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
Cindy Allen
OMAHA, Nebraska
,
April 17, 2014
(press release)
–
First Quarter Records 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: Summary of First Quarter Freight Revenues 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. 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. Logo - http://photos.prnewswire.com/prnh/20110304/LA59497LOGO
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.
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