Union Pacific's Q4 earnings increased 13% year-over-year to US$1.17B as operating revenues rose 7% to US$5.63B; for full year, earnings up 11% to US$4.39B, operating revenues up 5% to US$21.96B

OMAHA, Nebraska , January 23, 2014 (press release) –

Best-Ever Quarterly Records

  • Diluted earnings per share of $2.55 improved 16 percent.
  • Operating revenues totaled more than $5.6 billion, up 7 percent.
  • Operating income totaled $1.97 billion, up 14 percent.

2013 Full Year Records

  • Diluted earnings per share of $9.42 improved 14 percent.
  • Operating revenues totaled $21.96 billion, up 5 percent.
  • Operating income totaled $7.4 billion, up 10 percent.
  • Operating ratio of 66.1 percent improved 1.7 points.

Union Pacific Corporation (NYSE: UNP) today reported net income of $1.2 billion, or $2.55 per diluted share, for the fourth quarter 2013 compared to $1 billion, or $2.19 per diluted share, in the fourth quarter 2012. 

(Logo: http://photos.prnewswire.com/prnh/20110304/LA59497LOGO)

"For the first time in six quarters, we reported overall volume growth, despite significantly weaker coal shipments.  It highlights the strength of our diverse franchise, the extensive network reach we have to various markets, and a strong grain harvest," said Jack Koraleski, Union Pacific chief executive officer.  "Volume growth, combined with solid core pricing gains and our continued focus on safety, service, and efficiency, generated a record fourth quarter operating ratio of 65.0 percent.   The fourth quarter wrapped up another tremendous year for Union Pacific, with our overall financial performance exceeding all previous milestones."

Fourth Quarter Summary
Operating revenue increased 7 percent in the fourth quarter 2013 to more than $5.6 billion versus $5.25 billion in the fourth quarter 2012.  Fourth quarter business volumes, as measured by total revenue carloads, grew 2 percent compared to 2012.  Volume growth from agricultural products, automotive, industrial products and intermodal shipments more than offset declines in coal and chemical volumes.  In addition:

  • Quarterly freight revenue increased 7 percent compared to the fourth quarter 2012, driven by core pricing gains and volume growth.
  • Union Pacific's operating ratio of 65.0 percent was a fourth quarter record, 2.1 points better than the fourth quarter 2012 and only 0.2 points off the all-time quarterly record of 64.8 percent set in the third quarter 2013.
  • Average quarterly diesel fuel prices decreased 4 percent to $3.11 per gallon in the fourth quarter 2013 compared to $3.25 per gallon in the fourth quarter 2012. 
  • The Customer Satisfaction Index of 93 matched the fourth quarter record set in 2012.
  • Quarterly train speed, as reported to the Association of American Railroads, was 25.8 mph, down 3 percent from the fourth quarter 2012, primarily due to severe winter weather conditions. 
  • The Company repurchased more than 4.9 million shares in the fourth quarter 2013 at an average share price of $159.36 and an aggregate cost of $786 million.

Summary of Fourth Quarter Freight Revenues

  • Agricultural up 19 percent
  • Automotive up 17 percent
  • Industrial Products up 14 percent
  • Chemicals up 3 percent
  • Intermodal flat
  • Coal down 1 percent

2013 Full Year Summary
For the full year 2013, Union Pacific reported net income of $4.4 billion or $9.42 per diluted share.  This compares to $3.9 billion or $8.27 per diluted share in 2012, 11 and 14 percent increases, respectively.  Operating revenue totaled a record $21.96 billion versus $20.9 billion in 2012.  Operating income increased 10 percent to more than $7.4 billion, up from $6.7 billion in 2012.  In addition:

  • Freight revenue grew 5 percent to $20.7 billion compared to $19.7 billion in 2012.  Carloadings were flat versus 2012 as declines in coal and agricultural shipments offset volume growth from automotive, chemicals, and industrial products shipments.  Intermodal volumes were flat compared to 2012.
  • Union Pacific's operating ratio of 66.1 percent was a full year record, improving 1.7 points from the previous record set in 2012. 
  • Average diesel fuel prices decreased 2 percent to $3.15 per gallon in 2013 from $3.22 per gallon in 2012. 
  • The Company increased its quarterly dividend per share by 14.5 percent to $0.79 cents per share in the third quarter 2013.  Total dividends declared for the full year 2013 grew 19 percent compared to the full year 2012.
  • The Company repurchased more than 14.5 million shares in 2013 at an average share price of $152.52, and an aggregate cost of $2.2 billion.

2014 Outlook
"As we look at 2014, we see signs that the economy is slowly strengthening.  We're well-positioned for economic growth and are confident in our ability to deliver on our customers' growing transportation needs," Koraleski said.  "We'll continue our unrelenting focus on both safety and service to our customers.  We strongly believe in the power and potential of the Union Pacific franchise to drive even greater financial performance and shareholder returns in the years to come."

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 2007-2013, Union Pacific invested more than $21.6 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.

Investor contact is Michelle Gerhardt, (402) 544-4227.

Media contact is Stephanie Serkhoshian, (402) 544-0100.

Supplemental financial information is attached.

This press release and related materials contain statements about the Corporation's future that are not statements of historical fact, including specifically the statements regarding the Corporation's expectations with respect to general economic conditions and its ability to meet its customers transportation requirements, operate safely, adequately serve its customers and improve financial performance and shareholder returns.  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 Corporation'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 Corporation'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 Corporation'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 Corporation's Annual Report on Form 10-K for 2012, which was filed with the SEC on February 8, 2013.  The Corporation 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 Corporation 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 Corporation does update one or more forward-looking statements, no inference should be drawn that the Corporation 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,

 

2013

 

2012

%

     

2013

 

2012

%

 

 Operating Revenues

                         

      Freight revenues

$

5,297

$

4,931

7%

   

$

20,684

$

19,686

5%

 

      Other revenues

 

333

 

319

4

     

1,279

 

1,240

3

 

 Total operating revenues

 

5,630

 

5,250

7

     

21,963

 

20,926

5

 

 Operating Expenses

                         

      Compensation and benefits

 

1,210

 

1,135

7

     

4,807

 

4,685

3

 

      Fuel

 

905

 

920

(2)

     

3,534

 

3,608

(2)

 

      Purchased services and materials

 

585

 

533

10

     

2,315

 

2,143

8

 

      Depreciation

 

458

 

453

1

     

1,777

 

1,760

1

 

      Equipment and other rents

 

311

 

302

3

     

1,235

 

1,197

3

 

      Other

 

188

 

182

3

     

849

 

788

8

 

 Total operating expenses

 

3,657

 

3,525

4

     

14,517

 

14,181

2

 

 Operating Income

 

1,973

 

1,725

14

     

7,446

 

6,745

10

 

      Other income

 

37

 

43

(14)

     

128

 

108

19

 

      Interest expense

 

(127)

 

(128)

(1)

     

(526)

 

(535)

(2)

 

 Income before income taxes

 

1,883

 

1,640

15

     

7,048

 

6,318

12

 

 Income taxes

 

(709)

 

(604)

17

     

(2,660)

 

(2,375)

12

 

 Net Income

$

1,174

$

1,036

13%

   

$

4,388

$

3,943

11%

 
                           

 Share and Per Share

                         

      Earnings per share - basic

$

2.56

$

2.21

16%

   

$

9.47

$

8.33

14%

 

      Earnings per share - diluted

$

2.55

$

2.19

16

   

$

9.42

$

8.27

14

 

      Weighted average number of shares - basic

 

458.1

 

468.8

(2)

     

463.3

 

473.1

(2)

 

      Weighted average number of shares - diluted

 

460.7

 

472.0

(2)

     

465.8

 

476.5

(2)

 

      Dividends declared per share

$

0.79

$

0.69

14

   

$

2.96

$

2.49

19

 
                           

 Operating Ratio

 

65.0%

 

67.1%

(2.1)

pts 

   

66.1%

 

67.8%

(1.7)

pts 

 Effective Tax Rate

 

37.7%

 

36.8%

0.9

pts 

   

37.7%

 

37.6%

0.1

pts 

                           
                           

 

 

 

 UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

 Freight Revenues Statistics (unaudited)

 
 

4th Quarter 

 

Full Year 

 For the Periods Ended December 31,

 

2013

 

2012

%

   

2013

 

2012

%

 Freight Revenues (Millions)

                     

 Agricultural

$

937

$

785

19%

 

$

3,276

$

3,280

-%

 Automotive

 

544

 

466

17

   

2,077

 

1,807

15

 Chemicals

 

855

 

834

3

   

3,501

 

3,238

8

 Coal

 

985

 

990

(1)

   

3,978

 

3,912

2

 Industrial Products

 

954

 

835

14

   

3,822

 

3,494

9

 Intermodal

 

1,022

 

1,021

-

   

4,030

 

3,955

2

 Total

$

5,297

$

4,931

7%

 

$

20,684

$

19,686

5%

 Revenue Carloads (Thousands)

                     

 Agricultural

 

243

 

215

13%

   

874

 

900

(3)

 Automotive

 

205

 

187

10

   

781

 

738

6%

 Chemicals

 

263

 

265

(1)

   

1,103

 

1,042

6

 Coal

 

419

 

463

(10)

   

1,703

 

1,871

(9)

 Industrial Products

 

305

 

280

9

   

1,236

 

1,185

4

 Intermodal *

 

845

 

831

2

   

3,325

 

3,312

-

 Total

 

2,280

 

2,241

2%

   

9,022

 

9,048

-%

 Average Revenue per Car

                     

 Agricultural

$

3,846

$

3,647

5%

 

$

3,746

$

3,644

3%

 Automotive

 

2,653

 

2,487

7

   

2,659

 

2,448

9

 Chemicals

 

3,255

 

3,146

3

   

3,176

 

3,107

2

 Coal

 

2,352

 

2,141

10

   

2,336

 

2,092

12

 Industrial Products

 

3,134

 

2,978

5

   

3,093

 

2,947

5

 Intermodal *

 

1,208

 

1,229

(2)

   

1,212

 

1,194

2

 Average 

$

2,323

$

2,200

6

 

$

2,293

$

2,176

5%

 

*      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

 

2013

 

2012

 Assets

       

      Cash and cash equivalents

$

1,432

$

1,063

      Other current assets

 

2,558

 

2,551

      Investments

 

1,321

 

1,259

      Net properties

 

43,749

 

41,997

      Other assets

 

671

 

283

 Total assets

$

49,731

$

47,153

         

 Liabilities and Common Shareholders' Equity

       

      Debt due within one year

$

705

$

196

      Other current liabilities

 

3,086

 

2,923

      Debt due after one year

 

8,872

 

8,801

      Deferred income taxes

 

14,163

 

13,108

      Other long-term liabilities

 

1,680

 

2,248

 Total liabilities

 

28,506

 

27,276

 Total common shareholders' equity

 

21,225

 

19,877

 Total liabilities and common shareholders' equity

$

49,731

$

47,153

         

 Debt to Capital

 

31.1%

 

31.2%

 Adjusted Debt to Capital*

 

37.6%

 

39.1%

 Return on Invested Capital*

 

14.7%

 

14.0%

 

*

Adjusted Debt to Capital and Return on Invested Capital are non-GAAP measures; however, we believe that they are important 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,

2013

 

2012

 Operating Activities

         

      Net income

$

4,388

 

$

3,943

      Depreciation

 

1,777

   

1,760

      Deferred income taxes

 

723

   

887

      Other - net

 

(65)

   

(429)

 Cash provided by operating activities

 

6,823

   

6,161

           

 Investing Activities

         

      Capital investments

 

(3,496)

   

(3,738)

      Other - net

 

91

   

105

 Cash used in investing activities

 

(3,405)

   

(3,633)

           

 Financing Activities

         

      Common shares repurchased

 

(2,218)

   

(1,474)

      Debt issued

 

1,443

   

695

      Dividends paid

 

(1,333)

   

(1,146)

      Debt repaid

 

(640)

   

(758)

      Debt exchange

 

(289)

   

-

      Other - net

 

(12)

   

1

 Cash used in financing activities

 

(3,049)

   

(2,682)

           

 Net Change in Cash and Cash Equivalents

 

369

   

(154)

 Cash and cash equivalents at beginning of year

 

1,063

   

1,217

 Cash and Cash Equivalents End of Period

$

1,432

 

$

1,063

           

 Free Cash Flow*

         

      Cash provided by operating activities

$

6,823

 

$

6,161

      Cash used in investing activities

 

(3,405)

   

(3,633)

      Dividends paid

 

(1,333)

   

(1,146)

 Free cash flow

$

2,085

 

$

1,382

   

*

Free cash flow is a non-GAAP measure; however, we believe that it is important to management and investors in evaluating our financial performance and measures our ability to generate cash without incurring additional financing.

 

 

 

 UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

 Operating and Performance Statistics (unaudited)

 
 

4th Quarter

 

Full Year

 For the Periods Ended December 31,

2013

2012

%

   

2013

2012

%

 

 Operating/Performance Statistics 

                 

      Gross ton-miles (GTMs) (millions)

244,631

238,898

2%

   

949,065

959,280

(1)%

 

      Employees (average)

45,951

46,067

-

   

46,445

45,928

1

 

      GTMs (millions) per employee

5.32

5.19

3

   

20.43

20.89

(2)

 

      Customer satisfaction index

93

93

-

pts 

 

93

93

-

pts 

                   

 Locomotive Fuel Statistics

                 

      Average fuel price per gallon consumed

$ 3.11

$ 3.25

(4)%

   

$ 3.15

$ 3.22

(2)%

 

      Fuel consumed in gallons (millions)

283

274

3

   

1,091

1,085

1

 

      Fuel consumption rate *

1.157

1.148

1

   

1.149

1.131

2

 
                   

 AAR Reported Performance Measures

                 

      Average train speed (miles per hour)

25.8

26.7

(3)%

   

26.0

26.5

(2)%

 

      Average terminal dwell time (hours)

28.0

26.8

4

   

27.1

26.2

3

 
                   

 Revenue Ton-Miles (Millions)

                 

      Agricultural

24,197

18,937

28%

   

80,904

81,407

(1)%

 

      Automotive

4,238

3,829

11

   

16,169

14,942

8

 

      Chemicals

17,752

17,649

1

   

73,963

68,095

9

 

      Coal

45,865

51,297

(11)

   

186,902

207,466

(10)

 

      Industrial Products

19,523

17,009

15

   

77,760

70,924

10

 

      Intermodal

20,037

19,748

1

   

78,574

78,277

-

 

 Total

131,612

128,469

2%

   

514,272

521,111

(1)%

 

 

   

*

Fuel consumption is computed as follows: gallons of fuel consumed divided by gross ton-miles in thousands.

   

Note: Average rail car inventory is no longer being reported as a key railroad performance measure because of recently identified inaccuracies in the AAR's calculation for the rail industry, which prevents comparisons to prior reporting periods.  The impact of changes in rail car inventory will be described, as necessary, in connection with our discussion of train speed and/or terminal dwell metrics. 

 

 

 

 UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

 Condensed Consolidated Statements of Income (unaudited)

 
 

2013

 Millions, Except Per Share Amounts and Percentages

 

1st Qtr

 

2nd Qtr

 

3rd Qtr

 

4th Qtr

 

Full Year

 Operating Revenues

                           

      Freight revenues

$

4,984

 

$

5,153

 

$

5,250

 

$

5,297

 

$

20,684

      Other revenues

 

306

   

317

   

323

   

333

   

1,279

  Total operating revenues

 

5,290

   

5,470

   

5,573

   

5,630

   

21,963

 Operating Expenses

                           

      Compensation and benefits

 

1,216

   

1,185

   

1,196

   

1,210

   

4,807

      Fuel

 

900

   

863

   

866

   

905

   

3,534

      Purchased services and materials

 

557

   

585

   

588

   

585

   

2,315

      Depreciation

 

434

   

438

   

447

   

458

   

1,777

      Equipment and other rents

 

313

   

302

   

309

   

311

   

1,235

      Other

 

237

   

219

   

205

   

188

   

849

  Total operating expenses

 

3,657

   

3,592

   

3,611

   

3,657

   

14,517

 Operating Income

 

1,633

   

1,878

   

1,962

   

1,973

   

7,446

      Other income

 

40

   

23

   

28

   

37

   

128

      Interest expense

 

(128)

   

(133)

   

(138)

   

(127)

   

(526)

 Income before income taxes

 

1,545

   

1,768

   

1,852

   

1,883

   

7,048

 Income tax expense

 

(588)

   

(662)

   

(701)

   

(709)

   

(2,660)

 Net Income

$

957

 

$

1,106

 

$

1,151

 

$

1,174

 

$

4,388

                             

 Share and Per Share

                           

      Earnings per share - basic

$

2.05

 

$

2.38

 

$

2.49

 

$

2.56

 

$

9.47

      Earnings per share - diluted

$

2.03

 

$

2.37

 

$

2.48

 

$

2.55

 

$

9.42

      Weighted average number of shares - basic

 

467.8

   

465.3

   

461.7

   

458.1

   

463.3

      Weighted average number of shares - diluted

 

470.5

   

467.6

   

464.2

   

460.7

   

465.8

      Dividends declared per share

$

0.69

 

$

0.69

 

$

0.79

 

$

0.79

 

$

2.96

                             

 Operating Ratio

 

69.1%

   

65.7%

   

64.8%

   

65.0%

   

66.1%

 Effective Tax Rate

 

38.1%

   

37.4%

   

37.9%

   

37.7%

   

37.7%

 

 

 

 UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

 Freight Revenues Statistics (unaudited)

 
 

2013

   

1st Qtr

   

2nd Qtr

   

3rd Qtr

   

4th Qtr

 

Full Year

 Freight Revenues (Millions)

                           

 Agricultural

$

784

 

$

784

 

$

771

 

$

937

 

$

3,276

 Automotive

 

487

   

534

   

512

   

544

   

2,077

 Chemicals

 

873

   

890

   

883

   

855

   

3,501

 Coal

 

936

   

975

   

1,082

   

985

   

3,978

 Industrial Products

 

916

   

977

   

975

   

954

   

3,822

 Intermodal

 

988

   

993

   

1,027

   

1,022

   

4,030

 Total

$

4,984

 

$

5,153

 

$

5,250

 

$

5,297

 

$

20,684

 Revenue Carloads (Thousands)

                           

 Agricultural

 

212

   

209

   

210

   

243

   

874

 Automotive

 

184

   

197

   

195

   

205

   

781

 Chemicals

 

271

   

287

   

282

   

263

   

1,103

 Coal

 

402

   

414

   

468

   

419

   

1,703

 Industrial Products

 

289

   

317

   

325

   

305

   

1,236

 Intermodal *

 

810

   

822

   

848

   

845

   

3,325

 Total

 

2,168

   

2,246

   

2,328

   

2,280

   

9,022

 Average Revenue per Car

                           

 Agricultural

$

3,694

 

$

3,750

 

$

3,679

 

$

3,846

 

$

3,746

 Automotive

 

2,648

   

2,715

   

2,620

   

2,653

   

2,659

 Chemicals

 

3,225

   

3,098

   

3,134

   

3,255

   

3,176

 Coal

 

2,329

   

2,353

   

2,312

   

2,352

   

2,336

 Industrial Products

 

3,174

   

3,079

   

2,998

   

3,134

   

3,093

 Intermodal *

 

1,219

   

1,210

   

1,211

   

1,208

   

1,212

 Average

$

2,299

 

$

2,295

 

$

2,255

 

$

2,323

 

$

2,293

                             

*      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

 

2013

 

2012

 Debt (a)

$

9,577

$

8,997

 Equity

 

21,225

 

19,877

 Capital (b)

$

30,802

$

28,874

 Debt to capital (a/b)

 

31.1%

 

31.2%

   

*

Total debt divided by total debt plus equity. Management believes this is an important measure 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

 

2013

 

2012

 Debt

$

9,577

$

8,997

 Net present value of operating leases

 

3,057

 

3,096

 Unfunded pension and OPEB

 

170

 

679

 Adjusted debt (a)

$

12,804

$

12,772

 Equity

 

21,225

 

19,877

 Adjusted capital (b)

$

34,029

$

32,649

 Adjusted debt to capital (a/b)

 

37.6%

 

39.1%

   

*

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 5.7% at December 31, 2013 and 6.0% at December 31, 2012. The discount rate reflects our effective interest rate. Management believes this is an important measure to management and investors in evaluating the total amount of leverage in our capital structure including off-balance sheet obligations.

 

 

 

 UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

 Non-GAAP Measures Reconciliation to GAAP

 

 Return on Invested Capital as Adjusted (ROIC)*

       
   

Dec. 31, 

 

Dec. 31, 

 Millions, Except Percentages

 

2013

 

2012

 Net income

$

4,388

$

3,943

 Add: Interest expense

 

526

 

535

 Add: Interest on present value of operating leases

 

175

 

190

 Less: Taxes on interest

 

(264)

 

(273)

 Net operating profit after taxes as adjusted (a)

$

4,825

$

4,395

 Average equity

$

20,551

$

19,228

 Add: Average debt

 

9,287

 

8,952

 Add: Average present value of operating leases

 

3,077

 

3,160

 Average invested capital as adjusted (b)

$

32,915

$

31,340

 Return on invested capital as adjusted (a/b)

 

14.7%

 

14.0%

   

*

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 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.

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