UNION PACIFIC CORP - FORM 8-K - EX-99.1

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8-K - 8-K - UNION PACIFIC CORP	unp-20200723x8k.htm

Exhibit 99.1

Union Pacific Reports Second Quarter 2020 Results

FOR IMMEDIATE RELEASE

Omaha, Neb., July 23, 2020 – Union Pacific Corporation (NYSE: UNP) today reported 2020 second quarter net income of $1.1 billion, or $1.67 per diluted share. This compares to $1.6 billion, or $2.22 per diluted share, in the second quarter 2019.

“The Second Quarter proved very challenging as we faced a volume decline of 20 percent due to the economic impact of the COVID-19 pandemic. Demonstrating the transformation our Company is experiencing through the implementation of Unified Plan 2020, we were able to largely mitigate the impact of that volume loss,” said Lance Fritz, Union Pacific chairman, president and chief executive officer. “Our dedicated employees are feeling a very real impact from this pandemic, making tangible sacrifices. Despite this adversity, they continue to make strides to improve the safety of our railroad, while providing our customers an uninterrupted, enhanced service product.”

Second Quarter Summary

Operating revenue of $4.2 billion was down 24 percent in second quarter 2020, compared to second quarter 2019. Second quarter business volumes, as measured by total revenue carloads, decreased 20 percent compared to 2019. Volumes for all three business teams – bulk, industrial, and premium – declined in the quarter due to the deteriorating economic conditions brought on by the COVID-19 pandemic. In addition:

Quarterly freight revenue declined 24 percent, compared to second quarter 2019, as core pricing gains were offset by lower volumes, negative business mix and decreased fuel surcharge revenue.

Union Pacific’s 61 percent operating ratio increased 1.4 points compared to second quarter 2019.

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	Operating Ratio	Earnings Per Diluted Share
Second Quarter 2019	59.6%	$2.22
2019 Weather / Insurance Recovery	0.9 pts	$0.05
2019 Payroll Tax Refund	(0.7) pts	($0.04)
Fuel Impact	2.7 pts	$0.09
Core Results	(4.3) pts	($0.72)
Illinois Tollway Real Estate Sale	N/A	$0.07
Second Quarter 2020	61.0%	$1.67

Union Pacific recognized a $69 million gain from a real estate sale to the Illinois State Toll Highway Authority.

The $1.26 per gallon average quarterly diesel fuel price in second quarter 2020 was 43 percent lower than second quarter 2019.

Union Pacific’s first half reportable personal injury rate of 0.83 incidents per 200,000 employee hours improved 5 percent compared to first half 2019.

Quarterly freight car velocity was 225 daily miles per car, an 11 percent improvement compared to second quarter 2019.

Quarterly locomotive productivity was 136 GTMs per horsepower day, a 12 percent improvement compared to second quarter 2019.

Average maximum train length was 8,664 feet, a 13 percent increase compared to second quarter 2019.

Summary of Second Quarter Freight Revenues

Bulk down 17 percent

Industrial down 23 percent

Premium down 33 percent

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2020 Outlook

Although the state of global economy is somewhat uncertain given the lingering impact of the COVID-19 pandemic, Union Pacific currently expects full year 2020 carload volumes to be down around 10 percent or so compared to 2019.

“Our first priority continues to be the health and safety of our employees during the pandemic, as they perform critical service to support economic recovery,” Fritz said. “Our ability to be nimble and flexible in adjusting our resources to rapidly changing volumes, while providing a high level service product, demonstrates the strength of our service model. We remain focused on providing our customers with a safe, reliable and efficient service product.”

Second Quarter 2020 Earnings Conference Call

Union Pacific will webcast its second quarter 2020 earnings release presentation live at www.up.com/investor and via teleconference on Thursday, July 23, 2020 at 8:45 a.m. Eastern Time. 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 (NYSE: UNP) delivers the goods families and businesses use every day with safe, reliable and efficient service. Operating in 23 western states, the company connects its customers and communities to the global economy. Trains are the most environmentally responsible way to move freight, helping Union Pacific protect future generations. More information about Union Pacific is available at www.up.com.

Union Pacific Investor contact: Brad Stock at 402-544-4227 or bkstock@up.com

Union Pacific Media contact: Raquel Espinoza at 402-544-5034 or respinoza@up.com

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Supplemental financial information is attached.

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This news release 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 improve network performance, its results of operations, and potential impacts of the COVID-19 pandemic. These statements are, or will be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of 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 2019, which was filed with the SEC on February 7, 2020, and the Company’s Quarterly Report on Form 10-Q which was filed with the SEC on April 23, 2020. 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.

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UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Income (unaudited)



Millions, Except Per Share Amounts and Percentages,	2nd Quarter						Year-to-Date
For the Periods Ended June 30,	2020		2019		%		2020		2019		%
Operating Revenues
Freight revenues	$	3,972	$	5,236	(24)	%	$	8,852	$	10,246	(14)	%
Other		272		360	(24)			621		734	(15)
Total operating revenues		4,244		5,596	(24)			9,473		10,980	(14)
Operating Expenses
Compensation and benefits		905		1,145	(21)			1,964		2,350	(16)
Depreciation		551		551	-			1,098		1,100	-
Purchased services and materials		441		573	(23)			962		1,149	(16)
Fuel		247		560	(56)			681		1,091	(38)
Equipment and other rents		211		260	(19)			438		518	(15)
Other		235		247	(5)			533		552	(3)
Total operating expenses		2,590		3,336	(22)			5,676		6,760	(16)
Operating Income		1,654		2,260	(27)			3,797		4,220	(10)
Other income		131		57	F			184		134	37
Interest expense		(289)		(259)	12			(567)		(506)	12
Income before income taxes		1,496		2,058	(27)			3,414		3,848	(11)
Income taxes		(364)		(488)	(25)			(808)		(887)	(9)
Net Income	$	1,132	$	1,570	(28)	%	$	2,606	$	2,961	(12)	%

Share and Per Share
Earnings per share - basic	$	1.67	$	2.23	(25)	%	$	3.83	$	4.16	(8)	%
Earnings per share - diluted	$	1.67	$	2.22	(25)		$	3.82	$	4.15	(8)
Weighted average number of shares - basic		677.7		705.5	(4)			681.0		711.2	(4)
Weighted average number of shares - diluted		679.2		708.0	(4)			682.7		713.8	(4)
Dividends declared per share	$	0.97	$	0.88	10		$	1.94	$	1.76	10

Operating Ratio		61.0%		59.6%	1.4	pts		59.9%		61.6%	(1.7)	pts
Effective Tax Rate		24.3%		23.7%	0.6	pts		23.7%		23.1%	0.6	pts

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)



	2nd Quarter						Year-to-Date
For the Periods Ended June 30,	2020		2019		%		2020		2019		%
Freight Revenues (Millions)
Grain & grain products	$	644	$	711	(9)	%	$	1,333	$	1,376	(3)	%
Fertilizer		168		172	(2)			342		331	3
Food & refrigerated		205		272	(25)			455		514	(11)
Coal & renewables		369		523	(29)			790		1,077	(27)
Bulk		1,386		1,678	(17)			2,920		3,298	(11)
Industrial chemicals & plastics		435		482	(10)			930		934	-
Metals & minerals		368		557	(34)			837		1,093	(23)
Forest products		266		303	(12)			569		588	(3)
Energy & specialized markets		431		595	(28)			1,058		1,161	(9)
Industrial		1,500		1,937	(23)			3,394		3,776	(10)
Automotive		189		554	(66)			713		1,074	(34)
Intermodal		897		1,067	(16)			1,825		2,098	(13)
Premium		1,086		1,621	(33)			2,538		3,172	(20)
Total	$	3,972	$	5,236	(24)	%	$	8,852	$	10,246	(14)	%
Revenue Carloads (Thousands)
Grain & grain products		167		178	(6)	%		342		347	(1)	%
Fertilizer		53		54	(2)			99		97	2
Food & refrigerated		41		52	(21)			89		99	(10)
Coal & renewables		186		244	(24)			394		500	(21)
Bulk		447		528	(15)			924		1,043	(11)
Industrial chemicals & plastics		141		157	(10)			295		305	(3)
Metals & minerals		162		199	(19)			336		379	(11)
Forest products		50		56	(11)			106		112	(5)
Energy & specialized markets		115		156	(26)			277		303	(9)
Industrial		468		568	(18)			1,014		1,099	(8)
Automotive		79		218	(64)			287		428	(33)
Intermodal [a]		724		823	(12)			1,433		1,654	(13)
Premium		803		1,041	(23)			1,720		2,082	(17)
Total		1,718		2,137	(20)	%		3,658		4,224	(13)	%
Average Revenue per Car
Grain & grain products	$	3,861	$	3,993	(3)	%	$	3,901	$	3,959	(1)	%
Fertilizer		3,181		3,182	-			3,456		3,419	1
Food & refrigerated		4,986		5,211	(4)			5,142		5,215	(1)
Coal & renewables		1,979		2,147	(8)			2,001		2,155	(7)
Bulk		3,099		3,179	(3)			3,161		3,163	-
Industrial chemicals & plastics		3,086		3,081	-			3,148		3,064	3
Metals & minerals		2,276		2,806	(19)			2,494		2,883	(13)
Forest products		5,256		5,324	(1)			5,361		5,236	2
Energy & specialized markets		3,739		3,807	(2)			3,813		3,835	(1)
Industrial		3,201		3,408	(6)			3,345		3,436	(3)
Automotive		2,388		2,546	(6)			2,487		2,510	(1)
Intermodal [a]		1,241		1,295	(4)			1,274		1,268	-
Premium		1,354		1,557	(13)			1,476		1,523	(3)
Average	$	2,312	$	2,450	(6)	%	$	2,420	$	2,425	-	%

[a]

For intermodal shipments each container or trailer equals one carload.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Financial Position (unaudited)



	Jun. 30,		Dec. 31,
Millions, Except Percentages	2020		2019
Assets
Cash and cash equivalents	$	2,706	$	831
Short-term investments		60		60
Other current assets		2,317		2,568
Investments		2,042		2,050
Net properties		54,270		53,916
Operating lease assets		1,700		1,812
Other assets		460		436
Total assets	$	63,555	$	61,673

Liabilities and Common Shareholders' Equity
Debt due within one year	$	1,990	$	1,257
Other current liabilities		3,289		3,094
Debt due after one year		26,439		23,943
Operating lease liabilities		1,320		1,471
Deferred income taxes		12,171		11,992
Other long-term liabilities		1,894		1,788
Total liabilities		47,103		43,545
Total common shareholders' equity		16,452		18,128
Total liabilities and common shareholders' equity	$	63,555	$	61,673

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows (unaudited)



Millions,	Year-to-Date
For the Periods Ended June 30,	2020		2019
Operating Activities
Net income	$	2,606	$	2,961
Depreciation		1,098		1,100
Deferred income taxes		171		209
Other - net		517		(370)
Cash provided by operating activities		4,392		3,900
Investing Activities
Capital investments		(1,599)		(1,560)
Maturities of short-term investments		75		105
Purchases of short-term investments		(75)		(100)
Other - net		182		(55)
Cash used in investing activities		(1,417)		(1,610)
Financing Activities
Debt issued		4,004		2,992
Share repurchase programs		(2,556)		(3,629)
Dividends paid		(1,319)		(1,248)
Debt repaid		(770)		(604)
Accelerated share repurchase programs pending final settlement		(400)		(500)
Net issuance of commercial paper		(1)		471
Other - net		(65)		(29)
Cash used in financing activities		(1,107)		(2,547)
Net Change in Cash, Cash Equivalents and Restricted Cash		1,868		(257)
Cash, cash equivalents, and restricted cash at beginning of year		856		1,328
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	2,724	$	1,071
Free Cash Flow*
Cash provided by operating activities	$	4,392	$	3,900
Cash used in investing activities		(1,417)		(1,610)
Dividends paid		(1,319)		(1,248)
Free cash flow	$	1,656	$	1,042

*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)



	2nd Quarter				Year-to-Date
For the Periods Ended June 30,	2020	2019	%		2020	2019	%
Operating/Performance Statistics
Freight car velocity (daily miles per car) [a]	225	202	11	%	216	198	9	%
Average train speed (miles per hour) [a] *	26.9	24.5	10		26.0	24.6	6
Average terminal dwell time (hours) [a] *	21.6	25.7	(16)		22.8	26.2	(13)
Locomotive productivity (GTMs per horsepower day)	136	121	12		133	116	15
Gross ton-miles (GTMs) (millions)	170,626	220,009	(22)		371,923	430,328	(14)
Train length (feet)	8,664	7,652	13		8,517	7,472	14
Intermodal car trip plan compliance (%)	82	69	13	pts	83	68	15	pts
Manifest/Automotive car trip plan compliance (%)	76	59	17	pts	69	61	8	pts
Workforce productivity (car miles per employee)	868	866	-		882	839	5
Total employees (average)	30,059	38,657	(22)		31,965	39,355	(19)

Locomotive Fuel Statistics
Average fuel price per gallon consumed	$ 1.26	$ 2.21	(43)	%	$ 1.59	$ 2.14	(26)	%
Fuel consumed in gallons (millions)	189	245	(23)		414	493	(16)
Fuel consumption rate**	1.107	1.112	-		1.112	1.146	(3)

Revenue Ton-Miles (Millions)
Grain & grain products	16,242	17,244	(6)	%	32,353	33,421	(3)	%
Fertilizer	3,116	3,099	1		6,160	5,985	3
Food & refrigerated	3,752	4,851	(23)		8,258	9,358	(12)
Coal & renewables	18,188	24,855	(27)		38,193	51,184	(25)
Bulk	41,298	50,049	(17)		84,964	99,948	(15)
Industrial chemicals & plastics	6,286	7,215	(13)		13,460	14,027	(4)
Metals & minerals	6,402	10,260	(38)		14,935	20,179	(26)
Forest products	5,398	6,083	(11)		11,439	11,927	(4)
Energy & specialized markets	7,276	11,147	(35)		19,322	21,792	(11)
Industrial	25,362	34,705	(27)		59,156	67,925	(13)
Automotive	1,740	4,672	(63)		6,229	9,197	(32)
Intermodal	17,514	19,318	(9)		35,248	38,324	(8)
Premium	19,254	23,990	(20)		41,477	47,521	(13)
Total	85,914	108,744	(21)	%	185,597	215,394	(14)	%

[a]Prior years have been realigned to conform to the current year presentation.

* Surface Transportation Board reported performance measures.

**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)



	2020
Millions, Except Per Share Amounts and Percentages,	1st Qtr		2nd Qtr		Year-to-Date
Operating Revenues
Freight revenues	$	4,880	$	3,972	$	8,852
Other revenues		349		272		621
Total operating revenues		5,229		4,244		9,473
Operating Expenses
Compensation and benefits		1,059		905		1,964
Depreciation		547		551		1,098
Purchased services and materials		521		441		962
Fuel		434		247		681
Equipment and other rents		227		211		438
Other		298		235		533
Total operating expenses		3,086		2,590		5,676
Operating Income		2,143		1,654		3,797
Other income		53		131		184
Interest expense		(278)		(289)		(567)
Income before income taxes		1,918		1,496		3,414
Income taxes		(444)		(364)		(808)
Net Income	$	1,474	$	1,132	$	2,606

Share and Per Share
Earnings per share - basic	$	2.15	$	1.67	$	3.83
Earnings per share - diluted	$	2.15	$	1.67	$	3.82
Weighted average number of shares - basic		684.3		677.7		681.0
Weighted average number of shares - diluted		686.2		679.2		682.7
Dividends declared per share	$	0.97	$	0.97	$	1.94

Operating Ratio		59.0%		61.0%		59.9%
Effective Tax Rate		23.1%		24.3%		23.7%

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)



	2020
	1st Qtr		2nd Qtr		Year-to-Date
Freight Revenues (Millions)
Grain & grain products	$	689	$	644	$	1,333
Fertilizer		174		168		342
Food & refrigerated		250		205		455
Coal & renewables		421		369		790
Bulk		1,534		1,386		2,920
Industrial chemicals & plastics		495		435		930
Metals & minerals		469		368		837
Forest products		303		266		569
Energy & specialized markets		627		431		1,058
Industrial		1,894		1,500		3,394
Automotive		524		189		713
Intermodal		928		897		1,825
Premium		1,452		1,086		2,538
Total	$	4,880	$	3,972	$	8,852
Revenue Carloads (Thousands)
Grain & grain products		175		167		342
Fertilizer		46		53		99
Food & refrigerated		48		41		89
Coal & renewables		208		186		394
Bulk		477		447		924
Industrial chemicals & plastics		154		141		295
Metals & minerals		174		162		336
Forest products		56		50		106
Energy & specialized markets		162		115		277
Industrial		546		468		1,014
Automotive		208		79		287
Intermodal [a]		709		724		1,433
Premium		917		803		1,720
Total		1,940		1,718		3,658
Average Revenue per Car
Grain & grain products	$	3,940	$	3,861	$	3,901
Fertilizer		3,768		3,181		3,456
Food & refrigerated		5,277		4,986		5,142
Coal & renewables		2,022		1,979		2,001
Bulk		3,219		3,099		3,161
Industrial chemicals & plastics		3,205		3,086		3,148
Metals & minerals		2,697		2,276		2,494
Forest products		5,457		5,256		5,361
Energy & specialized markets		3,866		3,739		3,813
Industrial		3,469		3,201		3,345
Automotive		2,525		2,388		2,487
Intermodal [a]		1,307		1,241		1,274
Premium		1,583		1,354		1,476
Average	$	2,516	$	2,312	$	2,420

[a]For intermodal shipments each container or trailer equals one carload.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Non-GAAP Measures Reconciliation to GAAP

Adjusted Debt / Adjusted EBITDA*



Millions, Except Ratios	Jun. 30,		Dec. 31,
for the Trailing Twelve Months Ended [a]	2020		2019
Net income	$	5,564	$	5,919
Add:
Income tax expense		1,749		1,828
Depreciation		2,214		2,216
Interest expense		1,111		1,050
EBITDA	$	10,638	$	11,013
Adjustments:
Other income		(293)		(243)
Interest on operating lease liabilities**		61		68
Adjusted EBITDA	$	10,406	$	10,838
Debt	$	28,429	$	25,200
Operating lease liabilities		1,639		1,833
Unfunded pension and OPEB, net of taxes of $115 and $124		370		400
Adjusted debt	$	30,438	$	27,433
Adjusted debt / Adjusted EBITDA		2.9		2.5

[a]

The trailing twelve months income statement information ended June 30, 2020 is recalculated by taking the twelve months ended December 31, 2019, subtracting the six months ended June 30, 2019, and adding the six months ended June 30, 2020.

*Total debt plus operating lease liabilities plus after-tax unfunded pension and OPEB obligation divided by net income plus income tax expense, depreciation, amortization, interest expense and adjustments for other income and interest on operating lease liabilities. Adjusted debt to adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, other income and interest on operating lease liabilities) 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 Company’s ability to sustain given debt levels (including leases) with the cash generated from operations. In addition, a comparable measure is used by rating agencies when reviewing the Company’s credit rating. Adjusted debt to Adjusted EBITDA should be considered in addition to, rather than as a substitute for, net income. The table above provides reconciliations from net income to adjusted debt to adjusted EBITDA. At both June 30, 2020 and December 31, 2019, the incremental borrowing rate on operating lease liabilities was 3.7%.

**Represents the hypothetical interest expense we would incur (using the incremental borrowing rate) if the property under our operating leases were owned or accounted for as finance leases.

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