Union Pacific's Q1 net income climbed 14% year-over-year to US$1.09B as operating revenues rose 7% to US$5.64B, driven by 16% increase in revenue from agricultural freight; company expects record financial performance in 2014, years to come

OMAHA, Nebraska , April 17, 2014 (press release) –

First Quarter Records
Diluted earnings per share of $2.38 improved 17 percent.
Operating revenues totaled $5.6 billion, up 7 percent.
Operating income totaled $1.85 billion, up 14 percent.
Operating ratio of 67.1 percent improved 2.0 points.

Union Pacific Corporation (UNP) today reported 2014 first quarter net income of $1.1 billion, or $2.38 per diluted share, compared to $957 million, or $2.03 per diluted share, in the first quarter 2013. 

"Union Pacific achieved record first quarter financial results, leveraging the strengths of our diverse franchise in the face of challenging weather conditions," said Jack Koraleski, Union Pacific chief executive officer.  "We're proud of the efforts of the men and women of Union Pacific, who worked tirelessly to serve our customers despite these weather challenges and helped us achieve such a solid start to the year."

First Quarter Summary

Operating revenue increased 7 percent in the first quarter 2014 to $5.6 billion, versus $5.3 billion in the first quarter 2013.  First quarter business volumes, as measured by total revenue carloads, increased 5 percent compared to 2013.  Volume increased in agricultural products, industrial products, coal, intermodal and automotive.  Chemicals volumes were flat versus 2013 as growth in base chemicals was offset by a reduction in crude oil shipments.  In addition:

  • Quarterly freight revenue increased 6 percent compared to the first quarter 2013, driven by volume growth and core pricing gains.
  • Union Pacific's operating ratio of 67.1 percent was a first quarter record, 2.0 points better than the first quarter 2013. 
  • The average quarterly diesel fuel price of $3.12 per gallon in the first quarter 2014 was down 3 percent compared to the first quarter 2013. 
  • Quarterly train speed, as reported to the Association of American Railroads, was 24.5 mph, down 7 percent versus the first quarter 2013. 
  • The Company repurchased 3.8 million shares in the first quarter 2014 at an average share price of $178.85 and an aggregate cost of $683 million.

Summary of First Quarter Freight Revenues

  • Agricultural Products up 16 percent
  • Industrial Products up 10 percent
  • Intermodal up 4 percent
  • Coal up 3 percent
  • Chemicals up 2 percent
  • Automotive flat

2014 Outlook

"As we look forward, we're watching the economy very closely, as well as the potential impacts of weather, particularly on our coal and grain business," Koraleski said.  "There's still a lot of year ahead of us, but we are seeing signs of gradual economic improvement, and we're encouraged by the opportunities it presents.  With the power and potential of the Union Pacific franchise, we'll leverage these opportunities to drive record financial performance and shareholder returns this year and in the years to come."

About Union Pacific

Union Pacific Railroad is the principal operating company of Union Pacific Corporation (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 Mike Staffenbeal, (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 economic conditions and improvement, business opportunities, and its ability to 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 2013, which was filed with the SEC on February 7, 2014.  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,

1st Quarter

 For the Periods Ended March 31,

 

2014

   

2013

 

%

 

 Operating Revenues

               

      Freight revenues

$

5,286

 

$

4,984

 

6%

 

      Other revenues

 

352

   

306

 

15

 

 Total operating revenues

 

5,638

   

5,290

 

7

 

 Operating Expenses

               

      Compensation and benefits

 

1,254

   

1,216

 

3

 

      Fuel

 

921

   

900

 

2

 

      Purchased services and materials

 

607

   

557

 

9

 

      Depreciation

 

464

   

434

 

7

 

      Equipment and other rents

 

312

   

313

 

-

 

      Other

 

226

   

237

 

(5)

 

 Total operating expenses

 

3,784

   

3,657

 

3

 

 Operating Income

 

1,854

   

1,633

 

14

 

      Other income

 

38

   

40

 

(5)

 

      Interest expense

 

(133)

   

(128)

 

4

 

 Income before income taxes

 

1,759

   

1,545

 

14

 

 Income taxes

 

(671)

   

(588)

 

14

 

 Net Income

$

1,088

 

$

957

 

14%

 
                   

 Share and Per Share

               

      Earnings per share - basic

$

2.40

 

$

2.05

 

17%

 

      Earnings per share - diluted

$

2.38

 

$

2.03

 

17

 

      Weighted average number of shares - basic

 

454.1

   

467.8

 

(3)

 

      Weighted average number of shares - diluted

 

456.2

   

470.5

 

(3)

 

      Dividends declared per share

$

0.91

 

$

0.69

 

32

 
                   

 Operating Ratio

 

67.1%

   

69.1%

 

(2.0)

pts

 Effective Tax Rate

 

38.1%

   

38.1%

 

-

pts

 

 

 UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

 Freight Revenues Statistics (unaudited)

 
 

1st Quarter 

 For the Periods Ended March 31,

 

2014

   

2013

 

%

 Freight Revenues (Millions)

             

 Agricultural

$

910

 

$

784

 

16%

 Automotive

 

488

   

487

 

-

 Chemicals

 

893

   

873

 

2

 Coal

 

961

   

936

 

3

 Industrial Products

 

1,011

   

916

 

10

 Intermodal

 

1,023

   

988

 

4

 Total

$

5,286

 

$

4,984

 

6%

 Revenue Carloads (Thousands)

             

 Agricultural

 

239

   

212

 

13%

 Automotive

 

188

   

184

 

2

 Chemicals

 

270

   

271

 

-

 Coal

 

430

   

402

 

7

 Industrial Products

 

314

   

289

 

9

 Intermodal*

 

833

   

810

 

3

 Total

 

2,274

   

2,168

 

5%

 Average Revenue per Car

             

 Agricultural

$

3,815

 

$

3,694

 

3%

 Automotive

 

2,591

   

2,648

 

(2)

 Chemicals

 

3,307

   

3,225

 

3

 Coal

 

2,236

   

2,329

 

(4)

 Industrial Products

 

3,218

   

3,174

 

1

 Intermodal*

 

1,227

   

1,219

 

1

 Average 

$

2,324

 

$

2,299

 

1%

*   Each intermodal container or trailer equals one carload.

       

 

 

 

 UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

 Condensed Consolidated Statements of Financial Position (unaudited)

 
   

Mar. 31,

 

Dec. 31,

 Millions, Except Percentages

 

2014

 

2013

 Assets

       

      Cash and cash equivalents

$

1,857

$

1,432

      Other current assets

 

2,822

 

2,558

      Investments

 

1,344

 

1,321

      Net properties

 

44,189

 

43,749

      Other assets

 

686

 

671

 Total assets

$

50,898

$

49,731

         

 Liabilities and Common Shareholders' Equity

       

      Debt due within one year

$

632

$

705

      Other current liabilities

 

3,556

 

3,086

      Debt due after one year

 

9,544

 

8,872

      Deferred income taxes

 

14,229

 

14,163

      Other long-term liabilities

 

1,665

 

1,680

 Total liabilities

 

29,626

 

28,506

 Total common shareholders' equity

 

21,272

 

21,225

 Total liabilities and common shareholders' equity

$

50,898

$

49,731

         

 Debt to Capital

 

32.4%

 

31.1%

 Adjusted Debt to Capital*

 

38.4%

 

37.6%

*

Adjusted Debt to Capital is a non-GAAP measure; however, management believes that it is an important measure in evaluating our financial performance. See page 6 for a reconciliation to GAAP.

 

 

 

 UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

 Condensed Consolidated Statements of Cash Flows (unaudited)

           

 Millions,

Year-to-Date

 For the Periods Ended March 31,

2014

 

2013

 Operating Activities

         

      Net income

$

1,088

 

$

957

      Depreciation

 

464

   

434

      Deferred income taxes

 

75

   

184

      Other - net

 

140

   

(51)

 Cash provided by operating activities

 

1,767

   

1,524

           

 Investing Activities

         

      Capital investments

 

(893)

   

(782)

      Other - net

 

(12)

   

(18)

 Cash used in investing activities

 

(905)

   

(800)

           

 Financing Activities

         

      Debt issued

 

995

   

944

      Common shares repurchased

 

(644)

   

(374)

      Debt repaid

 

(402)

   

(83)

      Dividends paid

 

(363)

   

(323)

      Other - net

 

(23)

   

(34)

 Cash (used in)/provided by financing activities

 

(437)

   

130

           

 Net Change in Cash and Cash Equivalents

 

425

   

854

 Cash and cash equivalents at beginning of year

 

1,432

   

1,063

 Cash and Cash Equivalents End of Period

$

1,857

 

$

1,917

           

 Free Cash Flow*

         

      Cash provided by operating activities

$

1,767

 

$

1,524

      Cash used in investing activities

 

(905)

   

(800)

      Dividends paid

 

(363)

   

(323)

 Free cash flow

$

499

 

$

401

*

Free cash flow is a non-GAAP measure; however, management believes that it is an important measure 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)

 
 

1st Quarter

 For the Periods Ended March 31,

2014

 

2013

 

%

 Operating/Performance Statistics 

         

      Gross ton-miles (GTMs) (millions)

240,169

 

227,688

 

5%

      Employees (average)

46,166

 

46,437

 

(1)

      GTMs (millions) per employee

5.20

 

4.90

 

6

           

 Locomotive Fuel Statistics

         

      Average fuel price per gallon consumed

$ 3.12

 

$ 3.23

 

(3)%

      Fuel consumed in gallons (millions)

287

 

272

 

6

      Fuel consumption rate*

1.197

 

1.195

 

-

           

 AAR Reported Performance Measures

         

      Average train speed (miles per hour)

24.5

 

26.4

 

(7)%

      Average terminal dwell time (hours)

30.7

 

27.4

 

12

           

 Revenue Ton-Miles (Millions)

         

      Agricultural

23,723

 

19,459

 

22%

      Automotive

3,958

 

3,848

 

3

      Chemicals

18,814

 

18,601

 

1

      Coal

44,683

 

43,720

 

2

      Industrial Products

20,425

 

18,759

 

9

      Intermodal

19,940

 

19,576

 

2

 Total

131,543

 

123,963

 

6%

*  

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

 

 

 

 

 UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

   

 Non-GAAP Measures Reconciliation to GAAP

   
         

 Debt to Capital*

       
   

Mar. 31,

 

Dec. 31,

 Millions, Except Percentages

 

2014

 

2013

 Debt (a)

$

10,176

$

9,577

 Equity

 

21,272

 

21,225

 Capital (b)

$

31,448

$

30,802

 Debt to capital (a/b)

 

32.4%

 

31.1%

*

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*

     
   

Mar. 31,

 

Dec. 31,

 Millions, Except Percentages

 

2014

 

2013

 Debt

$

10,176

$

9,577

 Net present value of operating leases

 

2,946

 

3,057

 Unfunded pension and OPEB

 

154

 

170

 Adjusted debt (a)

 

13,276

 

12,804

 Equity

 

21,272

 

21,225

 Adjusted capital (b)

$

34,548

$

34,029

 Adjusted debt to capital (a/b)

 

38.4%

 

37.6%

*

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 5.6% at March 31, 2014, and 5.7% at December 31, 2013. The discount rate reflects our effective interest rate. Management believes this is an important measure in evaluating the total amount of leverage in our capital structure including off-balance sheet obligations.

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