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
Cindy Allen
OMAHA, Nebraska
,
January 23, 2014
(press release)
–
Best-Ever Quarterly Records 2013 Full Year Records 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 Summary of Fourth Quarter Freight Revenues 2013 Full Year Summary 2014 Outlook About Union Pacific 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.
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:
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:
"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."
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.
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