2020		2019		%
Operating Revenues
Freight revenues	$	4,596	$	5,146	(11)	%	$	13,448	$	15,392	(13)	%
Other		323		370	(13)			944		1,104	(14)
Total operating revenues		4,919		5,516	(11)			14,392		16,496	(13)
Operating Expenses
Compensation and benefits		1,008		1,134	(11)			2,972		3,484	(15)
Depreciation		555		557	-			1,653		1,657	-
Purchased services and materials		508		574	(11)			1,470		1,723	(15)
Fuel		301		504	(40)			982		1,595	(38)
Equipment and other rents		217		236	(8)			655		754	(13)
Other		299		277	8			832		829	-
Total operating expenses		2,888		3,282	(12)			8,564		10,042	(15)
Operating Income		2,031		2,234	(9)			5,828		6,454	(10)
Other income		37		53	(30)			221		187	18
Interest expense		(295)		(266)	11			(862)		(772)	12
Income before income taxes		1,773		2,021	(12)			5,187		5,869	(12)
Income taxes		(410)		(466)	(12)			(1,218)		(1,353)	(10)
Net Income	$	1,363	$	1,555	(12)	%	$	3,969	$	4,516	(12)	%

Share and Per Share
Earnings per share - basic	$	2.02	$	2.22	(9)	%	$	5.85	$	6.39	(8)	%
Earnings per share - diluted	$	2.01	$	2.22	(9)		$	5.83	$	6.36	(8)
Weighted average number of shares - basic		675.0		699.3	(3)			679.0		707.2	(4)
Weighted average number of shares - diluted		676.8		701.9	(4)			680.7		709.8	(4)
Dividends declared per share	$	0.97	$	0.97	-		$	2.91	$	2.73	7

Operating Ratio		58.7%		59.5%	(0.8)	pts		59.5%		60.9%	(1.4)	pts
Effective Tax Rate		23.1%		23.1%	-	pts		23.5%		23.1%	0.4	pts

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


	*3rd Quarter*						*Year-to-Date*
For the Periods Ended September 30,	2020		2019		%		2020		2019		%
*Freight Revenues (Millions)*
Grain & grain products	$	695	$	704	(1)	%	$	2,028	$	2,080	(3)	%
Fertilizer		157		161	(2)			499		492	1
Food & refrigerated		239		253	(6)			694		767	(10)
Coal & renewables		387		564	(31)			1,177		1,641	(28)
Bulk		1,478		1,682	(12)			4,398		4,980	(12)
Industrial chemicals & plastics		454		494	(8)			1,384		1,428	(3)
Metals & minerals		365		520	(30)			1,202		1,613	(25)
Forest products		284		290	(2)			853		878	(3)
Energy & specialized markets		464		598	(22)			1,522		1,759	(13)
Industrial		1,567		1,902	(18)			4,961		5,678	(13)
Automotive		481		542	(11)			1,194		1,616	(26)
Intermodal		1,070		1,020	5			2,895		3,118	(7)
Premium		1,551		1,562	(1)			4,089		4,734	(14)
Total	$	4,596	$	5,146	(11)	%	$	13,448	-	15,392	(13)	%
*Revenue Carloads (Thousands)*
Grain & grain products		187		181	3	%		529		528	-	%
Fertilizer		50		48	4			149		145	3
Food & refrigerated		48		48	-			137		147	(7)
Coal & renewables		213		271	(21)			607		771	(21)
Bulk		498		548	(9)			1,422		1,591	(11)
Industrial chemicals & plastics		144		158	(9)			439		463	(5)
Metals & minerals		156		200	(22)			492		579	(15)
Forest products		55		55	-			161		167	(4)
Energy & specialized markets		125		157	(20)			402		460	(13)
Industrial		480		570	(16)			1,494		1,669	(10)
Automotive		203		222	(9)			490		650	(25)
Intermodal [a]		863		789	9			2,296		2,443	(6)
Premium		1,066		1,011	5			2,786		3,093	(10)
Total		2,044		2,129	(4)	%		5,702		6,353	(10)	%
*Average Revenue per Car*
Grain & grain products	$	3,705	$	3,900	(5)	%	$	3,832	$	3,939	(3)	%
Fertilizer		3,172		3,334	(5)			3,361		3,391	(1)
Food & refrigerated		4,891		5,203	(6)			5,053		5,211	(3)
Coal & renewables		1,820		2,082	(13)			1,938		2,129	(9)
Bulk		2,964		3,068	(3)			3,092		3,130	(1)
Industrial chemicals & plastics		3,154		3,131	1			3,150		3,087	2
Metals & minerals		2,337		2,599	(10)			2,444		2,785	(12)
Forest products		5,181		5,275	(2)			5,300		5,249	1
Energy & specialized markets		3,742		3,797	(1)			3,791		3,822	(1)
Industrial		3,271		3,336	(2)			3,321		3,402	(2)
Automotive		2,368		2,436	(3)			2,438		2,485	(2)
Intermodal [a]		1,238		1,294	(4)			1,261		1,276	(1)
Premium		1,454		1,545	(6)			1,468		1,530	(4)
Average	$	2,248	$	2,417	(7)	%	$	2,359	$	2,423	(3)	%

[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	2020		2019
Assets
Cash and cash equivalents	$	2,601	$	831
Short-term investments		60		60
Other current assets		2,469		2,568
Investments		2,071		2,050
Net properties		54,375		53,916
Operating lease assets		1,642		1,812
Other assets		496		436
Total assets	$	63,714	$	61,673

Liabilities and Common Shareholders' Equity
Debt due within one year	$	1,980	$	1,257
Other current liabilities		2,861		3,094
Debt due after one year		26,080		23,943
Operating lease liabilities		1,293		1,471
Deferred income taxes		12,328		11,992
Other long-term liabilities		1,973		1,788
Total liabilities		46,515		43,545
Total common shareholders' equity		17,199		18,128
Total liabilities and common shareholders' equity	$	63,714	$	61,673

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES Condensed Consolidated Statements of Cash Flows (unaudited)


Millions,	*Year-to-Date*
For the Periods Ended September 30,	2020		2019
Operating Activities
Net income	$	3,969	$	4,516
Depreciation		1,653		1,657
Deferred income taxes		327		297
Other - net		44		(206)
Cash provided by operating activities		5,993		6,264
Investing Activities
Capital investments		(2,294)		(2,495)
Maturities of short-term investments		106		120
Purchases of short-term investments		(106)		(110)
Other - net		213		(22)
Cash used in investing activities		(2,081)		(2,507)
Financing Activities
Debt issued		4,004		3,986
Share repurchase programs		(2,956)		(5,162)
Dividends paid		(1,974)		(1,925)
Debt repaid		(832)		(642)
Debt Exchange		(327)		-
Net issuance of commercial paper		(2)		(5)
Other - net		(63)		(34)
Cash used in financing activities		(2,150)		(3,782)
Net Change in Cash, Cash Equivalents and Restricted Cash		1,762		(25)
Cash, cash equivalents, and restricted cash at beginning of year		856		1,328
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	2,618	$	1,303
Free Cash Flow*
Cash provided by operating activities	$	5,993	$	6,264
Cash used in investing activities		(2,081)		(2,507)
Dividends paid		(1,974)		(1,925)
Free cash flow	$	1,938	$	1,832

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,	2020	2019	%		2020	2019	%
Operating/Performance Statistics
Freight car velocity (daily miles per car) [a]	220	214	3	%	217	203	7	%
Average train speed (miles per hour) [a] *	25.3	25.2	-		25.8	24.8	4
Average terminal dwell time (hours) [a] *	22.8	23.6	(3)		22.8	25.3	(10)
Locomotive productivity (GTMs per horsepower day)	138	124	11		135	118	14
Gross ton-miles (GTMs) (millions)	196,998	215,487	(9)		568,921	645,815	(12)
Train length (feet)	8,984	7,924	13		8,676	7,618	14
Intermodal car trip plan compliance (%)	77	81	(4)	pts	81	72	9	pts
Manifest/Automotive car trip plan compliance (%)	72	67	5	pts	70	63	7	pts
Workforce productivity (car miles per employee)	998	883	13		920	853	8
Total employees (average)	30,155	36,659	(18)		31,362	38,456	(18)

Locomotive Fuel Statistics
Average fuel price per gallon consumed	$1.36	$ 2.09	(35)	%	$ 1.51	$ 2.13	(29)	%
Fuel consumed in gallons (millions)	213	232	(8)		627	725	(14)
Fuel consumption rate**	1.084	1.075	1		1.103	1.122	(2)

Revenue Ton-Miles (Millions)
Grain & grain products	18,035	16,545	9	%	50,388	49,966	1	%
Fertilizer	2,932	2,737	7		9,092	8,722	4
Food & refrigerated	4,614	4,679	(1)		12,872	14,037	(8)
Coal & renewables	20,374	27,516	(26)		58,567	78,700	(26)
Bulk	45,955	51,477	(11)		130,919	151,425	(14)
Industrial chemicals & plastics	7,170	7,268	(1)		20,630	21,295	(3)
Metals & minerals	6,536	9,224	(29)		21,471	29,403	(27)
Forest products	5,882	5,784	2		17,321	17,711	(2)
Energy & specialized markets	8,005	11,381	(30)		27,327	33,173	(18)
Industrial	27,593	33,657	(18)		86,749	101,582	(15)
Automotive	4,269	4,757	(10)		10,498	13,954	(25)
Intermodal	20,096	18,216	10		55,344	56,540	(2)
Premium	24,365	22,973	6		65,842	70,494	(7)
Total	97,913	108,107	(9)	%	283,510	323,501	(12)	%

[a]	Prior years have been realigned to conform to the current year presentation.

*	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)


	2020
Millions, Except Per Share Amounts and Percentages,	*1st Qtr*		*2nd Qtr*		*3rd Qtr*		*Year-to-Date*
Operating Revenues
Freight revenues	$	4,880	$	3,972	$	4,596	$	13,448
Other revenues		349		272		323		944
Total operating revenues		5,229		4,244		4,919		14,392
Operating Expenses
Compensation and benefits		1,059		905		1,008		2,972
Depreciation		547		551		555		1,653
Purchased services and materials		521		441		508		1,470
Fuel		434		247		301		982
Equipment and other rents		227		211		217		655
Other		298		235		299		832
Total operating expenses		3,086		2,590		2,888		8,564
Operating Income		2,143		1,654		2,031		5,828
Other income		53		131		37		221
Interest expense		(278)		(289)		(295)		(862)
Income before income taxes		1,918		1,496		1,773		5,187
Income taxes		(444)		(364)		(410)		(1,218)
Net Income	$	1,474	$	1,132	$	1,363	$	3,969

Share and Per Share
Earnings per share - basic	$	2.15	$	1.67	$	2.02	$	5.85
Earnings per share - diluted	$	2.15	$	1.67	$	2.01	$	5.83
Weighted average number of shares - basic		684.3		677.7		675.0		679.0
Weighted average number of shares - diluted		686.2		679.2		676.8		680.7
Dividends declared per share	$	0.97	$	0.97	$	0.97	$	2.91

Operating Ratio		59.0%		61.0%		58.7%		59.5%
Effective Tax Rate		23.1%		24.3%		23.1%		23.5%

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


	2020
	*1st Qtr*		*2nd Qtr*		*3rd Qtr*		*Year-to-Date*
*Freight Revenues (Millions)*
Grain & grain products	$	689	$	644	$	695	$	2,028
Fertilizer		174		168		157		499
Food & refrigerated		250		205		239		694
Coal & renewables		421		369		387		1,177
Bulk		1,534		1,386		1,478		4,398
Industrial chemicals & plastics		495		435		454		1,384
Metals & minerals		469		368		365		1,202
Forest products		303		266		284		853
Energy & specialized markets		627		431		464		1,522
Industrial		1,894		1,500		1,567		4,961
Automotive		524		189		481		1,194
Intermodal		928		897		1,070		2,895
Premium		1,452		1,086		1,551		4,089
Total	$	4,880	$	3,972	$	4,596	$	13,448
*Revenue Carloads (Thousands)*
Grain & grain products		175		167		187		529
Fertilizer		46		53		50		149
Food & refrigerated		48		41		48		137
Coal & renewables		208		186		213		607
Bulk		477		447		498		1,422
Industrial chemicals & plastics		154		141		144		439
Metals & minerals		174		162		156		492
Forest products		56		50		55		161
Energy & specialized markets		162		115		125		402
Industrial		546		468		480		1,494
Automotive		208		79		203		490
Intermodal [a]		709		724		863		2,296
Premium		917		803		1,066		2,786
Total		1,940		1,718		2,044		5,702
*Average Revenue per Car*
Grain & grain products	$	3,940	$	3,861	$	3,705	$	3,832
Fertilizer		3,768		3,181		3,172		3,361
Food & refrigerated		5,277		4,986		4,891		5,053
Coal & renewables		2,022		1,979		1,820		1,938
Bulk		3,219		3,099		2,964		3,092
Industrial chemicals & plastics		3,205		3,086		3,154		3,150
Metals & minerals		2,697		2,276		2,337		2,444
Forest products		5,457		5,256		5,181		5,300
Energy & specialized markets		3,866		3,739		3,742		3,791
Industrial		3,469		3,201		3,271		3,321
Automotive		2,525		2,388		2,368		2,438
Intermodal [a]		1,307		1,241		1,238		1,261
Premium		1,583		1,354		1,454		1,468
Average	$	2,516	$	2,312	$	2,248	$	2,359

[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]	2020		2019
Net income	$	5,372	$	5,919
Add:
Income tax expense		1,693		1,828
Depreciation		2,212		2,216
Interest expense		1,140		1,050
EBITDA	$	10,417	$	11,013
Adjustments:
Other income		(277)		(243)
Interest on operating lease liabilities**		59		68
Adjusted EBITDA	$	10,199	$	10,838
Debt	$	28,060	$	25,200
Operating lease liabilities		1,601		1,833
Unfunded pension and OPEB, net of taxes of $107 and $124		349		400
Adjusted debt	$	30,010	$	27,433
Adjusted debt / Adjusted EBITDA		2.9		2.5

[a]	The trailing twelve months income statement information ended September 30, 2020 is recalculated by taking the twelve months ended December 31, 2019, subtracting the nine months ended September 30, 2019, and adding the nine months ended September 30, 2020.

*	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, 2020 and December 31, 2019, 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.

SOURCE Union Pacific Corporation

Market News and Data brought to you by Benzinga APIs