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Union Pacific Reports Record Second Quarter Results

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OMAHA, Neb., July 18, 2019 /PRNewswire/ --

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

Second Quarter Results

  • Diluted earnings per share of $2.22 increased 12 percent.
  • Operating income totaled $2.3 billion, up 8 percent.
  • Operating ratio of 59.6 percent, improved 3.4 points.

Union Pacific Corporation (NYSE:UNP) today reported 2019 second quarter net income of $1.6 billion, or $2.22 per diluted share. This compares to $1.5 billion, or $1.98 per diluted share, in the second quarter 2018.

"We delivered record second quarter financial results driven by exceptional operating performance, including an all-time best quarterly operating ratio of 59.6 percent," said Lance Fritz, Union Pacific chairman, president and chief executive officer. "These results are a testament to the dedication of the men and women of Union Pacific, who are embracing Unified Plan 2020 and who worked closely with our customers to overcome numerous weather challenges."

Second Quarter Summary

Operating revenue of $5.6 billion was down 1 percent in second quarter 2019, compared to second quarter 2018. Second quarter business volumes, as measured by total revenue carloads, decreased 4 percent compared to 2018. Growth in industrial volumes were more than offset by flat agricultural products shipments as well as declines in energy and premium.  In addition:


  • Quarterly freight revenue declined 2 percent, compared to second quarter 2018, as core pricing gains were offset by lower volumes.
  • Union Pacific's all-time best 59.6 percent operating ratio improved 3.4 points, compared to second quarter 2018.
  • The $2.21 per gallon average quarterly diesel fuel price in the second quarter 2019 was 4 percent lower than second quarter 2018.
  • Union Pacific recognized a payroll tax refund of $32 million, along with associated interest income of $3 million in second quarter 2019.
  • Quarterly freight car velocity was 195 daily miles per car, a 4 percent improvement compared to the second quarter 2018.
  • Union Pacific's first half reportable personal injury rate was 0.87 per 200,000 employee-hours, compared to 0.76 in first half 2018.
  • The Company repurchased 3.7 million shares in the second quarter 2019 at an aggregate cost of $639 million.

Summary of Second Quarter Freight Revenues

  • Agricultural Products up 4 percent
  • Industrial up 4 percent
  • Premium down 2 percent
  • Energy down 13 percent

2019 Outlook

"We look forward to building on the momentum from Unified Plan 2020 and providing a consistent, reliable service product for our customers," Fritz said. "We remain focused on driving increased shareholder returns by appropriately investing capital in the railroad and returning excess cash to our shareholders."

Second Quarter 2019 Earnings Conference Call

Union Pacific will host its second quarter 2019 earnings release presentation over live webcast and via teleconference on Thursday, July 18, 2019 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. 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.

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,

2nd Quarter


Year-to-Date

 For the Periods Ended June 30,

2019

2018

%



2019

2018

%


 Operating Revenues














      Freight revenues

$

5,236

$

5,317

(2)

%


$

10,246

$

10,439

(2)

%

      Other


360


355

1




734


708

4


 Total operating revenues


5,596


5,672

(1)




10,980


11,147

(1)


 Operating Expenses














      Compensation and benefits


1,145


1,241

(8)




2,350


2,514

(7)


      Purchased services and materials


573


630

(9)




1,149


1,229

(7)


      Depreciation


551


546

1




1,100


1,089

1


      Fuel


560


643

(13)




1,091


1,232

(11)


      Equipment and other rents


260


265

(2)




518


531

(2)


      Other


247


248

-




552


514

7


 Total operating expenses


3,336


3,573

(7)




6,760


7,109

(5)


 Operating Income


2,260


2,099

8




4,220


4,038

5


      Other income


57


42

36




134


-

F


      Interest expense


(259)


(203)

28




(506)


(389)

30


 Income before income taxes


2,058


1,938

6




3,848


3,649

5


 Income taxes


(488)


(429)

14




(887)


(830)

7


 Net Income

$

1,570

$

1,509

4

%


$

2,961

$

2,819

5

%















 Share and Per Share














      Earnings per share - basic

$

2.23

$

1.98

13

%


$

4.16

$

3.67

13

%

      Earnings per share - diluted

$

2.22

$

1.98

12



$

4.15

$

3.65

14


      Weighted average number of shares - basic


705.5


760.5

(7)




711.2


768.4

(7)


      Weighted average number of shares - diluted


708.0


763.7

(7)




713.8


771.6

(7)


      Dividends declared per share

$

0.88

$

0.73

21



$

1.76

$

1.46

21
















 Operating Ratio


59.6%


63.0%

(3.4)

pts



61.6%


63.8%

(2.2)

pts

 Effective Tax Rate


23.7%


22.1%

1.6

pts



23.1%


22.7%

0.4

pts

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)

















2nd Quarter


Year-to-Date

 For the Periods Ended June 30,


2019


2018

%



2019


2018

%

 Freight Revenues (Millions)














 Agricultural Products

$

1,155

$

1,114

4

%


$

2,222

$

2,212

-

%

 Energy


966


1,111

(13)




1,948


2,284

(15)


 Industrial


1,494


1,437

4




2,904


2,777

5


 Premium


1,621


1,655

(2)




3,172


3,166

-


 Total

$

5,236

$

5,317

(2)

%


$

10,246

$

10,439

(2)

%

 Revenue Carloads (Thousands)














 Agricultural Products


284


285

-

%



543


564

(4)

%

 Energy


351


387

(9)




709


806

(12)


 Industrial


460


452

2




889


863

3


 Premium [a]


1,042


1,101

(5)




2,083


2,117

(2)


 Total


2,137


2,225

(4)

%



4,224


4,350

(3)

%

 Average Revenue per Car














 Agricultural Products

$

4,057

$

3,903

4

%


$

4,088

$

3,922

4

%

 Energy


2,753


2,874

(4)




2,746


2,835

(3)


 Industrial


3,242


3,178

2




3,266


3,218

1


 Premium


1,557


1,503

4




1,523


1,495

2


 Average 

$

2,450

$

2,389

3

%


$

2,425

$

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)








Jun. 30,

Dec. 31,

 Millions, Except Percentages

2019

2018

 Assets





      Cash and cash equivalents

$

1,049

$

1,273

      Short-term investments


60


60

      Other current assets


2,977


2,830

      Investments


1,989


1,912

      Net properties


53,115


52,679

      Operating lease assets


2,076


-

      Other assets


442


393

 Total assets

$

61,708

$

59,147






 Liabilities and Common Shareholders' Equity





      Debt due within one year

$

2,297

$

1,466

      Other current liabilities


3,368


3,160

      Debt due after one year


22,955


20,925

      Operating lease liabilities


1,612


-

      Deferred income taxes


11,574


11,302

      Other long-term liabilities


1,731


1,871

 Total liabilities


43,537


38,724

 Total common shareholders' equity


18,171


20,423

 Total liabilities and common shareholders' equity

$

61,708

$

59,147

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows (unaudited)






 Millions,

Year-to-Date

 For the Periods Ended June 30,

2019

2018

 Operating Activities





      Net income

$

2,961

$

2,819

      Depreciation


1,100


1,089

      Deferred income taxes


209


204

      Other - net


(370)


(79)

 Cash provided by operating activities


3,900


4,033

 Investing Activities





      Capital investments


(1,560)


(1,614)

      Maturities of short-term investments


105


60

      Purchases of short-term investments


(100)


(60)

      Other - net


(55)


(11)

 Cash used in investing activities


(1,610)


(1,625)

 Financing Activities





      Common share repurchases


(3,629)


(5,973)

      Debt issued


2,992


6,892

      Dividends paid


(1,248)


(1,125)

      Debt repaid


(604)


(1,295)

      Accelerated share repurchase programs pending final settlement


(500)


(720)

      Net issuance of commercial paper


471


196

      Other - net


(29)


(54)

 Cash used in financing activities


(2,547)


(2,079)

 Net Change in Cash, Cash Equivalents and Restricted Cash


(257)


329

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


1,328


1,275

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

$

1,071

$

1,604

 Free Cash Flow*





      Cash provided by operating activities

$

3,900

$

4,033

      Cash used in investing activities


(1,610)


(1,625)

      Dividends paid


(1,248)


(1,125)

 Free cash flow

$

1,042

$

1,283



*

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)














2nd Quarter


Year-to-Date

 For the Periods Ended June 30,

2019


2018

%



2019


2018

%


 Operating/Performance Statistics 












      Freight car velocity (daily miles per car)

195


188

4

%


191


181

6

%

      Average train speed (miles per hour)*

23.1


24.7

(6)



23.2


24.8

(6)


      Average terminal dwell time (hours)*

25.5


29.5

(14)



26.0


31.2

(17)


      Locomotive productivity (GTMs per horsepower day)

121


102

19



116


103

13


      Gross ton-miles (GTMs) (millions)

220,009


230,938

(5)



430,328


457,867

(6)


      Workforce productivity (car miles per employee)

866


836

4



839


831

1


      Employees (average)

38,657


42,114

(8)



39,355


41,925

(6)














 Locomotive Fuel Statistics












      Average fuel price per gallon consumed

$ 2.21


$ 2.30

(4)

%


$ 2.14


$ 2.22

(4)

%

      Fuel consumed in gallons (millions)

245


270

(9)



493


537

(8)


      Fuel consumption rate**

1.112


1.170

(5)



1.146


1.173

(2)














 Revenue Ton-Miles (Millions)












      Agricultural Products

25,218


25,908

(3)

%


48,804


51,081

(4)

%

      Energy

34,000


40,002

(15)



69,215


83,964

(18)


      Industrial

25,536


25,750

(1)



49,854


50,040

-


      Premium

23,990


25,976

(8)



47,521


49,951

(5)


 Total

108,744


117,636

(8)

%


215,394


235,036

(8)

%



*

AAR 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 

Year-to-Date

 Operating Revenues







      Freight revenues

$

5,010

$

5,236

$

10,246

      Other revenues


374


360


734

 Total operating revenues


5,384


5,596


10,980

 Operating Expenses







      Compensation and benefits


1,205


1,145


2,350

      Purchased services and materials


576


573


1,149

      Depreciation


549


551


1,100

      Fuel


531


560


1,091

      Equipment and other rents


258


260


518

      Other


305


247


552

 Total operating expenses


3,424


3,336


6,760

 Operating Income


1,960


2,260


4,220

      Other income


77


57


134

      Interest expense


(247)


(259)


(506)

 Income before income taxes


1,790


2,058


3,848

 Income taxes


(399)


(488)


(887)

 Net Income

$

1,391

$

1,570

$

2,961








 Share and Per Share







      Earnings per share - basic

$

1.94

$

2.23

$

4.16

      Earnings per share - diluted

$

1.93

$

2.22

$

4.15

      Weighted average number of shares - basic


716.8


705.5


711.2

      Weighted average number of shares - diluted


719.5


708.0


713.8

      Dividends declared per share

$

0.88

$

0.88

$

1.76








 Operating Ratio


63.6%


59.6%


61.6%

 Effective Tax Rate


22.3%


23.7%


23.1%

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)









2019


1st Qtr 

2nd Qtr 

Year-to-Date

 Freight Revenues (Millions)







 Agricultural Products

$

1,067

$

1,155

$

2,222

 Energy


982


966


1,948

 Industrial


1,410


1,494


2,904

 Premium


1,551


1,621


3,172

 Total

$

5,010

$

5,236

$

10,246

 Revenue Carloads (Thousands)







 Agricultural Products


259


284


543

 Energy


358


351


709

 Industrial


429


460


889

 Premium [a]


1,041


1,042


2,083

 Total


2,087


2,137


4,224

 Average Revenue per Car







 Agricultural Products

$

4,123

$

4,057

$

4,088

 Energy


2,740


2,753


2,746

 Industrial


3,292


3,242


3,266

 Premium


1,489


1,557


1,523

 Average

$

2,401

$

2,450

$

2,425



[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

Jun. 30,

Dec. 31,

for the Trailing Twelve Months Ended [a]

2019

2018

 Net income

$

6,108

$

5,966

 Less:





 Other income


228


94

 Add:





 Income tax expense


1,832


1,775

 Depreciation


2,202


2,191

 Interest expense


987


870

 EBITDA

$

10,901

$

10,708

 Interest on operating lease liabilities**


76


84

 Adjusted EBITDA (a)

$

10,977

$

10,792

 Debt

$

25,252

$

22,391

 Operating lease liabilities***


2,054


2,271

 Unfunded pension and OPEB,  net of taxes of $108 and $135


359


456

 Adjusted debt (b)

$

27,665

$

25,118

 Adjusted debt / Adjusted EBITDA (b/a)


2.5


2.3



[a]

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



*

Total debt plus operating lease liabilities plus after-tax unfunded pension and OPEB obligation divided by net income less other income plus income tax expense, depreciation, interest expense, and interest on operating lease liabilities. Adjusted debt to adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, 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 June 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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SOURCE Union Pacific Corporation

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