January 19, 2017 - 8:00 AM EST
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Union Pacific Reports Fourth Quarter and Full Year 2016 Results

OMAHA, Neb., Jan. 19, 2017 /PRNewswire/ -- Union Pacific Corporation (NYSE: UNP) today reported 2016 fourth quarter net income of $1.1 billion, or $1.39 per diluted share compared to $1.31 per diluted share, in the fourth quarter 2015.

Fourth Quarter Results

  • Diluted earnings per share of $1.39 increased 6 percent.
  • Operating income totaled $2.0 billion, up 2 percent.
  • Operating ratio of 62.0 percent, improved 1.2 points.

Full Year 2016 Results

  • Diluted earnings per share of $5.07 declined 8 percent.
  • Operating income totaled $7.3 billion, down 10 percent.
  • Operating ratio of 63.5 percent, up 0.4 points.

"While full-year volumes were down substantially year over year, we did see declines moderate in the fourth quarter," said Lance Fritz, Union Pacific chairman, president and chief executive officer.  "As we worked through the challenges of the year, we remained focused on the strategy we live each day through our six value tracks.  Executing on these value tracks enables us to run a safe, efficient, and productive railroad while providing our customers an excellent value proposition."

Fourth Quarter Summary

Operating revenue of $5.2 billion was down 1 percent in the fourth quarter 2016 compared to the fourth quarter 2015.  Fourth quarter business volumes, as measured by total revenue carloads, declined 3 percent compared to 2015.  While shipments of agricultural products grew 8 percent, volumes declined in the remaining five business groups.  In addition:

  • Quarterly freight revenue decreased 1 percent compared to the fourth quarter 2015, as volume declines and lower fuel surcharge revenue more than offset core pricing gains.
  • Union Pacific's 62.0 percent operating ratio improved 1.2 points compared to the fourth quarter 2015.
  • The $1.65 per gallon average quarterly diesel fuel price in the fourth quarter 2016 was 2 percent higher than the fourth quarter 2015.
  • Quarterly train speed, as reported to the Association of American Railroads, was 26.5 mph, 2 percent slower than the fourth quarter 2015.
  • The Company repurchased 9.6 million shares in the fourth quarter 2016 at an aggregate cost of nearly $940 million.

Summary of Fourth Quarter Freight Revenues

  • Agricultural Products up 7 percent
  • Chemicals flat
  • Intermodal flat
  • Industrial Products down 2 percent
  • Automotive down 6 percent
  • Coal down 6 percent

2016 Full Year Summary

For the full year 2016, Union Pacific reported net income of $4.2 billion or $5.07 per diluted share versus $4.8 billion or $5.49 per diluted share in 2015, representing 11 and 8 percent decreases, respectively.  Operating revenue totaled $19.9 billion as compared to $21.8 billion in 2015.  Operating income totaled $7.3 billion, a 10 percent decrease compared to 2015.  In addition:

  • Freight revenue totaled $18.6 billion, a 9 percent decrease when compared to 2015.  Carloadings were down 7 percent versus 2015, with declines in the chemicals, coal, industrial products and intermodal business groups.
  • Average diesel fuel prices decreased 20 percent to $1.48 per gallon in 2016 from $1.84 per gallon in 2015.
  • Union Pacific's operating ratio increased to 63.5 percent, 0.4 points higher than the full-year record set in 2015.
  • Train speed, as reported to the Association of American Railroads, was 26.6 mph, 5 percent faster compared to the full year 2015.
  • Union Pacific's reportable personal injury rate of 0.75 incidents per 200,000 employee hours was a full-year record, improving 14 percent compared to 2015.
  • Union Pacific's capital program in 2016 totaled just under $3.5 billion, a decrease of approximately $800 million compared to the full year 2015.
  • The Company repurchased 35.1 million shares in 2016 at an aggregate cost of $3.1 billion.

2017 Outlook

"Looking to 2017, we are fairly optimistic about some of the macro-economic indicators that drive our core business.  Higher energy prices, favorable agricultural markets and improving business and consumer confidence all support a return to positive volume growth this year," Fritz said.  "We continue to have confidence in the strength and diversity of the Union Pacific franchise, which will position us well to safely and efficiently leverage stronger volumes as our markets begin to rebound.  We will continue to execute on our strategic value tracks to provide our customers an excellent service experience while generating strong returns for our shareholders."

Fourth Quarter 2016 Earnings Conference Call

Union Pacific will host its fourth quarter 2016 earnings release presentation live over the Internet and via teleconference on Thursday, January 19, 2017 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 2007-2016, Union Pacific invested approximately $34 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 financial returns, improve network performance and customer service; 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,

4th Quarter


Full Year

For the Periods Ended December 31,

2016

2015

%



2016

2015

%


 Operating Revenues














      Freight revenues

$

4,832

$

4,863

(1)

%


$

18,601

$

20,397

(9)

%

      Other revenues


336


345

(3)




1,340


1,416

(5)


 Total operating revenues


5,168


5,208

(1)




19,941


21,813

(9)


 Operating Expenses














      Compensation and benefits


1,186


1,220

(3)




4,750


5,161

(8)


      Purchased services and materials


553


589

(6)




2,258


2,421

(7)


      Depreciation


520


517

1




2,038


2,012

1


      Fuel


431


424

2




1,489


2,013

(26)


      Equipment and other rents


280


305

(8)




1,137


1,230

(8)


      Other


233


235

(1)




997


924

8


 Total operating expenses


3,203


3,290

(3)




12,669


13,761

(8)


 Operating Income


1,965


1,918

2




7,272


8,052

(10)


      Other income


40


28

43




192


226

(15)


      Interest expense


(174)


(164)

6




(698)


(622)

12


 Income before income taxes


1,831


1,782

3




6,766


7,656

(12)


 Income taxes


(687)


(665)

3




(2,533)


(2,884)

(12)


 Net Income

$

1,144

$

1,117

2

%


$

4,233

$

4,772

(11)

%















 Share and Per Share














      Earnings per share - basic

$

1.40

$

1.31

7

%


$

5.09

$

5.51

(8)

%

      Earnings per share - diluted

$

1.39

$

1.31

6



$

5.07

$

5.49

(8)


      Weighted average number of shares - basic


819.2


850.6

(4)




832.4


866.2

(4)


      Weighted average number of shares - diluted


822.7


853.7

(4)




835.4


869.4

(4)


      Dividends declared per share

$

0.605

$

0.55

10



$

2.255

$

2.20

3
















 Operating Ratio


62.0%


63.2%

(1.2)

pts



63.5%


63.1%

0.4

pts

 Effective Tax Rate


37.5%


37.3%

0.2

pts



37.4%


37.7%

(0.3)

pts

 

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



4th Quarter


Full Year

For the Periods Ended December 31,

2016

2015

%



2016

2015

%


 Freight Revenues (Millions)














 Agricultural Products

$

961

$

895

7

%


$

3,625

$

3,581

1

%

 Automotive


517


549

(6)




2,000


2,154

(7)


 Chemicals


857


859

-




3,474


3,543

(2)


 Coal


699


745

(6)




2,440


3,237

(25)


 Industrial Products


829


842

(2)




3,348


3,808

(12)


 Intermodal


969


973

-




3,714


4,074

(9)


 Total

$

4,832

$

4,863

(1)

%


$

18,601

$

20,397

(9)

%

 Revenue Carloads (Thousands)














 Agricultural Products


258


239

8

%



980


941

4

%

 Automotive


219


225

(3)




863


863

-


 Chemicals


257


270

(5)




1,074


1,098

(2)


 Coal


320


353

(9)




1,166


1,459

(20)


 Industrial Products


265


280

(5)




1,097


1,213

(10)


 Intermodal*


827


836

(1)




3,262


3,488

(6)


 Total


2,146


2,203

(3)

%



8,442


9,062

(7)

%

 Average Revenue per Car














 Agricultural Products

$

3,732

$

3,745

-

%


$

3,702

$

3,805

(3)

%

 Automotive


2,362


2,447

(3)




2,317


2,498

(7)


 Chemicals


3,323


3,188

4




3,234


3,227

-


 Coal


2,183


2,107

4




2,092


2,218

(6)


 Industrial Products


3,123


3,004

4




3,051


3,139

(3)


 Intermodal*


1,172


1,165

1




1,138


1,168

(3)


 Average 

$

2,251

$

2,208

2

%


$

2,203

$

2,251

(2)

%

*   

Each intermodal container or trailer equals one carload.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
Condensed Consolidated Statements of Financial Position (unaudited)








Dec. 31,

Dec. 31,

 Millions, Except Percentages

2016

2015

 Assets





      Cash and cash equivalents

$

1,277

$

1,391

      Short-term investments


60


-

      Other current assets


2,259


2,739

      Investments


1,457


1,410

      Net properties


50,389


48,866

      Other assets


276


194

 Total assets

$

55,718

$

54,600






 Liabilities and Common Shareholders' Equity





      Debt due within one year

$

758

$

594

      Other current liabilities


2,882


2,612

      Debt due after one year


14,249


13,607

      Deferred income taxes


15,996


15,241

      Other long-term liabilities


1,901


1,844

 Total liabilities


35,786


33,898

 Total common shareholders' equity


19,932


20,702

 Total liabilities and common shareholders' equity

$

55,718

$

54,600






 Debt to Capital


43.0%


40.7%

 Adjusted Debt to Capital*


47.3%


45.7%

 Return on Invested Capital*


12.7%


14.3%



*   

Adjusted Debt to Capital and Return on Invested Capital are non-GAAP measures; however, management believes that they are important measures in evaluating our financial performance. See pages 8 and 9 for a reconciliation to GAAP.

 

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






 Millions,

Full Year

 For the Periods Ended December 31,

2016

2015

 Operating Activities





      Net income

$

4,233

$

4,772

      Depreciation


2,038


2,012

      Deferred income taxes


831


765

      Other - net


423


(205)

 Cash provided by operating activities


7,525


7,344






 Investing Activities





      Capital investments*


(3,505)


(4,650)

      Other - net


112


174

 Cash used in investing activities


(3,393)


(4,476)






 Financing Activities





      Common shares repurchased


(3,105)


(3,465)

      Debt issued


1,983


3,328

      Dividends paid**


(1,879)


(2,344)

      Debt repaid


(1,013)


(556)

      Debt exchange


(191)


-

      Other - net


(41)


(26)

 Cash used in financing activities


(4,246)


(3,063)






 Net Change in Cash and Cash Equivalents


(114)


(195)

 Cash and cash equivalents at beginning of year


1,391


1,586

 Cash and Cash Equivalents at End of Year

$

1,277

$

1,391






 Free Cash Flow***





      Cash provided by operating activities

$

7,525

$

7,344

      Cash used in investing activities


(3,393)


(4,476)

      Dividends paid**


(1,879)


(2,344)

 Free cash flow

$

2,253

$

524



*   

Capital investments include locomotive and freight car early lease buyouts of $90 million in 2016 and $327 million in 2015.



**  

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, the third quarter 2015 dividend of $476 million, which was paid on September 30, 2015, as well as the fourth quarter 2015 dividend of $467 million, which was paid on December 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)












4th Quarter


Full Year

For the Periods Ended December 31,

2016

2015

%



2016

2015

%


 Operating/Performance Statistics 










      Gross ton-miles (GTMs) (millions)

223,839

224,855

-

%


856,895

927,677

(8)

%

      Employees (average)

42,214

44,490

(5)



42,919

47,457

(10)


      GTMs (millions) per employee

5.30

5.05

5



19.97

19.55

2












 Locomotive Fuel Statistics










      Average fuel price per gallon consumed

$       1.65

$          1.61

2

%


$       1.48

$          1.84

(20)

%

      Fuel consumed in gallons (millions)

253

257

(2)



974

1,064

(8)


      Fuel consumption rate*

1.131

1.143

(1)



1.137

1.147

(1)












 AAR Reported Performance Measures










      Average train speed (miles per hour)

26.5

27.0

(2)

%


26.6

25.4

5

%

      Average terminal dwell time (hours)

29.0

29.4

(1)



28.1

29.3

(4)












 Revenue Ton-Miles (Millions)










      Agricultural Products

24,153

22,695

6

%


92,244

89,053

4

%

      Automotive

4,705

4,704

-



18,192

18,193

-


      Chemicals

16,132

17,124

(6)



66,964

71,707

(7)


      Coal

33,487

35,953

(7)



117,101

151,110

(23)


      Industrial Products

17,082

17,120

-



68,579

75,902

(10)


      Intermodal

19,559

19,122

2



77,059

79,070

(3)


 Total

115,118

116,718

(1)

%


440,139

485,035

(9)

%



*  

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

4th Qtr

Full Year

 Operating Revenues











      Freight revenues

$

4,502

$

4,430

$

4,837

$

4,832

$

18,601

      Other revenues


327


340


337


336


1,340

 Total operating revenues


4,829


4,770


5,174


5,168


19,941

 Operating Expenses











      Compensation and benefits


1,213


1,160


1,191


1,186


4,750

      Purchased services and materials


569


570


566


553


2,258

      Depreciation


502


504


512


520


2,038

      Fuel


320


346


392


431


1,489

      Equipment and other rents


289


286


282


280


1,137

      Other


249


244


271


233


997

 Total operating expenses


3,142


3,110


3,214


3,203


12,669

 Operating Income


1,687


1,660


1,960


1,965


7,272

      Other income


46


77


29


40


192

      Interest expense


(167)


(173)


(184)


(174)


(698)

 Income before income taxes


1,566


1,564


1,805


1,831


6,766

 Income taxes


(587)


(585)


(674)


(687)


(2,533)

 Net Income

$

979

$

979

$

1,131

$

1,144

$

4,233












 Share and Per Share











      Earnings per share - basic

$

1.16

$

1.17

$

1.36

$

1.40

$

5.09

      Earnings per share - diluted

$

1.16

$

1.17

$

1.36

$

1.39

$

5.07

      Weighted average number of shares - basic


844.0


837.4


829.0


819.2


832.4

      Weighted average number of shares - diluted


846.7


840.1


832.2


822.7


835.4

      Dividends declared per share

$

0.55

$

0.55

$

0.55

$

0.605

$

2.255












 Operating Ratio


65.1%


65.2%


62.1%


62.0%


63.5%

 Effective Tax Rate


37.5%


37.4%


37.3%


37.5%


37.4%

 

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













2016


1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Full Year

 Freight Revenues (Millions)











 Agricultural Products

$

882

$

845

$

937

$

961

$

3,625

 Automotive


510


488


485


517


2,000

 Chemicals


878


864


875


857


3,474

 Coal


519


494


728


699


2,440

 Industrial Products


834


830


855


829


3,348

 Intermodal


879


909


957


969


3,714

 Total

$

4,502

$

4,430

$

4,837

$

4,832

$

18,601

 Revenue Carloads (Thousands)











 Agricultural Products


235


229


258


258


980

 Automotive


217


217


210


219


863

 Chemicals


268


275


274


257


1,074

 Coal


262


243


341


320


1,166

 Industrial Products


274


275


283


265


1,097

 Intermodal*


788


809


838


827


3,262

 Total


2,044


2,048


2,204


2,146


8,442

 Average Revenue per Car











 Agricultural Products

$

3,749

$

3,692

$

3,637

$

3,732

$

3,702

 Automotive


2,350


2,247


2,310


2,362


2,317

 Chemicals


3,272


3,146


3,201


3,323


3,234

 Coal


1,985


2,026


2,134


2,183


2,092

 Industrial Products


3,041


3,025


3,019


3,123


3,051

 Intermodal*


1,116


1,124


1,141


1,172


1,138

 Average 

$

2,202

$

2,163

$

2,195

$

2,251

$

2,203



*    

Each intermodal container or trailer equals one carload.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
Non-GAAP Measures Reconciliation to GAAP










 Debt to Capital*






Dec. 31,

Dec. 31,

 Millions, Except Percentages

2016

2015

 Debt (a)

$

15,007

$

14,201

 Equity


19,932


20,702

 Capital (b)

$

34,939

$

34,903

 Debt to capital (a/b)


43.0%


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*






Dec. 31,

Dec. 31,

 Millions, Except Percentages

2016

2015

 Debt

$

15,007

$

14,201

 Net present value of operating leases


2,435


2,726

 Unfunded pension and OPEB, net of taxes of $261 and $280


436


463

 Adjusted debt (a)


17,878


17,390

 Equity


19,932


20,702

 Adjusted capital (b)

$

37,810

$

38,092

 Adjusted debt to capital (a/b)


47.3%


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 December 31, 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.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
Non-GAAP Measures Reconciliation to GAAP








 Return on Invested Capital as Adjusted (ROIC)*











 Millions, Except Percentages

2016

2015

2014

 Net income

$

4,233

$

4,772

$

5,180

 Interest expense


698


622


561

 Interest on average present value of operating leases


121


135


158

 Taxes on interest


(306)


(285)


(273)

 Net operating profit after taxes as adjusted (a)

$

4,746

$

5,244

$

5,626

 Average equity

$

20,317

$

20,946

$

21,207

 Average debt


14,604


12,807


10,469

 Average present value of operating leases


2,581


2,814


2,980

 Average invested capital as adjusted (b)

$

37,502

$

36,567

$

34,656

 Return on invested capital as adjusted (a/b)


12.7%


14.3%


16.2%



*   

ROIC 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 efficiency and effectiveness of the Corporation's long-term capital investments, and we currently use ROIC as a performance criteria in determining certain elements of equity compensation for our executives. ROIC should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP. The most comparable GAAP measure is Return on Average Common Shareholders' Equity.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/union-pacific-reports-fourth-quarter-and-full-year-2016-results-300393336.html

SOURCE Union Pacific Corporation


Source: PR Newswire (January 19, 2017 - 8:00 AM EST)

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